PLBuyer Cover Story: Is There a Place for Private Label Organics?

Discussion
Jul 06, 2006
Rick Moss

By Jill Rivkin, Editor, Private Label Buyer magazine


Through special arrangement, we offer this excerpt from PLBuyer‘s recent cover article for discussion on RetailWire. Click to view the entire article,
Price is Still Priority.


According to ACNielsen, 6 to 15 percent of U.S. consumers say they purchase natural and organic regularly, and those numbers are expected to grow. So where does private label fit in?


Recently, Pleasanton, Calif.-based Safeway made some noise introducing Safeway O, an organic private label lineup. Cincinnati’s Kroger touts its Naturally Preferred line, Pittsburgh-based Giant Eagle plans to grow its Nature’s Basket brand, and of course Austin, Texas-based Whole Foods Market continues to extend the reach of its 365 Organic line, while at the same time bringing new mainstream consumers into its stores. Retailers big and small are recognizing and reacting to the growing trend, but the real challenge is that many consumers don’t know it yet!


According to original research conducted for PL Buyer by Stamford, Conn.-based InsightExpress, 42.3 percent of shoppers say they purchase organic products, with 78.3 percent of those purchases made at their traditional grocery store. But more than half – 53.1 percent – say they have never seen or heard of private label organic products. Only 26.6 percent say they have heard of them, and 20.1 percent were not sure. There is quite an opportunity here to organize and educate consumers on private label organics – many are buying organic already, but don’t know that private label is an option. Only 16.9 percent say their grocery store “educates me on its private label organic program.”


Retailers have their work cut out for them. Only a quarter of respondents say they are “very likely” or “extremely likely” to buy private label organic products if they were available where they shop, and 40.5 percent say they are “not very likely” or “not at all likely” to buy private label organics.


The study shows across the board that consumers continue to be price-sensitive in purchasing decisions, expecting private label to offer a strong value against the national brands and maintain expected quality levels at the same time. But the price-sensitivity is even more prevalent in the natural and organic category, as these products tend to carry higher price points that can make the category exclusive. Nearly 54 percent of respondents agree that “price prohibits me from purchasing more organic products.” And 51.3 percent agree they would be “more likely to buy organic if it’s private label, as I would expect it to be less expensive.”


Consumers did have clear opinions on where they would like to see private label organic offerings. Only 31.2 percent said they would like to see organic items in a separate area of the store, while 43.6 say they would like to see organic items interspersed throughout the store. The store-within-a-store concept does not have legs with this consumer group.


Moderator’s Comment: Do consumer price and quality perceptions of organics work to the advantage of private label, or will it make adoption of PL organics
that much more difficult?
– Rick Moss – Moderator

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10 Comments on "PLBuyer Cover Story: Is There a Place for Private Label Organics?"


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Mark Hunter
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Mark Hunter
14 years 7 months ago

As retailers continue their push to brand their stores and create unique shopping experiences, the way Safeway is doing it with their lifestyle format, then the role of private label becomes less and less a price image and more an experience or lifestyle tool. When this happens, the door is wide-open for private label to move into organics and by doing so, it can become a key part of a retailer’s strategy to define their role in the marketplace. Organics will continue to evolve and much of their evolution will be a result of how they are marketed. A smart retailer will leverage the opportunity.

Len Lewis
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Len Lewis
14 years 7 months ago

It’s a matter of trust and this is not going to come easily. People see PL products side by side in the displays and they still don’t see the big difference — except perhaps on price.

Private label organics is not going to be an instant winner — except perhaps for chains like Trader Joe’s, Whole Foods and a handful of others who have been doing it all along and have convinced shoppers they are not just picking their pockets.

W. Frank Dell II
Guest
14 years 7 months ago

Like everything in retailing, the question is “what does the target consumer want and/or need?” Just adding organic private label items is as bad as not having any. Adding 1,000 private label organic items can not be rational. Consumers value organics more in some categories than others. The more consumer-important categories are the candidates for organic private label. If there is no private label in the category, the decision is easy; otherwise, the issue is whether to discontinue and replace or carry both. One advantage of organic private label is that it should carry a higher price point as it should represent value-added.

