BrainTrust Query: Brand as They Say, Not as They Do

Discussion
Sep 27, 2011
Carol Spieckerman

Among the confident statistics peppered throughout last week’s Private Brand Movement conference in Chicago was that, according to Nielsen, 70 percent of shoppers believe that store brands are as good as or better than name brands, while only 31 percent say that name brands are worth the extra price. These and other data points punctuated the gains in consumer perception that private brands have made even since last year’s conference.

According to Alex Petrov, Safeway’s vice president of consumer brands, with private brand market share sitting at 23.5 percent, the gap between shoppers’ perception and actions is problematic. In his presentation, "Innovation: Transforming the Private Label Business Model," he called this the "say-do dichotomy" and outlined how Safeway is closing the gap.

Safeway’s new innovation model fuses the best of CPG and retail brand-building since, according to Mr. Petrov, each model possesses unique strengths and challenges.

He cited three CPG strengths – all of which are transferrable to the retail brand-building model:

  1. Incredible data-mining capabilities focused on consumers and shoppers
  2. An unquestionable commitment to quality
  3. A passion for branding.

CPG and retail innovation models also diverge in two key areas, presenting both challenges and opportunities.

Business Objectives – CPG companies are seeking share of category and saying "pick my brand," while retailers strive to increase shopper trips and basket size, saying "pick my store."

Business Systems and Assets – CPG companies rely on vertical integration and specialized assets, from factories to sales, distribution, and marketing, whereas retailers must operate across hundreds of categories. Retailers lack product focus and insight and as a result, they risk becoming jacks of all trades and masters of none when developing private brands.

Mr. Petrov sees retailers’ sweet spot as their ability to execute across the entire store and be agnostic to categories, brands and target segments, which he calls "horizontal innovation." Safeway leverages horizontal innovation to arrive at product and brand solutions to unmet consumer needs without any bias toward particular categories or brands.

He cited Safeway’s multi-category lifestyle brands, O Organics and Eating Right, as the ultimate examples of horizontal innovation. In 2005, Safeway began developing solutions to the high expense and lack of accessibility of organic products but, instead of knocking off existing organic product lines, it worked closely with its supplier network to create its own "organic answer."

Safeway’s Signature soup program illustrates how retailers can differentiate by owning merchandising innovation. Safeway developed a dual-usage soup cart that features a hot soup station on the front as a destination for the lunch crowd and ready-to-heat versions on the back of the cart for the take-home customer. The stations not only address different need states, but also serve as a testing and sampling vehicle for new flavors. The innovation went a step beyond product creation, moving into product delivery.

Mr. Petrov’s presentation had me wondering why more retailers aren’t taking advantage of the assets and environments that they already control and tapping into consumers’ growing penchant for private brands in the process.

Discussion Questions: What are the unique assets retailers should leverage to build private label? What should be the response of brands?

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

14 Comments on "BrainTrust Query: Brand as They Say, Not as They Do"


Sort by:   newest | oldest | most voted
Doron Levy
Guest
Doron Levy
7 years 10 months ago

Take a lesson from President’s Choice. You need to bust the category and be the sole product on the shelf in certain areas. I don’t even think you can find any other brands of frozen meals in the case. The only way that brands can combat this is the same way. Bust the category with something new and unique and milk it for what it’s worth.

We talked about labeling a few weeks back and that is one area that needs drastic improvement. Plain white boxes and bottle clones are no longer sufficient to build market share. When it comes to private label, it really comes down to the label itself.

Ian Percy
Guest
7 years 10 months ago

I’m wondering if there’s any way to integrate private branding with “buy local.”

I think we’re going to see the “local” motivational factor grow faster than private branding. It makes food personal. Private branding doesn’t do that — at least not yet.

Charlie Moro
Guest
Charlie Moro
7 years 10 months ago

The store environment is a great selling point for creating a private label customer. The experience of being in a Wegmans for example and feeling all of the attributes of that shopping experience lends to the credibility to a Wegmans brand. Same for a ShopRite where you feel as a shopping experience that you are receiving value or a Trader Joe’s where the uniqueness of the experience verses the total shopping cart solution all add to credibility. The reverse is also true for those retailers who cannot establish a clear link to the “reason” for shopping their stores that their private labels become as vague as themselves as a secondary shopping trip rather than a destination.

Roger Saunders
Guest
7 years 10 months ago

Just as CPG concerns and retailers have “business objectives” and “business systems and assets” that are unique, so too does the consumer.

When the customer — who both CPG and retailers share, comes to the store, marketers would do well to remember the leading “objectives” and “systems and assets” that the consumer uses when shopping for groceries.

Based on the Consumer Intentions & Actions (CIA) survey, the consumer consistently ranks their reasons for shopping at a location as:

1. Location
2. Price
3. Selection
4. Quality
5. Produce
6. One-Stop Shopping
7. Service
8. Meat / Seafood
9. Store Layout
10. Store Appearance

Find the way to work with the consumers’ needs on each of these points, and marketers on both sides of desk can uncover winning strategies. Putting the innovative thinking of both retailer and manufacturer together will lead to stronger consumer satisfaction, as well as a more powerful top and bottom line.

Gene Hoffman
Guest
Gene Hoffman
7 years 10 months ago

We might begin by recognizing 1) that private labels are linked directly to the perceived quality of the store … and 2) that retailers have the ability to create or have created equal or better private label.

