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A glimpse at the past: The key PL trends of 2011
In Sept. 2011, even low-price-oriented, Bentonville, Ark.-based Sam’s Club rolled out three new premium-tier private label brands, Simply Right, Artisan Fresh and Daily Chef, adding to a year that saw more than its share of private label premium debuts.
“Premium private label really seems to be taking hold,” says Paula Rosenblum, managing partner at Miami-based Retail Systems Research (RSR Research). “I’m seeing more of it every day. I think that Sam’s having a premium quality product as an accompaniment to the traditional PL is a good idea because it allows them to extend their reach and go after the Costco customer.”
Canadian retailer Loblaws also went upscale in 2011 with a new President’s Choice black label line.
“We’ve seen a good number of successful premium private label offerings, with [Target’s] Archer Farms being the one that most comes to mind,” says Jonathon Asher, senior vice president of Perception Research Services. “The key seems to begin with the product proposition – offering a high quality version of whatever the product category is…and also, where possible, something unusual in terms of particular flavors, ingredients, benefits, etc.”
Retailers also may be rushing to premium in anticipation of how consumers will shop once the country’s economic malaise finally ends. People are buying private label today primarily because of price as they seek to stretch every dollar in the face of high unemployment and the collapsed housing market. While all that seems like it will last forever, no economic trend ever does and once it passes, retailers will need another hook to keep shoppers buying private label.
“I think this very strongly underscores a trend underway that is a reaffirmation of the evolution of private brands,” agrees Jim Wisner, president of Wisner Marketing Group, Libertyville, Ill. “The change in the economic climate peaked interest in the private label industry and encouraged retailers to broaden their scope of what can be done with PL.”
Private label marketing moved to a more sophisticated level in 2011, with a variety of retailers beginning to emulate national brands with fully integrated marketing campaigns for their private labels.
California-based Safeway, for example, used television, social media and a national public relations effort to promote its Open Nature line, even throwing in such old-time PR stunts as the world’s allegedly largest picnic table.
Walgreens rolled out a national marketing campaign for its private label health and wellness lines that emphasized the affordability and quality of its products. The campaign included television, print and digital media ads; exactly the type of campaign usually reserved for the national brands.
“I’ve always thought that a central element of a successful private label was that it was treated with respect by the retailer,” says Bill Emerson, president of the West Palm Beach County, Fla.-based retail consulting firm Emerson Advisors. “Respect is defined as quality that is equivalent to the national brands, stylish packaging, prominent placement, and price points that position it with national brands (assuming the quality warrants it.) With these elements in place, it makes sense to market the brand publicly.”
Loblaws ran a promotional campaign in the summer of 2011 that invited the public to sample its hottest food and beverage trends at the President’s Choice Summer Tour. Stopping in 170 stores across Canada beginning in May, the PC BBQ trailer and PC Ice Cream Shop Truck brought customers the tastes of summer to their local Loblaw banner store. The promotional campaign included TV ads and a special Insider’s Report flyer, among other tactics.
Expect this type of marketing to spread to other private labels.
“This type of marketing will definitely continue into next year and it’s the single biggest threat the national brands have to worry about, says Ben Ball, senior vice president of Dechert-Hampe, a Deerfield, Ill.-based consulting firm. “The retailers who are catching on to that and who are actually starting to invest dollars, most times, you’ll find are actually sourced from manufacturing trade spending, [not directly] obviously. Those are the retailers who are going to do very, very well.”
Everyone from A&P to Wegmans was busy rolling out new private label products this year.
El Sagundo, Calif.-based Fresh & Easy, for example,
expanded its eatwell range in January, introduced a frozen Italian gourmet pizza line in March, and came out with Green Things, an eco-friendly household cleaning and paper products range, in April. It also added to its Gourmet line of products in July.
The Fresh Market, Greensboro, N.C. , and Camp Hill, Pa.-based Rite Aid both cooled customers down by introducing new private label ice creams.
Oompa! Scarborough, Maine-based Hannaford Bros., Sunbury, Pa.-based Weis Markets and Rochester, N.Y.-based Wegmans all decided to think Greek as they launched private label versions of Greek yogurt, the hottest new product to hit the dairy case since pasteurized milk itself.
Cincinnati-based Kroger Co., Deerfield, Ill.-based Walgreens, Eden Prairie, Minn.-based Supervalu and supermarket franchisee Piggly Wiggly Carolina Co. all tapped into the private label beer market in 2011.
Whether this year’s new product rollout pace will continue in 2012 is open to debate.
