[Image of: RetailWire Logo and Tagline (for print)]

BUSINESS TIPS

ChannelAdvisor:
Online Selling Strategies
RR Donnelley:
In-Store Marketing
LoyaltyOne:
Enriching Customer Relationships
 
[22 comments]

Why do shoppers buy some store brand groceries and not others?

June 26, 2014

While a new survey from Market Force Information finds that private label groceries overall are growing in popularity, dairy still dominates the purchases.

In the survey of more than 6,200 consumers, 60 percent indicated they buy private label dairy most of the time or always, and another 35 percent said they sometimes purchase it. A wide majority (78 percent) indicated their primary grocer offered private label dairy products, 8 percent said their store did not and 14 percent didn't know.

The results were similar to a survey from 2013. Of the 95 percent who bought private label dairy at least somewhat regularly in the 2013 survey, 78 percent said it is because of the price and 48 percent pointed to the good value.

By comparison, private label gains were much lower in other categories:

Cereal: Only 27 percent of respondents said they purchase private label cereal most of the time or always, with 42 percent sometimes buying it and 31 percent never making a purchase. Nearly three-quarters (76 percent) recognized that their local grocer carried private label cereal.

Snacks: Twenty-seven percent report buying private label snacks most of the time or always, while 53 percent sometimes do and 19 percent never do. Sixty-eight percent recognized their primary grocer carries a private label snack brand.

Cleaning products: Twenty-six percent said they opt for private label cleaning products most of the time or always, with 43 percent sometimes doing it and 31 percent never buying. In this category, private label awareness was particularly low, as 39 percent of respondents said they didn't know if their grocer sells its own cleaning products.

Overall, the study revealed that 98 percent of shoppers purchase private label food items or cleaning products at least some of the time, up from 96 percent in 2013.

"While private label purchases in general are trending upwards, there is significant opportunity to capture additional wallet share, particularly in the categories with longer shelf-lives such as cleaning products and cereal," said Janet Eden-Harris, chief marketing officer and SVP of strategy for Market Force. "Shelf promotion is key, as shoppers often report trying a new brand because they noticed it on the shelf."

Discussion Questions:

Why do you think it has been easier for grocers to make private label gains in dairy than other products categories? What must retailers do to improve performance in store brand categories that are not as strong?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Which of the three under-penetrated areas explored in the Market Force Information research has the greatest potential for gains in over the next five years?

Comments:

The answer to this question lies in the consumer's perception of risk and brand awareness. While the survey asked and consumers answered about private label dairy purchase there was no verification that they could identify unaided which products were private label and which were not. Most shoppers believe that there are regulations associated with dairy products and hence downside risk is not associated with private label dairy products.

National brands associated with cereal, snacks and cleaning products are a whole other story. Awareness levels and product expectations are high in terms of taste satisfaction and effectiveness, respectively. That increases the risk factor for selecting private label, and in this case the shopper knows for sure what is private label and what is not.

The opportunity for retailers lies in their recognition of what consumers take into account when they make purchase decisions in the various categories. With that understanding their package or circular messages can help offset the perceived risk.

[Image of: View Braintrust Panelist button]
Joan Treistman, President, The Treistman Group LLC

Advertising is the answer. There are some ads on TV for dairy products but not nearly as many as you see for cereal, snacks and cleaning products. Most consumers do not see any difference in milk, eggs and cheese from national brands to store brands. Most of the items are even made by the national brand companies.

[Image of: View Braintrust Panelist button]
Frank Riso, Principal, Frank Riso Associates, LLC

Dairy lacks national brands who heavily advertise. As a result, consumers do not see much difference between brands and private label. This is not the case with cereal, snacks and cleaning products, where national brands heavily advertise, pay for premium shelf space and heavily promote their products. In some of these categories, despite what retailers say, their products are not as good as the corresponding national brands.

Ms. Eden-Harris is right to suggest that retailers aggressively promote their brands on-shelf. They can also accomplish their goals through circular and mailer advertising.

[Image of: View Braintrust Panelist button]
Max Goldberg, President, Max Goldberg & Associates

Milk is seen as a fungible product, i.e., milk is milk. This perception has been created by all the regulations that control milk production. This creates a halo effect for other private label dairy products. Consumers say, "well, if I drink this private label milk and it's good then the private label sour cream, etc., will also be good."

That is not true for other private label items. They are seen not as commodities but as unique items. The perception is, "I know what Honey Nut Cheerios are like, but I am not too sure about that private label version."

There have been very successful private label or controlled brands created for center store items. The effort put forth is the same as what it takes to create a national brand.

[Image of: View Braintrust Panelist button]
Steve Montgomery, President, b2b Solutions, LLC

In the dairy section, own label, particularly in milk, eggs, etc., has been perceived to be a "brand" equivalent to national brands. These products carry commodity status, thus the customer focus on price.

While food retailers have done a better job of "brandscaping"—good, better, best versus national brands, the key going forward is to position own label as a key differentiator. In essence, the challenge is to think like a brand and act like a retailer. Focusing on unmet or emerging consumer needs with innovative and unique offerings will enable food retailers to use their brands to gain the much-sought differential advantage.

