Winning with private label
By Grocery Headquarters Staff
By Barrie Dawson Private label products have become a way for retailers to differentiate themselves from the competition. Thirty years ago, private label products came in big, white cans and boxes with foreboding, black lettering that said clever things like, “BEANS” or “NAPKINS.” Today, private label products come in carefully crafted packages with appealing names. They are marketed in multiple tiers—from discount to premium. They often cost less, meet or exceed national brand quality standards and strive to be innovative. Many private label manufacturers are providing one-of-a-kind products that give retailers exclusivity—the greatest gift of all. Private label manufacturing has come a long way, but does the consumer really know how far? Is “less expensive” the only concept that jumps into a shopper’s mind upon seeing a store brand product on a grocer’s shelf? Are retailers and manufacturers doing a good job of working together to entice the public to give store brands a try? “The education of the public on private label, it’s sort of a silent education,” says Claire Cretors, president of Cornfields, based in Waukegan, Ill. “They don’t know they’re being educated, which is a great way to do it. It’s just sort of a natural, organic creation of something.” Cretors is among the many manufacturing executives who believe retailers are doing a good job of developing private label marketing strategies and executing them. The reason being, retailers are emphasizing front-end promotions and treating private label more like the national brands. “Most of the top-tier retailers are very good at attracting consumers to their store brands,” says Steve Fay, executive vice president of sales for Dakota, Ill.-based Berner Food & Beverage. “It is interesting that the retailers that are successful today put great emphasis and effort into store brands, while those that are not doing so well emphasized national brands at the expense of their store brands.” The Private Label Manufacturers Association (PLMA) offers Nielsen statistics that show private label to be growing slightly in terms of market share. At the end of 2013, private label’s unit share in all outlets was 21.2% of total market, while its dollar share was 17.5%. According to the PLMA, both are records and both show private label growth is outpacing that of the national brands. Industry observers say that private label sales remain on the rise and those retailers that do not adjust their marketing plans are likely to pay the price. In conjunction with Saint Joseph’s University’s Center for Food Marketing in Philadelphia, the PLMA offers an executive education program for retailers, manufacturers, wholesalers and brokers. The program shares the latest in marketing trends with executives and can help retailers develop or fine tune their private label strategies. “In most supermarket chains, the retailer has a very definite idea of what their message is,” says Brian Sharoff, president of the New York-based PLMA. “Sometimes a manufacturer can enhance a message. Sometimes they come to a retailer and say, ‘you don’t have a product like this in your private label program. I can make it, and I can convey the message for you if you want to do some business with me.’” Whether the retailer is a national chain or a small, independent grocer, observers say the basis for a winning private label strategy is always the same: an intimate knowledge of the store’s consumer base. Demographics are crucial, whether they relate to shopper income, age, education level, ethnicity or other key classifications. Although retailers must set their own strategy, private label manufacturers can often serve as advisers. “From the supplier perspective, you look at the private labels that are out there, and none of them reveal who makes it,” says Brian Carlson, director of marketing and consumer products in the U.S. for the Cascades Tissue Group, which has operations in Candiac, Que., Canada, and Eau Claire, Wis. “The retailers want the consumer to think, ‘That’s my brand. I manufacture it.’ So the supplier works in the background helping the retailer understand what they should have as a product offering.” Carlson says that if Cascades retail customers are willing, they will provide them with marketing analysts who will help determine where the retailer might be overexposed or underexposed in terms of its product assortment. Cascades determines the proper mix through its knowledge of the retailer’s market, its analysis of which price points are the hottest sellers and its broad view of Nielsen marketplace trends. Clearwater Paper Corp. provides many of the same services to its retail customers. “I think the best manufacturers in the business bring good marketing, good consumer shopper studies as well as products to the retailer in terms of what the consumers are looking for. The retailer has to be an expert in their shopper demographics, priorities and behaviors,” says Joanne Shufelt, vice president of sales and marketing for consumer products for the Spokane, Wash.-based company. “We don’t know their shopper as well as they will. We may not know what their shopping basket looks like, but we can bring broader trends in terms of what products, price points and pack sizes are most compelling and what relationships between the national brand and the store brand could be most valuable to drive top and bottom line,” she adds. “The goal is to make the retailer’s brand a focal point for those shoppers to keep returning to the retailer’s store, so the best relationships are collaborative in terms of focus on the shoppers, where we each bring our own point of view.” Manufacturer assistance is not the only source of help for retailers that want to develop a private label strategy. Daymon Worldwide, based in Stamford, Conn., provides private brand building, experiential consumer marketing and innovative retail-driven services to more than 100 retailers and almost 6,000 manufacturers on six continents. “We feel that finding the right partnerships between the retailer and manufacturer is critically important, and it really has to align around their interests for mutual benefit,” says Virginia Morris, Daymon’s vice president of strategy and insights. “Across the spectrum, some retailers have a heavy focus around their private brand program, and sometimes private brand programs take