1. OWN-LABEL V BRANDED IP AND THE BOTTOM LINE TUESDAY 2 ND JUNE 2015 THE LONDON STOCK EXCHANGE CHRISTIAN FINN

2. INTRODUCTION

3. THE FOCUS Brand owners The supermarkets, the discounters and the bargain stores. Suppliers and buyers.

4. DEFINITIONS Own-brand or Own label - “an item packaged and marketed under the brand name of a particular retailer, usually a large supermarket chain, rather than that of the manufacturer” (Collins English Dictionary, 2012) Private Label - “the label of a product, or the product itself, sold under the name of a wholesaler or retailer, by special arrangement with the manufacturer or producer”. (Dictionary.com, based on Random House Dictionary, 2015) Branded – “Commerce: Carrying the brand or trademark of a manufacturer:” (Dictionary.com, based on Random House Dictionary, 2015)

5. A DILEMMA… “There is a premise here that nobody holds up a product and says ‘Look, I paid 30% more for this than I needed to!’ Nobody feels smart about that, no matter how much you earn.” Steve Dresser, pricing analyst, Grocery Insight, interviewed on “You & Yours”, BBC Radio 4, Wednesday 13 th May 2015.

6. UK CONSUMER GOODS MARKET SHARE 2013/14

7. THE UK GROCERY MARKET – NOVEMBER 2014 Prices down 2.1% on average November 2014: first ever absolute decline in British grocery market Only Aldi, Lidl and Waitrose saw increases in food sales Discounters had 8.3% share of UK grocery market at the end of 2014; could be up to 13% by 2019 In 2008, Tesco had 30%, Aldi 3%, but buying power equal 50% of some bargain stores’ business is now in foodstuffs

8. THE UK GROCERY MARKET Major Manufacturers Smaller producers UK Consumers Supermarkets Discounters Bargain Stores Smaller outlets

9. SUPERMARKETS VS DISCOUNTERS Tesco offers 40x more items than Aldi “Big Four” sell around 35,000 different items; discounters only average 2,000 (Aldi 1,350) “Private label” now accounts for 41% of UK market “Own label” is 54% of supermarket sales 95% of food sold by Aldi is “own brand” Aldi Stores Limited owns 399 UK trademarks for foodstuffs (Cl 29-31)

10. UK SUPERMARKET BRANDING Total “own label” sales in UK is 3x world average Only 37% of UK residents think own- label only suitable for those on a tight budget 60% think quality of “own label” foodstuffs is as good as branded products Aldi won 13 Gold and 12 Silver awards at The Grocer Own Label Awards 2015

11. OWN BRAND STRENGTHS & WEAKNESSES 1.STRONG IN… Fruit & vegetables – 100% Meat & poultry – 96% 2.WEAK IN… Alcohol – 25% Confectionery – 22%

12. CHALLENGES FOR MANUFACTURERS “Copycat/lookalike” products Competition for shelf space (supermarkets) Delisting Little or no presence in discounters Discounted prices for premium brands in bargain stores Providing own-brand/private label Improved quality of “own brands”

13. SOME GOOD NEWS… 34% of own-brand shoppers buy 5 branded products a week 28% ALWAYS buy branded goods 14% of them buy 10 or more a week Only 9% do not buy ANY branded products

14. THE BARGAIN STORES No own brands or private labels Sell only branded goods 50% of Poundstretcher’s business is in foodstuffs Limited choice – daily “bargain” Volume sales, tight margins, low costs Initially sold only distressed stock or cancelled promotion goods A way back into market for manufacturers

15. SUPPLIERS AND BUYERS “You can have the best product in the world, but it won't sell if the brand isn't strong.” Will Chase, Chase Distillery Limited (Interview with Rachel Miller, “The Marketing Donut”, 2010)

16. WHY PRIVATE LABEL? PROSCONS Ready cash flowBuyer “calls the shots” Uses excess production capacityPrivate label may cannibalise market share of branded goods Regular ordersLose focus on developing market share Buyers generally financially healthy and/or market leaders Additional manufacturing or distribution complexities = costs Provides funding to enable development of branded goods Competition to continue supply when contract ends Wider distribution network?Increases dependence on buyers

17. YOUR BRAND OR PRIVATE LABEL? PRIVATE LABEL 70% of business with one company £ Millions per month Also supplying private label to two other buyers All aspects of product, price, packaging, etc., dictated by buyers. BRANDED PRODUCTS Limited sales Mainly overseas markets Little or no expenditure on publicity and marketing Too expensive to develop market themselves

18. ADDING VALUE

19. IF YOU HAVE LEMONS… OR MILK?

20. HOW TO RESPOND? Build brand equity in branded goods by continual promotion and marketing Constant innovation to meet consumer needs Different pricing for different brands Don’t compete against yourself with private label or own brand Use “own-brand” money to fund development/expansion of branded products and/or develop/strengthen market share for weaker brands Develop foreign/export markets Protect trade marks, get-up, etc.

21. HOW TO RESPOND? Niche markets Premium; limited-edition; restricted vintage/terroir Controlled distribution and/or market pricing Maintain high quality standards Monitor markets for infringements, counterfeits, etc. Manage social media and PR Enforce your rights!

22. THANKS TO THE AUDIENCE!