For most shoppers, store brands represent quality and performance as good as or better than national brands, but at substantial savings for the consumer.
As a result, by all industry measures, store brands have never been more popular. Last year, Nielsen reports that more than one of every five items sold across the country was a store brand product.
And sales are growing. The biggest expansion is occurring in the channel comprised of mass merchandisers, club stores and dollar stores - where store brands sales jumped by nearly ten percent last year. These retailers now account for close to half of all food and non-food grocery sales in the U.S. That performance helped push both private label sales and shares in all retail outlets to new highs.
The mass channel has grown in recent years to almost equal the traditional supermarket channel as the place where most consumers buy their groceries. Total sales of all products last year were $305 billion in the mass channel vs. $324 billion in supermarkets, according to Nielsen, which tracks consumer trends in grocery shopping.
Store brands accounted for $122 billion worth of sales in all channels in 2017 according to Nielsen. It is estimated that an additional $35 billion in private label sales occur in wholesale clubs, specialty retailers and discounters not included in the $122 billion figure, for total private label sales of nearly $160 billion.
What Are Store Brands? Who Makes Them?
Simply stated, store brands are the products that carry the retailer's name or private brands. Surveys reveal that nearly every shopper buys store brands with some regularity. They are most likely in the refrigerator, pantry, or medicine cabinet; or in the home office, basement, shed or garage.
Sometimes, they carry the chain's own name, or a variety of brand names 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, 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 housewares; among other sections in 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 brands offerings in a chain carry 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 can also serve as the store 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 available 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 favorite 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 (such as Husky, Hampton Bay, HDX) and Lowe's (Kobalt), among others.
Store brands are becoming prevalent 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 brands manufacturers enabled them to undertake a strategic expansion of their offerings.
The store brands 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 brands at their favorite stores.
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 brands 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 brands 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 brands manufacturers fall into several general classifications:
• Large national brand manufacturers that utilize their expertise and excess plant capacity to supply store brands.
• 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.
• 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.
• Regional brand manufacturers that produce private label products for specific demographic markets.
• Large, nationwide manufacturers of store brands across a range of food and non-food product categories who supply a multiplicity of retail 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 stores' 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 health and wellness diagnostic items 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 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 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 customers, stores are 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 shoppers get for their money.
Store Brands: The Smarter Choice
Store brands continue to represent significant savings for shoppers. Analysis of the latest point-of-sale data reveals that consumers last year saved an average of 72 cents per item, or about $32 billion on grocery and household purchases overall, by opting for the store brand over the national brand version of their favorite product.
Ongoing audits are conducted on behalf of PLMA that compare pricing at retail for store brands vs. national brands on 100 typical market basket items in selected markets around the country. These studies reveal consistently that shoppers save about one-third on their grocery and household items by selecting store brands over national brands.
One of the largest contributing factors to the pricing differential between store brands and national brands is the marketing expense that is incurred by the national brand makers, which is passed on to consumers – referred to by some industry analysts as the “marketing tax.”
Among the largest consumer packaged goods manufacturing companies, many routinely spend 20 to 30 cents or more of every dollar on trade promotion, advertising and shopper marketing in their efforts to drive sales and maintain their position in consumers’ minds. The marketing spend is also a means of supporting brand equity in the eyes of analysts and shareholders, who place a premium on their perception of a brand’s value in addition to the intrinsic value of the products themselves.
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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