In February 2019, LetterOne Retail (the majority owner of DIA Group) announced its Make DIA a Champion five-year rescue plan to secure the retailer’s future. Prior to this DIA had been facing serious financial difficulties. The Make a DIA a Champion plan is now well underway and is showing impressive results.
In Q3, DIA Brazil’s net sales increased by 20% (in local currency), with a growth of 17.5% in comparable sales. DIA said the performance was the result of its transformation measures, including an improved product assortment and supply chain, and the continued development of its private label offer.
In an exclusive interview, we spoke to Wilhelm Kauth, head of private label for DIA Brazil, to discuss the retailer’s strategy in the market and how private label plays a fundamental role for it.
Can you give a brief overview of Dia’s strategy in Brazil in 2020 and in the short term?
Brazil continues to be a focus point for the group, the market is huge, and we have great expectations to be the fastest growing country of Dia Group in the near future.
Our strategy in 2020 to build upon the growth we established with our delivery partners, which had a far bigger impact than we expected. We also want to find an optimized business model for franchise and own stores.
Dia has partnered with food delivery specialist iFood in Brazil
Source: Linked In, Dia Brasil
In the first half of 2020 you launched around 500 private label products, as a mix of both new and re-designed products. How have customers responded to the brand’s repositioning?
The first customer responses were incredibly positive, especially regarding the packaging, which is almost revolutionary for the Brazilian market.
The packaging is noticeably more vibrant and colourful than before. What was the thinking behind this?
Brazil is a very vibrant, emotionally driven, and diversified market. We wanted to move away from a European, colder, more rational solution to something very Brazilian, very fun…. very bacana (cool).
Our customers should be like an explorer of our shelves, each time they visit they should find something cool.
Source: Dia Brasil
Did you launch products in any new categories?
Yes, we moved into pet food, cosmetics and there will be more in the future. If it’s done right private label products are an option for every category.
Source: Dia Brasil
How is private label being positioned for Dia? Is it to provide value, to differentiate from rivals or meet demand brands currently do not?
Firstly, private label is about quality. In many categories we go beyond the quality of the market leader. So, differentiation should come from quality, innovation, packaging and then price.
The Brazilian market is mostly dominated by just a few brands, so there is lots of space to be different, whilst democratising categories for everyone.
Brazilians are also highly motivated by deals and promotions. Discounters typically follow an EDLP (everyday low prices) pricing strategy, but since the start 2020 we have seen Dia leverage promotional campaigns (e.g. Every Penny Counts) and pushing exclusive deals through the ClubDia app. How key do you think this will be in re-engaging with Brazilian shoppers?
Brazilian shoppers are very promotionally driven, that is a fact, and we will respect that. EDLP is not an option for now. Walmart tried it in Brazil, and it was one of the reasons their operations didn’t work out here.
We also have a very large customer base through the ClubDia app and ClubDia is part of our promotional strategy, as it should be for a modern retailer.
Source: Dia Brasil
Our understanding is that around 95% of your suppliers are Brazil-based. Do you do anything to shout about this to drive customer loyalty i.e. encouraging them to support local?
We already did the first step by switching to our 100% Brazilian inspired packaging, the next step will be to promote local and to build an emotional link between the customer and product/origin. Right now, this is not very common in the Brazilian market.
We were really impressed with Dia’s new, modernised store designs when we visited São Paulo in March. How important has this been to help reposition the brand and does this support the initiatives you are putting in place with private labels?
A modern, practical, and very Brazilian shopping experience is our strategy, not just for our new stores but also for our private label packaging. We want to be recognized as a Brazilian company and a friendly neighbour. Private label is another tool for going even further in this direction.
Source: IGD Research
Lastly, how important is private label to Dia’s wider corporate aims?
Private label is a core strategy of our business model, especially in the Brazilian market where its share is still far behind European and North American numbers. Dia Brazil is the market leader in private label sales, the potential in the market is huge and we´re going to push the bar even higher.
This is part one of a two stage interview. In our next piece we discuss the role of private label, more widely, in Brazil.