Private Label Buyer
Exclusives Retailer Roundtable

Private Label In Comfort Zone With Value Products

Buyers say in health, beauty and OTC categories, winning at value first is the priority, then finding subtle ways to bring value-added features home.

June 4, 2013
Comfort Zone With Value Products

Over the course of a surprisingly rainy and overcast day in Henderson, Nev., a small group of retail buyers gathered in a room during the ECRM Private Brand Health and Beauty Care trade show to talk about their business.

A pair of representatives from Ahold USA, category manager Mike McGowan and senior sourcing analyst for own brands Tom Doherty, were joined by Kroger brand manager of corporate brands Leah Frank-Finney and a silent observer from Nash Finch.

In the small group, I got to lead the questions about private label trends in both health and beauty categories as well as OTC. And the first place we started was with information about private label beauty products.

Having recently run a category insights feature for the magazine on beauty care, I knew there was limited data available about private label products in beauty care. So having asked where the buyers got their information, it wasn’t much of a surprise that they went by observations rather than information.

Sure, they said, they would go and check out either syndicated data such as IRI or Nielsen, or some proprietary information collected by their own companies. But they gained more insight from visiting other retailers, from seeing customer reactions to their products on blogs and social media sites.

“We watch the competition constantly,” McGowan said. “We’re looking at CVS, Walgreens, Kroger, seeing what works for them.”

The other place to get information? From the suppliers themselves. There was plenty of discussion about how the suppliers could help retailers and buyers with the information they’ve been able to collect to support their products, to show the desire of consumers to buy into the category or products, to become experts themselves for the retailers.

Especially at an event such as ECRM, where buyers and suppliers meet often in short 10- to 20-minute sessions over three days, there was plenty of talk about how suppliers can help out retailers if they’re not already working together.

Differentiation is a popular word within private label today, but these buyers were interested in it from a supplier point of view. What would make a new supplier stand out from the crowd, or be able to join a retailer that already has a supplier in that category? The buyers said the suppliers could stand out because of the quality of their products. Perhaps it’s the price they’re able to provide for their goods. Or perhaps it’s exemplary service that would put them above the crowd.

“For me it probably starts with where we are with them,” McGowan said. “In most cases, private label suppliers all have their little niche. We’ve developing these products, but how does that fit us? We have that conversation. There’s also a few companies with new products that can stand on their own without a national brand equivalent. That’s innovation. “

But that wasn’t all that was important. Particularly meeting with some smaller or niche suppliers that were at the ECRM show, the strength of the supplier was an important factor as well.

“I want to know a little more about their supply chain, how they’re driving the cost of goods, their ties to the commodity markets, how viable they are,” Doherty said. “If we are looking for a strategic partner, I want to make sure they are in for the long haul.”

Another factor in differentiation that was mentioned was, surprisingly, not being so different. Especially on the beauty care products, the buyers agreed that customers were used to national brands. They trusted national brands. They liked national brands. And the CPG companies had spent plenty of advertising money to make sure that the customers did.

So straying too far from a national brand equivalent item was a risky proposition, they all agreed. If the company happened to be a specialty retailer, such as Sephora, that used their own products as an extension of their brand, there was more leeway to take those risks.

But for more traditional retailers, whether those were drugstores or supermarkets or mass merchandisers, the thought was the buyers looked for subtle changes, small value-added features, in beauty care.

“There’s only so far you can deviate from the NBE without confusing the consumers,” Doherty said succinctly.

And that means the best way suppliers can make their beauty care products stand out in subtle ways is through packaging, they agreed.

“The beauty side, you’re dealing with a wide variety of shapes and sizes,” McGowan said. “I think the packaging is very important. The customer is drawn to it.

“But when the customer is buying private label, what’s their first thought when they switch? Does it look better, is it a better value, is it an equivalent product that’s cheaper? If they take it home and they’re satisfied, that’s the key.”

On the OTC side, though, all agreed that the playing field was different. Because of the regulations regarding prescriptions, supplements and other OTC items, getting an NBE correct was the most important process. Getting packaging right – something familiar and easy for customers to use – was also a key factor.

But given the recent recalls in OTC national brands, there had been more opportunities for customers to look into private label OTC products. And all agreed that customers had become more accepting of OTC private label since the recalls, and all agreed that they expected those customers to remain converts to private label, even after national brands had returned to the shelves.

“The OTC side is very easy. It has to meet the requirement and do the job,” McGowan said.

And in both OTC and health and beauty products, for now, McGowan said private label had its comfort zone.

“Private label is living very comfortable on the value side,” he said.