Could private label's success be driving top CPG manufacturers such as P&G into the retail side of the business? The Hartman Group thinks so.
According to The Hartman Group, a Bellevue, Wash.-based research and consulting firm, the continued growth of private label in the United States might play a role in Procter and Gamble's recent foray into the retail sector.
An observation published in the company's June 10 on-line newsletter, HartBeat, suggests P&G's December 2008 acquisition of a chain of car washes — followed by its recent purchase of the Art of Shaving, a 36-store group that sells upscale men's grooming products — might represent the first steps toward wresting control of the all-important retail experience away from retailers more interested in promoting their own high-margin store brands than national brands.
"During the 'high flying 1990s,'" The Hartman Group wrote, "It became intuitively obvious to us that the 'power' — the ability to connect and resonate with the consumer — was on a permanent, one-way trajectory away from brands, products and manufacturers and in the direction of retail." As a result, the company added, "What was once your strongest ally is quickly becoming your strongest competitor."
The company also cites vast improvements in the quality of many store brands, some of which now are beginning to eclipse iconic national brands.
In an effort to beat back the private label threat, it continued, P&G seems to be taking matters into its own hands, following the example set by Apple, which has enjoyed tremendous success selling its own products in its own stores.
"True, capital outlay is very high. Yes, retail is very complex, cumbersome and labor intensive," The Hartman Group admitted. "And, of course, you don't want to jeopardize your existing business model by competing directly with your most valued retail partner.
"But when a company like P&G, which is routinely referred to as the gold standard for innovation within the CPG arena, begins making very calculated plays into retail, is it possible that they may know something many of us don't," The Hartman Group added.
