CPGmatters: Organic Products Change Perception of Store Brands

Discussion
Jun 25, 2009
Avatar

By Lynne Cooke

Through a special
arrangement, presented here for discussion is an excerpt of a current
article from the monthly e-zine, CPGmatters.

The introduction of high quality, store-brand
organic products has changed consumer perceptions of private label grocery
brands, according to results of a J.D. Power and Associates’ Private Label
Industry Report.

In particular, consumer attitudes about many
store brands have shifted. Rather than being considered low-quality with
bland packaging, private label brands are being thought of as unique and
as having quality commensurate with that of traditional brands.

The report, conducted by the firm’s Web Intelligence
Division, found that the amount of online conversation about private label
products has increased steadily during the past year. Volume peaked last
fall as the economic crisis was unfolding.

While private label pricing motivates consumers,
the quality and flavor of organic products drive the highest levels of
positive sentiment. Private label food products from Safeway, Trader Joe’s
and Whole Foods received an especially high level of recommendations compared
with other private label brands, and are seen as being particularly healthful
and flavorful.

The report, which was previewed at the IRI
CPG Summit in Las Vegas in February, also found that, among retailers included
in the report, Safeway and Whole Foods get consumer raves overall for their
mix of private label brands and categories.

“It’s clear that consumers have begun to discard
the idea that private label brands are of lower quality than traditional
brands, which provides an opportunity for retailers to differentiate themselves
with high quality, reasonably priced store brands,” said Janet Eden-Harris,
vice president of J.D. Power and Associates Web Intelligence Division.

Appreciation for non-food private label products
such as diapers, paper products and cleaning supplies was not as high as
that of food products. The report implied that these products are perceived
as commodities, and were purchased for their lower cost rather than as
a favored brand by itself.

“While retailers continue to gain ground with
their private label products, there is still enormous opportunity for consumer
packaged goods manufacturers,” said Ms. Eden-Harris. “Innovation is still
a big growth driver, and CPG companies still lead in that regard. New and
differentiated products that are priced to value will win market share.”

Discussion Questions:
How has the introduction of upscale, organic products changed perceptions
of private label food products? In what other ways can retailers be
improving PL food’s reputation? Is there a similar opportunity in non-food
categories?

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

12 Comments on "CPGmatters: Organic Products Change Perception of Store Brands"


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

If you look closely at the organics category for most major chains, you will see that private label actually dwarfs regional and national brands. In some brands, only the private label is available. Shelf exclusivity and major improvements in branding and labeling is what is driving the category. Retailers have come to understand the margin importance of PL and are smart chains are investing heavily into it. Notables for organics are Shopper’s Drug Mart’s Nativa line, Safeway’s O, Loblaws President’s Choice Organics and Publix’s stand-alone GreenWise Markets.

Max Goldberg
Guest
11 years 10 months ago

The introduction of upscale organic products has helped the perception of private-label food products. Trader Joe’s has built its product reputation on private label. Consumers trust the Trader Joe’s brand, and when combined with the quirky nature of the TJ stores and friendly employees, TJ’s has become a powerhouse brand in its own right.

That is not to say that opportunities do not still exist for brand name manufacturers. As Ms. Eden-Harris said, “…new products priced to value will win market share,” and no one is better at innovation than brand manufacturers. In fact, it would be wise for brands to focus on innovation, rather than line extensions.

Gene Hoffman
Guest
Gene Hoffman
11 years 10 months ago

Whether private label or national brand, many products live on the reputation of the reputation consumers think they’ve made. For generations this has been an advantage for CPG products. While organic private label might be improving PL’s reputation so are the new, better and even quirky innovations that some non-traditional retailers are now bring forth to the marketplace.

This is a growing tide against which NBs will increasingly be swimming. The creativity and quality that magnetizes consumers are the growing key. And so this question arises–Who will be the most innovative, perceptive and agile swimmers in tomorrow’s marketplace? Place your bets!

Randy Hofbauer
Guest
Randy Hofbauer
11 years 10 months ago

At the All Things Organic show in Chicago last week, I was in a seminar on the ups and downs of starting an organic private label brand. A speaker made an interesting point that when you make a store brand product organic, not only are you appealing to the health- and green-conscious consumer–you also are automatically positioning your product as premium, allowing it to compete with the best products national brands offer. It’s like killing two birds with one stone!

John Lofstock
Guest
John Lofstock
11 years 10 months ago

This is strictly a quality issue. Trader Joe’s and Whole Foods have outstanding private label products and great reputations, so it makes sense that customers that can afford these products would become loyal consumers. However, if the quality of these store brands drops, I would think consumers would quickly back off them. It seems fairly straightforward that in order to gain a reputation “as having quality commensurate with that of traditional brands,” you have to start by actually having a quality product. In the convenience store industry, customers routinely opt for Wawa and Sheetz over traditional food brands like McDonald’s or Burger King because of the perceived quality of the product. In markets where customers have a choice where they shop, quality is trumping brand.

