Does Wegmans carry too much private label?

Through a special arrangement, presented here for discussion is a portion of a current article from Frozen & Refrigerated Buyer magazine.

Recently named America’s best supermarket — again — by Consumer Reports, Wegmans regularly receives accolades, including praise of its devotion to quality private label assortments. Naturally, some national vendors believe there’s just too much of it, thereby limiting selection.

"Their private label is everywhere, and many times there are multiple tiers of private label within one category," reports Don Stuart, managing partner at Cadent Consulting Group. "And the private label always seems to be placed adjacent to the biggest national brand, right at eye level. So they make it easy to buy their brand."

Mr. Stuart admits that over-emphasizing the Wegmans brand could become a weakness at some point in the future, though he doesn’t think it’s there yet.

"There’s such an aura around the Wegmans name and that clearly helps its private label," likewise raves food industry consultant Michael Sansolo. "The store itself is so well done that consumers perceive its private label as top-notch as well."

For the most part, Wegmans is, say vendors, acheiving high standards and consistent quality. It’s also pretty cutting-edge.

Wegmans private label

Source: wegmans.com

"Wegmans has vision," explains one manufacturer. "When they look for new items, they seem to know what the consumer trends will be well ahead of the competition."

For Wegmans, the upside of all that private label is good margins. "But margin isn’t the goal," says John Rand, SVP of retail insights for Kantar Retail’s Market Insights Group. "Branding strength is."

He adds, "Considering the high rate of failure, marginal levels of innovation and duplication of most branded supplier items, it is only surprising that more retailers aren’t as selective as Wegmans [about which national brands it will carry]."

One plus for branded manufacturers that are invited onto the shelf: slotting fees are pretty reasonable, which reflects the chain’s consumer-centric philosophy. They want to sell products they think their shoppers will like, so they try to reduce barriers to entry. But not all manufacturers see it that way.

"If you’re private label, they support you," says one. "If you’re not, not so much. They want [national brand] suppliers to ‘partner’ for very low margins under the guise of savings to the consumer," he explains. Which is fine and dandy if those savings are, indeed, passed along to shoppers. But often, he says, they’re put to margin instead. "Frustrating," he concludes.

Says another, "We have national distribution with many chains, but on a per store basis, they are not even close. We provide very effective promotional programs, but none seem to move the needle [at Wegmans]. They prefer a very low price to move our items, which we cannot support, and cheapen the product."

BrainTrust

"Figure out which national branded items your customers really want—demand even. Then develop private label brands/products that they want even more. John Rand is right (though Dave Nichol said it first): it’s all about brand strength. No offense John, but I prefer Dave’s original words (paraphrased from memory) "...no retailer can differentiate themselves by promoting promiscuously distributed national brands.""

Ben Ball

Senior Vice President, Dechert-Hampe (retired)


Discussion Questions

How does a conventional grocer strike the right balance between private label and national brands? Does Wegmans open itself up to risks with its heavy mix of store brands and more sparse national brand assortments?

Poll

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Zel Bianco
Zel Bianco
8 years ago

While Wegmans may take away some shelf space from national brands in favor of their private label, they still have a wide selection on their shelves. The variety they offer might not even be necessary as Trader Joe’s and the like have taught us that shoppers don’t necessarily need national brands and variety, so long as they trust and value the retailer’s brand.

I understand the supplier’s frustration, but the path to success is simple: create a quality product that shoppers will value and request. This is the new way of the consumer-centric world. If suppliers and retailers can stay true to that philosophy, they will be assured success.

And let’s just all take a moment to be thankful that we now have an incredible amount of shopper data to tell what the customer wants!

Dr. Stephen Needel
Dr. Stephen Needel
8 years ago

It sounds like Wegmans has figured out the right balance. The demand for national brands is less than manufacturers would like to believe, which may account, in part, for the high failure rate of new products.

The question of right balance is an empirical one. We’ve done lots of tests with our VR system looking at mix and location of private label products. If retailers/manufacturers don’t want to spend the money, they can do in-store testing themselves.

Tony Orlando
Tony Orlando
8 years ago

Wegmans does an excellent job at private label, and the margins help create profits for the stores. They are the best at what they do, and the customers are loyal so more power to them. It is the largest selection of private label I have seen, and the upscale PL is very nice. The only PL I think is better is President’s Choice, which we sold in the 1980s when we had Peter J Schmitt as our wholesaler (awesome cookies).

It is exclusive to Canada now, unfortunately, so anyhow, good for Wegmans to push a great PL line which should continue to grow for them.

Ben Ball
Ben Ball
8 years ago

Figure out which national branded items your customers really want—demand even. Then develop private label brands/products that they want even more.

John Rand is right (though Dave Nichol said it first): it’s all about brand strength. No offense John, but I prefer Dave’s original words (paraphrased from memory) “…no retailer can differentiate themselves by promoting promiscuously distributed national brands.”

Camille P. Schuster, Ph.D.
Camille P. Schuster, Ph.D.
8 years ago

Of course there is a risk—the same risk every retailer faces—how to provide a selection of brands that satisfy customers’ needs and wants. Quality, variety of selection, and value need to be balanced when providing consumer choices. Staying in tune with customers and staying in touch with the variety of products offered enables Wegmans to make good choices. This balance needs to be upheld for every decision, every day.

