- Baby Non-Food Products
- Baking/Cooking Staples
- Household Products
- Kitchen Products
- Paper Products
- Personal Care
- Pet Products
- RESEARCH & AWARDS
A trio of speakers helped open the first day of educational sessions for the National Association of Convenience Stores show in Las Vegas on Sunday afternoon by talking about private label’s future in the convenience channel.
In front of a large two-conference room with more than 50 listeners in attendance, CBX’s Todd Maute kicked off the presentation, titled “Private Label Profit Puzzle,” by urging stores to come up with private label strategies that are brand-led, rather than profit-led.
“To get to 18 to 20 percent share in private label, you have to do the basics,” Maute said, listing product breadth, merchandising, promotion, and category management as those steps. “But to get past the 20 percent plateau, you have to do more. You have to have a brand identity, come up with some compelling advertising, you’ve got to try and innovate, and have a great, strong, marketing strategy.”
Austin Martin, the senior director of sales and merchandising for MAPCO Express, followed Maute to talk about the success MAPCO has had with its 400-store company based in the southeast. As a former private label veteran with Aldi and Target, Martin said being in a new channel presented new challenges, as well as new opportunities.
He cited figures that Maute presented from SymphonyIRI Group showing that convenience had the lowest private label share among retail channels, just 8.8 percent of unit shares and 4.7 percent of dollar shares. By comparison, grocery was at 25.7 percent unit share and 20.8 percent dollar share, dollar channel at 16.6 percent and 16.8 percent, and drug channels at 14.7 percent and 15.0 percent.
“But if you look at convenience, private label is the fourth-highest sales category and the second-highest in gross profit, only second to candy,” Martin said, adding that there were opportunities available.
Martin reinforced Maute’s thoughts that value did not always mean private label products had to win on price alone, but rather by providing customers with more than national brands could. He talked about positioning private label as either a second option to strong national brands that could not come off the shelves, and finding areas where the retailer could provide “100 percent category solutions.”
“These are categories you can get into tomorrow and consumers are willing to trade into,” he said. “Like nuts, seeds, and dried fruits. These are categories we’re into now, and eliminating the brand alternative because there isn’t a dominant brand that consumers need.”
Bill Nolan, the vice president of marketing for Family Express, wrapped the discussion by offering examples from the Indiana convenience store’s strategy. Unlike the first two speakers, Nolan talked about being able to win on price with private label or control brands, but still framed in a value discussion.
His argument for the company was that unmoveable national brands such as Marlboro, Camel, Doritos, and Diet Coke fountain drinks accounted for as much as 50 percent of sales at the store.
“That’s another 50 percent that you have an option with,” Nolan said. “You can fill it with national brands that provide less value but still at a premium cost, or you can go with private label or control brands with a similar value and less cost.”
Nolan said Family Express began its benchmarking of national brands by doing some comparison shopping at stores such as Walmart, Costco, and Sam’s Club.
“What we found was a significant discount in cost, and that cost was not always shared with us,” he said.
That helps the company determine the “delta” of profitability between a national brand and alternatives, he said.
He went on to show a host of categories where the company either has dominance in with its private label or control brands, or where its growth is far outpacing the national brands. Categories included water, milk, vitamin water, juice, and chips.
“We think national brands are extremely valuable,” he said. “We just believe there’s a different value for all the items that are on the truck.”