Store Brand Investment Climbs

Dec 06, 2004
George Anderson

By George Anderson

What’s the appeal of private label/store brands for grocery wholesalers and retailers?

Sure, there are usually higher profit margins associated with the sale of a store’s own brand, but there can also be drawbacks. What if consumers don’t buy the item? The financial loss is entirely on the grocer.

That said, many retailers are increasing their emphasis on and investment in store brands because the upside often outweighs the risks. As James Patitucci, executive vice president of corporate procurement, merchandising and marketing for Nash Finch, told The Business Journal of Minneapolis and St. Paul, “When a consumer falls in love with an item that is a private-label item, they’re locked into the store that sells it.”

Locking customers in with store brands is exactly what more and more food merchants are doing. Nash Finch has had five consecutive years of sales increases of its store brand products.

“I think all the emphasis on supermarket private label is really a symptom of retailers beginning to appreciate and then work on the process of branding their stores and their services,” said Bill Bishop, president of Willard Bishop Consulting.

“Private label,” said Mr. Bishop, has “become an essential component of the supermarket strategy.”

In the past, stores have primarily focused their private label strategy on the manufacture of me-too items similar to the leading national brand sku in a category. Today, said John Paul, senior director of marketing and sales for Nash Finch, keeping up with the national brands is not good enough. “We want to take the lead with our store brands program,” he said. “If there is a need to come up with a diced tomato with cilantro and green chilies that is the hottest thing going, we want to be on the front end of that, as opposed to just following.”

Being out in front is exactly where Supervalu is trying to position itself with its new Carlita line of store brand Hispanic foods.

Craig Espelien, general director of store brands and strategic sourcing for Supervalu, said the wholesaler/retailer is looking to create its own signature brand.

“People want something different and Hispanic food seems to be where the consumer is moving to,” he said. “We’re trying to get out in front of that.”

Moderator’s Comment: What role do you think store brands should play in the marketing and merchandising mix of food retailers?

Supervalu’s Espelien said, “Traditionally, private label is easy to merchandise because you’re not building an emotional connection to the consumer. You
are selling on value and cost. But when you create a signature brand, you don’t want to sell it in that fashion. We want to create a different marketing program that will help
connect the consumer to our brands.”

George Anderson – Moderator

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