Future Looks Bright for Store Brands

Discussion
Nov 22, 2010
Ron Margulis

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?

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

15 Comments on "Future Looks Bright for Store Brands"


Sort by:   newest | oldest | most voted
Steve Montgomery
Guest
10 years 5 months ago

I was recently engaged in a conversation regarding PL brands and how they have evolved from the austere black and white labels that screamed generic to actual stand-alone brands. I think the tipping point in the consumer’s mind is when they start to refer to the brand by name rather than by the store’s names. Archer Farms (Target) is a good example.

Retailers who continue to improve their PL items on all the elements of what it takes to be a brand will find continued success. The issue they face is as they spend more on their PL offers and the price rises at the same time they are pressuring their traditional brand suppliers to lower their cost – what happens as the retail price differential shrinks?

Richard J. George, Ph.D.
Guest
10 years 5 months ago

Retailers still have a tendency to view brands as simply items placed on their shelves or racks. Successful retailers need to “think like a brand and act like a retailer.” Therefore, going forward, retailers need to develop those brands which provide a real point of difference for their customers. As a result, everything will begin and end with a customer focus.

Food retailers may be best suited to continue the growth of private label, particularly those that focus on “plant to shelf.” Since “bricks and mortar” retailing is still mainly a local phenomenon, those retailers which capture the unique needs of their market place with brands that reduce consumer compromise, will be in the position to use private label as significant point of difference.

Joan Treistman
Guest
10 years 5 months ago

Years ago I noted that there were two times a year that consumers could not forgo national branded cranberries aka Ocean Spray, Thanksgiving and Christmas. The rest of the year private label cranberry sauce was just fine.

Understanding how consumers differentiate their needs and wants in terms of private vs. national brand products will help retailers focus on where they are most likely to generate sales and profits. Broadening the private label net is not the answer for an effective strategy.

The other points from McKinsey are intuitive and well thought out. They are the follow up to the first step of identifying the products with the greatest potential and marketing them based on keen consumer insight and strategic focus.

David Biernbaum
Guest
10 years 5 months ago

If your private label brand is doing well strictly because of the low cost and the economy, then your private label is hardly a “brand” at all. Value should always be a major component to make your PL program appealing however your objective for your brand is that it still has appeal even when the consumer can afford a more expensive brand.

Bill Emerson
Guest
Bill Emerson
10 years 5 months ago

The key to growing store brands is for retailers to treat them with respect, viewing their brand as no different as any major national brand. This means investing in quality, packaging, and marketing. It means positioning these brands in all price zones, not just the opening price point.

Perhaps the biggest opportunity is to use store brands to speak to local demographics and psychographics. This includes, among other things, local growers and organic foods. Publix’s Greenwise is a great example.

In short, if the retailer respects the private label, the customer will as well.

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
10 years 5 months ago

Private label is entering an interesting period in its evolution as it moves away from price and focuses more on quality and assortment. Private label has always been the affordable, not-as-tasty option. That is no longer the case and retailers need to find ways to build trial of their PL items and be careful they don’t erode penny profits by selling their private label for too little.

Building trial for PL should be a primary focus for retailers as they look to expand their PL share of market over the next 5 years.

Gene Hoffman
Guest
Gene Hoffman
10 years 5 months ago

Store brands were on the ascendancy before the current recession. That indicates they’ve already won a place in America’s shopping carts and on our tables. What’s needed in the future, other than a continuation of improved quality and packaging, is concentration on marketing the PL brand.

Carol Spieckerman
Guest
10 years 5 months ago
I see retailers taking advantage of just about every opportunity to drive private brand awareness and loyalty, even if it means breaking long-held “rules” about how these brands are marketed. When Target transitioned from Bulls Eye to Up & Up for example, they leveraged receipt marketing, circulars, IRCs, and even previous in-store no-no, floor graphics to ensure that the brand took quickly. Increasingly, retailers aren’t treating private brands any differently than national brands and they are bringing national brand best practices, and best talent, into their organizations. The very definition of private brand is blurring as well as proprietary brands, temporary exclusives and retailer-boosted launches take hold (my recent blog postings on Walmart’s launch of Fat Foam and Sophyto at Sam’s are great examples). Shoppers don’t always know the difference between a national brand and a private brand and even when they do, they don’t care–a testament to the great job that retailers are doing at brand-building. What do retailers need to do in order to ensure private brand growth? Keep on keepin’ on!
Phil Rubin
Guest
10 years 5 months ago

