The Evolution of Private Labels in Food Proposals : The Case of the Top Four Italian Retailers and the Purchase Propensity of Consumers

The presence of products marked with the brand of the retailer is not a novelty in the mass distribution circuit. In the last decades, private labels (PLs) increased in a relevant way, upgrading the competition with the proposals coming from branded products. Since the beginning of the last century, this comparison attracted the attention of many scholars. Different factors were analyzed as, for example, the brand value, the trust in the distribution company or other elements that underlined the acceptance of PLs products. Actually, thanks to a new and consolidated trend in the market, it is possible to register an evolution of PLs, with a relevant specialization. The aim of the present work is to analyze, in the Italian context, this evolution, observing the food proposals of the main PLs. In addition, this differentiation is compared with the purchase propensity of consumers. The final purpose is to discover the effective match between market demand and the value propositions of qualified Italian retailers. The study is organized with a theoretical background to define in a structured way the topic. After, there are the evidences of the research, carried out on a double way. First there is the panel of the PLs proposals at the beginning of 2018, referred to the first four groups in the Italian market. Therefore, considering the categories represented by these products, a survey has been conducted to discover the acceptance of the consumers. Final results show how this panorama is become complex and when differentiation is able to fit the desires of customers. This study provides relevant implications from the marketing point of view. It is a valid contribution for practitioners and scholars, giving a further vision in the evolution of PLs foodstuffs.

The increasing presence of Private Labels (PLs) is an interesting issue to analyze, since it represents one of the most important competition element in the retail sector, especially in the food industry (Cotterill et al., 2000).The meaning of PL is rather simple to define, even if actually it has become a structured framework.Many authors tried to find a shared definition of PL (Schutte, 1969;Morris, 1979;Martell, 1986) and it is possible to assert, substantially, that PL groups all products that are manufactured by, or on behalf of, a specific retailer for sale exclusively in its stores.Other synonyms, commonly used, include "store brand" and "own label" (Lincoln & Thomassen, 2008).As noted by Veloutsou et al. (2004), there are different terms to indicate the same concept.They are private-labels products/brands, retailer products/brands, distributors' brands and store brands or labels, even if there are some authors that do not accept the term "label", since it could reveal a limited marketing role, while "own brand" is most appropriate (Burt & Davis, 1999;de Chernatony, 1989;McGoldrick, 1990).This last consideration could be also the consequence of the relevant selling results registered by this alternative value proposition or its developing differentiation, above all when there is a structured retail distribution system (Cuneo et al., 2015).PLs presence is surely not a novelty but, the continuous increasing market share is an important feature to observe (Calvo Porral, & Levy-Mangin, 2016), evaluating the strategic role in the competition among retailers (Lymperopoulos et al., 2010).PLs appeared in the market from the first decades of the last century, specifically from the 1930' in the U.S. context, thanks to the work of the major chain retailers, as noted by Call (1967).He also fixed in his work the following evolutions where, in the late 1940's and early 1950's, other food retailers adopted this merchandising effort related to food products.In particular, a research conducted by the US Food Commission in the spring of 1966 showed that, on a sample of 174 food retailers, only 27 were without a PL proposal but, in this last group, 26 were classified as small retailers (not having therefore the same resources of the big players).PLs started a remarkable increase in sales reaching, in the U.S. grocery industry, a 15% of total value throughout the 1990s.In the same period, this percentage in Europe was also higher, reaching, in the single U.K. market, a 36% in the 1994 (Hoch, 1996).Generally, in the 1990s, as noted by Parker and Kim (1997), the rise in the share of PLs attracted the attention of many observers (Connor and Peterson, 1992;West, 1992;Liesse and Levin, 1993;Hollingsworth, 1993;Kelly, 1994).Scholars analyzed different aspects of the competition among PLs and national brands.They focused, for example, the socioeconomic and demographic characteristics of consumers who were inclined to prefer PLs (Coe, 1971;Bettman, 1974), the attitudinal and behavioral characteristics of the latter (Baltas, 1997), the consumers' perceptions of these products (Bellizzi et al., 1981) or the consumer choice determinants (Baltas, et al., 1997).On the company perspective, Ward et al. cited other scholars that analyzed why firms produced PLs products (Bontems et al., 1999;Galizzi et al., 1997), the interesting of retailers in their selling (Mills, 1995;Dhar and Hoch, 1997;Narasimhan and Wilcox, 1998), and the reason of the price difference with national brands (Conner and Peterson, 1992;Hinloopen and Martin, 1997).Definitely, PLs could be considered a real threat for national brand manufacturers (Quelch and Harding;1996).At the beginning, PLs moved to few categories with a standardized offer and with the evident advantage of a lower price.Later this offer changed, growing in quality (Ward et al., 2002).In the last decades, PLs have become not a simple alternative in addition to national brands, but a concrete marketing strategy of the retailers beyond the core product offer (Burt, 2000).This evolution is well explained by Laaksonen and Reynolds (1994), investigating this issue in the food retailing, in the European context.They observed four generations of PLs.The first generation was characterized by basic products with low quality/image where the main reason for consumers' motivations to buy were related to price, 20% or more below the brand leader.The second step could be considered as a quality increase, confirmed by a price between 10% and 20% under the national labels.Anyway, price was the main feature observed by customers.The third generation was a clear step towards the brand leader.Products were no more generic and the quality and the image were close to the national brands.Price distance, in fact, was reduced from 10% up to 5%.In this context, the consumers' motivations were equally supported by price and quality.In the latest evolution, it was possible to observe the achievement, by PLs, of the same standards of the national brands.Sometimes PLs had also a higher price if compared with national brands.Moreover, customers recognized the value proposition of PLs as unique and better.Recent literature is still oriented in the comprehension of this competition where different factors are analyzed as, for example, the role of culture (Budhathoki et al., 2018), the relationship between PLs shares and store loyalty (Koschate-Fischer et al., 2014) or the effects related to the most important elements so far observed, that are price and quality (Olbrich, et al., 2017).The empirical analysis carried out in this work is an attempt to observe the recent evolution of PLs proposals, made by the most important Italian retailers in foodstuffs.In particular, the aim of this paper is to make a comparison between actually registered differentiation and the consumers' attitudes.Last data available, referred to 2017 in the grocery sector, showed the market share by value of Italian PLs at 18,8%, with an annual increase of 4,6%, compared with the +2,8% of all grocery (Nielsen, 2018).Nielsen report (2018) described as this last result was depending not only from the demand side, but it was realized thanks to a more structured offer too, confirming the direction of the following analysis.

