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Big brands face ‘crisis’ as private label gains “Private Label Winning Battle of Brands,” trumpets the headline for an article in Advertising Age, going on to say that “package-goods brands face their greatest crisis and strongest threat from private label since at least the early 1990s.”
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Kroger brand sales hit $12.5 billion |
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Store brand sales have climbed to $12.5 billion at Kroger, with unit market share for grocery reaching an all-time high of 35% in the fourth quarter. David Dillon, Chairman/CEO, also told Wall Street analysts that dollar market share advanced to 27% of grocery sales during the period. Overall, Kroger now carries more than 14,400 private label products.
The recession did not stop substantial gains in the chain’s premium products. Sales for Kroger’s Private Selection line exceeded $1 billion last year. In addition, Dillon noted that “our value brands enjoyed strong growth as well.” The sales performance of the big consumer product companies has not been nearly as strong. “The national brands were basically flat or slightly down in tonnage,” Dillon said. “And there may have been a few brands that were up, but on the whole it’s the Kroger brand story.”
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Aldi revamps store brand program |
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Aldi is revamping its private label program, changing brand names and packaging that communicate product attributes rather than just their category, as done previously.
“We are actively limiting the number of brands in the store to create stronger brands, and in that process trying to do a better job highlighting brand attributes,” Joan Kavanaugh, Vice-President, Purchasing, told Supermarket News.
The new approach moves toward a more traditional brand structure and away from the “fantasy brand” approach used by Aldi in Europe, where the proliferation of brands projects an image of product and brand variety. Kavanaugh believes brand consolidation will encourage trial and trust. “When a brand can reach across 15 products rather than two, it really starts to signify something for the consumer,” she explained. “And we want the brands to be synonymous with Aldi.” Aldi will also be more aggressive in pursuing seasonal holiday sales, including a marked increase in the number of items stores will offer. The strategy will be seen soon in store circulars and in TV spots this autumn.
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Target’s strategy: More food, store brands |
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Target is focusing on building both its food and store brands in the next few years, Gregg Steinhafel, CEO told analysts. He predicted that private label penetration in consumables may climb into the “upper 20s”, up from the current 20%.
The retailer is taking “an enhanced focus on frequency driving strategies which are centered on food, pharmacy and commodities; a consolidation of our own brand portfolio to make a more powerful statement about these exclusive, high quality, and affordable assortments.” The greater emphasis on food is “in recognition of its importance in driving greater frequency, increasing guest loyalty and making Target a preferred shopping destination. In recent years we have expanded our selection and assortment to provide improved convenience and outstanding value, and in 2009 we plan to further enhance our assortment of dry, dairy and frozen and add perishable items in new and remodeled general merchandise stores,” Steinhafel said.
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Store brands make history at Safeway |
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The recession is leading to the greatest market share growth of store brands in history at Safeway, Steve Burd, Chairman/ CEO, told financial analysts. “The spread right now, between corporate brand growth and national brand growth is a 1,000 basis points,” he said, describing it as the “greatest in modern times” for the retailer.
Despite these market share gains by store brands, Burd said some national brands are keeping their prices high. “I say, wait and see, because we’re going to chew them up on corporate brands. And we’re just going to keep driving corporate brands, and that is always been a disciplined mechanism on the national brands. And so I think they either have to contend with market share declines, which they will not like, while we make higher margins on corporate brands.” Burd added that Safeway is investing in new packaging to improve its fresh meals and salads. “We’re still in the process of reengineering some of the packaging. And we’ve completed that work on the salad side. I don’t think those products are in the market yet, but will be soon. And what we’ve done with all of these products has had dramatic increases in shelf life, with no deterioration in quality.”
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Senate bill strengthens FDA food safety powers |
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The U.S. Senate will consider a new version of the FDA Food Safety Modernization Act that would provide the Food and Drug Administration with greater power to order product recalls and compel companies to disclose their internal records, and impose regulations on foods most at risk of causing illness.
The legislation was introduced by Sen. Richard Durbin (D-Illinois) and Sen. Judd Gregg (R-New Hampshire), and already has garnered support from major industry trade associations. The Senate bill, however, differs from one under consideration in the House of Representatives, which would create a separate food safety agency and mandate a regular schedule of inspections regardless of risk assessments. |
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U.S. standard adopted for organic cosmetics |
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The NSF/ANSI 305 Organic Personal Care Products standard has been adopted as the U.S. National Standard for organic cosmetic products. The certification allows ‘made with organic’ claims for products with organic content of 70% or more that comply with all other requirements of the standard. Products covered by the standard include rinse-off and leave-on personal care and cosmetic products, as well as oral care and personal hygiene products. The move enables Quality Assurance International (QAI) to certify and comply with the NSF standard.
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Private label boosts Ahold’s financial gains |
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Private label played a role in the strong financial performance turned in by Ahold USA. Larry Benjamin, Chief Operating Officer, told Supermarket News, “Given the remarkable changes in the economy, we really haven’t anything particularly striking or off-trend other than a shift toward value and private label — but that’s a trend we’ve seen for a long time.”
“We’ve had good numbers on trips and good responsiveness to our everyday prices, and we were able to reduce promotional spending at Stop & Shop and Giant-Landover during the quarter, which was counterintuitive,” he added.