[Image of: View Braintrust Panelist button]
Richard J. George, Ph.D., Professor of Food Marketing, Haub School of Business, Saint Joseph's University

Don't most people assume that private label dairy is made by the local dairy? Iit is here in Atlanta. If so, why pay more when it's the same stuff? That differs from a lot of other categories where the perception is that private label may not be as good as the brand it's emulating.

[Image of: View Braintrust Panelist button]
Dr. Stephen Needel, Managing Partner, Advanced Simulations

Dairy products, particularly milk, are "fresh" in a way that a major national brand from far away has a hard time evoking. It is interesting that Coca-Cola made a serious inroad with Simply Fresh by burying the Coca-Cola source, masterful messaging and a GREAT product in superb, quality packaging. It's a little like Chiquita branding bananas, but Dole has been no slouch on the fresh front, either. National branding of "fresh" products can be done, but not if the traditional message of the existing national brand tries to carry the water. "Oh yeah! 'Tide' spring water!" Procter & Gamble is NOT that kind of stupid.

So the path to a national brand of milk is open, it's just "the road not taken."

[Image of: View Braintrust Panelist button]
Herb Sorensen, Ph.D., Scientific Advisor TNS Global Retail & Shopper, Shopper Scientist LLC

I agree with the comments about milk. What I have seen with cereal and snacks are that these are prices sensitive items. Associated Wholesale Grocers recently did a presentation on the Cost Plus format driving home the fact that stores need to be very price-competitive on cereal and snacks. Therefore I believe the price gap is much narrower between brand name and private label in certain categories. I often see promotions to buy name brand cereal and snacks such as eight boxes for $10 running quite often. With a pantry full of name brand cereal and snacks, it doesn't leave much room for private label at any price.

David Livingston, Principal, DJL Research

It has been easier for grocers to make private label gains in dairy simply because most of the products are commodities where low price is the competitive differentiator. In most other categories, suppliers often provide better products or better services as competitive differentiators, effectively blunting the impact of price as a key (and often the only) competitive differentiator, thereby limiting the growth potential of private label.

If retailers wish to gain share in other categories, they need to be offering better products or better services (where "better" is defined by the consumer) than their branded suppliers. A prospect with low likelihood as the resources required (particularly market research and R&D) to achieve this kind of competitive advantage are on the side of the branded suppliers.

Even within dairy, we have the yogurt category which illustrates this basic principle, where private label share is highly unlikely to grow vs. the many branded entries (i.e., competitively differentiated on the basis of superior product quality in this case).

So, the issue is not really about dairy per se, it's about competitively differentiating on some basis other than price (i.e., product and/or service superiority). It just so happens that there are more commodity products in dairy than most other categories that are viewed by the consumer as commodities. Ergo, generally greater private label success in dairy.

Kevin Price, President, The Market Performance Group, Inc.

I believe DJL has hit this one. The private labels have been squeezed out by a strong promotion strategy from national brands in these categories, to the point where you really have to search for the private label options.

'storewanderer'

On Dasher and Dancer and Prancer and Vixen, on Comet and Cupid and Donner and Blitzen. Everyone who answered this question before I got to it said it all, especially Max Goldberg on national advertising, and Dr. Stephen Needel on local. Exactly my thoughts.

[Image of: View Braintrust Panelist button]
Naomi K. Shapiro, Strategic Market Communications, Upstream Commerce

I can only speak for my family on this subject, but would be interested in hearing from others. I see little difference in "quality" of store label dairy and national brands, therefore the value proposition is a good one for us.

Cereal is at the other end of the spectrum. Private labels have a way to go in taste and shelf life to make the value equation work for us.

I am becoming a household cleaning fan of private label in that we are finding little difference in quality at a great difference in price.

A suggestion would be for retailers to do more national/regional blind tests and promote those results.

'vgallese'

Price and lack of a strong national brand have allowed for better, easier growth in the dairy segment than other categories for private label. Retailers should extend this foray by establishing their branding presence with private-label products into other refrigerated and frozen food sections.

[Image of: View Braintrust Panelist button]
Kai Clarke, President, Kowa Optimed, Inc.

Precisely what others have said: milk, eggs, cheese, even bottled water—all of the private label products that sell well—are commodities. Cereal, soda—not so much. Otherwise there wouldn't be a Coke and a Pepsi and ardent fans of each.

On the non-commodity items, price-sensitive cherry pickers know that the name brands are not only often better quality, but a better deal every time—there are sales, coupons, 2-for-1 deals, etc. that bring the price far below the EDLP store brands. Why settle for "Toasty O's" when you get Cheerios for next to nothing?

If private labels hope to make inroads in categories like cereal, they need to do more than make inferior knockoffs that end up being more expensive anyway. Look at Target's Market Pantry cereal—not only do many come in unique flavors, but they're packaged in stiff cardboard canisters with airtight plastic lids. That's a little innovation you don't get from Kellogg or General Mills, and there are many shoppers who are willing to forego the deals on the name brands as a result.

