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Brands feeling impact of private label growth Big brands are definitely feeling the impact of store brands’ growth during the recession. “Private label shares are growing in this environment,” Ken Powell, CEO of General Mills, told financial analysts. Store brand penetration climbed about one percentage point last year and is “up about a point for the first half of our fiscal year.” Powell said, “We focus very much and take very seriously private label products, we really think of them as retailer brands.”
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Safeway also tells brands: hike prices, lose share |
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Private label is playing an important role in some high-stake negotiations between supermarket chains and the big brands. Steve Burd, Chairman/CEO of Safeway, told investors that the brands “would be disappointed with their market share losses” to private label unless they lowered their pricing.
“There have been pretty public discussions going on among retailers and the vendor community, which has not backed off on prices, despite drops in energy costs and declines in commodity costs,” Burd said. “As they lose market share, vendors may give more allowance dollars, which is a reduction for them, but I don’t think they’re all that eager to lower their list prices.” At Kroger, Rodney McMullen, Vice Chairman, said its manufacturing operations give the company leverage when a supplier approaches it about a cost increase. While prices of some commodities have leveled off or dropped, he said, “we continue to receive cost increases from several of our product suppliers. We are discussing pricing issues with many of our vendors to make sure the price they charge Kroger reflects the appropriate input costs.”
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Wal-Mart store brands may hit 40%, analyst predicts |
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A leading financial analyst predicts that Wal-Mart’s store brand share could climb to more than 40% over the next three years as the company replaces slow-moving brands with private label.
The retailer’s store brand market share in grocery and health and beauty categories is about 16%, and has historically not been an area of focus for Wal-Mart, according to Deborah Weinswig, an analyst for Citigroup Global Markets. However, the expected relaunch of the company’s Great Value brand this year “could serve as a catalyst” for expanding store brands, she noted, suggesting that Wal-Mart could replace the slowest of three brands in a category with a private label line, “which would potentially force branded manufacturers to be more competitive on price with Wal-Mart.”
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Kroger sees HBC opportunity |
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Kroger’s aggressive expansion of store brands in food categories has gotten plenty of media attention. But David Dillon, Chairman/CEO, told Wall Street analysts that there may be even greater potential for growth in health and beauty products.
“I think there is big opportunity, actually, in HBC and still in grocery, too. But HBC would have a little bit more opportunity than grocery would. But we see them both as still really ripe for development and we continue to invest in the opportunity.” Dillon added: “Customer interest in our corporate brands continues to accelerate in the third quarter for two reasons. First, the current environment is prompting customers to try more of our private label products, and second, the overall strength and breadth of Kroger's private label program appeals to shoppers on any budget. “For the second quarter in a row we saw accelerated growth in our corporate brand penetration, both in terms of grocery sales dollars and units. During the quarter corporate brands represented almost 27% of Kroger's grocery sales and 34% of grocery units.”
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Spartan CEO: market share gains to last after recession |
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Dennis Eidson, CEO, Spartan Stores, believes the growing private label penetration at its stores will last after the recession is over. The Michigan-based retailer has been expanding its private label selection over the last five years, adding about 1,400 items and upgrading packaging. Private label penetration has risen to 22.8% based on units sold in the latest quarter, up from 21.8% a year earlier. “I don’t think we’re going to give any of the share back,” Eidson told CNN.
Another regional supermarket chain, Ingles Markets, is also expanding its store brand program. “We have new private label products coming on all the time and they are literally in every department in the store now,” Ron Freeman, Chief Financial Officer, told financial analysts. He pointed to “increased sales of private label items,” along with more home consumption of prepared meals and consumers combining shopping trips as major industry trends affecting the retailer. |
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Walgreens, Rite Aid build their brands |
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Private label’s market share gains in drug chains are primed to continue as retailers expand their assortments and step up promotions for their own brands.
Private label penetration is climbing at the nation’s third largest drugstore chain. Rite Aid executives told security analysts that market share for its brands was 12.7% in the most recent quarter, versus 11.7% in the same period last year. Rite Aid attributed the increase to customers who “increasingly look for value in this challenging economy.” “We have great focus right now on private label,” says John Standley, President/COO. “I think that’s a great way that we can bring value to today’s consumer. It offers us a great price point in the store at still a very, very good margin.” At Walgreens, there has been more emphasis on in-store promotions. The chain used shelf talkers to tout its items as “wallet-approved.” Placed in related categories, the signs featured product shots of private label lotion, detergent and other packaged goods. Walgreens also used end-cap displays to compare its OTC products with their national brand counterparts. The chain promoted store brand SKUs by dangling a $10 rebate on the purchase of $25 in health-related items eligible for Flexible Spending Accounts.
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Store brands boost margins at Costco |
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Private label is helping Costco boost its margins during the recession, Richard Galanti, Chief Financial Officer, told analysts. “We’re still focusing on private label expansion which helps margins,” he explained. Private label penetration is going up and he said “you should expect to see more.”
A survey by Warehouse Club Focus reports that Costco stocks 501 private label products primarily with the Kirkland Signature brand. These products represent 17.5% of sales, according to the publication, generating $796 in sales per week per location. “In developing and introducing private label products, Costco clearly focuses on high volume categories and merchandise,” the publication notes.
