Changing role of brands opens door to private label growth.
New research by The Hartman Group, Bellevue, Wash., found the role of brands has shifted over time, creating new opportunities for store brands to move to the forefront and "perhaps even leapfrog national brands in such critical areas as ingredients, flavors, preparation, even packaging," said Senior Vice President Michelle Barry, Ph.D.
In a webinar titled "Private Label 2010: Three Key Battlegrounds for Brand Loyalty," Barry said brands used to be indicative of differentiated levels of quality. Today, however, consumers expect much more.
"It's no longer enough just to create a consistently high-quality product," she explained. "A brand must also be distinctive, well-differentiated, experiential," and a whole host of other attributes. "Brands today are a navigator for re-imagined experiences," Barry continued, citing examples from Trader Joe's private label lineup that put a whole new spin on everyday products such as cereal (frozen oatmeal cubes, anyone?).
Although many national brands have fallen behind consumers' desires, creating a relevancy gap between what consumers expect companies to make and what they want them to make, private label and specialty brands have, in many cases, filled the void. And the future looks bright.
According to Barry, a shift from supermarkets that act simply as "warehouses for storing goods" to "supermarkets as theater" gives retailers the power to control the consumer's experience with many products — an advantage they are using to propel private label forward.
The Hartman Group's research indicates that the recent economic downturn spurred 43 percent of consumers to begin purchasing store brands. And a whopping 86 percent of those consumers said they have no intention of going back to their previous brand once the recession ends, making a post-recession reversal of private label's recent good fortune unlikely.
"Many of these consumers tried the private label product, liked how it performed, appreciated its quality and simply decided there's no reason to switch back," Barry told PL Buyer. "But I think there's a second, deeper issue at work here as well, related to branding in general. Brands today don't have quite the power over the consumer that they used to. We have an awful lot of choices now in every single category, so brand loyalties are less intense and less consistent than they used to be.”
She added that the younger generation, in particular, does not think at all about brand; but more about genre instead.
“They just want to buy, say, cheese or chips, and they don't care what brand it is,” Barry said. “That's just the 'robe,' and they're more interested in the product beneath it."
What qualities actually prompt consumers to make the jump from a national brand to a store brand? According to The Hartman Group's research, four key drivers motivate shoppers to experiment with private label, including unique flavor, global inspiration (ethnic foods, imported foods, etc.), a natural/less-processed formulation, and differentiated forms and textures.
Drilling down further, The Hartman Group cited a dozen categories it considers "up for grabs," including crackers, bottled water, packaged deli meats, soup, packaged cookies, dry dog food, ice cream (pint size), yogurt, refrigerated juice, potato chips, granola bars and frozen pizza.
"There are certain categories where the lines have already been drawn," Barry explained, putting cheese, analgesics and canned fruits and vegetables squarely in private label's corner, and carbonated soft drinks and cold cereal in the national brands’. But the 12 identified as "up for grabs" could go either way.
"These are categories where price is not always the determining factor, where quality is sometimes better differentiated and where national brands may have dominated in the past, but consumers are open to experimentation," she continued. "It all comes down to knowing the right quality cues to play up in each category."
Finally, Barry said, despite the current us-versus-them mentality in the industry, store brands and national brands can and should co-exist. The best way to do that, however, is for retailers to introduce private label products that do not just knock-off leading national brands but instead offer something different and special (think Target's Archer Farms collection).
