The biggest market was the wrong market

A shelf full of jars with somebody else's name on them

Herbs and spices are a small category that behaves like a large one. A jar of oregano costs a few euros, weighs almost nothing, and sits on the shelf for a year. The margins are good, the volumes are modest, and the brand on the lid is very often the supermarket's own.

An 8 to 10 week sprint. One senior analyst and two juniors. Four national markets sized, ten retailers profiled, five suppliers assessed and twenty-eight shelf assortments catalogued product by product.

Our client is a Nordic food company with roughly 1.4 billion euros of turnover and an established branded position in its home markets. It wanted to know whether it could grow by supplying private label herbs and spices to retailers in Western Europe, where it has no shelf presence at all.

That is not a branding question. Private label supply is a business-to-business contract: a retailer specifies the product, the packaging and the price, and the supplier delivers volume against it. Winning one is a matter of production capability and cost, not marketing. Losing one is a matter of somebody already being there.

Four countries were on the table: Germany, the United Kingdom, France and Spain. The internal assumption, reasonable on its face, was that the largest market would be the best place to start.

The headline market size answers a question nobody asked

Every syndicated report will tell you what the herbs and spices market is worth in Germany. That number is the sum of everything sold, and the overwhelming majority of it is branded product made by companies that are not going to hand over their contracts.

A private label supplier cannot sell into the branded share of the market. Sizing the total and then hoping is the most common way this analysis goes wrong.

So the useful number is not the market. It is the private label segment of the market, in value, with its own growth rate, in each country separately. Those splits exist but they have to be assembled, and once assembled they reorder the countries completely.

There is a second difficulty. Private label supply contracts are private. There is no register of who makes a supermarket's own-brand paprika. The answer has to be built from packaging codes, corporate filings, plant locations and the knowledge of people who work in the trade, and it comes out as a well evidenced inference rather than a fact.

The third is that price is the whole negotiation. A retailer will tell a prospective supplier what it pays only at the end of a long courtship. Getting to a defensible price before the first meeting means reading it off the shelf: every product, every pack format, in every relevant chain, converted to a comparable euros per kilogram.

The biggest market is the one you should enter last

Germany is the largest herbs and spices market of the four by a wide margin, worth 889 million euros in 2023 against 443 million for the United Kingdom. It also has the highest consumption per head, tied with Spain at 0.19 kilograms a year. On every headline measure it looks like the obvious place to begin.

Consumption per head is worth pausing on, because it cuts the other way from the market size. The United Kingdom consumes 0.08 kilograms a head, less than half the German and Spanish figure, on a population of similar order. That is not a reason to avoid the country. It is a reason to expect the value to sit in price rather than volume, which turned out to be exactly right.

Split the market in two and the order reverses

Once each market is divided into its branded and private label halves, the ranking that mattered to the client inverts. Germany is 89 per cent branded. The United Kingdom and Spain are two thirds private label.

Germany is the best market to be in five years from now and the worst of the three to enter first. Those are different questions and the client had been treating them as one.

In value terms the private label segment is worth 292 million euros in the United Kingdom, 167 million in Spain, 98 million in Germany and 69 million in France. The market our client was preparing to enter first is the third largest of the four.

The German figure carries a genuine counter-argument and it should be stated. German private label is growing at 8.8 per cent a year, the fastest of the four and nearly double the branded rate in the same country. On a long enough horizon it becomes a serious market. But it is growing quickly from 98 million euros, and a supplier with finite capacity has to choose where to put the first contract.

France was set aside on the evidence rather than on preference. Its category grows more slowly than any of the others at 2.9 per cent, its private label share is small at 19 per cent, and one branded manufacturer holds more than half the market. A new private label supplier entering France would be competing for a small segment inside a slow market against an entrenched incumbent with pricing power.

Six retailers worth a call, and the terms each would set

Ten retailers were profiled across the three markets that survived. Six came through as realistic first approaches, and they are deliberately spread so that the client has an alternative in each country if the first conversation fails on volume or on price.

Two of the six would each require more than 200 tonnes a year, at roughly 9 and 10 million individual units. That is the number the client had to check against its own factory before anything else happened, and it is the reason the study ends with a capability question rather than a pitch.

Price is the other constraint and it is not uniform. The German discounter runs the lowest median spice price of any retailer assessed, at 15.6 euros per kilogram. The Spanish cooperative and the Spanish hypermarket group both sit at a median herb price near 49 euros per kilogram. A supplier that can meet one of those numbers cannot necessarily meet the other, and the study says so rather than averaging them.

The German full-range retailer carries a distribution complication that the others do not. It runs more than 12,000 store locations, which implies tens of distribution centres, and supplying it is a logistics undertaking before it is a manufacturing one.

What the numbers rest on

Every ranking on this page can be rebuilt from the market table in the first finding and the brand and private label split in the second. Where a figure is a model output rather than a measurement, it says so on the exhibit where it appears.

On anonymity. The client is not named. Neither are the ten retailers profiled, the six recommended as approaches, nor the five manufacturers assessed as incumbents. Six of those retailers were identified as targets for a commercial approach the client had not yet made: naming them would disclose the client's intentions and hand the incumbents a warning. Countries and every figure are given in full.