Private labels a fillip for retailers

2013-11-10 14:00

As local groups branch out into the rest of Africa, their own labels will gain momentum and add value to their offerings

Private-label products could be a cash cow for retailers, particularly as they expand into the rest of the African continent.

In a report focusing on the outlook of South African retail and consumer products between 2012 and 2016, auditing and consulting firm PwC noted that challenging market conditions would likely see an increase in demand for private-label goods as has been witnessed in other markets, such as the UK.

David Kneale, the CEO of Clicks, says the retail group is taking its private-label brands into healthcare and generic medicine in a big way.

Kneale says that in his almost eight years at Clicks, the company has doubled its private-label portfolio. “We started private labelling because of value and the market, and we started in categories where it was easier to get into with privatelabels.

“But over the past five years or so, we have moved into more categories and into some categories that have traditionally been more difficult, such as nappies.

“Where we’re now taking the brand into is healthcare and generic medicine,” says Kneale.

But as privatelabels grow, it can cause tension with classic brands that retailers have a partnership with.

Yaw Nsarkoh, the managing director of Unilever for east and southern Africa, says while Unilever sees privatelabels as just another competitor, it is challenging managing information sharing as partners and as competitors.

“One worry that I have is that private labelling can infringe on intellectual property rights. If you start a private label ripping off or using information that is shared through a partnership, tension begins to emerge.”

But while retailers punt Africa as their next growth story, what about South Africa? Is it just a gateway into Africa, as many experts believe?

Chris Gilmour, an analyst at Absa Investments, says due to its extensive transport and other networks, South Africa is increasingly viewed as a gateway to the continent by multinational retailers.

An advantage, he says, is being eroded as emerging markets such as Brazil, China and India take a far greater coordinated approach to investing in Africa.

“SA has been a democracy for almost 20 years and yet only in very recent years has it attracted any real attention as far as multinational retailers are concerned.

“Had SA been seen as an end in itself rather than as a conduit into the rest of the continent, many more international retailers would have come here a long time ago,” says Gilmour.

He predicts that Nigeria will surpass South Africa as the largest African economy at the turn of the decade.

Kneale says he wants to grow the Clicks footprint, particularly its pharmaceutical brand, into townships.

“Certainly, when I arrived here eight years ago, Clicks had no stores in Soweto and now there are seven and that is one success that is making South Africa an exciting retail venture because you see retail formalise in the high-density urban areas.

“And certainly Clicks wants to go into those areas and is going into those areas, especially with our pharmacy.”

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