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Research Reveals Untapped Profits in Authentic Italian Store Brands
Italian food lovers know quality ingredients when they taste them or cook with them, and can easily detect imposters. Most U.S. grocery stores have not yet captured this important and growing customer base that likely shops at specialty stores and Italian markets to find authentic Italian products.
11/5/2009
Source:
Store Brands Decisions
Italian food lovers know quality ingredients when they taste them or cook with them, and can easily detect imposters. Most U.S. grocery stores have not yet captured this important and growing customer base that likely shops at specialty stores and Italian markets to find authentic Italian products.
In fact, shoppers are looking for authentic private label Italian products, but few retailers to date actually offer it, according to research conducted by Wisner Marketing Group, underwritten by the Italian Trade Commission (ITC), titled “The Opportunity for Italian Imports in the U.S. Private Label Market.”
Without question, Italian food is a favorite, with 89 percent of 524 shoppers interviewed for the study claiming it is either their favorite (59 percent) or that they like it (30 percent). Most importantly, nearly two-thirds of shoppers said if authentic Italian private label items were offered at their store, they would likely buy them, according to Jim Wisner, president of the research and consulting company.
“There certainly is an unfilled desire among consumer for more authentic Italian products,” said Pasquale Bova, ITC's Trade Commissioner, Chicago. “Authenticity in general – whether it is the environment, organic products, clean labels – is an underlying movement and there is genuine interest in things that are produced more simply and better.”
America’s love affair with recreational cooking – evidenced by the popularity of the Food Channel – and its particular affinity to Italian chefs such as Mario Batali and Giada De Laurentis -– feeds the desire and educates consumers about the differences between authentic Italian ingredients and faux Italian products.
“Even though these days it is chic to be cheap, in spite of the economy, the market for some of these premium products is up,” Bova said. “Instead of going out to eat, people are trying new recipes at home and spending the money on authentic Italian ingredients and other ethnic fare.”
Nearly half of shoppers (47 percent) said they wished their stores carried more authentic Italian products (made in Italy), and an overwhelming majority (70 percent) said it is worth paying more for authentic products some or most of the time. In fact, nearly two-thirds said they were willing to pay an additional 25 percent more for an authentic Italian product, which means retailers can command higher prices and profits for these items versus “commodity brands” or traditional domestic private label offerings, according to the research.
Only a handful of retailers have authentic Italian store brands, such as Wegmans’ Italian Classics, Harris Teeter’s H.T. Traders Authentic Italian, and most recently A&P’s Via Roma brands. Overall, most retailers “are literally missing the boat on this opportunity,” Bova said. (For more on A&P’s Via Roma see “A&P's High Hopes for Premium Store Brands.”)
“Retailers who offer a little better product in their own brands are enjoying a better sales,” he added. “Discriminating consumers buy these products and they can tell the difference.”
Building an authentic Italian private label programs can drive new profits and improve customer loyalty. Although many retailers have Italian private label products, they are not using products imported from Italy. For example, if a retailer wants to offer parmesan cheese, discerning and knowledgeable customers “know that Parmigiano Reggiano is available from only one place in the world,” said Patrick Capriati, ITC's Senior Trade Promotion Officer, Chicago. “While there are many other products on the market that are good, they are not nearly as good as the authentic product.”
This is true of many Italian categories such as olive oil, balsamic vinegars and pasta. Other authentic Italian private label category opportunities include specialty sauces and condiments, cured meats, refrigerated and frozen prepared foods and bakery items such as biscotti, bread sticks and bruschetta or crostini rounds.
“Customers who want authentic Italian are going to specialty stores to get it,” Capriati said. “Most retailers have not captured this customer, and it is not the same customer that is purchasing mainstream domestic Italian products.”
Some of the challenges of developing an authentic store brand product line could be supply chain logistics, but Italian manufacturers – with the support of the Italian Trade Commission – are working together to offer cost effective solutions for U.S. retailers and distributors.
Another opportunity to partner with U.S. based firms, is to use bright stock, which works best for canned and bottled products. For example, multiple retailers may be buying the same private label spec of olive oil, but instead of labeling it in Italy the product can be shipped here in bottles in bulk without labels. Manufacturers and distributors here label the items and consolidate orders already going out to those retailers, Wisner explained. “Another advantage is purchasing through cooperatives such as Topco,” he added. “Their ability to consolidate purchasing for multiple retailers creates considerable value.”
“If you have 50 retailers talking to 50 manufacturer in Italy the complexity is exponential,” Bova said. “Every time you can simplify a piece of the business and reduce costs, it gets much easier.”
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