Future Looks Bright for Store Brands
By Ron Margulis, Managing Director, RAM Communications
At the annual Private
Label Manufacturers Association show in Chicago last week, McKinsey & Co.
released data revealing that store brands continue to ride a wave of popularity
with American consumers. Depending on how retailers and suppliers execute on
their plans, according to the consultancy, there is a possibility that 24 percent
of sales at supermarkets could be store brands within six years. This is up
from the current level of 19 percent.
In their "Retail Trends 2011: Negotiating the New Normal" session,
Parog Desai and Alex Liu gave several reasons for the prolonged growth of private
label, including the established ones — the economy, quality improvement
and assortment expansion. They also presented a more consumer-centric basis
for the progress, covering a new focus by marketers on the customers that matter
(younger, older and Hispanics), the use of customized and localized marketing,
the use of technology to engage shoppers at "The moment of truth" and
more retailer/supplier collaboration.
The session mostly reinforced
what the audience knew, but presented a clear warning. The McKinsey consultants
gave three imperatives needed for the industry to grow sales during the eventual
uptick in the economy:
- Capture insights and deliver products to the consumers that matter.
- Enhance the assortment and marketing strategies to help build private label.
- Think and look "plant to shelf" to capture win-win opportunities.
Discussion Question: What will retailers need to do to grow store brands
as the economy rebounds? Do you think any retail channel has a bigger opportunity
to grow store brands than the others?