GHQ Cover Story 11/04: Private Label’s New Edge

Nov 03, 2004
George Anderson

By George Anderson

Editor’s note: Beginning with this feature, through special arrangement with Grocery Headquarters
, we’ll present opportunities to discuss the subjects of GHQ’s monthly cover stories.

Retailers seeking the Holy Grail of differentiation need look no further than their store brand offerings, according to private label industry executives.

As Jeff Posner, executive vice president and chief procurement officer at Topco Associates, told
Grocery Headquarters for its November 2004 cover story, Private Label’s New Edge, “Increasingly, private label is viewed as the primary tool which differentiates
retailers from the competition while driving profitable sales. As more customers routinely purchase private label brands, consumers’ loyalty to these brands, and to the retailers
which provide them, will grow.”

High profile examples such as Trader Joe’s, Aldi, Whole Foods and others illustrate the power of store brands to attract shoppers and keep them coming back for more.

According to the Private Label Manufacturers Association (PLMA), coming back for more is exactly what consumers are doing. In the supermarket channel, private label sales reached almost $43 billion in 2003. Store brand sales were up 2.2 percent between 2002 and 2003 while national brands grew 1.4 percent during the same period. PLMA estimates that for every new dollar generated in the supermarket channel last year, 23 cents came from store brands.

Perhaps, not surprisingly, many on the manufacturing side of the private label business believe retailers are holding back their own growth as they try to find the right promotional and merchandising balance between national and store brands.

Don Cacciola, marketing manager with Ferrania Imaging Technologies told Grocery Headquarters, “It is still a battle to get a buyer to think in terms of what he can do to grow his own brand. More retailers need to recognize that they have to treat the store brand the same as they would a national brand in terms of promotions and merchandising.”

Craig Espelien, general director of store brands and strategic sourcing at Supervalu, believes retailers can achieve growth by moving away from the traditional us versus them mentality when it comes to store and national brands. He recommends retailers build on the complementary nature of products and pair store and national brands together.

The Grocery Headquarters article provided the example of combining private label crackers with a promotion featuring a national brand soup.

“This offers consumers a brand solution and leverages the branded merchandising dollars to help drive private label sales in complementary categories,” said Supervalu’s Espelien.

Moderator’s Comment: Are retailers using their store brands to create a point of difference between their business
and competitors in the minds of consumers? For retailers who sell both national and store brands, what is the key to finding the right balance between the two?

Having recently toured some Aldi stores and spoken to some very happy customers, we find it hard to believe that many of these shoppers would be willing
to “trade up” to national brands even if the grocer gave them the option by stocking those items.

George Anderson – Moderator

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