As children's influence on purchase decisions grows, more and more retailers are exploring the possibility of dedicated private label programs for kids.
A recent report from Rockville, Md.-based Packaged Facts estimates U.S. parents spend a whopping $123 billion on food, clothing, personal care products and other items for their 3- to 11-year-old children, a growing segment of the population expected to surpass 37.5 million by 2012.
As the group’s numbers expand, so does its influence. Families today are much smaller, so fewer offspring have a lot more say in purchase decisions than kids in larger families did 30 or 40 years ago. And today, both mom and dad are much more likely to hold down jobs, resulting in more disposable income and an excess of parental guilt that can only be assuaged by giving kids what they want. But the real driver behind children's growing influence is the media. Research by Parents Magazine reveals kids are exposed to 10,000 advertisements for food each year -- and that's just on TV. Marketing messages are literally everywhere.
“All of that exposure creates demand,” says Jeff Weidauer, vice president of marketing for Little Rock, Ark.-based in-store marketing services company Vestcom. “It causes kids to think like consumers.”
Clearly, that's a concept national brand marketers have latched onto, resulting in the development of thousands of different products across hundreds of categories aimed at the 3- to 11-year-old set. Surprisingly, however, retailers have been much slower to move their private label programs into the kids’ segment.
While many companies support dedicated private label baby programs featuring everything from store brand diapers to infant formula, few offer similar collections for kids’ products. Why? For one thing, says Weidauer, national brands have invested heavily in the children’s marketplace, “so their influence is much stronger there than in the marketplace in general.” And since kids aren't footing the bill, they don’t much care about the value offered by private label products, nullifying one of store brands’ best selling points.
But parents aren’t much better. Sure, they want to save money, but a recent survey by Toronto-based ICOM, a division of Epsilon Targeting, indicates that while most consumers are willing to switch to store brands for food, household products and personal care products for themselves, only 12 percent were willing to do so for child care products due to the perceived risk associated with private label.
“Overcoming that perceived risk demands financial investment - an investment many retailers aren't willing to make,” says Kirsten Osolind, CEO of Coronado, Calif.-based marketing and public relations firm Re:Invention, Inc.
Despite the challenges, she continues, the time may be right for some retailers to take on the kids’ segment. “Recessions always make people more frugal and that leads to increased interest in private label. If a retailer really wants to establish a private label presence, it makes sense to focus not just on parents but kids, too.” Not only do they influence purchase decisions, “but children will be adults someday soon,” Osolind continues, so why not begin building that brand loyalty sooner rather than later? She adds, “Kids become brand conscious by age 3, so it's a perfect time to start developing [private label] products for them.”
Building on Baby
Of course, many retailers offer a wide range of store brand items for children from birth to age 3, though those products are marketed mostly to moms and dads rather than to the kids themselves. The baby care aisle offers a tremendous opportunity for private label because it's the only brand in the section that spans every category from infant nutrition to diapers, so equity is easily transferred from one product to another.
The problem is “after working so hard to build all of that goodwill [among parents], you basically throw it all away after a couple of years,” says Tony Harrington, director of HBC program management for Skokie, Ill.-based Topco Associates, which supports a very successful line of private label baby products under the Top Care Baby brand.
Not wanting to waste all of that hard-won brand equity, the company decided to create a new sub-brand called Top Care Kids. Launched about a year ago, the program includes close to two dozen SKUs in categories like children's vitamins, bath and body care, dental care, even fluoridated bottled water, a natural extension of its very successful Top Care Baby Nursery Water collection. “It just made sense for us to take the next step,” explains Harrington, adding that packaging for Top Care Kids includes some of the same design elements as Top Care Baby but also incorporates fun, cartoon-type characters and kid-appropriate messaging. “We wanted it to be familiar to Top Care Baby buyers but because the end user has a little more say in the decision, we had to make it appeal to them, too.”
Currently, he continues, the line includes more commodity-type products where the brand isn’t as important to consumers. “These products also have a high use-up rate, so it’s easier for consumers to feel good about making the move to private label.”
While Topco focuses on the low-hanging fruit in non-foods, other retailers have built their store brand kids’ programs around better-for-you foods, a priority among today’s parents. For example, El Segundo, Calif.-based Fresh & Easy Neighborhood Market recently just launched a new kids’ line made up of “fun, delicious and convenient items kids will love and parents can feel good about feeding their children.” Like all Fresh & Easy products, the chain’s new Goodness line for kids contains no artificial colors, flavors or preservatives; no added trans fats and no high-fructose corn syrup. But the retailer also worked to limit the amount of sugar, sodium and fat in Goodness products, which are free of artificial sweeteners and added caffeine as well.