“I think I would be cautiously optimistic about that,” says Jim Hertel, managing partner at Barrington, Ill.-based consulting firm Willard Bishop. “The only reason for my hesitance is that we’ve seen such a large number of launches in 2011 that the people who’ve been very active might be in a bit of a catch your breath and see how it’s working mode.”
Agrees Wisner, “From what I’ve seen lately, it’s leveling off a bit. We had about a two- to three-year span where we’ve seen some pretty good growth in a lot of segments. We’re certainly not exhausted in terms of where people can go and what they can do, but I think we’ll start to see a little bit of a flattening of the curve. Everybody is just trying to catch up and catch their breath right now.”
This year saw some retailers, such as Supervalu, consolidating their various banner private labels into one umbrella label, Essential Everyday in Supervalu’s case.
The new line arose our of consumer research done by Supervalu.
“We started with the shopper and wanted to make sure we understood what they thought was a value,” Sam Mayberry, Supervalu’s vice president of private brand, has told PLBuyer. Supervalu’s “primary motivator was to provide a brand that was easily identifiable across the store” that consumers could equate with value and quality, he says.
In additional to Supervalu, the Delhaize-owned banners Food Lion, Hannaford, Bloom, Bottom Dollar and Sweetbay recently implemented a private brand strategy that consolidated their brands under the My Essentials line.
“We will probably continue to see some retailers pare down their private label brands,” says Wisner. “You get into the argument between ‘am I better off with a brand that grows across the entire store or one that’s really targeted specifically on the category that I’m doing business in. Interestingly enough, the answer to that question is yes to both, depending on where you’re positioned as a retailer.
“For somebody like a Wegmans whose name carries some cache, they put their name on whatever they can that fits the bill. For others, they may more strategically be looking to enhance their reputation by creating targeted brands.”
The Grocery Manufacturers Association, which together with the Food Marketing Institute (FMI) launched the Facts Up Front nutritional labeling system in January, 2011, expressed concern in October, about the front-of-package labeling approach the Institute of Medicine (IOM) suggests in a new report.
IOM is calling for a ratings system that tells which foods are healthy and which are not, an approach the food business opposes and fears the government will mandate. FMI and GMA came out with Facts Up Front as the industry’s answer to call’s for front-of-packaging labeling.
“The GMA is doing what it’s supposed to do-lobby in favor of its industry and free trade, and the IOM is doing what it’s supposed to do-provide clear context and insight into what the information provided actually means,” Rosenblum told PLBuyer.
The year saw a blizzard of retailers rolling out new PL packaging that was either all white, predominately white or included white accent areas. The trend has become so pronounced that some are concerned private label may be entering a new generic era, a time when all private label packaging is so similar that consumers feel no brand affinity for one retailer’s offering compared with how they feel about national brands.
“It’s interesting that the white trend came over from Europe where white is used in a very upscale way and over there it evokes authenticity, simplicity and purity,” says Carol Spieckerman, president of newmarketbuilders, a Bentonville, Ark.-based marketing firm. “Here in the U.S., there’s still that hang up that white means generic. I think that white packaging is not a thing of the past and it makes a lot of sense. You’ll find that the latest and greatest concepts still tend to go that direction.”
This year also saw some major private label manufacturers consolidating. Expect to see more of that in 2012.
“Well-established companies are going to be looking to grow and expand and capital is available for purchasing companies in this space, so there’s some impetus to keep the wheels going for a while,” says Wisner. “Who it will be and when it will be I don’t know, but 2011 had some interesting moves such as the Ralcorp, American Italian Pasta Company (AIPC) and Sara-Lee acquisitions.”
This year saw some categories that haven’t had much success starting to make some headway, according to Wisner. Categories such as personal care, skin care, snacks, new age beverages, beer and wine are some to keep an eye on, he says.
“We’re seeing retailers break into markets that 10 years ago, we thought were never going to be fair game for private label and it’s happening little by little, so that’s encouraging. As the market gets more diverse, I think the opportunities are going to be there.”
As raw material and commodity costs climbed through the year, prices for both national brands and private label rose as well. Today’s price gap is 2.8 points less versus the same period a year ago, according to Private Label: Brand Positioning in the New World Order, a Times & Trends report from Chicago-based SymphonyIRI Group.
This gap could close, however, in the New Year, says Ball. Why?
“I think it has a lot more to do with retailers realizing they don’t need the level of discount versus the national brands that they’ve been maintaining in order to achieve or maintain volume,” he says. “Their products have more value then they are pricing them at and that’s what is closing the gap. The absolute level moving up is commodity price driven for both.”