on more of a support role.” In terms of consumer behavior, Daymon tracks what Morris calls “eight megatrends,” which the firm believes drive the overall consumer experience and influence consumer choice. Those megatrends are: B-Well (health and wellness); Always On! (always on the go); Conscious Raising (social responsibility); YOUniverse (the ability to learn, do anything); All for One (impact groups, social media perspective); JOYment (the thrill of the pleasant surprise); Current-cy (recession-related economic lifestyle change); and Cultural Ecology (shifting demographics). “This is the lens through which Daymon approaches our entire business,” says Morris. “It’s our unique perspective on the marketplace and how consumers are shifting and impacting the landscape of private brands.” One of Daymon’s eight megatrends, Current-cy, refers to the recession years and what they did to consumers’ budgets. That, in turn, had an influence on private label. With shoppers looking to save money wherever they could, many turned to less expensive store brands more regularly or for the first time. Although private label has been around for decades, the recession provided the industry with increased exposure. “Hard times promote more careful cash management, and store brands scored a big win during the recession,” Fay says. “Interestingly, as we exit those hard times, store brands have retained higher shares of market. The best thing that can happen to store brands is for consumers to try them and discover that they are the equivalent to the national brands.” The recession actually presented private label manufacturers with two opportunities, say observers. Not only did it generate trial with a new set of consumers, it gave manufacturers the impetus to improve product quality. Now, not only are private label products better, the packaging has vastly improved, too. Much of private label packaging instantly conveys a message about a product’s quality and it is an important component in the creation of a store brand. “It’s all about that moment, that instant the customer has to make a decision,” Cretors says. “If your packaging is great and it conveys whatever you’re selling—the product is healthier and it looks delicious—the consumer may not even look at price or realize it’s private label.” As the Nielsen statistics show, the public is catching on as retailers do a better job of promoting their store brand products. Yet, there is always room for improvement and observers say there are certain areas where more consumer education is needed. “Many consumers feel private brands to be lesser in quality than the national brands,” says Tom Barbella, president of Bektrom Foods, based in Monroe, Mich. “In-house tastings are a surefire way to show consumers that store brands are equally good in quality—and sometimes better.” Jeff Leaf, the director of sales at U.S. Alliance Paper, based in Edgewood, N.Y. says he frequently talks to consumers who will buy private label products solely because they are less expensive. “I think a lot of that falls back to the retailers, as far as educating their customers on their private label programs,” Leaf says. “I think it would be a huge advantage if they just took that to the next level and started talking to their consumers about the quality and the value of private label, not just cost.” As private label continues to meet consumer needs, the question remains, how much further can it eat into national brands market share? “I think we’ll always coexist with them,” Carlson says of private label’s relationship to the nationals. “They have enough money, and they’re constantly innovating. In a lot of aspects, they’re always one step ahead of the private label guys, but we are fast followers.” What’s new in private label There can be no rest for private label manufacturers. Their retail customers need them to be innovative and collaborative, so there must always be something new and different on the drawing board. For Clearwater Paper Corp., based in Spokane, Wash., innovation means working with new technology, according to Joanne Shufelt, the vice president of sales and marketing for retail consumer products. “The paper industry has gone through a revolution over the last two or three years, where a technology that was proprietary in terms of softness and absorbency was introduced,” she says. “Until recently, much of this technology was patent protected. The primary patents expired, opening up new opportunities for the retailers.” The availability of the technology gives private paper brand manufacturers the opportunity to market products, especially bathroom tissue and towels that can match the national brands in terms of the highest standards in the category—validated by consumer testing—in softness and absorbency, say industry observers. “Clearwater as well as others have made significant investments in manufacturing infrastructure to bring this high-quality ‘ultra’ product tier to retailers,” Shufelt says. To help promote its lines, U.S. Alliance Paper, based in Edgewood, N.Y., has obtained a license to market Disney products. Facial tissue featuring Disney characters from the movies Frozen and Monsters University are currently available. The company also has purchased new machinery that will increase production capacity. The Cascades Tissue Group, based in Candiac, Que., Canada, and Eau Claire, Wis., has two new products available. One is ServOne, a plastic napkin dispenser, similar to ones found at diners. Company officials say its primary purpose is to keep napkins in place at picnics and other outdoor activities. The other is called AntiBac, an antibacterial paper towel. Consumers wash their hands with water, then dry them with an AntiBac towel that is infused with a water-activated bacteria fighter. On the edibles front, Bektrom Foods, based in Monroe, Mich., has added spicy hush puppies and no-MSG pasta entrées in its Loretta product line, and it is about to introduce a Larry the Cable Guy gravy line. Berner Food & Beverage, based in Dakota, Ill., has recently marketed a fat-free, high-protein sports recovery drink, while Cornfields, based in Waukegan, Ill., is experimenting with some new heritage grain foods. One, the Quinoa Chia Chip, has quinoa as the main ingredient and is still in development. Cornfields is also working on some new foods involving the sweet potato and some new ways to expand its popcorn line.