Grocers and other industry players agree: The future of private-label beverages, like so many other private-label categories, lies in establishing the products as strong quality brands through marketing, product development and pricing that is more closely aligned with national brands.
"The best thing that could be done to help corporate brands is for the suppliers of the corporate-brand beverages to view themselves more as a competitive player to the Cokes and the Pepsis of the world," said Rick Kelly, beverage category manager for K-VA-T Food Stores, Abingdon, Va.
Kelly said he'd like to see private-label suppliers throwing the same amount of advertising and merchandising weight behind their products as the national brands. Currently, retailers carry the burden of promotions and merchandising for private-label beverages.
Those elements are key to furthering the success of private-label beverages, according to Dan Mazur, senior vice president at Topco, a cooperative based in Chicago.
"Commitment to aggressive promotion and display -- the brands really outdo corporate brands in these areas," he told SN.
The huge dollar amounts provided by some of the national brands can be a daunting obstacle for many retailers. Paul Provost, general manager at Table & Vine, a Big Y subsidiary in Northhampton, Mass., finds the discrepancy in advertising support a negative component of private label, although he allows that from a price perspective there are some profitability upsides. Table & Vine is an upscale market carrying grocery, beer, wine, liquor, cheese and meats.
Taking promotions and advertising that one step further is important, but the retailer must also play a part, not just the supplier, said David Biernbaum, senior level marketing consultant with David Biernbaum Associates, St. Louis.
"It's a self-fulfilled prophecy. Many retailers say they wish suppliers would be more innovative in formula, packaging and design, but those expectations are not realistic because retailers are pricing beverages as though they are not private brands but merely generics."
The specter of the generic tag, which has haunted corporate brands, still looms over many products. Biernbaum points out that many retailers detract from their quality message by underpricing their corporate brands, making it difficult for consumers to realize they are getting a comparable product.
The right pricing for private-label brands should ideally be 70% to 80% of the national brand counterparts, leaving room for consistent promotions, high quality packaging and profitability for all involved parties, Biernbaum said.
All is not bleak, however, as some retailers are starting to expand their private-label beverage lines beyond just key stockkeeping units. Over the last year, according to Kelly, K-VA-T's private-label carbonated beverages have been running at a clip, up about 10%. The chain plans to roll out a line extension of different size packages this January that will bring the corporate brand beverage line up to about 60 SKUs.
"Currently we have the 12-packs and the 24-pack suitcases and the 2 liters. Now we're getting into the multi-pack plastic corporate brands so that we match product line for product line with the national brands."
Topco also sees its members expanding their product offerings, Mazur said, but he cautions that it shouldn't only be about innovation.
"Based on current market share for corporate brands, we have a lot of potential yet to be realized for existing corporate-brand beverage products."
Topco employs a cautiously experimental approach to product development, devoting time and resources only to those products that the co-op feels have decent staying power and market share. While there has been a high level of innovation in the beverage segment, Mazur pointed out, there have also been a lot of product failures. Topco is closely watching the value-added water category, he added.
Giant Food, Landover, Md., recently kicked off a large national brand line extension with private-label soda products this fall, as reported by SN. According to Barry Scher, the chain's vice president of public affairs, beverages were a natural place to start the extension.
"Obviously, it's a very popular item. It gives customers an alternative to the nationally branded products," Scher told SN when asked why the rollout started with soda. Scher stressed the quality and value of the private-label soda line in announcing the new products.
Jim Collins, national accounts manager for IGA brand management, Chicago, said he sees an improvement in private-label packaging recently leading to increased shelf appeal. That in turn, he said, could be connected to the inroads private-label products have increasingly made into the national brands' share of the market.
K-VA-T's packaging additions scheduled for this winter echo the package innovation Collins pointed out. Kelly said the launch is not only geared to increase private-label penetration but to emulate the national brands' product and package varieties. Before, he noted, retailers just chose particular product lines and went for volume sales. Today's private-label lines reflect a much more complicated approach.
The time might be particularly ripe for retailers to dedicate the time and effort to their private-label lines.
Increased costs attached to national brands opens the door that much wider for the private-label/corporate-brand drink segment to show significant category gains, Kelly said.
Retailers should be poised to use all the means at their disposal to wedge that door open even more, retailers and experts agree. For Biernbaum that strategy war occurs on one very important front, in-store tactics.
"Retailers have the advantage of dictating space allocation, display, planogram, schematics and in-store promotion. All of these weapons can be used to support the private brand at the point of purchase."
Store operators need to use every in-store tool at their disposal from shelf signage through on-pack promotions as well, Biernbaum stressed. Anything that can be done to build brand share through new trial and repeat purchasing is fair game.
