What are Store Brands?
What exactly are store brands? Chances are they are already in most consumers' homes. Surveys consistently reveal that nearly every shopper buys the products with some regularity. They are most likely in the refrigerator, pantry, medicine cabinet, even in the basement, shed and garage.
For many shoppers, store brands have come to represent better selection, value and savings. Simply put, they are products that stores put their own names or brands on. They may also be called private label, private brands, house brands, own brands, own label or retailer brands, but they all have one thing in common – they are manufactured and brought to market in much the same way as the familiar national brands sitting next to them on store shelves. Years ago, they might have been called generics, but that name isn't accurate anymore. Today, they are brands like any other.
Store brand products encompass all merchandise sold under a retail store's private label. That label can be the chain's own name or a brand name created exclusively by the retailer for their stores. In some cases, a store may belong to a wholesale buying group that owns labels that are available to the members of the group. These wholesaler-owned labels are referred to as controlled labels.
Store brand items are offered in just about every food and non-food grocery category: fresh, frozen and refrigerated food, canned and dry foods, snacks, ethnic specialties, pet foods, health and beauty care, over-the-counter drugs, cosmetics, household and laundry products, lawn and garden chemicals, paints, hardware, auto aftercare, stationery and house wares, among other sections of the store.
Retail chains of all sizes develop and market store brands in various ways. They may create a whole line of products around a particular feature -- such as Safeway's O Organics and Eating Right offerings, or Kroger's Private Selection and Albertsons Wild Harvest organic lines. In other cases, a majority of the store brand items in a chain may carry the same name -- such as Costco's Kirkland, Wal-Mart's Great Value or Whole Foods' 365 Everyday Value products.
Store Brands Are Everywhere
Increasingly, store brands are popping up everywhere. When it comes to how the products can help meet their home and family's needs, consumers are turning to private label in retail chains besides their food, drug and discount store. Specialty chains – such as those selling office products, hardware, domestic goods, consumer electronics, baby care, home improvement, do-it-yourself, pet care, toys, personal care and sporting goods, and others -- are bringing to market a growing variety of store brand products.
Store brands are becoming prevalent in these chains for the same reasons they have grown in supermarket, drug stores and discount stores. They are available in familiar categories and offer the same advantages in performance and savings that consumers expect from store brands that meet their grocery needs. Many of these chains started out primarily as sellers of national brands. But the growing availability of high quality store brand manufacturers enabled them to undertake a strategic expansion of their private label offerings. So, the store brand advantage is not just available to consumers with cereal, orange juice and aspirin. They can buy store brand printing paper and writing instruments; tools and paint; and linens and frames with the same confidence they will be getting top quality and performance at significant savings.
Store Brands: As Good As or Better Than National Brands
In terms of product quality, most consumers see no difference between private label and national brands. In a GfK study, half the respondents had switched to the store brand in categories where they had previously only bought a national brand. Nine of ten who switched compared store brands favorably to their previous national brand choice.
The Hartman Group says it's no surprise store brands give national brands a run for their money: "In many instances, shoppers no longer can distinguish between national and private label brands. What's most interesting is not so much the fact that it's happening, but that people don't really care that they don't know the difference."
Mintel reports that American shoppers say store brands quality has improved. Some 44% believe store brand products are of better quality today than they were five years ago and 39% would recommend them. One third said they don't feel like they're giving anything up, such as flavor or prestige, by using store brands. "The lack of perceived difference can be attributed, in part, to the fact that many retailers have introduced premium private label products that rival their branded counterparts in flavor and nutritional value, as well as packaging design and shelf placement."In terms of product quality, most consumers see no difference between private label and national brands. In a GfK study, half the respondents had switched to the store brand in categories where they had previously only bought a national brand. Nine of ten who switched compared store brands favorably to their previous national brand choice.
Where Do Store Brands Come From?
More and more store brands are appearing on the shelves of stores throughout the country. But how do they get there, why are they there and who makes them? For many consumers, store brands have become an important ally in how they provide their families with high quality, everyday products at good value. Store brands have also become important to retail chains, another reason they have grown so quickly. They give the chains a way to set themselves apart from the competition and enable them to offer customers more choice. Consumers know they can buy a national brand anywhere but they can only buy their favorite store brand at their favorite store.