Don Delzell
Guest
Don Delzell
11 years 10 months ago
The opportunity was created here by the attitude of major food brands toward organic products. Rather than adding this category to their mix, the major brands have simply ignored it, or at best, offered poorly marketed select items. Organic is not currently threatening mass produced food products in any category, nor is it likely too in the near future. Seen as a qualifying niche category produces an entirely different outlook. Major food brands have a tendency to avoid or ignore niche businesses…something true of behemoth players in almost every consumer-good product category. The normal pattern is for a small competitor or group of competitors to develop the niche and prove definitively if the demand and profit meet the threshold level the behemoths look for. In this case, those small competitors are the stores themselves. Will the goodwill established through quality organic product offerings transfer to other areas in the store? The article mentions Whole Foods and Trader Joe’s specifically…retailers with real brand equity and well established private branding reputations, as well as dominant positions in… Read more »
Peter Milic
Guest
Peter Milic
11 years 10 months ago
Improvement in the perceptions consumers have of store brands did not occur over night and from my perspective I would have to say the credit retailers are now getting is well deserved. In the recent past, retailers have been more willing than CPG to adjust their business in direct response to consumers. Perhaps it is simply a matter of the retailer having greater flexibility than a large CPG company to innovate. The larger the manufacturer the less likely they are to consider a product that delivers modest sales volumes. In the retail world, many of the products offered are being provided by smaller, more nimble and in all likelihood more aggressive small manufacturers. Let’s face it, the measure of success for a large CPG organization is not the same as it would be in organization operating on a more limited scale. Fulfilling the increasing interest in organic foods is a natural for retailers, after all, they responsible for the perimeter of the store where fresh items are sold. Finally, does shelf stable and organic somehow… Read more »
W. Frank Dell II
Guest
11 years 10 months ago

Organic Private Label is not a one-trick pony. The success of Trader Joe’s showed the way. Safeway followed. The key difference is that retailers are marketing Private Label, not just selling it.

For years, speaker after speaker has been saying to retailers that they must take control of their Private Label program. That included rationalizing the line, clearly defining the role and image for each store brand, updating the packaging while improving the quality. The current recession is helping, but Private Label volume and share was increasing on its own.

Kevin Price
Guest
Kevin Price
11 years 10 months ago

The headline here, I believe, is more aspirational than accurate. Introduction of PL organics may well improve the ‘average’ perception, but it has nothing to do with the same perception of those cheap canned peas the consumer still sees on the shelf.

Very few retailers view and treat PL as a strategic, customer-driven initiative (those listed in the article) while the vast majority continue to think and treat ‘lower price’ as the attraction. If these majority of retailers were moving any slower on developing a meaningful PL program, they’d be going backwards.

Herb Sorensen
Guest
11 years 10 months ago

As usual, price is way overemphasized. Price is far less significant to shoppers than retailers, brands and the commentariat are typically ready to acknowledge. Kinda like if your only tool is a hammer, every problem is a nail.

Even if price is the focus, it does play too very important roles: First and foremost, it tells the shopper what this item is WORTH! The lesser issue is what it will cost.

Once retailers begin treating their own “brands” as brands, they find the same rules apply as for outside-the-store brands. With the added cachet of exclusivity for their own chain.

The fact is that the biggest impediment to private label is the historically atrocious relation that retailers have had to brand value. But not all retailers today are Neanderthals in this regard. As retailers as a class become more brand astute, the earth is moving under the national/global brands. Nimble brand players with a strong franchise will still thrive, partially because they are not tied to a single retailer.

Justin Time
Guest
11 years 10 months ago

I especially enjoy the quality and savings of the GreenWay organic line sold exclusively at Great A&P family of banner supermarkets.

The organic juices are flavorful, tasty and priced right.

So are the organic dairy line, the fresh veggies, the pasta, the cleaning products, the cereal lines and other categories.

With quality organic lines like GreenWay, you can eat healthy and pocket the savings.

Ralph Jacobson
Guest
11 years 10 months ago

In addition to what has already been said here, the online forums, social networks, etc. are driving interest and, yes, loyalty for organic PL items. A couple of “tweets” about a product can send shockwaves around the world, literally. Just look at what Kraft’s Vegemite (although neither organic, nor PL) has become due to more than a billion posts in 38 languages. Social media is what will take PL organics to the next level, and ensure their sustainability in the marketplace.

wpDiscuz

Take Our Instant Poll

In general, what’s driving private label purchases more - price or quality - at retailers such as Whole Foods, Safeway and Trader Joe’s?

View Results

Loading ... Loading ...