Erwin Weglehner

STUDY: PRIVATE LABEL INTERNATIONAL

STRATEGIC OPTIONS FOR EUROPEAN FOOD MANUFACTURERS

Conducted by: ERWIN WEGLEHNER MBA

Private Label International 2004/2005

Table of Contents

1. Introduction 7 1.1. Situation Analysis – Problem Definition 7 1.1.1. North America 7 1.1.2. Europe 9 1.1.3. Asia Pacific, the Emerging Markets and Latin America 11 1.1.4. Consumer behavior 12 1.2. Aims and expectations 13 2. Theoretical Background 14 2.1. Brands 14 2.1.1. Definitions of Brands 15 2.1.2. Definitions of Private Label Brands 16 2.2. Analysis and Studies on Private Label Brands in Relation with National Brands 17 2.2.1. Consumer Perspectives 17 2.2.1.1. Antecedents of PLB Attitude and NB Attitude: Similarities and Differences 20 2.2.1.2. Price Consciousness 23 2.2.1.3. Perceived Quality, Category and Consumer Characteristics 28 2.2.2. Manufacturer and Retailer Perspectives 33 2.3.. Explanations and Re-combinations 33 3. Empirical Analysis 36 3.1.1. Foreword 36 3.1.2. Methodology 36 3.1.3. Key Findings 43 3.1.4. Geographic Insights 47 3.1.5. Category Insights 53 3.1.6. Pricing Trends 56 3.2. A Western European Perspective on Biscuits and Confectionary 60 3.3. Selected Explanations of Empirical Analysis 62 3.4. Analysis on global food retailers and manufacturers 65 3.4.1. The leading global food retailers 65 3.4.1.1. The Internationalization of the Major Retailers 67

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3.4.2. Global Food Manufacturers 71 4. Industry Outlook 72 4.1. Global Retail Development 72 4.2. Private Label Growth 73 5. Strategic Options 74 5.1. Theoretical Background 74 5.1.1. Competitive Forces Model 74 5.1.2. Generic Competitive Strategies 75 5.1.3. Value Disciplines 76 5.1.4. Core Competence Model 77 5.1.5. Balanced Scorecard Method 78 5.1.6. Strategies revisited 80 5.2. Building alternative Private Label Strategies 83 5.2.1. Roadmap for Strategic Architecture 83 5.2.2. Uncontrollable Condensed Environmental Factors 84 5.2.3. Controllable Internal Factors 85 5.2.4. Definition of Strategic Direction at a broader Level 87 5.2.5. Combining Activities and Key Factors 88 5.3.1. Example for Strategic Alternative I 93 5.3.2. Example for Strategic Alternative II 94 5.4. Sharpening existing and Building new Core Competencies 95 6. Limitations 96 7. Conclusion 97

Table of Illustrations

Figure 1: Share of private label brands by region and private label growth rate 2003 vs. 2002 (based on value sales) Figure 2: Private label price differential compared to manufacturer brands Figure 3: Internationalization of major retailers (existing of 7 figures) Figure 4: Forces driving industry competition Figure 5: Balanced Scorecard Method Figure 6: Combination of activities for strategic alternative I Figure 7: Combination of activities for strategic alternative II

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Index of Tables

Table 1: Exclusions of the AC Nielsen research Table 2: Exchange rates for research evaluation Table 3: Private label shares and growth rates by product area (based on value sales) Table 4: Value share private label brands by country Table 5: Sales of private label brands in absolute dollars Table 6: Top 10 fastest growing private label markets (based on value sales) Table 7: Sales of private label brands per category (in absolute dollars) Table 8: Price differential between PLB and manufacturer brands by country Table 9: Price differential between PLB and manufacturer brands by product area Table 10: Private label market share volume and value for all product categories Table 11: Private label market share volume and value for all biscuit and chocolate products Table 12: Private label brands market share volume and value, year 2003 vs. year 2002 Table 13: The leading food retailers Table 14: Major global food manufacturers Table 15: Establishing a core competence agenda

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