Historically, store brands signified good value for consumers while national brands were usually seen as the premium item in a category. That is no longer true. Store brands have come to mean more than value. Many chains now offer a range of products that are not solely focused on value. They offer premium products just like the national brands. As they become more than just a place to buy products, stores are involved in finding and developing new items they can put their own name or brand on.
To produce those products for them, they turn to store brand manufacturers. When they do, they make it clear that high quality across the board – from ingredients to the supply chain, from the packaging and labeling to the final product itself -- is the number one requirement.
Store brand manufacturers who meet those high standards come in all sizes and many are listed on stock exchanges. There are thousands of companies in hundreds of categories that produce the products in partnership with retailers.
Manufacturers of store brand products fall into four general classifications:
• They are large national brand manufacturers that utilize their expertise and excess plant capacity to supply store brands.
• They are small, quality manufacturers that specialize in particular product lines and concentrate on producing store brands almost exclusively. Often these companies are owned by corporations that also produce national brands.
• They are major retailers and wholesalers that own their own manufacturing facilities and provide store brand products for themselves.
• And they are also regional brand manufacturers that produce private label products for specific markets.
Store Brands Meet All Standards and Requirements
These companies make certain that their products meet the same exacting standards and requirements as all the major national brands. Just like national brands, store brand products are tested and analyzed for quality and safety by independent companies before they reach the shelves.
Manufacturers also package and label the product to meet the store's specifications. Each store has its own unique identity and the packaging reflects that. Developing good packaging was the first frontier in making store brands more successful. One of the primary reasons store brands have grown is the recognition of the importance of functional and attractive packaging. This means not only how the package looks but also how it opens, closes, and sits on the store shelf, pantry or refrigerator.
While packaging is important as the first impression of a product, ingredients and quality remain paramount. With most consumers believing store brands are as good as or better than national brands the next step is to be more innovative. Innovative products can be found all over, from fresh-frozen products in supermarkets to over the counter medicines in drug stores to household cleaning products in discount stores. Another area of innovation is the development of multiple tiers of products targeted to different consumer segments.
For the consumer, store brands represent choice and the opportunity to regularly purchase high quality food and non-food products at considerable savings compared to national brands. Because the store's name or symbol is on the package, the consumer is assured that the product is manufactured to the highest quality standards and specifications.
When it comes to food, retailers and their private label suppliers abide by the Nutrition Labeling and Education law that requires standard nutrition labeling and that content and health claims meet FDA regulations. Non-food items also conform to prevailing federal and industry standards and regulations.
To make a stronger impression with their customers, stores have become actively involved in developing more products they can call their own. They are available only at their store and carry the store's name or brand. At the same time, they also represent better value. And when it comes to the importance of value, it's not just about price it's also about what the shopper gets for her money.
By comparison, national brands operate on a different playing field, one that is far more costly. Their goal is to be in every store in the country. That means they spend huge sums of money on advertising, merchandising and promotion. Store brands are not cheaper they are just less expensive to market than national brands are. That's good news for consumers.
Store Brands: The Smarter Choice
Exactly how much do consumers save? Last year, American shoppers who reached for the store brand version of their favorite food and non-food grocery products rather than the national brand enjoyed an estimated $32 billion in annual savings. Ongoing research by PLMA consistently reveals that on a trip to a typical supermarket shoppers save about one-third on basic grocery and household items by choosing store brands over national brands.
The difference is the so-called marketing tax, which consists of advertising and promotional costs incurred by national brand makers that are then passed on to consumers in the form of higher prices. Big CPG companies spend more than $21 billion annually on advertising media. They earmark about 25 cents of every dollar to build brand equity. They do this to satisfy shareholders and Wall Street analysts who place a premium on the perceived value of their brands.
A store brand manufacturer does not have these costs. But it buys the same high quality ingredients and runs the same state of the art manufacturing line. There is not much else that isn't exactly what the national brand item has.
Habit and familiarity are reasons consumers have traditionally been drawn to national brands. But many of those formerly national brand-loyal consumers are now reaching instead for store brands. In the process they are building new habits and making new friends. With top quality, unique items and solid savings, store brands add up to a smarter choice for consumers.
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