CHICAGO -- The big story in brand marketing is not that private-label products have national brands on the run, said the president and chief executive officer of the Grocery Manufacturers of America. That's not true. The big story is that looking at supermarkets alone for an accurate picture of food distribution in the 1990s is misleading. It now accounts for only two-thirds of the business, said C. Manly Molpus. "For over a hundred years, value is what national brands have delivered. In doing so, they've earned the trust of the American consumer," he said, defining the position that national brands hold in the marketplace. "Demographics may change, channels may change, lifestyles may change, the very definition of the word may change, but delivering value is what we do best," he said. Molpus, speaking here at the International Food and Lifestyles Media Conference this month, outlined how national brands are faring amid "a revolutionary change in food distribution." Also, using statistics from Information Resources Inc., Nielsen Marketing Research and Yankelovich Partners, Molpus refuted the alleged gains of private-label products. "There's been a lot of noise lately to the effect that private-label products have the national brands on the run," he said. "Don't buy into the fallacy that brand equity is fading [and] the idea that national brands are in trouble. It's dead wrong."
According to IRI, 80% of the growth of controlled brands falls into only 15 of the 240 categories of grocery products. "Cut out those 15, and there is no such thing as controlled-brand growth," he said. "Their sales are flat."
Molpus said the latest national data shows that store brands are beginning to lose their appeal to consumers now that the economy is improving. According to Nielsen, less than one in five shoppers buys primarily on the basis of price, he said. The 1993 Yankelovich Monitor survey shows that 72% of consumers are reluctant to change from a national brand they like, even if they find a less expensive store brand they like. Molpus said there's a difference between the meaning of value-conscious and cost-conscious. Consumers are making more choices based on value, he said, which is the balance between performance, quality and price.
"That means it's up to manufacturers to differentiate their products clearly and deliver value competitively. That means the national brand has to sell a distinct characteristic. It has to get your clothes cleaner, or taste better, or be nutritionally superior, or be packaged to meet lifestyle and convenience demands," he said. "But guess what. That's what national brands are best able to do. From my vantage point at GMA, I see an industry that understands this challenge," he said.
Molpus said national brands are the leaders in taste, nutrition, convenience and environmental responsibility. "Store brands can't do what needs to be done. They can try to copy, but they can't innovate. They can't respond to the changed tastes and circumstances of today's rapid-fire competitive environment. And they can't challenge the national brands when it comes to trust and reliability."
"Simply put, national brands build the business. They generate the traffic. They create the excitement that drives the sales," he said. Molpus said 81 of the top 100 best-selling items in the supermarket are national brands. Fourteen of the remaining 19 store-brand items are in the dairy case. "Any way you want to cut it -- by channel, by dominant category -- national brands are leading the parade," he said. Molpus listed several examples of innovation to prove "why national brands sell best, serve the consumer's needs best, work best and taste best." They include:
Nabisco's SnackWell cookie: Years of research and development have yielded "a line of low- and no-fat cookies that taste great."
ConAgra's Healthy Choice frozen foods: "It revolutionized the frozen food market."
Gillette's Sensor razor: "Another revolution that registered 22 patents.
"Microwave popcorn. Nonalcoholic beers. Egg substitutes. Frozen yogurt. High-fiber cereals. Single-serving packaging that reduces waste for small households. The list of innovations and improvements could go on and on," he said. Where consumers are buying these innovative products is changing, according to Molpus. On the average, consumers have reduced their total number of supermarket shopping trips per year by two. They now make an average of one-and-a-half shopping trips to traditional supermarkets each week. "Two trips over the whole year may not sound like much, but herein lies the really hot news," he said. "We're undergoing a landmark shift right now in 'where' people are spending their dollars."
According to Nielsen data, the average household shops at 12 different retail channels per year, he said. Here's the breakdown:
66% of the consumer packaged-goods dollar is still spent in the supermarket.
15.4% is now spent in mass merchandisers.
8.8% is in outlets such as convenience stores, ethnic markets, specialty shops, pet food stores and others.
6.1% is in drug stores
3.7% is in warehouse clubs.
"Whether the issue is trends, or the performance of a single brand, or the performance of a category of products, you need to look at all channels and total markets. It is no longer fair or accurate just to look at supermarket sales. In fact, it's actually misleading," said Molpus.
"You can compare the proliferation of channels in the grocery industry to that of the television industry. Supermarkets will continue to be the biggest player. But consumers will have many more choices."