Bill Clarke, Publisher, CouponsInTheNews.com

"Why do you think it has been easier for grocers to make private label gains in dairy than other products categories?"

Maybe because all milk and sour cream and butter tastes pretty much exactly the same to people, and nothing else out there is as good as a real Oreo or Hellman's/Best mayo? Duh.

'Liatt'

Yes, I agree (completely) with regard to the lack of "national" dairy brands; and there's no mystery why—dairy is a locally sourced product.

I disagree though with the idea that dairy is "commoditized." Perhaps people are showing their age (i.e. they're too far removed form the milk guzzling days of childhood) but there definitely ARE differences among different brands of milk, etc. OTOH, cereal? Maybe I'm just a cereal offender in this regard, but if there's something that IS commoditized, I would think it's a box of cornflakes...its poor showing is a mystery.

'notcom'

Dairy has long been a stronghold for retailers in their own brands. Lack of really strong national and in some cases regional brands have given retailers the ability to make inroads over the years. Many dairy products are regulated by states and consumers believe that branded dairy is no different than private label in taste and quality.

Retailers need to work hard to build categories like snacks, cereals and cleaning products. These categories have strong national brands with deep advertising pockets and most retailers are content to only offer their brands as lower-priced alternatives. In order to build these categories retailers must mine their shopper data to identify potential consumers, target them with promotions and find a way to induce trial in these categories.

Shelf presence and price will only be effective when the consumer trusts the product. That takes some marketing on the part of the retailer.

[Image of: View Braintrust Panelist button]
J. Peter Deeb, Managing Partner, Deeb MacDonald & Associates, L.L.C.

This is more of a U.S. statement than in other countries. If you look at certain European and Asian countries, you will see far greater penetration of PL products in all categories than in the U.S.

Bottom line, promote, sample and merchandise PL products alongside national brands. Price competitively, however, not too low. Also, investigate multiple quality levels of PL brands. This has literally worked well for decades for some retailers.

[Image of: View Braintrust Panelist button]
Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

Success in PL depends on a number of very important factors. Retailers that have addressed these key ingredients have realized tremendous success with their PL assortment:

  1. Know your customer and what they want.
  2. Define the purpose, position and comparables for the brand and be consistent in what you stand for and the quality of product and labeling.
  3. Provide consumers with the opportunity to trial the PL products.
  4. Go overboard on your assurance of quality and consistency as well as brand promise.
  5. Don't just copy, bring true innovation in packaging and product to your customers.
  6. Think and market like a brand. Advertise and invest in marketing your efforts to offer a differentiated value to your consumers.

Consider HEB, Wegmans and Costco. Think of their brands and what they stand for. Customers at Costco, for example know the quality of Kirkland Signature and trust the brand to the point that they will buy without trial because they know what the brand stands for and how Costco stands behind every item. Grocers have an opportunity to blitz the sales floor with PL products and in most cases, PL for a Grocer can be found in nearly every center store category. Non-grocery retailers can be just as successful if they follow these 6 keys to success. However, trip on any one or more of these 6 and it really doesn't matter what type of retailer you are, you will struggle with adoption and ultimately success with PL.

Kevin Sterneckert, CMO, OrderDynamics

Dairy and egg products are fresh and that resonates very highly for trust with consumers—products are made locally and that matters for refrigerated items. In other categories, where store brands compete against heavily advertised and promoted products, the best approach is to get consumers to try the product, either through in store sampling, retailer coupons, and advertising to try the brand. For items like cereals, where there are familiar family favorites, experiencing the product is very important to drive selection.

[Image of: View Braintrust Panelist button]
Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

From my point of view as a consumer, milk, for example, has the same taste whether it is private label or brand name. It comes from a cow, regardless. Maybe because it is easier for consumers to understand dairy ingredients and its production process, it's harder for grocers to create differentiation (i.e. my cow's cheese tastes better than your cow's cheese).

And as a consumer (not as a marketing content writer) that may be a good thing.

Pamela DeLoatch, Owner, B2B Storytelling

In Western Europe where store brand share of basket is nearly double that of the US, shoppers expect and get comparably priced private label products that are BETTER THAN the leading "national" brand. Product quality and packaging are key differentiators between retailers. And that's happening at all tiers, from value to specialty.

In the US we see a number of retailers and PL manufactures who are embracing the "better than" approach and are thriving. They are innovating items and packaging that fill unmet needs the national brands are overlooking.

Sadly, too many US retailers are still commoditizing—not differentiating—their store brand offerings. The October 2013 issue of Consumer Reports evaluated 50+ store brand items and found extreme variations in quality from category to category and retailer to retailer. There are indeed some great PL products available here, but still far too many disappoint.

Greg Mueth, VP, Account Planning & Shopper Marketing, GROUP360 Worldwide

Search RetailWire
Follow Us...
[Image of:  Twitter Icon] [Image of:  Facebook Icon] [Image of:  LinkedIn Icon] [Image of:  RSS Icon]

RetailWire's
Getting Started video!

View this quick tutorial and learn all the essentials...

RetailWire Newsletters