The Evolution
of Leader Price
A supermarket
in an upscale Paris suburb near Versailles seems to defy a whole
range of French shopping traditions: Store brand only, a stripped-down
ambiance, emphasis on deep discounts. You even supply your own
bags to check out.
In this neighborhood,
it seems distinctly out of place. Yet sales in this Leader Price
supermarket are booming, and it is evolving as a regular food
store for all shoppers, at all income levels.
This is not
a single store phenomenon. Leader Price is rocking the retail
food industry across France and challenging the dominance of
the hypermarkets, including global powerhouse, Carrefour.
How is this
discount chain winning with a "100% Store Brand" strategy?
Our current newsletter introduces you to Leader Price and identifies
6 reasons for its success:
An Economy Demanding Change
While global
giant Carrefour and other French hypermarket chains continue
to dominate the European retail environment, growth in their
home country has flattened: Carrefour's profits climbed 15.5%
in the rest of Europe in the past year, but profits in home country
France fell 14.8%.
Here's why:
Between 1999 & 2004 (when the euro currency began), French
consumers have experienced a 14% increase in consumer food prices.
So given consumer
frustration with higher prices, deep discounters like Leader
Price have emerged to provide an alternative. And Carrefour
and others are scrambling to compete with discount brands of
their own, cutting their profit margins in the process.
The Key Difference: 100% Store Brand
Leader Price
is one of a number of "deep discounters" in France
(Germany's Lidl was the first).
But Leader
Price is distinct from other discounters by exclusively
offering its own brands. With few exceptions (beer & wine),
every one of over 2,800 food products, from dairy & coffee
to pet foods & snack foods; from cookies & chocolate
to cereals & prepared meals; frozen and shelf-stable . .
.
. . . everything
at Leader Price is a Leader Price brand
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Overcoming the Credibility Gap
The combination
of exclusively store brand and deep discounting implies a risk
of credibility for a retailer: Consumers may assume substantially
lower quality compared to national brands. Even in Europe, where
store brands have higher acceptance than in the US, there may
be constraints on how far a retailer can limit consumer selections.
Leader Price
undoubtedly faced this problem in its early days: A clientele
limited to pure discount shoppers who were focused on price,
or who would purchase only commodity products.
But today,
with an apparent success underway, Leader Price is reaching a
broader base of consumers across an extensive food product assortment.
An Astute Packaging Strategy
When seen side-by-side,
these 2 yogurts have similarities but are clearly different brands.
But when the
Leader Price package is seen without the national brand present,
we think the graphic elements & use of color evoke the national
brand. It's a perceptual effect that lets Leader Price give its
products a national brand image.
The Leader
Price logotype is always small, subordinate, almost a seal of
approval, and not a distraction from other primary package graphics.
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the same
yogurt ? |
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LeBercail brand
yogurt is made from sheep's milk and has a unique consistency
& flavor, unlike traditional yogurts
Because of
it's uniqueness, I selected this product for a spoonful-to-spoonful
comparison, and found both versions identical in taste &
consistency
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Leader Price
evokes a national brand image by co-branding free-range eggs:
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co-branding leverage |
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The Leader
Price eggs display the same prestigious "Label Rouge"
as a national brand
As usual, the
Leader Price logotype is subordinate to the overall package image
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6 Decisive Factors of Success for Leader Price
The significance
of Leader Price's progress goes beyond discounting in a tight
economy: It is the degree to which consumers will accept the
concept of an exclusive store brand, especially in a country
which prides itself on a history of culinary seriousness.
Our analysis
suggest there are 6 factors that underpin Leader Price's success.
