Private label health ranges provide a key differentiator in the retailers' offering, both in terms of competition against brands, and also against each other. Healthy products at a low price. One of the key trends is sale and fat reduction. Asda and Tesco are leading the way in a health debate in the UK by getting behind the governments drive to cut the average person's intake of salt to a target of 6g a day by 2010. Tesco overhauled its private label ranges to reduce salt, fat and calories and Asda promised to cut salt from all its canned vegetables by July 2006. Asda's health initiative is part of its food pledge program to reduce salt, sugar and fat in its private label products. This is a follow-up to the reformulation of its Smartprice range in January 2005 that reduced the amount of fat, sugar and salt consumed by customers by 180 tonnes, 130 tonnes and 189 tonnes respectively.
In addition, in the UK some grocers have implemented further health initiatives to reinforce the value of a healthy lifestyle such as Sainsbury's Active Kids and Tesco's Sport for Schools and Clubs campaigns. Tesco also offers its customers free membership in its Healthy Living Club and in 2005 Asda launched a quarterly health magazine and offered over 100,000 free health checks to customers.
Tesco has taken its health offering a step further by developing a range of products with functional benefits. In December 2005, Tesco announced it would roll out its own dairy range in combination with supplier Fayrefield Foods. The release of 'Reducol' products which contain plant sterols to reduce cholesterol levels will be the first significant private label presence in the UK in a category dominated by national brands. Tesco is likely to undercut its brand rival, offering cheaper alternative to cholesterol lowering brands. The range will consist of a spread, yogurt drink, yoghurt and milk containing plant sterol and stanol.
I "Our strategy is to mix innovative products with advantageous prices. This will allow us to get the maximum range ofproducts to consumers." (Chris Swire, Fayrefield Marketing Director)
However, Tesco is releasing Reducol some years after the UK launch of similar brands such as Benecol. This shows that while private label will follow into exciting categories, brands will continue to enjoy sustained periods of first mover advantage if they produce more advanced products. Cholesterol-reducing dairy products are particularly profitable as they combine convenience with a positive health benefit from regular consumption. Furthermore, Tesco's move shows these functional products have now entered the mainstream. Studies have shown that consuming Reducol on top of a healthy diet can help lower cholesterol by up to 24%.
Still, retailers are developing products and outlining health initiatives that are allowing them to compete more effectively with brands. For example, many brand manufacturers have announced the reduction or elimination of trans fats from some of their products, but in November 2005, UK retailer Marks & Spencer announced it would remove all hydrogenated fats (trans fats) from its entire food range by mid 2006.
Kraft is a key player in the trans fat free movement and announced in December 2005 it has successfully completed its trans fat reduction efforts and will meet the January 1st 2006 U.S. Food & Drug Administration (FDA) deadline for on-pack trans fat labeling. However, there will be delays on some products re-entering the store due to issues with reformulation and not all products will be completely free from trans fats. Other manufacturers that are developing trans fat free or reduced fat products include Kellogg and Pepsi owned Frito-Lay.
Marks & Spencer are removing trans fats from all its food products. The ban follows the retailer's previous initiative to remove all artificial flavorings, colorings and trans fats from its chilled ready meals in October 2005. Marks & Spencer has achieved a number of food industry firsts including the removal of MSG 10 years ago and banning the use of Tartrazine 20 years ago.
"We know that consumers are concerned about additives and believe we are well ahead of any other retailer in terms of removing additives from all our foods." (Guy Farrant, director offood at Marks & Spencer)
Figure 4.25:Marks & Spencer gourmet additive free crisps
Business Insights Ltd
Figure 4.25 is an example of Marks & Spencer's innovative approach to healthy private label retailing. The retailer has combined the three mega-trends, health, convenience and indulgence in a single product. The potato chips are a snack and therefore essentially convenient whilst a premium product claiming to be 'Full on Flavour' and 'lovingly made with the finest ingredients' (3). However, most importantly the packet of crisps displays a healthy label at the bottom of the packet, informing consumers that the product contains 'no artificial flavours'.
By developing trans fat and additive free ranges, the retailer is setting a trend in place that is likely to escalate rapidly. It reveals the trans fat concern has now entered Europe from the US where companies were required to have removed trans fats from their products before the new labeling initiative enacted in January 2006. The new regulation stipulated that the amount of trans fats in all products had to be labeled clearly on the nutritional facts panel.
Previously, Europe has been slower to follow on similar proposals, and while there are still no such labeling rules in the EU, national governments are pushing for change. For example, Denmark became the first country in the world to introduce restrictions on the use of trans fats, with oils and fats now forbidden on the Danish market if their trans fat content exceeds 2%. Marks & Spencer's range is another example of how private label is developing in Europe. The ranges are becoming more sophisticated and retailers are finding new ways to compete with brands and differentiate their offer.
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