“One thing we've heard consistently from parents is that they are looking for ways to feed their children high-quality, nutritious foods without stretching their budgets,” explains a company spokesperson. “Fresh & Easy Goodness for kids offers an affordable and convenient solution for busy parents that won't break the bank.”
Like the America’s Choice Kids line launched more than a year ago by Montvale, N.J.-based A&P, Fresh & Easy Goodness includes an assortment of on-the-go snacks in single-serving packages ideal for kids’ lunchboxes as well as traditional favorites like cereal, macaroni and cheese, pasta and sauce, multi-grain chips and juice.
While Topco, A&P and Fresh & Easy all have opted to create dedicated children's private label programs, a majority of retailers still offer kids’ products under their primary store brand. However, a few have adopted more of a hybrid approach, developing category-specific sub-brands for kids. For example, Salisbury, N.C.-based Delhaize Group U.S. recently rolled out a group of four waffle-type cereals under the new Good 4 Kids label. Available through the company’s Food Lion, Hannaford and Harveys banners, the vitamin- and fiber-rich collection is low in sugar, saturated fat and cholesterol. Although Delhaize hasn’t said whether it plans to expand the brand into other categories, industry insiders say it might not be a bad idea.
Although Topco hasn’t studied whether or not sales of existing kids’ products actually increased when they moved from its regular Top Care program to its new Top Care Kids label, Harrington says the company has seen a dramatic increase in promotion of the items since they can be marketed as a group. “We’ve seen a lot more marketing support behind the products because retailers can feature the entire group under the same Top Care Kids banner,” allowing items that wouldn’t normally be promoted at a particular time to get some additional exposure.
Although kids are the end user of children's private label products, mom and dad control the purse strings, presenting marketers with a unique challenge. “Appealing to dual targets makes marketing kid-focused private label products all the more difficult,” agrees Osolind. “It’s a very delicate balance.”
Of course, the item has to attract the child with fun, amusing graphics or characters, but it’s also got to convince the parent that it's good for the child. “Really good quality packaging that engages the child but also offers nutrition and quality information for parents is key,” she continues. “It can make or break the product.”
While Topco uses a variety of cartoonish characters on its packaging, a few retailers feature licensed characters to give the private label products for kids instant cachet.
Kroger’s introduction of more than 100 co-branded Disney Magic Selections items in 2006 and 2007 is perhaps the best-known example of private label licensing, but Safeway more recently made a big licensing move of its own. The company inked a deal with Warner Brothers Consumer Products that allows it to feature various Looney Tunes characters on its better-for-you Eating Right Kids line.
According to Roz Nowicki, executive vice president of global licensing and marketing at New York-based 4 Kids Entertainment, it’s clear that the use of licensed characters can boost sales tremendously. “But when you combine it with the value offered by private label, you’ve got an unbeatable combination.” She adds that a character licensed by well-respected companies like Disney or Nickelodeon known to provide safe, kid-friendly content also helps parents feel good about a brand they might not know a lot about at the start. Yes, she continues, retailers will have to give up some margin in order to pay the licensing royalties, “But that character can really be the difference.”
But licensed characters, fun packaging and interactive web sites won’t do much good if the product itself doesn’t meet kids’ expectations in terms of flavor, size and shape, and ease of preparation. For example, says Ricardo Alvarez, president and CEO of Holland, Ohio-based Frozen Specialties, its single-serve pizzas come in simple, kid-preferred flavors such as cheese and pepperoni, they’re just the right size for kids to hold and they’re microwaveable. Parents appreciate that they contain fewer calories and less sodium than many national brand alternatives and no trans fats.
Balancing good for you notes that play well with parents while having flavors, packaging and products that appeal to children is the formula to strive for in the kid-friendly category. Do that, and the little ones, plus their parents, will be flocking to your kid-friendly aisles.
New Kid Friendly Offerings
Company Product Line Details
Delhaize Group U.S. Good 4 Kids Four waffle-type cereals
Fresh & Easy Neighborhood Market Goodness On-the-go snacks in single-serving packages; traditional favorites like cereal, macaroni and cheese, pasta and sauce, multi-grain chips and juice.
Topco Associates Top Care Kids Includes some of the same elements as Top Care Baby, adds cartoon-type characters and kid-appropriate messaging.