Lenta is going to strengthen its market position by expanding its food private labels. As Lebensmittel Zeitung revealed in an interview with Jan Dunning, CEO of the St. Petersburg-based large-format operator, the retailer will focus on developing its standard and premium private label segments to increase customer loyalty. According to the paper, Lenta targets a private label share of 18-20% within the next years, up from currently 12-14%.
At the moment Lenta manages a portfolio of more than 4,000 own brand items in total and plans to add around 900 new food SKUs thanks to the new co-operation with sourcing alliance EMD (European Marketing Distribution). Additionally, the company will extend its private label competence by co-operating with Swedish Axfood in organic and Finnish Kesko in ambient food ranges.
Lenta’s economy label ‘365 dney’ (‘365 days’) shows prominently in its stores, an indication that the retailer sees customer preferences moving towards price-oriented, smaller proximity formats in Russia. Alone for the year 2017, LZ Retailytics expects almost 4,000 additional minimarkets and discounters to open their doors in the country, often drawing traffic from big-box catchment areas.
With Pyaterochka & Co. evolving upmarket, focusing on fresh ranges and quality, Lenta banks on its full product range and one-stop shopping proposition while building a strategic retailer brand for the future. Considering the slight economic upturn in Russia, the focus on quality-oriented, retailer-branded private label lines will contribute to stem the outflow of customers while safeguarding profitability in a price-oriented business model.
Tapping into joint procurement on an international level with the likes of Axfood, Schwarz Group's Kaufland (via EMD) and Kesko will provide the opportunity to build long-lasting value that will be hard to copy. This is also due to the fact that the Russian retail scene to date has kept to itself when it comes to cross-border co-operation.
Combined with plans to bring its loyalty programme to a new level, we see Lenta’s recent step as a further piece of a jigsaw to create a unique retail brand - one that is able to prove that big-box is not doomed yet.
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