Among consumers:
1. Confidence in the overall integrity of the chain; that the
management is committed to serving the community with high quality
foods at lower prices while giving smaller producers a chance
to compete
2. Perception
that the store brands are really the same quality as the more
expensive national brands
3. Belief that
lower prices are the result of astute chain purchasing policies
and reduced overhead; not a function of inferior quality or compromises
| Supporting these first 3 factors, Leader Price
advertises that it uses "PME" - small and medium sized
suppliers who are implied to be dedicated producers of fine products,
but are shut out of the hypermarkets by mega-sized corporate
suppliers. Leader Price thus accesses new good suppliers, creates
new jobs . . . |
Within the
stores:
4. An extensive
range of products (2800+) that covers most or all needs of consumers
for foods, so that Leader Price becomes the store for daily shopping,
not just for selected items
in some stores,
shoppers are welcomed with the fragrance of fresh baked baguettes
& breads
5. Packaging
that reinforces the imagery of the Leader Price products:
inspired by
familiar national brands (but without being direct copies)
the Leader Price logotype as a subordinate package design
element
6. Consistently
lower prices (averagely 30% below the national brands on all
products), with the absence of sales, promotions and loyalty
programs (which Leader Price describes as misleading) . . .
. . . this
is the ultimate expression of "Everyday Low Price"
Discounters Enter the Mainstream
62% of French
consumers made purchases in a discount food store last year,
according to research group TNS-Secodip, and a study by Ineumen
Consulting shows that 86% find prices too high in hypermarkets;
57% report searching for lowest prices.
This marks
a change in a society that traditionally was loyal to local merchants,
and accepted high prices as the cost of service. Now it's the
price that counts.
Further, Leader
Price, Franprix and most of the more than 3,300 discount stores
in France make themselves convenient to find, concentrating in
cities and suburbs while hypermarkets tend to be outside urban
areas.
The stores
also tend to be smaller, which permits proliferation, since recent
legislation (the Law Raffarin, after the former Prime Minister)
have placed limitations on stores over 300 M2 (about 3,000 sq.
ft.). So as the hypermarkets suffer the dual constraints of slowing
sales and restrictions on opening new stores, the smaller discounter
proliferate.
An Emerging Star for Rallye-Casino
Leader Price
is a division of Group Rallye's Casino division; its performance
is leading the growth of this chain:
Sales of Leader
Price (and sister discount chain, Franprix) increased 7.9% in
2004 to represent 34% of the group's net revenues. Gross profit
increased by 10.7%.
Leader Price
began in 1989, and today commands 25% of the French discount
food trade. There are 405 stores in France, and a total of 700
worldwide; in Israel, Russia, Asia, Africa & Latin America.
Battle of the Shopping Carts
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To retaliate,
Carrefour created a new discount line - "Number 1"
- & advertises that a shopping cart filled with this brand
costs less than a comparable cart of Leader Price products.
Leader Price,
in turn, has responded to refute the Carrefour claim. Whoever
wins, the result is increased consumer awareness of discounted
pricing!
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An Example of Reassurance
Leader Price
offers smoked salmon from Norway, Scotland, and Ireland
a full selection. The package copy is exemplary reassuring shoppers
of quality, and Leader Price's active role in their behalf:
. . . No genetic
manipulation . . . fed only fish-based proteins & oils .
. . no animal parts or byproducts . . . no antibiotics or hormones
. . . Site
supervised . . . water purity is verified . . . fish are prepared
by a French company certified ISO 9001 . . . one of the 1st to
obtain environmental certification
. . . We are
able to track the fish from egg through birth to packaged slices
. . . we assure strict controls & inspections . . . conformity
to the strictest regulations
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package imagery is reinforced by reassuring copy
that describes a comprehensive program of supervision & quality
control |
Another Store Brand Success: Picard
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Picard Surgele
stands as another example of a nearly exclusive store brand retailer
. . .
. . . but one
with an important difference
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Most urban
& suburban communities in France are familiar with Picard,
a chain specializing in frozen foods. There are 600 Picard stores:
Most of their 1000 products are Picard brand, but unlike Leader
Price, this is not a discounter.
Picard's prices
are competitive with the major chains: Their distinction is an
emphasis on quality, with elaborate appetizers, meals & desserts
that appear more "gourmet" than the national brands.
All forms of basic frozen foods: Vegetables, fish & shellfish,
simple dishes . . . are offered as well.
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a distinctive
emphaisis on gourmet-level quality |
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Picard stores
tend to be small, and somewhat clinical in appearance (the blue
& white environment evokes icy cold) but they effectively
present an image of superior quality though package graphics
and imaginative offerings. Picard has a spirit of leadership
in frozen foods.
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An
active home delivery program is underway; shoppers can order
online or via Picard's catalogue and popular newsletter. |
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