1. Private Label Development and Current European Trends by Jeff Freeman Research Manager Private Label Manufacturers Association 11 March 2004 Sinaia, Romania

2. What Is PLMA? More than 3,200 members worldwide Largest private label trade shows in the world- Chicago & Amsterdam Services for retailers and manufacturers www.plmainternational.com

3. A Definition Of Private Label Products which carry a retailer’s brand, such as: name of the retailer (e.g.- Sainsbury, Casino) or name of retailer’s brand (e.g. St. Michael’s- Marks & Spencer)

4. Why Do Retailers Develop Private Label Programmes? Higher profitability and profit margins Better competitive position Increased visibility of store name Increased customer loyalty Lower sourcing costs Pricing free of manufacturer pressures and of state price regulations Control within retail system: store image, inventory control, range and quality

5. Retailer Brand Evolution In Europe First were generics with low prices and high margins Then came “Me-too” products Third generation emphasizes quality and innovation Many retailers use all three

9. BASICMID-RANGE FINEST Price Position Entry price level Brand -10% Brand +5%, unique Margin Average Volume SOURCE: CHRISTINE CROSS Example of Retailer Brand Positioning At Tesco

10. European Private Label Market Share - Results from ACNielsen/PLMA International Yearbook

11. Overall Private Label Market Share (%) In 2002 Source: AC NIELSEN, PLMA

12. French Private Label Market Share (%) in 2002 20.1 25 36.4 Source: AC NIELSEN, PLMA

13. German Private Label Market Share (%) in 2002 28.5 36.4 39.4 Source: AC NIELSEN, PLMA

14. British Private Label Market Share (%) in 2002 29.5 32.7 44.8 Source: AC NIELSEN, PLMA

15. Selected Category Conclusions One of every four products sold in Europe is private label Overall private label market share is highly dependent upon local conditions Conventional retailers are beginning to explore new areas for their brands, including non-food

16. Retailer Attitudes Towards Private Label - Results from PLMA’s Retailer Trends Survey 2002

17. Benefits Of Retailer Brand Programme (more than one answer possible) SOURCE: PLMA RETAILER TRENDS 2002 SURVEY OverallUKGermanyFranceCEE Increase profit margins75%91%72%71% Good for retailer identity64%73%72%64%29% Build consumer trust52%73%61%42%43% Build consumer loyalty64%91%72%67%43% Compete with brands54%55%39%75%43%

18. How Retailers Promote Their Own Brand (more than one answer possible) OverallUKGermanyFranceCEE Local advertising41%27%44%29% National advertising51%55%39%58%57% In-store promotion75%82%83%67%100% Price-offs39%55%11%38%57% Coupons19%18%6%30%14% Sampling26%46%33%25%14% Comparisons to brands14%9%17%25%0% SOURCE: PLMA RETAILER TRENDS 2002 SURVEY

19. Main Competition To A Retailer’s Private Label Programme OverallUKGermanyFranceCEE "A" brands50%73%44%67%14% Competitor's private label29%18%28%21%29% Discounters16%9%22%4%57% National brands3%0%6%0% SOURCE: PLMA RETAILER TRENDS 2002 SURVEY

20. Future Development of Private Label By A Responding Retailer (more than one answer possible) OverallUKGermanyFranceCEE More budget lines24%0%17%13%43% More value- added lines76%82%72%96%86% More bio lines32%9%28%33%29% More non-food33%36%22%38%29% More innovative change93%82%100%87%100% SOURCE: PLMA RETAILER TRENDS 2002 SURVEY

21. Summary Of Exclusive PLMA Survey Nearly 90 % of retailers surveyed say that they will expand their private label programmes in the near future Over half will look for new sources of retailer brand products from other parts of the world More than half saw retailer brands as crucial to consumer trust of the retailer and for building consumer loyalty Nearly 60% of Central and Eastern Europe respondents said that retailer brands help establish their identity in new markets

22. Consumer Attitudes Towards Private Label- Results from MORI/PLMA Study

23. European Consumers Are Increasingly Aware Of Private Label Source: MORI, PLMA

24. Surveyed European Consumers Responding That They ‘Frequently’ Buy Private Label Europe- 32% Netherlands- 55% Great Britain- 52% Belgium- 38% France- 28% Germany- 26% Source: MORI, PLMA

25. Consumers Want A Wider Variety of Private Label Source: MORI, PLMA

26. Consumer Advantages Products as good or better or more innovative than “A” brands Prices are 5-25% lower than “A” brands Consumers trust the nearby store, which is important for fresh food and personal care items Instead of looking for a new brand in each product area, there is a trusted name throughout the store

27. OPPORTUNITIES FOR SUPPLIERS A way to quick-start exports without high costs Better margins than for branded production An alternative to high cost of developing of manufacturer brand Innovation safer and quicker due to consumer feedback from retailer

28. Private Label Outlook for Central And Eastern Europe Source: PriceWaterhouseCoopers, Incoma.CZ Bulgaria- retailers emphasising own label to provide cost efficiency and consumer benefit, retail development is favouring local manufacturers Czech Republic- large potential for private label, retailers are beginning to develop qualitatively and diversify their offer Hungary- consumers attached to traditional brands, but own label introductions are increasing