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Store brand SKUs up 11% at Whole Foods |
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Whole Foods reports that its private label SKU count has increased 11% year over year and now accounts for 22% of our total grocery and health and beauty sales. In addition, the retailer offers 300 exclusive branded products, with more in the pipeline.
“We have more than doubled the offerings under our Whole Trade product line to over 1,000 products, ranging from bananas and chocolate to cleaning products and body care items,” said John Mackey, CEO. The retailer also announced that it reformulating its 365 Everyday Value shampoo, conditioner, body lotion and shower gel to meet the company’s Premium Body Care Standards.
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Metro plans to double store brand items |
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Metro supermarkets in Canada plans to more than double the size of its store brand program this year. Richard Dufresne, Senior Vice President, told analysts that the supermarket chain now carries about 1,500 items under its premium Irresistibles and a national-brand-equivalent Selections brand, but plans call for having 3,500 items by the end of the year.
Store brand sales have been very strong in recent months. While the weak economy may have helped boost sales, he believes the recently revamped product lines have had an impact. “We think the customer appeal of the new products and new formulation is working well for us.”
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Roundy’s to add 2,000 products |
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Roundy’s Supermarkets aims to add 2,000 more store brand SKUs, bring the total to 6,000, according to Robert Mariano, Chairman/CEO. “We’ve been on a very aggressive effort to grow our own brand presence,” adding by about 1,000 items annually in recent years, he said. The expansion “plays right into where the customer is at.”
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Food Lion tests convenience aisle displays |
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Food Lion is testing a convenience and prepared meal aisle in 17 stores. The supermarket chain will test merchandising sets within a center store aisle that are arranged by level of convenience rather than by category. For example, “ultra-convenient” foods that only take 10 minutes to prepare will be grouped together, while boxed meat dinners that take about 20 minutes to prepared will be displayed together near the meat department.
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PetSmart streamlines brands |
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PetSmart, the specialty store chain, is looking to increase its store brand sales by increasing promotions and streamlining the number of brands. Robert F. Moran, President, told analysts: “We have 27 different proprietary brands and we’re going to reduce that down into the low double-digit numbers and put some marketing behind it to really build the brand.”
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IN THE STORES |
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Winn-Dixie
reports “the rising penetration rate on our private label sales has also helped our margins in this difficult economy.”
Wal-Mart
hired a new ad agency, Publicis & Hal Riney, to improve the marketing of its Great Value brand.
Loblaw
is introducing a cosmetics line with 200 varieties of makeup under the Joe Fresh Beauty brand. Canadian makeup artist Simone Otis advised on formulations and colors.
Rite Aid
is introducing a range of sun care products. The Rx Suncare line includes seven protective products, all with the Skin Cancer Foundation’s seal of approval.
Aldi
introduced its Lacura skin care line to all of its 1,000 stores in 29 states. Lacura was first introduced in the United Kingdom under the brand name Siana.
ShopRite,
the New Jersey-based supermarket chain, has launched a line of whole grain loaf cakes and whole grain muffins made in its store bakeries.
Staples,
the office supplies retailer, is stepping up its in-store promotions for private label products. The chain is devoting a majority of endcaps to Staples brand items.
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MARKET RESEARCH |
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Shoppers look for more than low prices |
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Consumers’ purchasing decisions are based primarily on perception of product value rather than price alone, according to a new study from Brandweek. Its Brand Keys Customer Loyalty Engagement Index, which surveyed 26,000 consumers, showed that expectations of a brand being good value, as opposed to simply low price, were up by 20% on the previous year. “There is a price-value formula consumers use to calculate brand differences and to decide which brands to buy.”
“Shopper consciousness has shifted from just trying to ferret out deals to looking for brands that provide value,” Brandweek says. “The concept of value embraces other attributes as well as cost, especially perception of superior quality.” |
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Coupons usage up in mass merchandisers |
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More shoppers are redeeming their coupons at mass merchandisers rather than supermarkets. “For years, nearly 70% of coupons were redeemed in conventional supermarkets,” reports Inmar Carolina Services Revenue Recovery Services. Last year conventional supermarkets accounted for less than 64% of coupon redemption, while mass merchandisers now account for nearly 19% of all coupons redeemed.
Overall coupon redemption rose nearly 10% in the fourth quarter of 2008 compared to the prior year earlier, the first jump in redemption since the early 1990s. Despite the uptick in coupon usage, there has been a long-term decline in the number of shoppers clipping coupons. Last year 2.6 billion coupons were redeemed, according to Inmar. The peak year for coupon redemption was 1992, at the end of the last major recession, when 7.9 billion coupons were redeemed. |
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PLMA NEWS |
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PLMA offers SQF training course, April 28-29 in Chicago |
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PLMA is sponsoring a special two-day food safety training course to be held April 28-29 at the Hyatt Regency O’Hare in Chicago. The course, “Implementing SQF 2000 Systems,” is designed to help member companies meet the need for food safety audits and certification.
The training course is presented in conjunction with Silliker, Inc., a respected industry leader in food safety and quality assurance, and gives participants the information and knowledge they need to achieve compliance with SQF 2000 Code standards for manufacturers and distributors. Registrants will receive certificates of completion. PLMA is offering the “Implementing SQF 2000” training course to members at a substantial discount compared to other SQF programs in the industry. For more information, please e-mail trainingcourse@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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