PL Buyer: Private Label Without National Brand Counterparts

Discussion
Jun 28, 2010
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By Randy Hofbauer

Through a special arrangement, what follows is a summary
of part of a current article from Private Label Buyer, presented here
for discussion.

As national brands have pulled back on the number of new items
they’ve been introducing amid the downturn, there have been fewer targets from
which retailers can draw inspiration to develop their own store brand products.
But unlike years past, national brands are now not always the category leaders
store brands follow.

“Now you’re going to see more and more private brands putting
out innovative items,” said Al Greenwood, director of frozen foods, Daymon
Worldwide. “Retailers recognize this as a way to differentiate themselves
from their competition.”

Mr. Greenwood spoke as part of a roundtable discussion
themed “Taking
Private Label to the Next Level: Where Do We Go from Here?”

Of course,
Tim Sullivan, private brand product manager, Delhaize America said, it takes
a good supplier to take a risk in developing unique private label product with
no national brand counterpart.

Marc Lessard, manager of product development,
Delhaize America, gave an example of such an item developed for Delhaize’s
North American banners several years ago.

“When I was a category manager in dairy, we developed a private label
probiotic granola, and we merchandised it in the yogurt section,” he
said, pointing out that a large number of consumers who buy yogurt add items
to the product after taking it home — granola, fruit, nuts or something
else.

“It’s about trying new items that may not necessarily have a brand
target, putting it under your own label and taking a chance on something,” said
Mr. Lessard.

Steve Felts, purchasing manager, Houchens Industries, also believes
in creating products with no national brand counterpart.

“When [customers] come to your location looking for your specific brand
— your specific private label — at that point in time, you’re setting
yourself apart from [other] retailers,” he said.

Mr. Felts added that
not only is it a huge compliment when a customer asks a retailer why he or
she cannot find a certain private label product at a competitor, it
also reveals the direction in which a retailer needs to head in product development.

Discussion Questions: What are the advantages and challenges in developing
store brands without a national brand counterpart? Which retailers are doing
the best job creating such distinctive private label products and why?

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15 Comments on "PL Buyer: Private Label Without National Brand Counterparts"


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David Biernbaum
Guest
10 years 10 months ago

In this day and age of SKU rationalization uniformity and with every store carrying almost exactly the same product assortment in every category wall to wall, it behooves smart retailers to include even in the store brand mix some products and specialties that will drive destination shopping and even surprise some consumers as they walk the SKU-rationalized vanilla aisles of sameness and banality.

Dr. Stephen Needel
Guest
10 years 10 months ago

My favorite store in the universe (Trader Joe’s) routinely creates products without an obvious brand counterpart and look at how successful they’ve been. They succeed, in part, because they focus on what shoppers like and what they may want in new products, not on how they can make a knock-off cheaper. They are not trying to make a PL version per se, they are trying to make a stand-alone brand.

Roger Saunders
Guest
10 years 10 months ago

Manufacturers are not, and never have been the sole owners of “brand.” A good number of retailers in grocery, apparel, home improvement, selected specialty and sporting goods have made solid use of private label to take their value proposition to a higher level, and make certain that they do not have to ‘sit on the sidelines’ and wait for a manufacturer to control the innovation process.

Private label isn’t for everybody. Taking a step in that direction requires “making decisions” and “accepting a willingness to innovate.” Those bold enough to take those steps can protect revenues and grow margins, while maintaining a smoother supply chain flow.

Roy White
Guest
Roy White
10 years 10 months ago

Before the economic downturn, many private label programs were beginning to feature unique items, items only available in that store or chain. Indeed the trend was justifiably (and probably correctly) viewed as the future of private label.

Economics intervened and the NBE came back into its own for cash-strapped consumers. However, long-term, it would appear that private label’s future lies as much in creating unique items that make the store different and exciting and provide them with a competitive advantage. While the guessing is that the NBE will be as important as ever, the growth edge of PL likely lies with a set of unique, quality items available nowhere else.

Liz Crawford
Guest
10 years 10 months ago

I have often thought that we are headed in the direction of European grocers who frequently take the lead on product innovation. There are so many obvious advantages to this–both strategically (traffic) and financially (margins to the retailer).

It’ll be interesting when national brands follow store brands to market.

Chuck Palmer
Guest
10 years 10 months ago

Archer Farms. Up & Up. Target does a best-of-class job at this. Up & Up offers a substantive alternatives to national brands and relies on national brands’ innovation and consumer insights. Archer Farms takes cues from smaller brands and brings product assets up to a national mass scale.

Don’t forget Choxie.

Another interesting example in this space is Craftsman. Its brand value has outgrown the confines of Sears & Kmart and is now available at Ace Hardware.

My point here is, if you see a product opportunity that the national brands do not, then it is necessary for your new product to transcend the context of the national brand. In effect, it becomes a standalone and needs the proper operational investment for it to stand out.

