South Korean convenience stores have long been a part of the country’s quick, fast-changing lifestyle, and are going a step further by producing their own private brands, as reported.
“The private brand business here will continue to grow across all industries, centered on firms with strong distribution channels. South Korea has a relatively low private brand penetration rate compared to other OECD (Organization for Economic Cooperation and Development) countries,” Suh Yong-gu, a professor of marketing at Sookmyung Women’s University, told the new source.
Private-label brands also benefit from a lower price tag, Suh added. 7-Eleven Korea’s introduction of private coffee brand Seven Café is an example of an affordable product that competes with existing brands. The news source notes that Seven Cafe ranked No. 1 in terms of the number of products sold at the chain’s locations this year between July 1 and November 16, which marks the first time a private brand product outperformed established brands sold at 7-Eleven stores. Seven Café began with just 20 vendors in January 2015 and has expanded to more than 4,000 vendors as of November.
Convenience stores are also collaborating with consumer goods manufacturers for added value, notes the news source. For example, South Korean c-store chain CU this year worked with dairy company Seoul Milk to release CU Big Yogurt. Since launching in April, more than 1 million bottles have been sold every month, and the product topped the list of yogurt beverages sold at CU locations, according to the company. CU has about 1,000 different private brand goods on display, which account for about 25% of all products sold at CU stores.
C-store chain GS 25, operated by GS Retail, and instant noodle maker Paldo recently rolled out Omori Kimchi stew ramen, reports the news source, noting that about 9 million units of the Omori Kimchi stew ramen were sold within a year of its release, surpassing sales of Nongshim’s Shin Ramyun.
In South Korea, c-store chains aren’t shy about experimenting with private brand products, even when they’re not food or beverage related. For example, in October 2015, CU teamed with local toy maker Oxford Block to introduce three limited edition toys. At 26,000 won ($22), the toys were sold out within five days of release.
“The rise of private brand products suggests a rosy outlook for convenience retail brands. On the downside, it has cast a cloud over manufacturers of products such as beverages which have to allocate more budget for advertisements and promotions next year,” Kim Tae-hyun, an analyst at IBK Securities, told the news source.
Industry experts look no further than Japan to gauge the future private brands in convenience stores.
“Over the past 10 years, Japan has seen a power shift from manufacturing companies to convenience retail businesses on the back of the latter’s distribution channels. For example, Seven & I Holdings, the operator of 7-Eleven Japan, gains 50% of its net sales from private brand products,” said Han Kook-hee, an analyst at NH Investment and Securities, in a report. “Most leading Japanese manufacturing firms are keen to produce private brand products for convenience store brands.”
