“Surveys suggest consumers are increasingly interested in products which have an economy position and are domestically and locally sourced. Consumers perceive home grown products as environmentally sound and healthy. They also want products that compete with mainstream prices,” Hannonen said.
A burgeoning private label market will also increase competitiveness and boost manufacturing both within Finland and within neighbouring countries.
“S Group is present in other markets other than Finland so this might mean that some Finnish products end up in neighbouring markets and likewise some private label manufacturers that are specialists in private label in other countries might end up in the Finnish market.”
In addition, S Group’s focus on domestic products will help increase the distribution network for small manufacturers.
“Small to medium-sized businesses now have the opportunity to produce private label products for large retailers. Making products for the Kotimaista series for example, means they will benefit from its extensive distribution network.”
Private label packaged food currently accounts for 20% of sales in Finland, according to Euromonitor, compared to more than 30% in the UK and Germany and the west Europe-wide average of 25%.
Hannonen said Finland’s private label market has fallen behind its neighbours thanks to the dominance of two major retailers – S Group and Kesko – and the absence of competition from discount stores.
The entry of the likes of Lidl just over 10 years ago provoked a string of private label launches at the time but since then product introductions have slowed, with only Lidl itself bucking the trend.
“Lidl has dozens of private label brands at the moment and are growing all the time. In contrast, major retailers like S Group and Kesko haven’t launched any new label series for years and years.”
However an unstable global economy will drive sales as budget lines become even more attractive to consumers and will encourage further growth in the coming years, said Hannonen.
“I think it’s possible that within the next 10 years private label of packaged food will account for 25% of the market in Finland. This will depend on issues like the economy and the number of products launched - either way we are moving slowly in that direction.”
S Group’s Kotimaista brand is clearly inspired by consumer feedback regarding food provenance, quality and price, added Hannonen, although he is less enamored by the strategy of Kesko’s K-Menu.
“Out of the two I would say Kotimaista will be the more successful. The focus of K-Menu is too vague. It is difficult to associate it with basic everyday products and the name doesn’t offer any clues,” he said.
“Consumers will immediately know where they stand with Kotimaista. The provenance is implied by the name Koti, which means ‘home’ in English, so it is obvious to consumers that the product is locally produced. The packaging screams domestic.”
S Group will unveil 200 new products over the next few months with a further 400 planned in the longer-term.
Meanwhile, S Group’s Rainbow brand will be positioned under K-Menu, which will also comprise 100’s of new products.