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European Business News – Week ending September 24, 2010

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European Business News – Week ending September 24, 2010

September 23
11:04 2010

Two of the UK’s three largest grocer retailers announced revamps of their own label food ranges in the past week. Asda’s relaunch of its ‘Chosen By You’ range involves more than 3,500 own brand food products, 500 of which are entirely new and another 1,000 of which have been reformulated. The range generates annual sales of between £8 billion and £9 billion and the revamp is the largest own brand relaunch in UK retailing history. Sainsbury has relaunched its premium ‘Taste the Difference’ own brand range, featuring over 1,000 products.

The latest figures from Kantar Worldpanel reveal solid growth of 4.3% by the UK grocer market, ahead of grocery inflation at 2.7%, for the 12 weeks to the start of September. However, Asda has been underperforming for some time and its own brand relaunch is designed to help reverse this trend.

Although British consumers are still concerned about value for money, they are also placing a strong emphasis on quality. The Asda and Sainsbury relaunches are in response to this ‘premiumisation’ within the marketplace.

Increased Pressure on Food Manufacturers

The moves by Asda and Sainsbury are expected to increase pressure on suppliers’ profit margins as prices for consumers are unlikely to increase despite the quality improvements to the products. The revamps will also significantly intensify own label competition for branded food manufacturers in the UK.

Asda chief executive Andy Clarke has stressed that the UK’s second largest retailer “will now drive as hard on quality as it does on price.” Despite improvements in quality, the Chosen By You range will continue to be up to 20% cheaper than the equivalent leading brand, according to Asda.

Indeed, Asda’s aggressive pricing strategy precipitated the recent milk war amongst the major supermarket groups, which prompted liquid milk specialist Robert Wiseman Dairies to issue a profits warning earlier this month.

As part of its relaunch Sainsbury has introduced a new Bistro range, which offers a selection of ‘restaurant-quality’ starters, main courses and desserts, with each dish serving two. This will make it more difficult for the food service sector as retailers continue to be successful at encouraging consumers to dine at home rather than going out for a meal.

Fruit Juice Expansion

German-based Eckes-Granini Group, which is one of the leading fruit juice producers in Europe with sales of Eur827m last year, is continuing its international expansion. It is planning a fruit juices joint venture with Turkish firm Yildiz Holding, shortly after forming a strategic partnership with KMV, the leading bottled water supplier in the Czech market, in August.

Russian Confectionery Allure

The allure of long-term growth and profits in the Russian market was highlighted during the past week with Roshen’s announcement that it will invest $250m building a new chocolate factory there. The new plant will become the Ukrainian confectionery group’s third facility in Russia.

Green Energy Venture

One of Europe’s largest dairy groups, FrieslandCampina, has embarked on an innovative venture to harness the green energy potential of its Dutch farmer members. It is teaming up with power company Essent to establish local initiatives for the production and supply of solar, wind and biomass (manure fermentation) energy. The enterprise is likely to provide a blueprint for similar projects by other vertically integrated dairy companies throughout Europe.

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