29. Private Label Outlook for Central And Eastern Europe Source: PriceWaterhouseCoopers, Incoma.CZ Poland- consumers are still developing attitudes on private label and brands, many retailers already have lines and expansion rates average 40% per year since 1998 Across the region, consumers are diversifying their shopping habits, using not only neighbourhood stores, but hypermarkets, supermarkets and discounters; ‘Eastern’ Consumers are becoming more ‘Western’ in their habits

30. Private Label Development and Success

31. Eight Stage Process in Successful Private Label Development Formulate retailer brand strategy Identify products and opportunities Commercial requirements Supplier selection Consumer testing Design and packaging formulation Product launch Study impact and results This is a team effort which involves many departments doing a specific task during the entire process. SOURCE: CHRISTINE CROSS

32. Measuring Private Label Success Number of new products launched Improved customer perception of price & quality versus the competition Improved margin mix over the product area Volume increase over the product area Increased sales and profit The contribution of the product to the category Better leverage over the brands SOURCE: CHRISTINE CROSS

33. Examples of Successful Retailer Brand Strategies

34. CASINO/ LEADER PRICE Casino is a large French retailer with a variety of formats in Europe, the Americas and Asia Leader Price is Casino’s discount chain, started as a discount-level private label line in 1989, it later became a separate format Leader Price products are carried across Casino’s formats and by retailers where Casino has no stores Leader Price range has almost 3,000 items in grocery, perishables, frozen, drinks, dairy, gourmet and health and beauty A number of sub-lines carry certifications as to origins, bio-friendliness, etc.

37. CARREFOUR Carrefour is one of Europe’s largest retailers Recently launched the “No.1” private label line are designed to compete with hard discounters, and be the least expensive in a category “No.1” is in a variety of product areas, including fresh goods, cosmetics, health and beauty, dry grocery and elsewhere The new brand was started almost simultaneously across Europe and in Taiwan in 2003 Packaging is very simple and clear Balanced in some countries by third-generation, value-added private label, including ‘Reflets de France’

40. ALDI The largest discount retailer in Germany Notable for its use of many “in-store” brands, none of which use the name of the retailer Developed reputation in Germany for excellent prices and good quality Has gradually replaced brands over the years with private label, now almost 100% retailer brand, including cigarettes and fresh meat Has recently brought in scanning, electronic payment and fresh foods to better cater to consumer convenience and tastes

42. ALBERT HEIJN Largest retailer in The Netherlands Notable for its AH umbrella brand for most categories, from fresh food to banking Specific lines, however, have different names (Euroshopper, Perla Coffee) Products have clear positioning and message Albert Heijn is now experimenting beyond its traditional format with Albert Heijn XL (large stores) and AH To Go (convenience stores) Albert Heijn’s Central European supermarkets and hypermarkets use different branding, including the name Albert

46. COOP ITALIA One of the largest Italian retailers Notable because the retailer recently redesigned its own label lines New packaging involved work between different departments of the retailer, design experts, suppliers and others Redesign is meant to appeal to consumers, who want more information, quality and supply chain transparency, and to make the private label lines highly visible Features of the new packaging include: more nutritional information than legally required, an information telephone number, serving and storage suggestions, quality certifications, etc.

49. SAINSBURY’S Sainsbury’s is one of the UK’s largest retailers. The Blue Parrott brand is notable because it was specially developed to be good for children’s health, convenient, fun and to appeal to concerned parents. Launched March 2001, over 150 products for children 5-11 years old. Controlled levels of fat and salt, no carbonated drinks. Designed to appeal to children’s tastes and to parents’ concerns. Supported by celebrity endorsements and other marketing (special publications, ads).

52. GENERAL CONCLUSION: SUCCESSFUL PRIVATE LABEL IS Dynamic and innovative, Highly dependent on the retailer and local consumer tastes and sensibilities, and Responsive to concerns from the public about quality.

53. ASSOCIATION-AT-A-GLANCE PLMA ’ s Head OfficeNew York PLMA International CouncilAmsterdam Business Development OfficeParis PLMA International CouncilHong Kong in Asia PLMA Representative OfficesParis London Bielefeld Barcelona Sydney

54. 2 400 3 200 1980254 1985663 1990 1063 1995 2003 MEMBERSHIP GROWTH Source: Jean-Pierre BONVALLET, PLMA

55. PLMA ACTIVITIES Trade Shows : USA, Chicago- November International Trade Show, Amsterdam- May Country shows- Britain, France, Asia Studies, Conferences and Seminars Research and Publications Press and Public Relations PLMA Global: Online Trade Show Executive Education Programme (USA, The Netherlands, France)

56. INTERNATIONAL SHOW PROFILE 2003 - 2 500 exhibit stands - 1 300 companies, from 60 countries / v 35 in 1998 including 30 national and regional pavilions / v 13 in 1998 - Retail visitors in 2003: Benelux (NL & B)26% Germany 17% UK 11% Scandanavia 8% Italy 7% France 7% Spain 5% New EU Member 4% Other 15%

57. AMSTERDAM 2004 SHOW SCHEDULE Monday 24 May Pre-Show Seminars13.00-16.00 Preview for New Exhibitors 16.00-19.00 Tuesday 25 May Show Floor Open 9.00-18.30 Wednesday 26 May Show Floor Open9.00-16.30 This year ’ s show will once again feature the New Product Expo.

58. PLMA’s World of Private Label Trade Show 25 - 26 May 2004 www.plmainternational.com