As Private Label Sales Keep Growing,
Brands Will Coupon More
By Jack Grant
It’s no surprise that store brands have benefitted from the economic downturn. Shoppers have discovered that the quality of private label goods – and the lower price – fit their budgets comfortably nowadays.
But as the economy begins to recover, the shift back to brand names isn’t happening as expected. In fact, an ongoing shopper experience study currently underway by The Integer Group and M/A/R/C Research shows that shoppers are definitely buying more private-label store brands than in previous years, and among those who are buying more, three in four say they don’t plan to return to name brands.
“Consumers are discovering many private-label brands are relatively equal in quality, but priced lower than name brands,” said Craig Elston, senior vice president of Insights/Strategy at Integer. “Although the top concern is saving money, consumers also want to feel like they are getting the best value — and to them this means the best quality product for the best price, equals value.”
In food and drug stores, shoppers have always relied on coupons to increase the value of their purchases. But have the sales growth of private label products in tough times prompted makers of national brands to generate more coupons? If so, will that continue?
“There’s an enormous amount of pressure on national brands,” said Suzie Brown, chief marketing officer at Valassis. “Because of necessity, consumers have traded down – if you would – to private label. It is going to be a continuing challenge for branded marketers to bridge that price gap, which is what they tried to do with a coupon.”
Brown acknowledged that private label quality has improved, and believes that consumers
are more satisfied with private label. So the challenge for branded marketers is to either gain that share back that they lost or try to get a new consumer to trade up into a brand from
private label.”
“As CPG marketers faced the pressure of maintaining sales and fending off private label competition in the midst of the worst recession since the Great Depression, they strategically increased their use of coupon promotions in 2009 across all major forms of coupon media,” reported Charles Brown, Vice President of Marketing at NCH Marketing Services.
“Every brand’s circumstances and therefore their strategies are unique, but certainly the macro-level influences of consumer frugality and increased private label competition are drivers in the coupon market,” he said. “They’re intertwined really. Due to the economic downturn, consumers have become more price conscious and promotion sensitive. They stretch their budgets by trading down. But coupons equalize, if not improve, the price point comparison that shoppers are considering. So marketers are distributing them at an even greater rate than they did pre-recession. The trend continues in 2010, with coupon distribution up 14% through the first quarter on top of the growth seen in 2009.”
Consultant James Tenser agrees that the recent step-up in couponing may in some measure be a way that CPG brands are combating the strong showing by own-labels during the recent economic doldrums.
“Coupon promotions offer a face-saving way to drop retail prices temporarily to stimulate shopper demand. They effectively alter the price gap with private label while taking some of the ‘sting’ out for retailers by rewarding them for redemption,” said Tenser, principal with VSN Strategies based in Tucson, Ariz.
For brands to compete for the newly converted and veteran private-label shoppers, they must offer incentives like couponing and loyalty programs to entice the consumer, according to Elston. “If brand names do this, then previous consumers will most likely return, and they can begin to increase awareness and trial amongst those who have typically purchased private label brands.”
Tenser sums up: “Brands that use coupons tactically instead of TPRs or downsizing packages to meet a lower price point will hope to maintain their price image so they can sustain full margin sales later when the economy warms up.”
JUNE 2010
What Are Top Ten Best Practices for Promotion?
By John Karolefski
Increasing store brand sales calls for building innovative marketing strategies. The best way to do that, says Professor Mark Lang of St. Joseph’s University, is to borrow a page from the brand manager’s playbook. In other words, learn how brand management best practices transfer into the promotion of store brand products.
“A good cycle of promotions will assure that private label will maintain gains during the recession,” said Lang recently in a presentation at the annual Food Marketing Institute (FMI) conference and trade show in Las Vegas.
He reviewed the basics of promotion including its common elements and the Top Ten Best Practices. What is the objective all promotions? “Obviously, it’s to increase sales,” he said.
Lang listed the following common elements of a promotion:
- Offer What are you giving? TPR, other?
- Message What are you saying?
- Display Where and how are products presented?
- Delivery In-store (controlled by the retailer) or out of store (controlled by media)
“All of these elements work together to create a promotion,” he said.
Here are Lang’s Top Ten Best Practices:
1. Organizational buy in
2. Focus on target customer (“Who is the subset of the population being targeted?”
The promotion must be built for that target)
3. Don’t promote on price (“You don’t want to habituate on price. It’s a slippery slope.”)
4. Use store brand as a feature item.
5. Partner with national brands (“You can partner and collaborate on retailer-generated
promotions.” Examples include Comet cleaner and Safeway towels, and Nabisco cookies
and Target milk)
6. Cross promote (grocery with fresh foods)
7. Leverage symbolic products
8. Promote solutions (“Multiple executions add up to store loyalty.”)
9. Branded execution (Use integrated marketing for consistency across packaging,
POS, etc.)
10. Mix and match (combine two or three elements in one promotion)
In response to a question from the audience, Lang singled out Wegman’s, Publix and Trader Joe’s as retailers doing an outstanding job promoting store brands.
Sales of store brand products topped $86.4 across the major U.S. retail channels over the past year, according to the latest data compiled by The Nielsen Company for the Private Label Manufacturers Association.
In supermarkets alone, where market share in units reached an historic high of 23.7%, store brands growth outpaced national brands by a spread of 8 basis points and dollar market share also set a new record at 18%. Store brands accounted for 90% of the sales growth in supermarkets, adding $1.5 billion in incremental sales (+2.9%), while national brand sales were virtually flat for the year at +0.1%.
