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The Art of Imitation

September 25, 2009
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In this economy, more Americans lack the insurance and funds to visit the doctor for treatment of their aches and pains, which means they’re turning to store shelves to get relief. And since consumers are more concerned than ever about cost, they’re often choosing private label over-the-counter (OTC) remedies instead of the national brands’.

And apparently, consumers don’t believe they’re “settling” in choosing private label. They’re actually quite proud of the choice.

“I hear folks talking about how shrewd they feel to have discovered store brands,” says Mary Aagesen, director of retail sales at Triad Pharmaceuticals, a division of the Hartland, Wis.-based Triad Group. She says these consumers talk of private label’s great quality, great value and great ability to stretch a dollar.

Data from Chicago-based market researcher Information Resources Inc. (IRI) for the 52 weeks ending June 14 show that overall internal analgesics saw a 0.6 percent increase in dollar sales and a 2.0 percent decrease in unit sales (U.S. supermarkets, drugstores and mass merchandisers, excluding Walmart). At the same time, dollar and unit sales of private label internal analgesics rose 7.2 percent and 6.6 percent, respectively.

The IRI data also show that dollar sales in the overall gastrointestinal tablets sector were up 1.3 percent, while unit sales fell 3.2 percent. But dollar and unit sales on the private label side rose 34.5 percent and 15.8 percent, respectively. And while dollar sales in the overall cold/allergy/sinus tablets/packets category rose 4.6 percent (unit sales fell 4.2 percent), private label dollar and unit sales here rose 17.8 percent and 6.6 percent, respectively.

And private label no longer is limited to the OTC basics. It also is going in new directions.

For example, combination products such as pain relievers containing a sleep aid - once an innovation of the national brands - now are more widely available on the private label side. In December 2008, Allegan, Mich.-based Perrigo Co. received FDA approval for its ibuprofen-based pain reliever and sleep aid, which the company said offers retailers a product comparable to Wyeth’s Advil PM tablets.

Harry Overly, vice president of marketing and innovation at Mooresville, N.C.-based BestSweet Inc., says price typically is the main reason consumers look at private label alternatives.

“But quality and national brand equivalency are becoming just as important,” he adds.

However, retailers shouldn’t assume that consumers will be switching from national brands to private label in every OTC segment. National brands still have a strong pull on parents with sick children. According to “OTC Healthcare - US,” a report from London-based Euromonitor International, because children will not consume a pill if its flavor is not masked, parents are more willing to buy a national brand product than a store brand if the national brand comes in chewable, fruit-flavored or the more recent dissolvable film format.

And just as parents want to ensure that the medications they give their kids are safe to consume, they and other adult consumers increasingly are looking for “safer,” natural remedies. The Global New Products Database from Mintel International Group Ltd., Chicago, says research highlighting the benefits of pain relief products such as aspirin has been countered by information publicizing the possible negative effects. Homeopathic remedies, which once served a more niche market, have had strong growth, with private label launches from retailers such as Target indicating efforts to market the product to a broader audience.

Promote to Stay Afloat

In addition to high quality at a reduced price, store brand OTC products need packaging appeal and their share of merchandising and promotion to succeed.

Lenny Luongo, vice president of new business development and marketing at Somerset, N.J.-based A&Z Pharmaceuticals, says retailers should make sure their store brands’ packaging look as much like the national brands as possible. They must be careful, though - packaging that is too similar to the national brands can constitute copyright infringement.

Luongo also says store brands need to give the exact same value on the shelf as national brands. For example, if a national brand offers a bonus size bottle of pills containing 20 percent more product, retailers should offer the same with their brands. And they should offer the promotion at the same time.

Promotions should not be limited to the bonus sizes, either - retailers can offer other deals such as two packs shrink-wrapped together. Even with the advertising from the national brands, Luongo says, consumers are keen enough to spot the store brand on the shelf and understand it offers more bang for their buck.

Coupling bonus sizes with coupons offering cash rebates or a buy-one-get-one-free deal is a classic move, but Luongo believes it still works, especially via social media.

“[Many retailers] have their own communication going out to their customers,” he says. “They encourage their customers to go on the Internet.”

Retailers can post coupons on Twitter and Facebook for consumers to access from their computer, or even an Internet-activated cell phone. Retailers also can set up an account on their Web site where consumers can register to receive coupon codes via text messages, which offers a convenient way to save money without wasting a piece of paper.

Overly agrees.

“As consumers’ research behavior incorporates more online/digital activities, Web site support is a must,” he says.

Overly also says retailers have found success through cross-merchandising. He says a good way to cross-merchandise OTC products is by creating a “solution center” - one such center could have cough syrup, cough drops and tissue.

And no matter what a retailer does to promote its store brand OTC products, it must never forsake a good partnership with its suppliers. Aagesen believes retailers should enter into a mutual brainstorming session with their suppliers. “Having dialogue about creative product concepts, even when there is no national brand on the shelf, can generate some great ideas for new product development,” she says. “Sometimes the simplest idea just hasn’t made it to the shelf.” PLB

WEB EXCLUSIVE SIDEBAR: Next Stop: Smoking

While a recession is a good time to start practicing healthier habits, it is also a good time to shed unhealthy ones. According to Marketplace, a radio program broadcast by American Public Media, smoking is one of the latter habits. Although a recession often sees a rise in consumers indulging in comforting activities, financial downturns in the past generally have brought about a drop in smoking.

Stanton Glantz, a professor of medicine at the University of California San Francisco, found that smoking among American dropped 20 percent during the Great Depression. Since then, Americans have learned more about the dangers of smoking, and tobacco taxes have increased dramatically. Now could be a better time than ever, therefore, to introduce more private label smoking cessation aids.

Perrigo is one manufacturer ready to meet retailer needs. In July, the company received FDA approval to sell private label OTC coated 2mg and 4mg nicotine polacrilex lozenges, USP-grade, in cherry and cinnamon flavors. The new products are comparable to GlaxoSmithKline’s Commit lozenges.

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