In the most recent edition of ESM, we spoke to retailers across Europe about their private label strategies, including chatting to Teemu Nieminen at Finnish retailer Kesko, about the importance of playing to your strengths when it comes to store brand development. This article first appeared in ESM Issue 3 2020.
Pirkka, the private label of retailer Kesko, is one of Finland’s best-loved brands, and the group is eager to put this front and centre in its marketing approach.
The retailer recently expanded its Pirkka Luomu organic range, as well as taking measures to ensure that its private-label offering reflects its corporate social responsibility commitments.
ESM spoke to Teemu Nieminen, Kesko’s planning manger of own-brands.
ESM: What are the main consumer trends driving private-label growth in Finland at present?
Teemu Nieminen: In Finland, conscious consumption was the biggest trend influencing food choices in 2019. This can be seen, for example, by the growing interest towards product origin – the popularity of Finnish food and local food has been growing for several years.
Over the past year, climate awareness has also increased, and, as a result, the packaging and products of Kesko’s private label, Pirkka, now contain less plastic or are plastic-free.
In what ways has Kesko sought to respond to specific consumer interests with its private-label offering?
The emphasis on hectic lifestyles and changing eating rhythms has increased demand for meals that can be prepared quickly. At the same time, people are hoping for more support to help them lead healthy lifestyles.
Convenience foods, however, have maintained their position as an easy and fast everyday choice. There is also a noticeable increase in takeaway products, such as sandwiches, baguettes, wraps and kebabs. Sales of convenience foods have increased since 2015 and are growing by almost 10% from month to month.
Customers have been particularly interested in healthy and high-quality convenience foods, and Kesko has responded to this growing demand by launching our own takeaway product range, as well as cold smoothies, which have gained in popularity among our customers. In addition, interest in organic products has been apparent for a long time. For example, sales of organic food in K-food stores increased throughout the 2010s and have been in the 10%-20% range in recent years.
We responded to this growing demand by renewing and expanding our organic private-label product range, Pirkka Luomu, in spring 2019. This product range now covers everyday basic products in a versatile and competitive way, as we wanted to offer our customers the possibility of making better choices. Sales of organic private-label products have grown by more than 17% since the renewal.
Elsewhere, the range of gluten-free and vegan products is also constantly growing, and our private-label product range includes a comprehensive selection of products for these diets. Sales of plant-based protein products have slowed down after the boom a couple of years ago, but are still growing from month to month.
What effect, if any, will the coronavirus crisis have on private-label development at Kesko?
The effects of the COVID-19 pandemic are difficult to predict, but, in our view, it will increase the desire of consumers to support Finnish food production even more strongly.
In a crisis situation such as a pandemic, Finns cannot trust that food will be transported to Finland on a large scale across the Baltic Sea. For this reason, K-Group has long talked about the importance of domestic food production and self-sufficiency. Our private-label product range includes over 3,000 SKUs, of which over 1,000 are manufactured in Finland.
How important is your private-label offering to the identity of your retail brand?
K Group’s private label, Pirkka, is the reason why many customers do their grocery shopping at K-food stores. According to an ongoing consumer survey, Pirkka is the best-known store brand in Finland – 90% of Finns recognise it, and seven out of ten customers buy Pirkka products regularly.
We launch new private-label products every month, which are designed to meet customer needs, using data and feedback.
Historically, private label has adopted a good-better-best architecture. Do you think that architecture is still valid?
Today, the classification in Finland is more like better-best, according to marketing and trends. Customers are looking for and appreciating high-quality private-label products, which has been reflected, for example, in the sales of our premium private-label product range, Pirkka Parhaat.
With the Pirkka Parhaat product range, products are selected based on specific criteria relating to origin, ingredients and manufacturing. In addition to flavours from around the world, the range strives to offer Finnish products that stand out from other products.
Depending on how the current COVID-19 pandemic affects the global economy, the situation may change, and customers may become more interested in low-cost alternatives classified as ‘good’ in the classic private-label architecture. On the other hand, the appreciation of local food may also increase.
© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine
