A strong offering of private label nonfoods items—from shampoo to foot care—can help supermarket operators increase sales and profitability.
Nearly every supermarket has private label canned corn, but how many have a private label corn remover?
Yet that is where the greater profit potentials lie. A strong private label nonfoods assortment enables supermarkets to better compete against mass merchandisers and the big three drugstore chains, while greatly enhancing the margins and profits of the nonfoods categories, say industry observers. Throw in a weak economy and skyrocketing gasoline costs and the environment to build on nonfoods private label assortments has never been brighter.
“Private label sales in the medical device and first aid categories have shown tremendous growth in recent years as consumers demonstrate increasing trust in private label products,” says Alexander Corsun, project manager at Premier Brands of America, a Mt. Vernon, N.Y.-based manufacturer of more than 125 different products in the foot care, first aid, medicated spray, depilatory and beauty categories. In addition to its Premier brand, the company’s products are in more than 50,000 stores as private label.
As a result, retailers are continuing to dedicate more shelf space to store-brand nonfoods product offerings, Corsun says. “With today’s economy, the average cost conscious, on-the-go consumer is looking for a one-stop shopping experience to save time and transportation costs. Providing a good mix of product, including a strong selection of items outside of the food and beverage aisles, will encourage the consumer to do more of their shopping within the grocery store,” he says. “Without a private label component in the medical device and first aid areas, there is often not enough selection to encourage the consumer to seriously shop this section and that will force him or her to go elsewhere.”
The current economy is having a positive impact on the private label business, says Gregory Rubin, CEO of Garcoa Labs. The Calabasas, Calif.-based company manufactures more than 1,000 private label items, including shampoo, skin lotion, over-the-counter drugs, hand sanitizers, foot powder and baby care items.
“The mentality of a grocery retailer really needs to change to not look at health and beauty aids as a necessary evil,” Rubin says. “It is really something that is to their benefit, and is necessary to make their stores a one-stop destination. They need to be more promotion oriented in the health and beauty care field, and provide more activity for the consumer, do end cap displays and other things to appear to be more committed.”
That is exactly what more and more supermarket operators are doing.
“When it comes to nonfoods private label it is no longer just opening price-point for the stores, they want quality and national brand equivalents,” says Amanda Kmetz, director of marketing, implements and foot care, at Pacific World Corp., based in Lake Forest, Calif. Competing against brands such as Sally Hansen and Revlon, Pacific World provides private label nail clippers, eyelash curlers, salon boards, foot files, scissors and nippers.
“Retailers are looking for innovation for their brands, to be leaders and give quality and assortment to their consumers,” Kmetz says. “More store brands are seeking multi-levels for price points in their offerings as well.”
According to the Private Label Manufacturers Association’s 2012 PLMA Private Label Yearbook, the fastest growing nonfoods private label categories are grooming aids, pain remedies, cough and cold remedies, auto accessories, light bulbs, batteries/flashlights, buckets/bins/bath accessories, medications and feminine hygiene.
“The marketplace has benefited private label very, very nicely,” says Brian Sharoff, president of the New York-based PLMA.
Historically, Sharoff says, drugstores have done a better job with private label, especially when it comes to OTC medications. “Unlike supermarkets, when it comes to private label, the drug chains have the shelf space to match product for product,” Sharoff says. “If there is a national brand ibuprofen, the retailer has an ibuprofen. When it comes to Aleve, there is a retailer version of Aleve. The result is that on the shelves are an enormous number of SKUs in similar categories.”
And unlike many food categories, in the nonfoods sector private label packaging often mimics the national brand, Sharoff says, because retailers wanted to assure their customers that what they are buying is not an inferior product even though it is often retailing for 30% to 40% less than the national brand.
“In health and beauty, unlike food, you have an ingredient statement on every package,” Sharoff says. “Consumers can and do examine that and see that the ingredient statements between private label and the national brands are very close.”