Charles P. Walsh
Guest
Charles P. Walsh
10 years 10 months ago

We’ve moved far beyond the traditional concepts of Private Brands having to be comparable to National brands.

That was mostly true at the beginning of the widespread adoption of Private brands, when it was felt that consumers’ acceptance of a PB was based only upon a comparative price, and trust was developed once the consumer purchased and was satisfied that the quality/value relationship was equal to or better than the national brand substituted.

Private brands today are regional or national brands unto themselves and spending by the retailers on media and in store advertising can be significant.

Private brands are a permanent, successful and oft sought item on many consumers shopping lists and smart retailers, as pointed out by Roy and Chuck, are innovating in surprising ways to meet this need.

Brian Kelly
Guest
10 years 10 months ago

Most retailer private label programs are not developed with the end user in mind (customer centrism). Rather they are driven by profit and line structure as merchants own the product and price “PS.” And most merchants are not marketers. Hiring trends in retail call for hiring CPG pedigree for CMO slots. Often these result in disappointment as those CPG attributes are not fully appreciated or activated.

It takes an economic downturn and disruption of consumer shopping behavior to push retail evolution to where that CPG experience is really relevant to drive private label development. That along with the creep toward adaptive marketing. Something we might recognize as “make the day” marketing, enabled by digital technology and distribution.

The more things change, the more they stay the same. Or as we like to say, “retail ain’t for sissies.”

Dan Berthiaume
Guest
Dan Berthiaume
10 years 10 months ago

The obvious advantage is that the private label good has no direct competition and also carries less of a stigma without a nationally branded counterpart with which it would otherwise be compared. The retailer just needs to make sure it is truly building a better mousetrap with the new item, there may be a reason no national brand has developed one. Also without a branded counterpart its R&D, production, etc. will likely be more expensive for whatever company manufactures the product for the retailer (unless the retailer has the capability in-house).

Alison Chaltas
Guest
Alison Chaltas
10 years 10 months ago

So much of this discussion depends on the retailer’s own brand equity, the complexity of the category and how much education is required to educate shoppers on the new products. Retailers with strong brand position are very well suited to lead innovation in their power zone. Think about all the wellness products led by GNC here or by Boots in the UK, exciting new food flavors from Wegmans, and the olive oil variety at Fairway; all from retailers that stick to their knitting in developing small, store brand innovation.

As products become more technical or complex to explain, most store brands are better suited following national players with big R&D and advertising budgets. National and store brands can coexist successfully as long as each plays a clear and different strategic role.

Dan Desmarais
Guest
Dan Desmarais
10 years 10 months ago

The biggest opportunity is to create truly unique and desired products. Finding the need takes time, money, skill and experience. Retailers must commit to the effort in order to reap the rewards. Building trial and consumption is then the job of the merchant.

Joel Warady
Guest
Joel Warady
10 years 10 months ago
Its about time! for years in the US, the retailers have primarily been focused on national brand equivalents, and then had difficulty understanding why they were unable to build brand loyalty. When your selling proposition is based on the concept of “our product is just as good (not better) than the name brand, but cheaper” and it is available at my store as well as other stores, why would the consumer rush to your store to purchase the product? Once the retailer realizes that offering unique products, that are more innovative and better tasting than other products in the marketplace, then they can charge a premium, earn a higher margin, and ultimately create better brand loyalty. The Europeans have been doing this for the last 20 years, but the US retailers just didn’t get it. Obviously there are exceptions. Trader Joe’s has been doing this for years, and they DO get it. Their success indicates such. Now additional retailers are finally realizing the error in their strategies, and are making the change, but it is… Read more »
Ed Rosenbaum
Guest
10 years 10 months ago

Which comes first in today’s marketing and branding, private label or national brands counterparts? It has become the expected to see both side by side in many stores today. When you do not see it, you ask yourself, why?

I view it like the chicken and the egg question. Both are definitely needed to be a counterpart to the other. When I am in a store, like yesterday, I have the opportunity to look and compare. Sometimes we select the national brand. Other times we select the private label. Yesterday the national brand won.

Ed Dennis
Guest
Ed Dennis
10 years 10 months ago

It’s easy, just lean on local taste and preferences. National Brands are designed for broad demographics. Local tastes often don’t fall into those parameters. Take Bar-B-Q; every locality likes it prepared a little differently. Take advantage of your local population and you will build some bullet-proof PL products.

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

I agree with Stephen Needel; you only need to look at Trader Joe’s to see examples of great private brands that don’t have direct inspiration from national brands.

Not only does private label have an opportunity to bring unique products to the market, but they should also be considering more innovative packaging. Creating a package that keeps food fresher longer, or is better for the environment or easier to use for consumers can all be added value that quickly pays for itself. This type of innovation helps build stronger barriers to competition and consumer loyalty.

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