Frozen Private Label Sales in Germany Soar
at Nation’s Deep Discount Outlets
By TED SHOEMAKER, QFFI Correspondent

Viva Vital is the healthy foods store brand at Plus, with entrees like low-fat chicken fillets.

Gnocchi bowl meal with strips of chicken in sour cream, onions and spices is part of the BioBio organic line from the Plus discount supermarket chain in Germany.

Outlets Economy retailers like Aldi, Plus and Lidl have long undercut name brands, but not just with cheap offerings. Their innovative lines include relatively upscale, healthy and organic products.

An entire hall at last May’s Private Label Manufacturers Association exhibition in Amsterdam was, for the first time, given over to frozen and chilled foods. This reflects the fact that the all-important discount supermarkets, principal purveyors of private labels, have gone headlong into frozen foods.

A number of German frozen food producers, including Freiberger, Agrarfrost, Schne-Frost, Schroeder and Hasa, were represented at the fair. Production of private labels, or store brands, is now a big part of their business. The consumer likes them mainly because of price, which can be way below branded products.

In Germany, for example, frozen pizza ranges between 1.35 and 1.60 euros at the discounters, while the main branded products are typically offered at between 2.30 and 2.60. But the private labels have other appeals as well. They are also getting a reputation for convenience, quality and innovation – to the point where the discounters even consider them a carrier of their image.

“Private label products,” said a Nielsen report, “have evolved into strong brands in their own right, in many cases challenging the once dominant manufacturer brands in the premium space.”

And that premium space definitely includes the freezer case. Aldi, Germany’s biggest discounter with EUR 22 billion in annual sales, has a large range of frozen products under its “Eskimo” label: everything from breaded Alaska salmon fillets to baguettes and creamed spinach.

The Plus discount chain, recently taken over by Edeka from Tengelmann, has had great success all over the store with special brand names for its healthy and organic products, Viva Vital and BioBio, respectively. Frozen Viva Vital offerings include chicken breast fillets, which are promoted as being very low in fat. Frozen BioBio products include a Gnocchi Plate with strips of chicken, the ingredient list of which is full of asterisks. Patrons are assured that not only the gnocchi but also the sour cream, onions and even the spices are organically produced.

As these examples indicate, the private labels are following most of the trends that are found also in the name brands. Healthy and organic products are becoming an important part of the discount market, though not all organic farmers are happy at this development. They feel that discounted products hurt their image. Other trends are toward convenience, value-added fish, snacks, ethnic foods and spiciness. The discounters are even getting into high value items, charging more than comparable standard fare, but “discounting” them in comparison to the regular supermarkets.

Nielsen reports that the demand for frozen private labels increased 12% in 2006 to account for nearly 37% of all house brands. The agency says that 81% of German households now buy frozen food from a discounter an average of 8.3 times in a six-month period.

Aldi’s Steam Cuisine line includes microwave meals like Sweet and Sour Chicken with rice and vegetables.

These private labels present little challenge to the well established top brands, which according to Nielsen are secure in the market. But it’s a different story with the lesser brands, which are feeling competitive heat from the private labels. In the frozen pizza market, for example, there are Oetker and Wagner at the top, the private labels at the bottom, and very little in the middle.

Pizza, as in conventional stores, is the biggest frozen seller at the discounters. Aldi pizzas, like everything else, are strictly private label, though Lidl, Plus and Penny carry discounted name brands along with their no names. Multipacks of two and three standard-size pizzas go over well in the discount stores.

Convenience, especially microwaveable products, is a big trend. Most of the dishes are pastas, as represented by the Penne Gorgonzola with spinach, under the brand name Mamma Pasta, being offered Rewe’s discount subsidiary, Penny Markt. This represents the ultimate in convenience, since the product usually comes in a disposable bowl, eliminating the need for dishwashing.

Other offerings also come microwaveable with a disposable dish. Aldi has its “Steam Cuisine” line, offering, among others, Sweet and Sour Chicken with rice and vegetables. The bowl is sealed with a clear plastic cover that is vented to let steam escape during microwave oven preparation. Not everything is microwaveable, but Aldi suggests that some of its frozen products be initially thawed in the microwave and then prepared in less time in the pan or oven.

Value-added fish, especially seasoned fillets, is on a roll because it has no less than three peak selling periods: Christmas, Easter and the summer barbeque grilling season. Lidl, the second largest discounter with a 13 billion euro turnover, is on the sustainable fisheries bandwagon. It has introduced a range of seven frozen items and one smoked fish product carrying the Marine Stewardship Council’s (MSC) bold blue eco-label to help customers make an environmentally-correct choice. Lidl, however, has also run afoul of environmentalists, who forced it to stop selling shark steaks.

Bordelaise is a gourmet fish fillet line produced for Aldi by Almare Seafood.

Aldi offers a gourmet fish fillet, “Bordelaise,” in line with both the high value and fish trends, while Gourmet Snacks from Plus combine, as the name makes clear, the high value and snack trends. Filled Dough Jackets, distributed in 32-piece, 512-gram boxes sold under the brand name “Heat and Eat,” are offered with four different fillings: eight each of ricotta cheese with spinach, tomato and a “Pueblo” mixture with lots of red pepper.

The discounters are also not beneath something else generally considered high value: game. The Penny Markt carries Hirsch-Geschnetzeltes (deer strips), produced by Krause Meat of Lüneburg.

Pizza and pasta are, of course, the classic ethnic dishes. Oriental and Tex-Mex have also been offered for some time, but new ideas are always sought. Tiefkühlbackwaren Einhaus of Gelsenkirchen is supplying the discount stores with a spicy Turkish dish of tomato, hamburger, onions and red pepper under the brand name Lahmacun.

The ethnic trend, not to mention the snack trend, is also in high profile with the Chinese spring rolls that Aldi presents in four-packs under the brand name Daloon. Another trend is spiced-up products, as reflected by Penny’s Ravioli Diavolo, which is eight percent red pepper.

Private labels are financially attractive to retailers for two reasons. For one thing they aren’t offered by competitors, so the stores are free to price them as they wish. For another the retailer can switch the brand to another producer if it wishes, meaning that the suppliers have to compete with one another for the business.

Nielsen predicted that, “with retailers mounting aggressive advertising campaigns to promote their proprietary lines, the differentiation between private label and manufacturer brands will continue to fade and consumer acceptance will continue to rise.”

Costa Meeresspezialitäten GmbH & Co. KG, Emden, a leading German manufacturer of frozen fish and seafood for the retail market, became part of the Rheine-based apetito group effective Nov. 1.

For apetito, it means a bigger stake in seafood retailing. For Dr. Oetker, which has owned Costa since 1990, it means another step towards concentration on the group’s strategic core markets for shelf stable goods, frozen pizza and chilled dairy products. Costa employs 80 people at two locations (Emden and Bielefeld) and manufacturers a range of about 80 products sold under the Costa brand name.

“With acquisition of the Costa premium brand, we have made an important step towards fostering our branded business, and expect high growth potential in the fish meals and fish preparations segments,” said Andres Ruff, ceo of apetito AG.

In order to guarantee a smooth transition, the parties agreed to develop the Costa business together for a while. “For bringing together apetito and Costa and for developing the branded business, the know-how of the Costa employees is crucial,” Ruff said.