The Agribusiness World Today

Ken Shwedel
Investigador de Agronegocios de Rabobank, México
1 - 5 de Diciembre de 2008

The World

More private labels: We have seen the growing importance of private labels, largely because of both the higher margins that retailers are able to achieve and the ability to use store brands to create chain loyalty. And, of course consumers have come to accept store brands. In the U.S., for example, according to recent Nielsen research “nearly three-quarters (72 percent) of consumers believe store brands are good alternatives to name brands, and 62 percent said they consider store brands as good as name brands”. Now with the economic contraction in a number of countries, we expect that private label brands will grow even faster. That is what we seeing with 7-Eleven, the convenience store retailer. They have decided to speed up their development and launch of more 7-Select private label brand items. They first offered products under the 7-Select brand in 2004. Presently they have 32 items sold under the 7-Select brand. They say that the “sales of 7-Select products are strong, and some items are already outselling the name brands.” Their idea is to come out with an additionally 180 private label grocery items. In general they will be sold for between “10 to 20 percent cheaper than national brands”. At the same they will rebrand their private label water, presently sold as Quality Classic Selection, to the 7-Select brand. As retailers give more emphasis to their private label brands, food manufactures will have to adjust their own strategies, most likely focusing on power brands while even being willing to abandon lesser performing brands.

Cracking down on plastic bags: Concerns about the environment as well as growing problems with waste management is putting increasing pressure on retailers to, at least, limit the use of plastic bags. In the UK, so far, the country’s retailers, looking to be at least one step ahead of regulators, have been taking voluntary measures by agreeing to a 25 percent reduction. In fact, the four largest retailers say that by next Easter they will reduce the number of plastic bags given to consumers by 50 percent. The chains are taking different strategies. Asda has placed the plastic bags “under the control of cashiers who were told to have a conversation with the shopper before handling them over”. Sainsbury gives consumers “a weekly ‘bag reminder’ text message… just before they usually go shopping”. Morrison offers customers cardboard boxes. While in the UK the retailers are taking the lead, in Toronto there is a proposal from the local government to charge consumers a “fee of five cents per plastic bag at the checkout”. Although there is still some resistance, this is not without some precedence, No Frills, the “discount grocery arm of Loblaw” has a flat-fee program in place. In the case of Toronto, grocery retailers aren’t the only target of efforts to reduce plastics. City officials have also set their eyes on disposable coffee cups.

Mexico

Opening the border: That is the proposal of the Secretary of the Economy that would eliminate tariffs in approximately 80 percent of the tariff codes, with an eventual maximum 10 percent tariff on the remaining imports. Behind the proposal is the idea that this will enhance the country’s competitiveness. While we are in general agreement with the concept, with the global economic slowdown we do not consider that this is the best moment for a radical unilateral opening of the economy.