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Private label gets bigger role at Dollar General |
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Richard Dreiling, CEO, Dollar General, has big plans to build the retailer’s store brand program. “There’s no doubt private label will play an ever-increasing role as we move through 2009 and beyond,” he told Wall Street analysts. “Our private label penetration in the third quarter is at 20.2% now. That’s compared to last year at 17.2%. So we saw a nice acceleration through the quarter.”
Another Dollar General senior executive noted that “we’re seeing new customers and we’re seeing our customers that historically have come in coming in more often. There is no doubt that the new planograms that we have rolled out, the new items we’ve added, and our new private label offerings are definitely driving traffic into the store.”
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Trader Joe’s lists favorite products |
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Trader Joe’s has published a list of “The Most Favored Favorite Trader Joe’s Products of 2008.” Topping the list is Mandarin Orange Chicken, a frozen entrée. Other items making the favorite list are: Greek Yogurt; Triple Ginger Snaps; Candy Cane Joe Joe’s; Refrigerated Pizza Dough; Frozen Green Beans; Hummus; Tarte D’Alsace; Frozen Sweet Potato Fries; Avocados; Frozen Brown Rice; Frozen Buffalo Burgers; Chocolate Peanut Butter Cups; Sparkling Blueberry Juice; Garden Patch Vegetable Juice; Almond Milk; Tortillas; Dunkers Cookies, and Pound Plus Bittersweet Chocolate.
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Schnuck store brands climb double digits |
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Schnuck Markets is on pace to hit double-digit growth this year in sales
of its private label goods, including milk, chicken, meat, cereal and paper
goods. Store brands already are more than 20% of the company's
business. “Shoppers are smart,” said Tom McMunn, director of private brands. “They know a good deal when they see one.”
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IN THE STORES |
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A&P
reports that private label penetration at its Pathmark stores has climbed to 17%, up from 14-15% last year.
Supervalu
says that initial sales of its Culinary Circle line of prepared meals are exceeding expectations.
Whole Foods Market
has created a line of eco-friendly adolescent skin-care products. The Teens Turning Green collection features all-natural ingredients and environmentally friendly packaging. Products range in price from $3.99 to $20.99.
Aldi
hopes to open its first store in New York City this year, according to published reports. Overall, the retailer intends to open a total of around 75 stores in the U.S.
Wal-Mart Mexico
reports that private label sales are rising sharply: “Our private label sales have been growing at a higher rate than total sales and in the last six months growth for our own brands has increased even further.”
Save Mart Supermarkets
in California reports that sales of its store brands were up 20% from a year earlier.
Wegmans
has introduced Food You Feel Good About organic grass-fed beef sourced from Uruguay. The supermarket chain is offering strip steak, sirloin steak, half sirloin steak and chuck roast. The beef is raised by small family farms and processed in USDA inspected facilities.
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MARKET RESEARCH |
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Big gain in men’s personal care introductions |
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Mintel reports a big increase in the number of men’s personal care product introductions.
The research firm tracked over 500 new personal care products for men last year compared to only 375 in 2007. The introductions are moving upscale: “Manufacturers are trying to stay one step ahead of men’s evolving grooming habits. New personal care products launched for men today step beyond the basics of showering, shaving and deodorizing.”
Mintel identified areas that are experiencing rapid growth: products that target specific areas of the body such as eyes, lips and hands; “anti-aging” grooming products highlighting exfoliating and wrinkle fighting ingredients; and products offering organic, natural ingredients and featuring ethical production. |
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Shoppers look for larger sizes to save money |
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As they struggle to stretch their budgets during recession, shoppers are looking for larger economy size packages offering lower price points per serving, according to a Nielsen survey. Nearly half (47%) of consumers surveyed prefer consumer packaged good manufacturers offer large, economy sizes with lower price points per serving. Only 17% of consumers prefer manufacturers introduce smaller pack sizes at lower prices. More than half (58%) of U.S. consumers are “very concerned” about rising food prices.
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PLMA NEWS |
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PLMA’s 30th Anniversary Celebration at Pebble Beach |
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Registration is open for PLMA’s special 30th Anniversary Leadership Conference, to be held March 26-29 at Pebble Beach, Calif. Speakers include David W. Bernauer, former Chairman and CEO of Walgreens; Jim Donald, who has held executive positions with Wal-Mart, Pathmark and Starbucks; Erik Peterson, an expert on global change and Richard Curtin, one of the nation’s leading researchers on consumer attitudes.
There also are special events honoring key figures in the early development of PLMA as well as Private Label Hall of Fame introductions. The annual PLMA golf tournament will be conducted on the afternoons of March 27 and 28 at the world famous Pebble Beach resort. For more information on attending PLMA’s 2009 Annual Meeting & Leadership Conference contact annualmeeting@plma.com.
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EVENTS |
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| e-Scanner is a monthly publication of the Private Label Manufacturers Association, 630 Third Avenue, New York, NY 10017, Telephone (212) 972-3131. Copyright 2009 by PLMA. | ||||||||
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