Many of those in the food-distribution industry connected in some way with private-label products and their merchandising are convened now at the Private Label Manufacturers Association trade show in Rosemont, Ill., a suburb of Chicago. The huge event runs through Tuesday night.
In anticipation of the show, you'll see a news feature in this week's SN that delves into some of the issues surrounding private label. Let's take a quick peek at them, then look at a couple of other developments.
Going Horizontal: Private-label product, along with much other product, is less exclusively in the domain of the supermarket channel now than it was in the past. As recently as 1997, supermarkets had an 80% market share of relevant product. That has dipped to 67% now. So where is it going? It's going the way of all product, to other channels of trade. Supercenters now have a 12% share, against 4% in 1997. Membership clubs are up to 5%, as compared to 1% earlier. Dollar stores are at 1%, against none earlier. Mass merchants also crept up a percentage point, from 6% to 7%. Drug stores have held flat at 4%. There's a news article about this and other private-label considerations on Page 31, and a chart that summarizes these developments on Page 34.
Going Upscale: Meanwhile, the quality of private label continues to proceed upward, although this factor is a bit more difficult to quantify than is market share. In the same news article, an expert on private-label marketing notes that, "A lot of the growth in private label has been in premium items." Many examples could be cited, but Albertsons rolled out a 50-item upscale line called "Essentia" this year. The premium line includes products such as frozen food, pasta, pizza, cookies, crackers and more.
But, there's a good deal more to consider about product positioning and merchandising than issues such as these connected to private label. For instance, elsewhere in this week's SN is a news feature about how drive-through pharmacy windows can hand a competitive advantage to supermarkets with a pharmacy. The feature, on Page 16, shows that supermarkets can dispense 20% to 30% of the prescriptions they sell through windows. So, little wonder that something approaching half of supermarket chains with a pharmacy operation have at least one store with a drive-through. It's still a tiny proportion, though.
Finally, take a look at how Gigante, based in Mexico City, is winning big business in Southern California with stores that look like domestic supermarkets, but which cater to the needs of the growing segment of the population with an Hispanic heritage.
Let's not leave the topic of Southern California with a strike mention. As it develops, there's nothing like a bit of labor strife to stir thoughts about the future of supermarkets, and to sow them into the consumer press. That's all to the good. For instance, last week the Los Angeles Times offered its readers an opinion column about the future of the business. Cited as challenges were the usual suspects, such as alternate formats, ill-considered acquisitions and botched centralized-buying initiatives.
The column concludes with this rhetorical question, and its answer: "Does your supermarket have a future? Sure. Will it change? It had better." Well, true enough.