When priced competitively, private label wellness products can attract consumers focused on value and health.
By Carol Radice
As the recession continues to grip consumers’ wallets, it comes as no surprise that they are seeking out competitively priced private label wellness products. As indicated in several recent studies, consumers are open to buying private label wellness products as long as they perceive them to be a value. The real question for suppliers and retailers: Will this trend continue as the economy improves?
A Whole Foods Market Food Shopping Trends Tracker survey conducted online by Harris Interactive in June 2010 took a look at baby boomer buying habits and concluded that the majority of shoppers polled are more concerned about what they eat, are reading nutrition labels more closely and have a better understanding of how their food is produced.
When the topic of cost was introduced, the baby boomers surveyed noted that if prices are comparable they prefer natural and/or organics foods over conventional foods (73%) and they would like to find additional ways to purchase these foods while adhering to their budget. Of those that noted current food prices have affected their grocery shopping, 46% indicated they go out of their way to look for lower-cost items. Despite being more price conscious, 72% say they are not willing to compromise on the quality of food they buy.
Another study—this one conducted by the New York-based Private Label Manufacturers Association—took a look at consumer purchasing behavior beyond the recession and found shoppers are willing to buy more store brand products in categories where they previously only purchased the national brand even when things ease up. At the same time, these shoppers are assigning more importance to nutrition and health related issues when making choices about which food to buy.
Although consumers say they intend to purchase more private label wellness products, experts note that they are not always following through at the checkout.
According to Christine Bushway, executive director and CEO of the Organic Trade Association, based in Brattleboro, Vt., the top organic categories were meat, fish and poultry, dairy, fruits and vegetables, beverages and condiments. Bushway notes that sales of organic private label meat, poultry and fish have been waning.
OTA officials note that the falloff in sales is not necessarily an indication of declining interest, but could be a sign that consumers are cutting back on higher-priced items as well as a reflection of the renewed effort branded companies made to win back share.
Bob Johnson, founder of Danville, Calif.-based Organic Foods International, believes that, despite the rejuvenation of branded products, consumers will continue to purchase private label wellness products at a healthy pace. He notes that many consumers will be feel the effects of pay cuts and downsizing for years to come. “Many people moved over to private label organic so they could continue buying organic even though money was tight,” he says. “Their financial constraints won’t instantly disappear.”
If anything, Johnson says the shift in share has been a wakeup call for brand executives. “National brand companies are ratcheting up promotions to regain the share they lost,” he says. “It’s going to [remain] a highly competitive marketplace.”
To compete with branded products, retailer are taking a more forceful approach to developing and managing their private label wellness products, experts note. Kim Greenfield, a principal with Campo Verde Solutions, a Boston-based consulting firm, is impressed with the maturing and sophistication of private label programs.
“Today’s buyers are taking control of the product development process and are not afraid to set guidelines with vendors as to how much sodium, fat, calories, etc. they will allow in their private label products,” she says. “This is entirely different game than it was a few years ago when retail buyers were letting vendors call all the shots.”
Increasingly, retailers are pulling in experts and are involving their corporate nutritionists in determining which products to add to their private label wellness lineup, notes Greenfield. “[Nutritionists] are getting involved at the baseline and are able to be much more proactive in the formulation of these products to ensure it is in line with a company’s goals,” she says.
Greenfield also sees retailers increasing the emphasis on the healthy qualities and features of their products through packaging and graphics. “They are clearly calling out the product’s health attributes such as low-fat, low-calorie, gluten-free, all-natural, etc.,” she explains.
Kathy Oneto, vice president, brand strategy for Anthem Worldwide, a global strategic design firm based in San Francisco, sees both opportunities and challenges ahead for grocers looking to expand private label wellness programs. She notes that from a price perspective, private label brands have historically offered a value to consumers, something that has clearly attracted consumers in this economy. “By dually positioning organic as something that is affordable and healthy, retailers have done well attracting consumers to private label organic,” says Oneto.
That’s not to say the metrics are in place for retailers to expand every natural and organic category with more private label offerings, experts note. Oneto says that while natural products are appealing within personal care, for example, there is still a gap with what consumers say they want and what they are buying. “People are in fact buying traditional national brand personal care products less frequently as they look to squeeze every drop from what they already purchased.”
While Oneto feels the newly established natural personal care standard will go a long way in creating a stronger value proposition for consumers, she says many are still struggling with understanding the differences between natural and organic. “Retailers should start by strengthening the value proposition of natural and organic by stressing the qualities and features each of the two segments offers,” she says.
Looking ahead, Oneto says given the premium nature of the category, consumers need incentives to continue purchasing natural and organic in a down economy. “People are and will continue to be concerned about their health and are seeking solutions to feed their families better.”
While interest is clearly there, experts such as Greenfield agree that given the economy retailers should carefully consider any expansion of their private label wellness programs. “Retailers have been wise not to enter too many new categories this year in an effort to build their private label business,” she says.
Greenfield says it is important to develop a clear marketing message for private label wellness products. “A good example of this is A&P’s Via Roma,” she says. “The company has done a great job capturing the nostalgia and family aspect of these natural and organic products they sourced from Italy.
Greenfield says people are sticking with private label because of the quality, the product attributes and the price.
“As much as they are dictating ingredients, retailers should also be dictating price,” she says. “As long as the value proposition remains clear, I see a healthy future for private label wellness programs.”