It’s hard to generalize and definitively conclude the new prominence of store brands for all retailers. Like so many other factors, it’s a function of stores that believe fundamentally in branding and invest in creating brand-driven engagement with customers. Many retailers are not good at marketing but for those that are, their ability to leverage PL brands, and in fact their own store brand, will be much easier.

James Tenser
Guest
10 years 5 months ago

True wisdom may sometimes seem to arrive slowly in the retail world, but it’s clearly emerging when it comes to private label marketing.

The inexorable PL growth trend confirms for me that a brand is a brand. When a retailer applies a level of sophistication to a store brand that is on par with the national brands, it can become a credible competitor within the category.

As others here point out, this is not an economically-driven trend. Even if tight times stimulate store brand trial, it’s product quality, packaging, and marketing that sustain shopper satisfaction and influence long-term purchase behavior.

Reviewing the PLMA reports last week, I was struck by the vibrancy of the sector. Retailers are close to reaching a “tipping point,” in my opinion, where their own branding efforts become equally or more important than their national-brand assortments in many categories. Can true in-store marketing fail to follow?

Lee Peterson
Guest
10 years 5 months ago

Although this is a fairly new successful venture for food brands, specialty retail has been great at private label for 30 + years. There are plenty of emulators out there, even within food. The reason for the latency is that most food brands don’t think like either A) a brand or B) a retailer. They have spent the better part of the past century thinking like a warehouse or middle man instead.

But times have changed! So to me, the first step is to start to do what retailers and brands do: focus on the customer (I know, it sounds crazy!). Of course, it’s easy to say that from a booth on the 50 yard line (sports metaphor), and much much harder to do after years and years of rote behavior. It’s not easy even if you’re an expert at it!

So, that kind of change in mentality across the system really calls for one thing: new blood. It’s way more than just another project for marketing.

Mark Johnson
Guest
Mark Johnson
10 years 5 months ago

When you look at what Target, Kmart, and Kroger are doing, you see merchants that are tapping into their consumer knowledge and providing brands/products that they can market effectively to an audience that has expressed a desire to engage and purchase from them.

Timely, relevant and communication in the form/factor the consumer wants is the key.

Charlie Moro
Guest
Charlie Moro
10 years 5 months ago

If you continue to see Trader Joe’s as the best example of creating a brand and a destination for private label instead of trying to knock off each of the CPG companies’ perceived best items, you will be a part of creating the long-term success of private label.

Consumers want a variety of great tasting products, and the opportunity to buy unique products at price points that make trial a strong desire.

Another choice of cut green beans is not going to build a brand.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
10 years 5 months ago

There is a basic fallacy inherent in all of the bright prognostications regarding the growth and popularity of store brands: It’s not true that shoppers are clamoring for them or even preferring them to national brands in any significant numbers. Instead, the major impetus to store brand growth is retailers forcing them onto their shelves while shouldering national brands off. In other words, they are reducing customer choice. Because of this very consequential factor, all reports regarding the wonderfulness of store brands must be taken with a grain of national brand salt.

David Milstein
Guest
David Milstein
10 years 5 months ago

Marketers in the US need to change their paradigms! Store brands are not about competing with “recognised” brands. Store brands are the result of retailers re-inventing themselves as a brand!

If you like Tesco or Woolworth’s products, then you HAVE to go to that retailer to buy again. And, whilst you are there, well, you may as well do the rest of your shop at that store. Stores like Aldi are almost exclusively house brand products, but you will have difficulty finding its name on the product. For those in the industry who make a living from promoting PRODUCT brands, you better develop new strategies to help your customers as the nature of retailing changes.

wpDiscuz

Take Our Instant Poll

Which factor do you think is most critical to growing store brands as the economy recovers?

View Results

Loading ... Loading ...