“We have found that consumer perception of private label brands has changed remarkably in the last 10 years,” says Premier’s Corsun. “Previously, consumers assumed that the private label brand was inferior, now they’re looked at as equal in quality. Retailers understand that stocking inferior private label product will reflect badly on them, so they have pushed manufacturers to meet the highest of quality standards,” he says, adding that differences often come down to perceptions.
“A drugstore’s brand does not necessarily reflect better on a first aid product than a supermarket’s brand, provided that the supermarket’s brand is well executed,” Corsun says. “When it’s the same product behind the packaging, it comes down to marketing. As long as the marketing support is there, the supermarket brand can have just as much cache with the consumer as the drugstore’s brand.”
Retailers are using their nonfoods private label to differentiate their assortment from the competition. Take the wet wipes category, for example. “Our Nice-Pak Innovation Center has a continuous pipeline of new products across all categories,” says Thomas Hernquist, president, consumer division, for Orangeburg, N.Y.-based Nice-Pak Products. “There is a constant evolution of fibers, technologies and meaningful consumer insights that we research and develop. We are continually challenging the status quo and providing our retailers with the latest technologies available. We strive for our innovations to be category-leading breakthrough products capable of driving growth and profit.”
Made in the U.S.A.
Consumers are not only reading ingredient panels on the back of medicinal packages, but also looking at where the products are manufactured, says Garcoa Lab’s Rubin. “A lot of manufacturers are ‘coming back from China,’ so to speak,” he says. “Many had gone to Chinese sourcing, but are starting to realize that the consumer is reacting negatively to products manufactured in China, Turkey or some other foreign country. There seems to be an American movement to support American manufacturing.”
Nice-Pak touts that its new Pudgies brand of controlled wipes are American-made. “Retailers are able to provide a quality, hypoallergenic, alcohol free wipe that is soft and thick for gentle cleaning that is ‘Made in the USA’ and can capitalize on an important consumer need and build incremental sales,” Hernquist says.
The vast majority of paper products are manufactured in the U.S. and that is another area that is strong for private label.
“The paper category is one of the best tools retailers can use for marketing and driving traffic to their stores,” says Daniel David, executive vice president at Global Tissue Group, based in Medford, N.Y. “No matter which retailer you visit—supermarket, dollar store or club—the majority of shoppers have some type of paper product in their basket. Therefore, retailers use paper goods to drive sales in other categories, especially private label.”
David suggests that retailers feature private label paper products in their weekly circulars. “They should even go as far as listing them side-by-side to the national brands to highlight the fact that their private label paper products have an everyday low price—almost always lower than the heavily discounted brand,” he says.
Innovation is also driving private label paper sales. Global Tissue Group, for example, has introduced color paper towels under the Pixel brand. “This is the first premium towel program offered in an assortment of vibrant colors,” David says. “We are happy to add another opportunity to our premium quality towels focused on design and individuality with themes as an important concept.”
Pryor, Okla.-based Orchids Paper Products Co. is offering private label paper goods featuring a processed print. “It gives the print an almost hi-def and great detail,” says Dan Daniels, vice president of sales and marketing. “A regular standard print uses four colors. Processed print actually blends the colors together to give quite a few more colors. It is almost like a real-life picture.”
He adds, “The quality around private label paper and tissues is very, very close, if not the same or better than the national brands, and it is for a cheaper price.”
Tops with table top
American supermarkets can also take a cue from their European cousins and stock private label dishes, glasses and bakeware.
“As grocery stores work to promote and develop their private brands, table top is a natural expansion of that, especially since they can’t devote the space that a Target could devote to the category,” says Jerry Bittick, national sales manager at Kennex USA, the Oceanside, Calif.-based subsidiary of Hong Kong-based Kennex Group Cos.
A table top offering will help them compete against mass merchandisers. However, since most supermarkets do not have the space to carry a complete assortment of patterns, Bittick suggests they stick to basic white and solid colors. Tableware is a category that is easily branded, he says.
“Anything that is brought into the States is required to have a permanent backstamp,” Bittick says. “The retailer could use their store name or whatever brand they are using. That could certainly be used to permanently remind people where they bought it.”
And since tableware lasts for years, astute retailers can keep their name front and center with the consumer for decades to come.