Method
In order to reach the purpose of this study, research was conducted in a double direction, utilizing an empirical approach.The first step was the representation of differentiation in PLs foodstuffs, referred to the most important Italian groups, to have a complete and precise framework.The second step was the investigation among consumers, aiming to highlight their orientation.These activities started in January 2018.

PLs Food Proposals -Market Analysis
The panorama of PLs food proposals in the Italian market at the beginning of 2018 was wide.The first point was to identify the value propositions made by the most representative retailers, since it was necessary to insert real companies/products in the questions of the survey, to make the latter more clearer for respondents.Consequently, an initial problem was the selection of retailers, considering the presence of many operators, about 30 (Food, 2018).The features observed, that are the most important elements that characterize a distributor, were: -presence of PL foodstuffs in own proposals; -stores located in all Italian territory; -relevance of company, in terms of revenues and sales area.
These criteria were chosen to warrant a perfect market coverage, considering the most relevant dimensions from the competitiveness point of view.In the table below, data about the numbers of stores and the sales area are showed.In the following table (Table 2) data related to market shares by value are represented.Making a summary, the companies selected, evaluating the above-mentioned parameters, were Coop, Selex, Conad and Auchan, since these were the only ones to be present in all national territory, with a remarkable market share.Moreover, they represented Italian and multinational organizations, enlarging the framework to different strategic approaches.These four operators reached together, in the national framework of retailers, the 47% of sales points, the 50% of sales area and a global market share of more than 42%.After having completed this identification, it was possible to continue the work, discovering the value propositions.These companies were able to ensure a wide and varied offer, in terms of PLs food proposals.Every retailer developed a proper strategy, but it was possible to group all kinds of proposals, as showed in the next table (Table 3), in a specific product lines.The development of PLs was evident, with a real diversification made through 10 different lines.
In particular, all retailers had generic proposals as well as specific offers focused on the territorial origin, the intolerances, or marked with an eco-label (above all the Euro leaf of organic farming).The only PL line, which had as main feature the low price, was proposed by only one operator (Auchan).A particular interest emerged from some innovations, not so usual in these items.An example were the ingredients to simplify homemade preparations ("L'osa", proposed by Coop).All this research activity covered the month of January 2018.