The retailer should say, “If you enjoy the ambiance in my store, then you will love the quality of my store brands.” If the retailer can’t say that, they lose the true dynamic values of their private labels. So: retailers, make sure your store, which is your commanding brand, is a magical place. Then translate that feeling in the promotion of your PL.

National brands should build upon the trust that has been afforded them down through the years. To wit: “Your mother trusted our brand down through the years and took good care of you by giving you the very best. You, too, can place your trust in us today.”

Roy White
Guest
Roy White
7 years 10 months ago

Back to basics: good pricing, right mix, helpful and courteous associates, in-stock and good locations are the assets needed by a retailer to build its brand.

Ed Rosenbaum
Guest
7 years 10 months ago

The economic timing is right for building on private label branding. The public has become more price conscious, except for those buying at specialty stores like a Trader Joe’s or Whole Foods. Maximizing the private label brands is the right tool at the right time. The two issues are going to be pricing and being comparable to brand-name products. If those are met, the store brand will have the upper hand for now. As location is important in real estate, timing is important in this.

Art Williams
Guest
Art Williams
7 years 10 months ago

Horizontal innovation can be very powerful if done correctly, but most retailers aren’t willing to make the commitment required. A retailer that I believe does it right is Costco. First, and I think most important, is their insistence on the quality of their private label products. It doesn’t matter how great the labels are or how well integrated into the total store they are if the quality isn’t there. Then they have to be priced competitively with other retailers. Once the quality and price issues are in place, the labels become important. If executed correctly, the retailer’s label can become a “brand” in its own right and of course, is available only there.

Another successful example is Aldi. They have bet their future on private label and are executing it extremely well. Excellent quality, strong pricing, and consistent performance have made their label fly off the shelves.

Gene Detroyer
Guest
7 years 10 months ago

Once consumers realize that private brands are equal to, if not better in quality than CPG products, there is no more reason for being for the traditional CPG marketing. The key is that the retailer must ensure the quality and further target for better quality.

The retailers have hundreds of millions of dollars to spend on quality that they don’t have to spend on advertising.

Cathy Hotka
Guest
7 years 10 months ago

Safeway has put new packaging on some of its store brands, giving cereals, for instance, a perky and classy new look. Now it’s not embarrassing to save money, and everyone wins.

Adrian Weidmann
Guest
7 years 10 months ago

While designing in-store media initiatives along with their supporting business models for retailers, the conflicting business objectives between retailer and brand vendors seems to always appear. The brands want direct access to their customers and the retail space whereas the retailer wants to be the trusted brand and claims ownership of their customers. Retailers want all the brand marketing funds to go into a neutral marketing and merchandising bucket while the brands want direct accountability of those funds. A number of retailers have attempted to rationalize in-store media initiatives by allocating brand funds to promote and support the retailer’s private label brands.

Unlike brands, retailers have an opportunity to integrate a broad palette of goods and services into private label offerings. Retailers can leverage the interest in supporting local products and services into a valued community. In order for this to succeed, retailers need to become innovative marketers. They need to align their efforts around the broader customer community rather than the product(s).

Richard J. George, Ph.D.
Guest
7 years 10 months ago

Stores need to realize that brands are more than items on the shelf, whether those items are national or own brands. The store is a brand and as such needs to consider everything it does to communicate and reinforce its brand positioning to customers.

To that end, retailers needs to develop unique positions that it can reinforce with its own label of brands. For example, a store could be the destination for breakfast occasions, offering store brand solutions, products, recipes, combination purchases, etc. that give legitimacy to its claim. Another store might become the party solution, offering a wide variety of goods and services (catering, invitations, wine recommendations, etc.) which prominently feature store brands and solutions.

It’s not about private label; it’s about store positioning, namely, using private label to establish and reinforce the store’s proclaimed competitive advantage.

Matthew Keylock
Guest
Matthew Keylock
7 years 10 months ago
I would say the retailer now has more power when it comes to data mining and insight. The capabilities they have at their fingertips through their data are not available as readily for CPGs. These capabilities not only provide a higher resolution for finding opportunities, but by connecting research, behavioral data and testing at an individual consumer/shopper level, retailers can align the innovation chain in a way that CPGs can’t. The US is following some of the European Markets in Private Brand development where there are many great examples of retail successes such as Tesco “Finest” or those at Waitrose in the UK. CPGs should seek to use consistent and granular data throughout their innovation chain like retailers now can. They should also focus in three other areas: (1) strive for new disruptive innovations (e.g. Swiffer) that change the category and customer perceived needs and (2) sophisticated marketing for their brands that is increasingly personalized (3) Incorporating the concept of loyalty into their approaches and “rewarding the behaviors they seek.” Brand success will be determined… Read more »
John Karolefski
Guest
7 years 10 months ago

To grow sales, store brands should continue to focus on niche categories such as ethnic, organic, eco-friendly, etc, and build a loyal shopper following. Retailers should do more in-store sampling because not nearly enough is done for their store brands. How about a store-brand coupon in the circular?

wpDiscuz

Take Our Instant Poll

Is horizontal innovation or vertical innovation a more productive way to bring private label products to the marketplace?

View Results

Loading ... Loading ...