AVENTURA, Fla. -- It's possible for private label to see 25% to 30% share levels in the grocery channel in the next five years, according to Ron Carlson, vice president for corporate brands at American Stores Co.
"One of the ways retailers will go after the higher share is by developing store brands in new categories, such as perishables, fresh and frozen home-meal replacements," he said.
Other ways include eliminating the secondary level of national brands that take shelf space and consumers away from store brands, switching certain categories, and developing more control brands and sub-brands.
Carlson stressed that in order for store brands to grow, quality must be paramount.
"A poor-quality store-brand product anywhere in the system has the potential for destroying the quality image of all store brands," he said.
Carlson said Salt Lake City-based American Stores ensures high quality by setting product specifications equal to or better than the national brands.
To determine that the supplier has the necessary financial stability and product capacity, Carlson said, retailers should check credit references, talk to their current customers about deliveries and inspect the supplier's plant.
As for pricing, he said American Stores aims for a minimum of 15% off the retail of the national brand, depending on product category and competition.
To test the viability of a private-label product, Carlson uses a formula: Find the cost and retail of the national brand. Enter the private-label cost, even if it is only an educated estimate; factor the private-label retail based on the percent of saving you want to show the consumer; extend the gross margin dollars and compute the difference.