WASHINGTON -- There are vast opportunities for grocers to capture additional shoppers within the private-label arena, particularly those from certain ethnicities, and to capitalize on the link between store loyalty and store-brand sales, according to a new study by the Food Marketing Institute here.
"Building Shopper Loyalty With Store Brands" -- sponsored by the Stamford, Conn.-based Daymon Associates, an international company specializing in the sales and marketing of private-label consumer products -- suggests that heavy private-label shoppers are not necessarily only interested in price, with only 29% of respondents saying they would buy the national brand even if they had more money.
In addition, in asking shoppers about six specific categories, including cookies, cereal, ice cream, refrigerated juice, laundry detergent and toilet tissue, a high percentage of store-loyal shoppers said they would purchase these products at their identified store, regardless of price.
"Having actual hard data that actually confirms that loyal shoppers to a grocery store are far more likely to purchase private label even when those shoppers are not necessarily in lower income categories -- I think that is really one of the key findings," said Janice Jones, director of research for FMI.
The report also found that ethnic shoppers, notably Hispanics, African Americans and Asians, are less likely to purchase private-label products overall, even though they say they do recognize the value proposition of store brands.
"You have a difficult time getting ethnic shoppers to buy store brands because they may be less familiar with a store brand. They may come from a country where they have heard of Coca-Cola and Procter & Gamble products and when they come to the U.S. it's easier for them to buy something that they are familiar with," Jones said. But, retailers can capitalize on this potential store-brand shopper by playing up product attributes other than price, and including an abundance of in-store sampling.
"In one sense you have to get over that familiarity hurdle but if you do it right and if you have the right message it can be a wonderful win-win for the retailer and for the ethnic shopper who may be looking for ways to stretch their dollar," she added.
In fact, retailers need to enhance their targeted marketing programs and category management overall in order to catch the eye of each and every consumer. Simply carrying an abundance of private-label products doesn't automatically ensure success. Respondents to the survey also reported varying attitudes toward particular categories, with ice cream being the most purchased private-label item in supermarkets and nonfood items like cleaning supplies and paper products being the least purchased.
"The point for the retailer is to try to understand that just having a great private label and then throwing it across a bunch of categories is not going to deliver the optimal results. You're going to have to look at each category individually and understand what the factors are behind each category that is going to drive purchase." Jones said.
According to the FMI study, cookies are the least price-driven category, while ice cream and refrigerated juice are most driven by taste. In cereal, it's a toss-up, with 68% of respondents rating price as very important and 67% rating taste as very important.
One way to reach multiple consumers' needs is to carry a tiered private-label program. Premium private-label shoppers closely resemble national brand-loyal shoppers in terms of demographics, the report says, and a tiered store-brand approach that includes premium segments will add additional purchasers and generate higher margins for retailers. However, this tiered approach may not be right for every store.
"I think having tiering can really help expand your private-label reach with your shoppers, but you need to be smart about which tiering you do; are you going to do three tiers, or go for a regular tier and a value tier or a premium and a regular," Jones said.
"There are certain stores for which having a premium private label would absolutely be the way to go. There are other stores that, if their whole store image is based on lower priced products, if they're in targeted areas where their shopper demographic may be lower income, maybe a premium private label is not right for that store because it might be going counter to what the store's whole image is."
"Building Shopper Loyalty with Store Brands" was conducted via the Internet and included 1,145 shoppers who shopped at nine specific supermarkets across the United States. For each product selection question asked respondents were shown at least three photos, those of the top two national brands and their particular store's private-label. Prices were not shown and products were chosen based on household penetration level and whether or not they would have a comparable store brand.
The last time FMI conducted a study on the private-label industry was in 1994, and that survey was telephone-based.
"We felt that there have been so many changes in the way private label has been handled over the last 10 years that it was time to get a new look at the topic," Jones told SN.
"Building Shopper Loyalty with Store Brands" will be the subject of a Category Close-Up session today at FMI's annual trade show at McCormick Place in Chicago. As part of the presentation, Peter Brennan, president of Daymon Associates, will also talk about ways in which private label can differentiate a store from the competition.