Mildberry brand building solutions

QUIET REVOLUTION IN RUSSIAN RETAIL MARKET

Our client pool has changed drastically in the past three years. Today it includes retail chains alongside national and international brands. They are confidently overtaking the shelf space from independent brands, to fill it in with their labels, which presents the main danger for traditional FMCG players.

The owners of national and international FMCG brands are at risk of missing out on the revolution in Russian retail, if they're still underestimating their prospective competition or if they think that store brands in Russia are low cost products only, with maximum cost cutting and without any chances for making it to medium and premium price segments.

This was one of the popular topics for discussion on 15 February, the Russian Branding Consultancies Association (RBCA) Branding Day, at a prod forum "Marketing and Advertising" (ProdExpo-2019). Mildberry's Strategy Director Alexey Poggenpohl and Creative Director Igor Mospanov were talking about how retailers fight for their customers.

They pointed out that the global store brand market has already moved away from the simplistic labels to full-on brands. Store brands in America, Britain, France, Spain and other countries are being developed as part of comprehensive corporate strategies. The chains keep track of the latest trends among customers, invest in new packaging solutions, the quality of products, the design and communications.

Due to the combined effect from the activity of the overseas retailers their store brands take up 40% to 60% of the overall product offering, while in Russia the share of store brands is at around 7% to 15%.

Such a big difference is a good incentive for the development of store brands in Russia, and store chains are already actively investing in creating full-on brands. As the consumers demand decreases, this strategy seems very lucrative for the retailers, but it is also a serious threat for traditional players.

Retailers have the advantage over independent brands: shelf control, direct contact with consumers, managing big data and quick response. Having analysed consumer trends in different product categories, retail chains can quickly react to the specific demands of their target audience, offering local, niche or specialised brands, or original lines.

And even more opportunities arise from collaborations with manufacturers.

When it's possible to manage the manufacturing process, the marketing side of things and the shelf — that's when noteworthy projects appear.

In 2018, X5 Retail Group and Nesvizh Plant for baby foods created a new type of business. They consolidated their efforts and together managed to bring quite challenging branding strategies to life. Working together with Mildberry agency, the companies launched two brands — "Sarafanovo" and "Verhovye", owned by the plant and the retailer.

In view of the current events, traditional players are now faced with new challenges having to compete on an entirely new playground. It means that the traditional approach to brand development, brand launch and brand strategy has to be revisited. It's crucial to bring back the importance of strategy and high quality expert reviews involved in the creation and management of brands. And this is bad news for FMCG players because it entails additional investment in brands. Forced as it may be, this step is necessary because the stakes are high in the battle with retailers for shelves and customers.