Where Do Store Brands Go from Here?
By James Tull
Although store brands have been a mainstay in grocery stores for years, two things have bolstered their power on the shelf recently: the recession and a concerted effort by retailers to improve quality.
“There is no question the economy has made a huge contribution to the rise of private label in the last 24 months,” said Jamey Boiter, a nationally recognized brand strategist and brand principal at BOLTgroup in Charlotte, N.C.
Scott MacLennan, Director of Store Brands at STR in Canton, Mass agreed, citing “cost savings” as the primary sales driver of private label goods.
And it couldn’t have happened at a better time. Although consumers have always been
lured to these goods because of their perceived value, they may not have expected to find many private label goods to be on par with a category’s brand leaders in quality, packaging
and presentation.
No more.
“Consumers got a big surprise when they discovered that many of these store brands were high quality and there was no discernable difference between them and the national brands,” said MacLennan.
So where do store brands go from here?
Whether or not retailers can continue riding the crest of the wave, poor economy or otherwise, is still to be determined. And much of that will depend on how store brands are handled.
“The ability of retailers to manage brands has historically has been weak, and has caused consumers to never develop a strong preference or loyalty to private label,” said Boiter. “If retailers treated and marketed their private label brands with the same respect they demand of their national brands, they could create some more permanent preference in certain categories.”
Laura Corser of Cliffstar Corporation in Dunkirk, N.Y. also feels that it’s time for retailers to step it up.
“Retailers need to think and act like a brand with regard to their private label. They also need to prominently and consistently promote their store brand program in terms of value and quality, rather than price alone,” said Corser, senior business manager for the country’s largest provider of private label drinks and juices.
MacLennan sees this happening right now. Retailers are starting to put their sales floor to better use by leveraging premier shelf space, end caps, and the tops of checkouts, to aesthetically display and promote the cross-selling of store brands. And, perhaps in an attempt to allay any hesitancy that customers might still have, retailers are finally providing some private label pizzazz, too.
“Now they want packaging design, innovative materials and colors that pop,” MacLennan said.
Which private label categories are benefiting the most from the economic downturn? Data from The Nielsen Company show that in 2009 private label baby food was the biggest mover, with a year over year growth of 22.3%; frozen pizza and snacks placed second at 20.4%.
“Our quality testing laboratories have seen growth in these categories,” admited MacLennan, “but honestly, we’ve also seen it across nearly all product categories.”
He also says that there are a few slow segments, and retailers are actively analyzing these categories to determine the cause. Investments in QA programs are growing in these areas. “Our sensory laboratory is doing a lot of in home consumer use testing to find out why these categories are lagging.”
Boiter looks for less popular categories of store brands to do well in the future, even when the economy improves. He points to “bridge” and “luxury” brands and products, which less vulnerable to permanent decline.
The analyst also notes the current “down market turn-around” trend as having been around for quite awhile now. This is an occurrence where “higher-income shoppers temporarily buy down market on certain items – including private label – without completely abandoning their favorite brands,” he explained.
MacLennan believes that overall store brand growth will continue, but that such a trend will occur “as long as private label distributors consistently evaluate their products by testing the quality aspects and performance characteristics.”
He is optimistic about shopper perceptions.
“The economy has driven consumers to purchase private brands, but the quality has captured their hearts, minds, and loyalty,” he said. “As consumers shop within one segment and build trust with certain items, they will continue to shop others aisles in the store because of their confidence in private brands.”
Since private label products currently have a stage like never before, said Corser of Cliffstar, it is imperative that brand managers seize the day.
“With all of the focus on store brands, retailers should capitalize on the opportunity to update their labels to reconnect their value and quality positions to the consumer,” she said. “Store brands must be highly visible, and present a consistent message across all types of media.”
Boiter says that managing not only the quality of the products, but also how the brand is manifested at point of sale and out of store, is vital to successful brand building. Private label, he believes, must be built on the compelling truths or pillars of the brand just like national brands, and need to stand for something other than value and price.
“Otherwise,” he warned, the store brand is merely “a commodity with no loyalty.”
MARCH 2010
Market Watch
PLMA Lauds Retailers with ‘Salute to Excellence’
By Lynne Cooke
Outstanding store brand products in food and drink and home and health were spotlighted
by the Private Label Manufacturers Association (PLMA) in its annual Salute to Excellence awards program.
Among the retail chains with multiple awards were A&P, Trader Joe’s Company, Winn-Dixie, Save-a-Lot, Price Chopper Supermarkets, Aldi, and Wakefern Food Corporation (full list is available at www.PLMA2010awards.com).
Nominations for the awards were made by retailers, wholesalers, manufacturers, brokers
and trade suppliers. Products were divided into Food & Drink Awards and Home & Health Awards and then subdivided by category of product, such as appetizers or over-the-counter (OTC) drugs. Products must have been introduced into the marketplace within the preceding
12 months.
Professional testing personnel prepared all products for evaluation by a judging panel. Products were reviewed for concept, packaging, value for money, and taste. Non-food products are judged on concept, innovation, presentation and value for money
All judging panels included consumers pre-screened for knowledge of store brands and past shopping experience. Judging and scoring was done on the same basis as professional panel members. Their views were intended to provide everyday insight and balance to the process.
Loblaw Tests Discount Brands
Loblaw is testing several discount store brands to lure more shoppers, as well as compete against well-entrenched national brands. These “fighter” brands, as some analysts call them, are much like the ones Tesco is using to compete with Wal-Mart’s store brand.
With such names as Bijou (frozen juice), Terra (canned vegetables), Cercle (mayonnaise) and Du Matin (jam), these products aim to look and compete like a name brand. For instance, a large jar of Cercle mayo is priced at $3.49 – more than the chain’s private-label No Name product at $2.59, but less than a smaller jar of Kraft Miracle Whip selling for $4.29.
PL Focus at Family Dollar
Discount chain Family Dollar is aiming to increase its store brand assortment with largely food and other consumables, according to reports.
The company sees an chance to increase consumable private-label sales from today’s levels of 10% of sales to 15% to 20%, according to Kenneth Smith, Family Dollar’s chief financial officer. Family Dollar also wants to serve shoppers with annual incomes above $40,000 better, he added.
