Retail News Newsletter — 12th April 2005

Supermarket private labels are a growing trend in the Middle East. How will suppliers react to their emergence?

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By  David Ingham Published  April 11, 2005

Own labels are here to stay|~||~||~|It’s taken a long time and there are plenty of people who insist the concept won’t catch on here, but there can now surely be no argument that the supermarket own label has well and truly arrived in the Middle East. In last month’s issue of this magazine, Geant made it pretty clear that it intends to agressively promote its private labels at its new UAE store. That news was followed up by Spinneys Dubai’s recent introduction of its Home Choice brand, which offers a limited range of products at rock bottom prices. The debate over own labels has now moved beyond when or if supermarkets will start to offer them. The key questions now are whether or not they will catch on with consumers and how brand name suppliers are going to react. The most likely option is that suppliers will simply do nothing and ignore the problem in the hope that it will go away. Plenty of people think that regional consumers, particularly in markets like the GCC and Lebanon, are brand snobs, for whom buying Coca-Cola, Heinz baked beans and Pantene shampoo is a statement of affluence. This magazine does not believe, however, that suppliers would be wise to take a do nothing approach to own labels. Spinneys and Geant are deadly serious about developing their private label businesses, and don’t forget what has happened in North America and Europe. Introduced in a very low key way 20 years ago, own labels now account for almost 40% of grocery sales and have had a dramatic effect on the revenue and margins of the big suppliers. If Spinneys and Geant meet with some success, Carrefour can also be expected to put more effort into promoting its own brands. Whilst the rise of private labels is inevitable to some, there are plenty of ways in which suppliers can respond. Gulfa, for example, seems to have decided that if you can’t beat them join them: despite having its own water brand, it is now producing Spinneys’ Home Choice bottled water. Another (highly desirable) option is for suppliers to reinvest some of their profits, which are often boosted artifically by the region’s agency laws, in promotions, marketing and product development — in other words, innovation. If that is one result of the emergence of own labels, then their appearance in the region can only be seen as a good thing.||**||

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