Store Brands Facts

For most shoppers, store brands have come to represent outstanding selection, performance, value and savings.

By all measures, store brands have never been more popular. The Nielsen Company reports that nearly one of every four items sold in the country's supermarkets last year was a store brand. Every time they shop for groceries, almost half of consumers buy a store brand product "always or frequently," according to a recent study conducted by Surveylab for PLMA. Compared to five years ago, a majority now buys more store brands each time they shop.

Large numbers of shoppers are still discovering new store brand products and come away pleased with the experience. In the same PLMA study, half said they recently tried store brands for the first time in product categories where they previously only bought a national brand. More than eight of ten reported that the store brands compared "favorably" to the national brand. As a result of their trial, half have switched to the store brand.

What Are Store Brands?

But what exactly are store brands? Chances are they are already in most consumers' homes. Surveys reveal that nearly every shopper buys the products with some regularity. They are most likely in the refrigerator, pantry, or medicine cabinet; or in the home office, basement, shed or garage.

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. Many years ago, they might have been called generics, but that name isn't accurate anymore. Today, they are full-fledged 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 its 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 brands 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, Eating Right and Open Nature offerings; Kroger's Simple Truth, Comforts for Baby and Private Selection; Albertsons' Essential Everyday and Wild Harvest brands, or Aldi's Simply Nature.

In other cases, a majority of the store brand items in a chain carries the same name—such as Costco's Kirkland Signature, Wal-Mart's Great Value, Whole Foods' 365 Everyday Value, or Meijer Gold. The chain's name alone can also serve as the brand: Walgreens, CVS, Rite Aid, Family Dollar, DG, Wegmans, Giant Eagle, Publix, Raley's and Trader Joe's are a few examples.

Store Brands Are Everywhere

Store brands are popping up everywhere, even outside the grocery channel. 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 home office products, hardware, domestic goods, consumer electronics, baby and child care, home improvement, do-it-yourself, pet care, toys, personal care and others—are bringing to market a variety of outstanding products that compete on equal terms with national brands. Some familiar store brands in these channels include eponymous lines from Staples, Ace and Petco; as well as unique brands from Home Depot (Husky, Hampton Bay, HDX), Sears (Craftsman) and Lowe's (Kobalt), among others.

Store brands are expanding in these chains for the same reasons they have grown in supermarkets, drug stores and discount stores. They are available in familiar categories and offer the same advantages in performance and savings that consumers expect from the store brands that meet their grocery needs. Many of these chains started out primarily as sellers of the big brands. But the increasing availability of high quality store brand manufacturers enabled them to undertake a strategic expansion of their offerings.

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, towels and picture frames with the same confidence they will be getting top quality and performance at significant savings when compared with national brands.

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 generally seen as the premium item in a category. That is no longer true. Many chains 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 brands on.

To supply those products to 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 the major stock exchanges. There are thousands of companies in hundreds of categories that produce the products in partnership with retailers.

Store brand manufacturers fall into several general classifications:

• They are large national brand manufacturers that utilize their expertise and excess plant capacity to supply store brands.

• They are small, high 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 run their own manufacturing facilities and provide store brands for themselves and, in a few cases, for other retail chains as well.

• They are regional brand manufacturers that produce private label products for specific demographic markets.

• And, they are large, nationwide manufacturers of store brands across a range of food and non-food product categories who supply a multiplicity of retal chains and channels in the U.S. and even internationally.

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 brands are tested and analyzed for quality and safety by independent companies before they reach store 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 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 a shelf, pantry, tabletop 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 and 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 assortments of products targeted to different consumer demographic segments, such as ethnic, gluten-free, diabetes care, regional and "better for you" items. Organics and natural are categories that are particularly active with new product introductions.

For the consumer, store brands represent choice and the opportunity to regularly purchase high quality food and non-food products at considerable savings. 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?fs 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 available in every store in the country. That means they spend huge sums of money on advertising, merchandising and promotion as well as on their supply chain. Store brands are not cheaper they are just less expensive to market than national brands. And that's good news for consumers.

Store Brands: The Smarter Choice

Exactly how much do consumers save? During 2015, based on Nielsen data, 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 $30 billion in savings, according to PLMA. Periodic research by PLMA also 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 marketing costs incurred by national brand makers that are passed on to consumers. Big CPG companies spend 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 identical to what the national brand item has.

Habit and familiarity are reasons shoppers have traditionally been drawn to national brands. 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 American consumers.

 

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