Q&A: PLMA's Sharoff breaks down the business ahead of annual convention

Less than one month from now, private label manufacturers and retailers will come together in Chicago to participate in the 2017 Private Label Trade Show. And business is good, with private label household penetration on the rise and the arrival of Lidl, an own brand–centric retailer, into the U.S. marketplace. Private label market share has reached nearly 25% of unit sales in the United States and is expanding faster than national brands, PLMA has noted.

More than 1,300 companies from 40 countries will be exhibiting their products at next month's event, including 25 international pavilions. Owns Brand Now recently sought out Brian Sharoff, PLMA president, for a sense of what people in the own brand sector are talking about, how the own brand business is faring these days and which trends we can expect to see at the show, being held at the Rosemont Convention Center Nov. 12 to Nov. 14.

Own Brands Now: What were the top stories in the private label space this year?

Brian Sharoff: The top stories [were] Amazon and Lidl. Everything in the year 2017 is going to flow from their decisions to become so active in the U.S. market. Most people in the industry understand that the acquisition of Whole Foods was not the question of a new owner buying an existing retailer. It was a question of whether an ecommerce retailer with huge pockets can buy a bricks-and-mortar retailer and then use [that] retailer to expand its total ecommerce business. The implications [for private label] are far reaching.

OBN: How does the Whole Foods deal augment Amazon’s portfolio of brands?

Sharoff: Amazon’s portfolio of brands has generally been limited to non-supermarket items, so a great deal of its success has been built around consumers buying electronics, books, clothing, housewares, hardware. This venture is intended to bring it into the most intimate of relationships with the consumer — namely weekly grocery purchasing. Whatever [Amazon] has accomplished in the other aspects of private label, now it has to make all of that work in the grocery area.

OBN: Regarding Lidl, and its similar-in-store-format competitor Aldi, how will that play out in the United States?

Sharoff:  Lidl and Aldi are very different. As German companies, their history is to provide extraordinarily good product at extraordinarily low prices. When they discovered that the “A” brands were not able to do that, they created their own brands. It’s not quite the history of private label that you and I would be familiar with here in the United States. By creating their own brands in order to stock their own stores, they were able to create a niche for themselves in their market in Germany, which was unknown outside of [that country]. And that is high-quality, low-price, limited-assortment, very reliable, very German products and stores. That’s the concept that’s coming over. One would confuse oneself by looking at private label in France or private label in Spain or private label in the United Kingdom and think it’s all part of the same phenomena. It’s not.

OBN: So how will their approach affect the private label business in the United States?

Sharoff: Aldi came into the market in 1970. Whatever Aldi saw as an opportunity in the United States is 47 years old and is no longer a relevant reason for being here. Lidl’s decision to come to the United States is based on a set of business goals that are [at least] five years in the making. You cannot lump the two of them together. I think the two of them are reacting to the same market. The fact of the matter is that the American market is not like the European markets. So no one can really say for sure whether or not Lidl’s analysis of the U.S. market is, in fact, correct.

It’s not a question of discounters coming into the United States. It’s a question of “a” discounter coming into the United States in a marketplace that is as big as all of Europe combined and is very well stocked with stores. It’s completely different from the way in which Lidl expanded in Ireland, England, the Netherlands or Switzerland. It’s completely different. I would have to say that all guesses are off as to whether or not it’s going to work or not, because it bears no resemblance to anything Lidl has done.

As for Aldi, it came into the United States so many years ago, when the concept of the box store, the limited-assortment box store, was totally new and limited to developing in the Midwest, which had a very strong influence of German, Czech, Central European demographics, as well as the heritage of the Midwestern people. It was a friendlier marketplace to which Aldi came with a format that was not necessarily threatening to other major retailers, supermarkets and so on. It survived for 40-some-odd years just playing the game the way they like to play it. When Aldi saw a [new] opportunity, it didn’t change Aldi stores to fit the demographics and the economy. Instead it created the up-market Trader Joe’s. This is very different from Lidl coming into an [overcrowded] marketplace in 2017.

You need to compare Lidl and Aldi, because once they’re here in the United States, they become natural competitors. And as natural competitors, what is going to be the impact they have on each other and on the marketplace in general? I don‘t know the answer to that. What we can smile about in private label is that this latest retailer to come into the U.S. market is a devoted own-label retailer. Whether or not the statistics are going to reward them for it is anybody’s guess.

OBN: What is the state of private label in the United States?

Sharoff: The state of the industry is pretty much as it has been since the 1990s, which is not to say that it’s stagnant, but rather to say that the marketplace is stable for private label. And that’s really good, because retailing itself is not stable. Private label has survived and prospered as the No. 1 vehicle and strategy for retailers across all the different channels. It has survived and prospered as the innovator of environmentally friendly products, organic products, heat-and-serve microwavables — all of this directly due to the innovation of retailers through their private labels.

OBN: What can attendees expect at next month’s private label trade show in Chicago?

Sharoff: Our job, every year, is to produce a trade show where the largest number of exhibitors to date show their products for private label. So we do it again in 2017. Each time we get a sense of trend, we have the show relate to that trend. So when premium products were first promoted back in the 1990s, we had several pavilions devoted to premium. When pet food began to show strength as a private label category, we had a pet pavilion. This year, our pavilion is devoted to housewares and kitchenwares, because we are seeing retailers, whether they are supermarkets or mass merchandisers, devoting more space in the store for products in the kitchen and products for the home. That would appear to be something that’s being reflected in the stores, and if it’s in the stores, we want to reflect it in the show.

OBN: What’s the bottom line when it comes to private label?

Sharoff: The takeway is very simple. For all those people who come to the show — exhibitors, retailers, brokers, suppliers — we want them to see as much as they can, talk to as many people as they can, learn as much as they can, benefit as much as they can. For the people who don’t come to the show, have never come to the show, will never come to the show, the message is smell the coffee, smell the roses, wake up, because private label is not unimportant nor is it going away. Sooner or later, you’re going to want to know what it’s all about. And the show in November is the single best place for you to find out.

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