Thanks to their increasing allure for shoppers, private-label brands—a.k.a. “house, “store,” and “own” brands—have become big business for retailers. The Private Label Manufacturers Association (PLMA [New York, NY]) says that over the past decade, annual sales of private-label products have risen by 40% in supermarkets and by 96% in drug chains, reaching more than $100 billion in 2010.
Private-label brands are the stars of the show—and prime moneymakers on the shelves—at Sunflower Farmers Market (Boulder, CO, Phoenix, AZ), a network of full-service grocery stores in the Southwest. “Whenever we introduce a private-label item, it skyrockets straight to the top of its category,” says Daniel Sinclair, director of private label for the 36-store chain, where the inventory includes a mix of house and national brands.
Sinclair says that about 30% of his private-label stock consists of premium organic foods such as jams from Denmark, truffles from France, and other delicacies that consumers can sample in the stores. Once they do, Sinclair says, they realize the only difference between the house products and their nationally branded equivalents is that the national brands “just have a lot of marketing money behind them”—but no edge in quality.
Once upon a time, says Perry Seelert, strategic partner at the retail design consultancy United* dsn (New York and San Francisco), private-label was the “ugly stepchild of branding.” Today, it’s soaring gracefully past its second-tier reputation, giving stores new ways to cement customer loyalty with distinctively packaged products that shoppers can find nowhere else.
More than margin
Glen Pfeifer, vice president at the private-label branding agency Daymon Worldwide (Stamford, CT), acknowledges that some retailers still look to store brands primarily for the help they can give to the bottom line. Unlike “name” national brands, private-label products don’t have advertising and promotional expenditures built into their cost structures. Thus, they can be sold at lower prices to consumers with better profit margins for the seller.
But retailers that have learned to see them “as not just a margin play” can turn a private-label component into “a true point of difference” and competitive advantage, Pfeifer says.
A large measure of the credit for the new cachet of private-label brands belongs to Trader Joe’s, Whole Foods, and other pioneering retailers that specialize in developing premium products and everyday items under their own names, says PLMA president Brian Sharoff. Maria Brous, director of media and community relations for Publix Super Markets (Lakeland, FL), says that her chain sells private-label products in nearly every category, and that shoppers who can be persuaded to try them usually become strong brand advocates.
These sellers “are really starting to treat these products as brands, moving private label to the forefront,” says Todd Maute, partner at CBX (New York, NY), a strategic branding firm. And it’s working: A 2011 study for PLMA found that eight out of 10 consumers now rate private label as either “equal to” or “better than” national brands.
Upside of “economic woes”
The recession is helping fuel the surge of interest in private-label brands. A downturn, says Sharoff, usually produces a fresh crop of price-sensitive shoppers who may be looking at private-label products for the first time in their lives.
But to keep shoppers loyal to the store brands they’ve tried, the attraction has to be based on more than just penny-pinching. This means that generic packaging won’t do. Private-label brands that want to compare favorably with national CPG leaders must speak with “a voice that transcends the shelf, and they have to have a personality that transcends mere price,” declares Seelert.
That insight has become the core concept for the development and launch of the most effective private-label brands. Instead of thinking about their opportunities in simplistic good-better-best terms, says Maute, retailers now are “creating products around lifestyle segments and consumers’ wants and needs.”
One of his clients, the New York City pharmacy chain Duane Reade, asked for help in creating a store-brand portfolio geared toward New Yorkers. The new portfolio includes the “Apt. 5” line of household cleaning products, with package graphics that evoke urban living spaces. There’s also a no-name collection of paper towels, bathroom tissue, and other items, readily identifiable by their images of New York City landmarks rendered as UPC codes. Duane Reade, appreciating the environmental awareness of many New Yorkers, has catered to this lifestyle trait with “Apt. 5 Goes Green,” highlighting the naturally derived and biodegradable ingredients of some of the products.
Come home to “Via Roma”
United* dsn aimed to evoke a strong sense of place when it developed the Via Roma (New York, NY) line of Italian foods and pasta sauces for A&P.
Seelert says that the bottles and cartons, with their
cinematic-looking images of folks from Tuscany in the old country, possess a “tremendous personality” that builds brand loyalty. Via Roma fans, Seelert says, “don’t think of it as a private label.”
About seven years ago, says Brous, Publix Super Markets decided that it would stop trying to blend in with the look of national brands when designing packages for its private-label products (a number of which, such as its premium ice creams, it also manufactures). Now the visual keynotes are more white space and “less noise” in a clean layout with eye-catching graphic details.
Branding with barcodes
With the creative assistance of Vertis Communications, Sunflower Farmers Market (Baltimore, MD) has enhanced the simple look of its store-branded packages with bold colors, a bigger logo, and, on about 40% of the items, QR codes that connect shoppers to educational content about the products.
The landing pages, says Sinclair, might offer nutritional advice and recipes. Some tell stories about the chain’s commitment to bringing its customers what its tagline calls “Serious Food” at “Silly Prices.” For example, by snapping 2-D barcodes on jars of organic jam, shoppers learn that the products use only fair-trade sugar from sources certified for their equitable treatment of growers and harvesters.
It all goes to show, says Seelert, that private-label brand positioning should be “no different than you would put into any other brand. You can’t put a substandard investment into something and think that consumers are going to get uniquely attached to it.”
Today’s consumers, agrees Pfeifer, are brand-savvy across the board—maybe more so, in some ways, than retailers who insist on seeing private-label products and the national leaders as distant relatives.
They’re closer than that, and they shouldn’t be treated as dissimilar opportunities, certainly not when it comes to the amount of creative inspiration put into the packaging. Private-label or national, says Pfeifer, when you get right down to it, “it’s just branding.”
For more information, visit
Daymon Worldwide, www.daymon.com
Private Label Manufacturers Association, www.plma.com
united* dsn, www.uniteddsn.com
Vertis Communications, www.vertisinc.com