Budget brands no longer

Consumers are putting their trust in store brand nonfoods products; retailers who are dedicated to their brand will come out ahead.

Opening the cabinet in a woman’s bathroom can be risky business. At any given time there may be an accumulation of skin creams, styling gels, make-up and health aids, among other items, all in various stages of use. A closer look might reveal three- or four-dozen different brands, recognizable from their placement in magazines, on billboards and during commercial breaks. PL-Pressboard-Plates

How do consumers decide which products to stock in their bathroom cabinets—as well as the kitchen cupboards, closets, laundry room and other odd places people store nonfood grocery products? The answer to that question is not what it once was.

According to industry observers, consumers are no longer shopping based on brand—or at least not “national brand.” Many shoppers have adopted a shopping strategy that focuses on value and includes experimenting with a supermarket chain’s brand. In response, many retailers are focusing on rebuilding their private label lines, developing them from the “budget alternative” they were once called, to a unique and premium option. Those that have exhibited dedication to their cause have been met with growing market share and loyal customers, observers add.

Take the health and beauty care (HBC) category, for example. As reported by Nielsen and the Private Label Manufacturers Association (PLMA), private label HBC products make up 13.8% and 17.3% of dollar sales and unit sales in the supermarket respectively.

There are two factors contributing to the growth of private label in the nonfoods categories, specifically the HBC segment, according to Brian Sharoff, president of the PLMA, based in New York City. “The first is the aggressive marketing and merchandising by the drug chains that have expanded—and are extremely committed to—their own brands. I think it has educated the consumer in general about the value of store brands versus national brands.”

The second driver behind the growing popularity of store brands in HBC is mass merchandisers—particularly Target and Walmart—that “have signaled to the consumer that HBC is a major part of the store brand offering at these chains. Their private brands have become nationally recognized,” says Sharoff.

How have they earned this reputation? It is all about quality, say observers.

There is a move away from the national brand equivalent (NBE) callout. Manufacturers are working with retailers to differentiate their store brand products with unique characteristics and premium quality, instead of mimicking the national players. “Retailers aspire to offer something different than the national brands in the HBC category,” says Moto Okawa, marketing manager for Diamond Wipes, based in Chino, Calif.

“We constantly receive questions and requests for something new and exciting. Innovation in this category is still in its infancy stage. I think the next thing we will see is more customized and individualized product proposition. Through collaboration with marketing agencies, the national retailers aim to rebuild their store brand programs from the ground up, not relying solely on the conventional tactic of NBE,” he adds.

Taking the lead
Other nonfoods segments, such as feminine hygiene, foot care and household cleaning items are moving in the same direction as HBC, say observers. Companies like Clean Ones and Premier Brands have strayed from the typical private label “fast-follower” mentality and are striving for continuous innovation.

Technological advancements play a big role in how Premier Brands develops its private label options. “Foot care products are becoming more sophisticated; for example, insoles have evolved from general use products made of simple foam or gel to highly specialized products that incorporate advanced materials to better meet the specific needs of the consumer,” says Steven Corsun, owner and CEO of Mount Vernon, N.Y.-based Premier Brands. “It is imperative for retailers to continue to engage the consumer by offering advanced products that provide quality, value and superior performance.”

Offering more color and quality options is another tactic private label manufacturers are using to produce premium offerings in household and utility categories, especially on items with a lower price point. Consumers are recognizing that they can pay just a little bit more and get a lot better product, says Erin Crum, marketing director for Clean Ones, based in Portland, Ore. “Private label has historically been an ‘opening price point’—the value glove—but we are seeing private label target a higher price point.”

Some of the attributes the gloves category is seeing more of include a wider variety of color and different materials, such as latex-free for both disposable and reusable gloves, as well as blended materials. Crum expects this to continue. “We will see the variety and sets continue to expand. Consumers are specific about what they want,” she says, adding that their research shows consumers want different colors for different rooms and options between disposable and reusable.

While many national retailers have been focused on building their store brand since the recession, there is still a lot of room for growth across the entire store, especially the nonfoods section, where grocers have been losing overall market share to drug chains and mass merchandisers, say observers. Private label still only makes up 20% to 25% of the total market, says Crum, and retailers should be striving for the higher penetrations seen in Canada and Europe.

Many observers attribute the growth in private label to the economic downturn. Though as the economy picked up, consumers stuck to their new shopping habits, which include experimenting with store brands and eating and entertaining at home more often.

According to Nielsen, more than 50% of consumers are choosing to entertain at home more often, says Paul Huckins, vice president of Huhtamaki Retail Division, a De Soto, Kan.-based manufacturer of disposable tableware among other food containers.

“Consumer lifestyles will continue to drive demand for high quality products that are a great value and make it easier to spend time with family and friends,” he says. “As private label gets more competitive, retail brands must be innovative through a unique product offering or an exclusive design option, driving the consumer specifically to that retailer. Retailers must know their shopper and always be thinking of new ways to exceed his or her expectations.”

Staying ahead in the innovation game is no easy task, manufacturers agree. National brands are constantly evolving their product offerings in an effort to stay one-step ahead of private label options.

Since 2008, national brand manufacturers in the feminine hygiene category have been introducing new premium options to the market, says Martine Henault, marketing director for Fempro I, based in Drummondville, Que., Canada. “These new products are more expensive and complex to produce, setting up a big challenge for private label manufacturers. Should retailers offer a ‘premium national brand equivalent?’ Is their marketing strategy the same as other brands? These are questions retailers have to ponder.

“National brands change often to prevent stores from easily introducing equivalent options and keep their market share. Retailers and private label manufacturers have to react quickly to additions to the market; they must work together early on in projects, from conception to commercialization,” Henault adds.

The feminine hygiene category has, however, proven to retailers that it is possible to keep up. The total category has seen a decrease in both unit and dollar sales, but the private label segment has seen a 7.7% increase in dollar sales and 4.8% in unit sales, according to Symphony IRI data, for the 52 weeks ended August 11.

When it comes down to it, building and executing a store brand is all about quality, says Premier Brand’s Corsun. “Retailers must build consumer trust in order for their brand store brand to survive. If the product quality is sub-par, the consumer suffers and ultimately the retailer as well.”

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