Mark Lilien
Guest
14 years 7 months ago

Typical store brand product marketing plan: 90% bargain price, 10% “other” (copy label of famous brand is most common “other”). Heavily committed organic shoppers want more information about the definition of “organic,” related animal treatment issues, local origins, etc. Marketing need not stop at the label, and the word “organic” isn’t strong enough on its own for premier credibility. Labels could refer customers to more detailed info on store web sites. Stores could sell tickets to farm trips (day trips, bed and breakfasts, tours) locally and even internationally via alliances with travel agents and farm organizations. Publicity opportunities are key, since word of mouth is the best (and lowest cost) advertising.

Race Cowgill
Guest
Race Cowgill
14 years 7 months ago

Our data shows that 78% of consumers do not know what “private label” is; and when told, 85% either incorrectly identify a national brand as a private label or vice-versa. In other words: consumers don’t know the difference — they may notice that a particular brand is usually cheaper, but they don’t tie this to “private label.” It’s just a cheaper brand.

Even without the national exposure that a national brand gets, a private label can be marketed any way you want, as long as the product itself supports the marketing strategy. For example, you could have a private label that was 50% higher than any national brand in all categories, and if the product characteristics supported this concept, and the packaging and marketing and placement were right, this could theoretically work. This is why I conclude that this issue is not really about private label. It is about product quality and marketing.

Jack Rhodes
Guest
Jack Rhodes
14 years 7 months ago

If a retailer is going to make Organic a part of their future, they need to train their people about Organic. Just because you’re a buyer of meat, seafood, etc., does not qualify you as an Organic buyer.

Carol Spieckerman
Guest
14 years 7 months ago

Allow me to be skeptical about the premise. Any time I have conducted or participated in research regarding private label, a significant number of consumers always ask “…so what is private label again?” and even after it is explained, they invariably include multiple private labels and proprietary brands within their “favorite national brands”…and that is within frequently-shopped categories. I posit that these days, most consumers wouldn’t recognize many private labels AS private labels if they reached out and grabbed them in the grocery aisle.

I would expect this to be even more significant in the organic category where consumers don’t yet know which brands are the major national brands to begin with (unless they did most of their shopping at Whole Foods).

I don’t find the results compelling for that reason. I will be more interested in checking out SuperValue’s Sunflower Market concept which will massify organics and drive prices down pronto utilizing what else? Private label.

Ben Ball
Guest
14 years 7 months ago

Boing, Boing, Boing.

Oh, excuse me. That’s just the sound of me tuning up my “same old saw.” But in reading the comments of Mark, Race and others, it sounds like this is no one man band.

It’s not about private label organics…it is about proprietary branded organics. Consumers in the “organic market” obviously are not pure price shoppers and are understandably less susceptible to Brand X pricing and quality.

But they are interested in organic. A brand that effectively communicates that feature should do well, perhaps even better than the “National Brand” organic line extension would. Consumers tend to be somewhat skeptical about the big guys changing their spots to do something very differently.

The very nature of “organic” connotes small brand/company/farmer — ideally local. These companies don’t have big national advertising budgets or fancy packaging. Authenticity is what counts. This is a perfect opportunity for retailers to establish and own a value-added brand at a strong price point and margin.

Barry Wise
Guest
Barry Wise
14 years 7 months ago

Private label organics will be successful where the consumer trusts the retailer it’s buying them from. The average person buying organics tends to be an informed consumer, and in turn they know and trust the retailers they’re buying from. I believe this will lead to some retailers being successful with private label organics and others not as successful, however overall private label organics will be a success.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
14 years 7 months ago
Call me old-fashioned (you’d join our kids in this), but I don’t buy private label and I don’t buy organics. Friends know me as an early adopter, but I’ve been disappointed by both PL and organics too many times to try them again. In my Safeway, I’ve seen the “O” brand pop up throughout the store (even center-store), and I avoid them totally. Two strikes, and then there’s strike three: the price. In my conversations with fellow shoppers at Safeway, I find echoed my impression that the store is simply pushing our favorite national brands off the shelf. And like me, most of them cross-shop at the Raley’s down the street. But if Safeway — and other supermarkets — want to make PLO (that’s Private Label Organics, not Palestinian Liberation Organization) work, a much better communication effort is required. Why should I buy it? How does it fit my personal Value Equation? WIIFM? (What’s In It For Me?) And finally, if center-store organic products have consumer appeal, why have the national brand manufacturers not led… Read more »
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