Questionnaire Development -Sample and Data
The second step of the analysis was to highlight the propensity of consumers towards the differentiation of PLs, in particular the buying propensity.Therefore, the data have been collected through a structured questionnaire, which was created according with the objectives of this study.The composition of questions followed the most relevant suggestions, coming from the methodological approach in marketing research (Churchill and Iacobucci, 2006;Brace, 2008;Fowler, 2013).The relevance and measurement scales of the questions were given due weightage.Moreover, an on-line platform was utilized to build a significant sample, overcoming geographical and/or other limits that could have hampered all work.The survey was conducted from February 2018 to November 2018, including every kind of consumer, without any particular distinction in terms of gender, education or other features.Men and women under 18 years of age were the only excluded, since they were not able to buy, in grocery departments, alcoholic drinks, having a limited spending capacity too.The absence of particular restrictions in sample building was related to reach all possible customers of the mass distribution circuit.At the end of the survey, the questionnaires considered valid were only those with complete answers.Survey included three sections.The first two sections were referred to information and buying propensity towards PLs food proposals.The third section was about demography of respondents.Information section had the aim to confirm, overall, the knowledge, the trust and the purchase frequency towards PLs food products, taking into account the companies selected.Second section was focused on specialization of PLs proposals.Third section was built to highlight, essentially, demographic items such as gender, age, income and education.Some answers, having a qualitative nature, were provided through a five-point Likert's scale.In particular, Linkert scale was utilized to measure trust, purchase and buying propensity.The final sample was made off by 454 respondents, coming from all Italian territory.It was quite stratified, with a slight prevalence of young people, as represented in the following table (Table 4).

Analysis and Findings
Survey provided significant results, as below exposed.First of all, sample underlined the relevant position of companies indicated in the Italian market, confirming the validity of criteria adopted for the selection preventively made.Consumers expressed an excellent notoriety about food products marked with the brands of these operators, going from 91,6% to 76,2%.Moreover, they communicated a good trust, as well as a good purchase frequency, even if the level of trust was slightly less than the level of purchase.It meant that trust was not totally transferred in buying process but, substantially, the distance between these two elements was not so remarkable.Answers for measuring trust and purchase frequency were provided through Linkert scale values, from "1" to "5".Regarding to trust, "1" was "I do not trust", while "5" was "I trust very much".For purchase frequency "1" was "never", while "5" was "always".Data are represented in the Table 5, showing in percentage the knowledge of PLs foodstuffs and, with the mean values, both trust and purchase frequency.Coop was at the first position in all three observed elements and this result was strictly connected with its significant position in the national context.Moreover, Coop was the only one to register a level of knowledge more than 90% and a trust/purchase frequency more than 3. Other companies reached good results too, showing a wide acceptance.Therefore it was possible to observe the purchase propensity towards the different PLs lines registered in the table 3. Questions were about 8 lines, having excluded the generic products and the products characterized only for the low price, since the latter were the basic/initial differentiations of any PL.Even in this case, each respondent answered through the values 1-5 of Linkert Scale, where "1" was "never" and "5" was "always".It is clear that in the sample not all respondents were oriented to all categories but the question was: "If you had to buy a product for…", creating a context where there was a necessity connected with all categories exposed.The results are showed in the table 6, highlighting the differences among men and women.These last results revealed important elements to observe.The PLs foodstuffs that received a strong acceptance by consumers are those related to territory, ecolabel, traceability and healthy.A good position was also reached by proposals where the main feature was the taste.A not so very satisfactory result was obtained by other three categories: intolerance, baby and easy preparation.The purchase propensity above registered did not expressed particular differences among women and men, underlining a homogeneous behavior.In general, men were slightly more sensitive to territory and traceability, while women to healthy.Gender did not produced differences towards foodstuffs characterized for taste or for the presence of an ecolabel.