Ryan Mathews
Ryan Mathews
8 years ago

Ah … and here is the real question. Wegmans is many things, but,” … a conventional grocer …,” isn’t one of them. Wegmans is unique and that uniqueness gives it implicit permission to act differently from labor models to—well—private label programs.

As to the second question, let me take a slightly different tact than my good friend Michael Sansolo. True, as he notes, Wegmans has a great brand but I’d argue that that brand halo isn’t the key to the private label program’s success, but rather that it is a symbiotic relationship.

A brand is a promise and, in retailing, goods and services are the proof points of that promise. If the private label consistently fails, that failure will reflect negatively on the brand.

So, given that symbiosis, I’d say Wegmans needs an aggressive private label program to reinforce its brand position. Branded goods manufacturers might disagree, but its pretty tough to argue with sustainable success.

Alan Lipson
Alan Lipson
8 years ago

As others have already noted, it seems that Wegmans has struck a good balance already between their store brands and the national brands. But the more important distinction is that Wegmans is approaching this from the viewpoint that they are their customers’ buying agent, rather than the vendors’ selling agent.

Wegmans understands their customers’ wants, needs and desires and finds the right product mix to satisfy those needs. In addition, they also use that understanding to bring new products to their marketplace that have a better than average chance at being successful.

As long as they continue this focus, they should be able to continue to strike the appropriate balance and not go too far one way or the other.

Andy Casey
Andy Casey
8 years ago

Truth is, the power and appeal of most national brands has been waning for a long time and even for those still preferred by large numbers of customers, their availability at multiple retailers reduces their draw largely to price. The turning point for private label was when retailers began to realize that stressing PL quality rather than price had the potential to be a dramatic point of difference for their stores and one far more difficult for competition to counter than simply matching a promoted price on a national brand. Considering their success, it would seem Wegmans has found the right mix for their customers already.

J. Peter Deeb
J. Peter Deeb
8 years ago

A conventional grocer must find the right strategy and tactics they want to use in the marketplace in which they compete before they can decide on the right balance of brands and store brands. Wegmans has obviously figured theirs out and is executing very well.

Competitors to Wegmans must take a different approach if they want to survive and thrive in the markets in which Wegmans operates. Replicating what Wegmans does would be very difficult for conventional retailers to achieve. Hi-Lo branded promoters, EDLP operators, and no frills businesses all CAN compete IF they do their homework and find an opportunity in their respective markets with consumers.

Howard Davidson
Howard Davidson
8 years ago

The Wegmans shopper is voting loud and clear with their wallets in support of Wegmans assortment strategy. I would suspect that as long as the PL brands more than satisfy shopper expectations from Wegmans in terms of quality and value—while the strong national brands in key categories are still offered—there’s no stopping this train. This is not easily duplicated by “conventional” grocers who are not perceived by their shoppers as offering strong PL options.

Stephen Gauthier
Stephen Gauthier
8 years ago

Wegmans’s private label offerings are exceptional—better in many cases than national brands. They also have the added feature of often being produced and packaged in Canada, enabling them to take advantage of a favorable exchange rate.

Ed Rosenbaum
Ed Rosenbaum
8 years ago

I wonder, if Wegmans was in more areas, would they be able to maintain the same balance? I tend to think the answer would be positive. Wegmans, like Publix and Trader Joe’s, in some ways have their markets figured out well enough to know what is going to sell best in certain areas, and they make sure the shelves are stocked.

Christine Courtwright
Christine Courtwright
8 years ago

Not in the least. This store has been around for a very long time and has always carried its own name brand. After moving away from the Northeast, I have yet to find a store as good as Wegmans. There is not one store in the nation that can compete with the Wegmans brand. I make a trip once a year back North to purchase many of the Wegmans brand foods and bring them back south. If I can’t make it up there, then friends take my order and bring it to me. So, to many of you nay-saying people (who probably don’t even live in the Wegmans chain area) you might want to rethink how the Wegmans shoppers will shop in the future. You are not on the right track.

vic gallese
vic gallese
8 years ago

I think the old term used to be “SKU rationalization” and most of the leaders let the customer vote on which brands they wanted. Trader Joe’s, while almost all private label, still trades up if customers do not want the current offering. Maybe Wegmans can offer the nationals a little cheese with their whine.

David Livingston
David Livingston
8 years ago

I would not second guess any retailer with the sales per unit and sales per square foot that Wegmans achieves.

Paul Stanton
Paul Stanton
8 years ago

No on question number two.

Paul Stanton
Paul Stanton
8 years ago

Zel Bianco’s comment says it all, I agree 1000 percent with it.

CareerVariety
CareerVariety
6 years ago

Quite an old discussion now, but as a consumer living in the heart of Wegmans country, the best thing they have going for them in support of their overabundance of private labels is Tops Market.

I can endure the lack of choices at Wegmans only because I can go next door to a Tops Market where they have an abundance of brand-name products.

For that matter, it doesn’t hurt to also have a Walmart Superstore, Aldi, Trader Joe’s, Costco, BJs and Target grocery all within 12 miles of each other. If there is a brand I prefer over a Wegmans private label, there is my option to buy it.