The domestic Italian market continues to witness record levels of unemployment and declining purchasing power by the consuming public. The natural instinct in such circumstances is to seek foreign markets. Till now, small Italian food-manufacturers are less likely to have engaged in export than their colleagues in Spain, France or Germany -- but the harsh reality of the domestic Italian market is leaving them with little choice. How to accomplish this is quite another matter. Their challenge is to go beyond the cachet enjoyed abroad by many types of Italian food and build their own brand identity. The battle is between serving as a mere manufacturer for private label products abroad and selling these products under the company’s own trademarks.
Consider the tale of Corsini Biscotti, a Tuscan-based family baking company. As reported in the article, this company had already engaged a sales manager, even before the economic downturn, to develop the British market for the company’s products. Building upon a relationship with the Sainsbury supermarket chain, it now sells its food products in such prestigious English retailers as Harrods, Selfridge and Lakeland as well, presumably under the company’s own trade marks. Indeed, sales of products in England now constitute around 25% of all the company’s sales. But the company’s brand appears to be doing less well in other foreign markets, where it is often relegated to serving as a mere private label manufacturer for local mega-retailers. In part this is due to the fact that most large European countries (other than Italy) have one giant supermarket chain, such as Aldi in Germany, Carrefour in France and Dia in Spain, which not only covers the local market but also maintains branches outside of the home country. As a result, a hard bargain is often driven with those suppliers fortunate enough to part of the retailer's supply chain.
As an example, to gain access, Corsini is being increasingly required to supply its bakery products to these giant supermarkets in accordance with often draconian conditions that do not enable the company to develop its own brands. This often means that the company has to narrow the number of its products and to provide many of these products for sale by the retailer itself as a private label product. In so doing, Corsini is placing a fundamental bet that it can ultimately sell its products under its own brands and marks. In the words of the article, private label goods are “a low-margin business, but often a stepping stone to selling branded goods to the same retailer.”
|Sounds Italian -- or French?|
The gatto in the gâteau ...