Conclusions and Discussion
The study carried out is an attempt, in the competition among national brands and private labels, to discover the determinants that can favor PLs proposals in their differentiation, exclusively in the food sector.The selling growth of PLs foodstuffs is a particularly interesting market trend, where there are different strategic elements to observe.It is important the focus on proposals as well as other features that are improving the offer, like store image (Wu et al., 2011).The analysis shows how high is the level of specialization achieved by the main retailers in the Italian market, in line with other markets in the international context (Marañón & Gallo, 2016).The period of generic PLs proposals, where the main feature was only the low price, is certainly expired.Surely, attempts to attract customers with profitable offers are still resisting, but the main direction is clearly oriented towards more structured proposals, where the customer attention is captured by other factors.All main Italian retailers developed specific lines, both from the qualitative point of view and from the quantitative point of view.Evaluating the 10 lines observed in the research, every company ensures a differentiation, based from a minimum of 6 lines to a maximum of 8 lines.It is possible to affirm that every category of food products, independently from producer and/or distributor, is covered by a PL proposal.Customers seem to appreciate this evolution, but the buying propensity expressed is not similar for each value proposition of stores brands.The results obtained underline that the appreciation is more evident when the value of PLs foodstuffs has ensured by a third element, above all when this third element is out of retailer control.This finding is confirmed above all in the case of ecolabel presence, the option that registers the best propensity.In this case the certification, expressed by a specific label (for example Euro-leaf), many times under a third and independent organization evaluation, increases significantly buying propensity.This evidence is also confirmed from recent literature about organic labelling (Bauer, et al., 2013;Morrone and Schena, 2018), where the intervention of an external and recognized procedure is a real element to improve market acceptance.On the same direction are positioned the results obtained by proposals connected to territory, traceability and healthy.Traceability is a warranty in quality orientation, since every passage in the production is clear, representing a complete information.Traceability makes the proposal more safety and food safety is of particular interest to consumers, as expressed by previous researches too (Hobbs et al., 2005;Van Rijswijk & Frewer, 2008;Jin et al, 2017).The connection with territory, above all when the latter is represented by a local food, is another element with a growing consumer demand (Meyerding et al., 2019), confirming the right direction chosen by retailers towards this strategic market segment.
A good acceptance is reserved also for healthy products, but here it is possible to observe a particular finding.
When the assumption of a foodstuffs can produce a particular and direct effect on health, as well as in the case of intolerances or when the final consumer is a baby, the acceptance of PLs proposals is significantly reduced, favoring the traditional brands.Therefore, PLs foodstuffs seem to be not so really accepted when consumers have to reserve an improved trust.Generally it is possible to assert that PLs proposals receive a good evaluation but not for all categories.When there is an evident risk in food assumption, PLs are not so well accepted.From the managerial point of view, these findings highlight the market segments that could be better developed, both from retailers and from producers.PLs need to increase their acceptance among consumers, improving the image of safety foodstuffs where also primary needs can be preserved.National brands have to face a strong competition.They have to recover the lost positions through a renewed offer, understanding on which elements it is necessary to specialize, in order to curb the offensive of retailers.From the scientific research point of view, further analysis could be focused to find, in the specific categories, determinants that play a particular role in the acceptance of national brands rather than PLs proposals, using the method of cluster analysis too.Limitations of this work are connected with the sample, referred only to Italian respondents.It could be useful, to improve the obtained results, to enlarge the analysis on a wider area, to observe if these findings could be confirmed in other countries too.In this way some elements, for example culture and traditions, could be measured, to evaluate their influence on purchase propensity.This is one of the main directions to follow, updating the recent research in this field.

Table 1 .
Large organized distribution in Italy: points of sales and sales area (2017 data)

Table 2 .
Market shares by value (first semester 2017)

Table 3 .
PL food proposals of selected retailers in the Italian market(January 2018)

Table 5 .
Knowledge, trust and purchase frequency