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November 5, 2009

INSIGHT: Delhaize sees private label growth slowing

Belgian retailer Delhaize said today (5 November) that increased promotional activity from national brands has slowed the growth of its private label sales in the US.

Belgian retailer Delhaize said today (5 November) that increased promotional activity from national brands has slowed the growth of its private label sales in the US.

“When national brands fight for the growth of their top line with some very interesting promotions consumers are interested. We have seen a lesser increase in private label than in 2008 and early 2009,” Delhaize CEO Pierre-Olivier Beckers said during a conference call.

Delhaize operates a three-tier system of ‘good, better, best’ private label products in Belgium and the US. Beckers said that as the economic downturn continues to pressure consumers, sales of its lower tier private label goods have witnessed the fastest growth rates.

“As consumers are pressed on both sides of the Atlantic, we have seen higher growth in the lower tier of private label,” he revealed.

For example, Delhaize has seen consumers trade down within its private label offering in the US, with the lower tier witnessing sales volumes grow by more than 16%.

Earlier today Delhaize posted a 5.7% increase in pre-tax profits, despite a drop in like-for-like sales in the US.

The company said that its sales in the market were hurt by food deflation and the “highly aggressive promotional nature” of competitive activity in the US.

In contrast, Delhaize emphasised that sales in Belgium increased 4.6%, expanding its share of the Belgium market despite the downturn.

“Like everywhere in the world, consumers [in Belgium] are sensitive to promotion and good deals,” Beckers said.

In order to drive growth in Belgium, Delhaize has invested in its price positioning. Management suggested that a key plank of its consumer appeal in its home market was the strength of its own brand offering.

“We have launched the first private label in Belgium with our three tier approach. Carrefour is launching its own range, but I can tell you we are very strong and consumers recognise that. This is part of our market share gain.”

Delhaize said that it was able to drive its top line through investments in price because it was on-track to generate savings of EUR100m this year.

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