Refusing to retreat

Certain private label nonfoods categories continue to entice shoppers with quality and value.

Traditionally, when the economy emerges from a recession, private label sales recede. This time around such a shift still has yet to materialize as consumers continue to flock to store brand products.diaper

Supermarkets’ private label sales reached record market shares with $60.8 billion according to data provided to the Private Label Manufacturers Association by the Nielsen Co. for the 52 weeks ended December 27. While this is great news for retailers’ overall private brands strategy, Brian Sharoff, president of the New York-based PLMA, remains concerned with the continued decline of the nonfood grocery department for private brands.

“The category is down almost 10% to 1.6 billion from 1.78 billion units sold in 2009,” he says. However, as nonfood grocery has been on decline, health and beauty aids have seen units grow 9.7% over the last five years.

“If I’m a retailer, I need to have a better understanding of what’s going on in my stores in order to reposition my private label for continuous growth,” says Sharoff. In order to revive the beleaguered nonfood grocery categories, Sharoff suggests retailers look to specialty items like motor vehicle accessories, seasonal items and kitchen gadgets.

“When consumers are in a bind, they don’t want to take the time to travel to a specialty retailer for an item that might very well be available at the local grocery store,” he says. “These everyday-use items create a great opportunity for impulse purchases since they’re not usually products consumers expect to need.” He cites the lucrative opportunities de-icing salt and snow shovels presented during this year’s especially harsh winter as an example. Kitchen gadgets are another lucrative area.

“Suddenly we’re seeing 40 to 50 linear feet of kitchen gadgets at grocery. Retailers have begun to turn the category into a destination,” says Sharoff. “It’s interesting because it comes at a time when most people would say consumers are cooking less, and yet private label kitchen gadgets grew 6.4% over the last year. The total category is now valued at $1.1 billion.”

In 2013, kitchen gadgets lead the nonfoods categories in private label volume growth, up 7.4%. Motor vehicle care products and accessories followed with a 10.4% increase in private label sales.

In addition to offering value propositions, private label brands must now compete aggressively against national brands for consumer preference, industry observers say. Retailers can do that by leveraging their private label assortment, tapping into unique solutions and offering technology at a better value than their nationally brand counterparts.

“Increasingly, private label brands are being competitively positioned with the right technology and ingredients,” says Lori Miller Burns, director of marketing for the Marietta, Ga.-based Arylessence, a developer of custom fragrance programs for private label brands.

However, a sole focus on value may limit a retailer’s opportunities and profits, Miller Burns says. “If you take advantage of the tremendous opportunity to develop competitive product offerings that connect to consumers with key sensory cues, you will create destination brands, build shopper loyalty, and dramatically improve revenues and profits.”

Brush Buddies has enhanced its private label offerings with value packs and its patented sonic technology for its range of toothbrushes. The company has created bristles that whiten teeth with regular toothpaste. It also offers brushes with bristles specifically designed for consumers with sensitive teeth and gums.

“Teeth whitening and sensitivity are the two biggest topics in oral care right now,” says Anish Patel, owner of the Fontana, Calif.-based company. “If those are the aspects that the retailers go after in the private label segment, it’s probably their best growth factor.”

After value, reliable technology is one of the most important features consumers look for as it continues to have an increasing, if not dominating, role in their lives.  “Consumers are looking for products that really do make their lives easier,” says Kimberly Milstead, product marketing manager for Clean Ones. The Portland, Ore.-based company makes a wide variety of private label and branded gloves for household, automotive and outdoor use.

Suppliers also stress the importance of addressing subcategories that are often ignored by national brands. For a growing number of consumers, this often means eco-friendly products that are not only healthier for their family, but for the environment, too.

“We pride ourselves on our ability to be very flexible, always meeting the needs of the retailers we work with,” says Kyle Tucci, Valor Brands’ senior vice president. “We’re well positioned to customize programs to our retailers’ needs.” The Alpharetta, Ga.-based company specializes in private label and branded diapers and training pants in a variety of sustainable materials. Private label accounts for about 22% of unit share in the disposable diapers category today.

Part of the customization that suppliers can offer retailers is a wide variety of options and features that they can then pass onto customers. “Ultimately, we’re trying to provide a glove that makes their life a bit easier,” says Milstead. Having the right assortment of options available to consumers in-store can make or break a sale for the gloves category, valued at about $67 million. Clean Ones offers features like latex-free, vinyl, nitrile, long cuff, super gripping, phthalate-free, moisture absorbent linings and more for their reusable and disposable products.

Private labels have long been identified for their good, better or best quality. Observers suggest that a shift-up is in retailer’s best interest.

“Traditional thinking that targets consumers at multiple price points with good, better or best offerings often misses the mark,” says Pat Conroy, vice chairman for Deloitte, a New York-based consulting firm. “Given the bifurcation of consumers between higher and lower income levels, brands should instead address different shoppers’ ability and willingness to spend by moving to an OK, better and excellent brand portfolio.”

Value will get a younger consumer to buy a product the first time, but quality is what keeps them coming back. “Retailers need to make sure that if there are Millenials in their consumer base, that they understand how important value and quality is to them,” Sharoff adds.

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