Insights – Own Brands

Mr Bresler, one striking trend in retail is that own brands are seeing increasing importance and relevance owing to various factors such as inflation. Is this also true for wholesale and our B2B customers?

Jens Bresler: Yes, I would say in wholesale this trend is no less visible than in retail. In general customers have become more price sensitive and it holds true for our professional customers too. The inflation is an obvious factor for this shift, as the cost of production and packaging has risen significantly, which in turn pushes food prices. In addition, our professional customers also need to cope with the rising energy and personnel costs in their operations. Therefore, they need to pay more attention to the price-quality ratio to keep their business profitable. This is where our own brands provide a very attractive solution for them – and this is where we can help keep them competitive.

So the growing price sensitivity is the core driver for this shift in purchasing behaviour?

Price is only one factor. Our customers appreciate the fact that we develop our own brand products based on their specific needs, with our unique approach of "developing products with professionals for professionals”. This positions us different from retailers and as a close partner for them. And this also makes our products distinct and effectively pushes customer loyalty.

How does this trend translate into the individual brands?

METRO Chef is by far the biggest own brand for our hospitality customers, accounting for over 40% of our own brands sales. However, aro, which is the price-entry range, is the 2nd-biggest brand. Our restaurant customers naturally go for METRO Chef when they purchase food products, no matter it is meat, cooking oil, French fries or any other food product. The same counts for METRO Professional in Non-Food and Near-Food (cleaning, detergents, hygiene etc.) categories which makes good sense for their business. But if you run a small fast-food business, aro as a price-entry offer is also an important and reliable solution. Overall, all own brands grow well with their respective profiles addressing corresponding business needs, yet METRO Chef is the primary brand for the hospitality customers where we place our strategic focus.

In METRO’s growth strategy, own brands sales share is set to reach 35% by 2030. Are you satisfied with the growth pace so far?

We are pleased with the progress so far, having reached a 22% sales share in the last financial year (as of September 30, 2023). Own Brands have always been a priority within the company’s strategy, yet for quite some years the sales share had been around 17%. That´s why we have launched some significant initiatives to vigorously boost the sale share, and we have achieved robust progress by increasing more than €1 billion sales annually over the past 2 years. This is why we are confident to hit the ambitious target by 2030.

What are the initiatives fueling this growth you mentioned?

I think the most important factor is that we’ve managed to establish own brands as an important subject across the entire company, no matter in which country or in which function you work. This is crucial because in the end it is all of us together to make our own brands successful. Together we have built a momentum and a common faith in the relevance and competence of our own brands, as they bring higher profitability and they are instrumental in building customer loyalty. One of the major initiatives pushing this momentum is that we provide our Sales Force teams with Own Brand samples for their regular customer visits. Because we all know that there is nothing more convincing than seeing, touching, smelling and tasting a product. And the results show that a customer who has tried out our own brand products are very likely to become a recurring customer.

Talking about sales growth, which role play different customer groups like hospitality and trader?

As part of our sCore strategy, we have a very strong focus on hospitality customers, with our own brands METRO Chef for food and METRO Professional for non-food particularly targeting this segment’s needs. This strategy has paid off as the majority of our sales growth is contributed by this customer group. For the Trader segment, where customers are traditionally more price sensitive, we are continuously refining and pushing the own brand Fine Life in terms of assortment and pricing to ensure our customers find competitive solutions with this brand line. This is particularly relevant for the Franchise partners across East European countries.

And how is the own brand acceptance across different sales channels like in-store and Food Service Distribution (FSD)?

We are very solid with the own brand development in the in-store channel, and it will continue to serve as solid foundation. On the other hand, as the FSD channel is becoming increasingly important for us, we plan to stronger address customers in this sector. One example is a closer collaboration with the FSD-specialists within our company portfolio that are not operating under the METRO brand. Together we are now looking to add METRO’s own brands into their assortments to leverage synergies but also to gain insights and expertise in serving catering chain businesses. I am sure both METRO and they will benefit from such collaboration which will in turn further drive the own brands sales in a multi-channel context.

The wholesale transformation of METRO is primarily about simplification and raising efficiency both for us and our customers. How do own brands contribute to this?

Optimising our own brand packaging is a critical pillar as well as a priority in our efforts to increase the productivity and save cost which ultimately benefits the customer. For example, optimised packaging takes up less space on the pallet and in transportation, thus enhancing our supply chain and operational efficiency. In a store or FSD depot, proper packaging makes it quicker and more practical to replenish shelves. There are basically two policies here, one is “no knife” (for cutting cartons) and the other is “10 seconds from pallet to shelf” in replenishment. This is where we have introduced so-called “shelf-ready” packaging which eases the operative work in the store.

How are Own Brand products developed at METRO? What steps does it take for a METRO Chef item to take shape and be shelf-ready? The journey always kicks off with an in-depth analysis of the particular customer needs such as an attractive quality-price performance, which is becoming more relevant for professional customers, and packaging specification that differs from the retail set-up. Moreover, innovative product characteristics complementary to existing market offers play a key role in the product development. By taking into account all these wholesale-specific aspects, coupled with fresh market insights, METRO is able to build good value own brand solutions to effectively address various customer groups.

When seeking strategic sourcing partners and locations, METRO relies on its global network of competent and trustworthy producers to secure long-term supply partnerships that meet METRO’s quality, sustainability, volume and logistics requirements. As METRO operates wholesale business in more than 20 countries, an increasing number of its Own Brand products are being sourced centrally to serve multiple local markets, with commitment on the quantity and cross-border logistics from the producers. The synergy benefits the company in terms of sourcing costs and productivity as well as quality control. The establishment of a new partnership often also includes on-site check and certification to ensure full compliance with METRO’s strict sourcing protocols.

Before an Own Brand product goes into production, METRO involves professional chefs in the test of the products designed for professional kitchen, both in food and non-food assortment, to seek the expert assessment in fields such as quality, durability, usability and packaging. This enables METRO to efficiently refine and customise its Own Brand solutions to reliably bring value and convenience to its professional customers.

Finally, the fulfillment of logistics is undertaken either by the producers or 3rd-party operators after orders are placed for multiple countries. Hereby, shipments are delivered to the central depot of local METRO operations or straight to individual wholesale stores depending on contracts and local supply chains.