I’m heading down to San Antonio later today to attend one of the conferences that I find most interesting: IRI’s annual Summit. I’m particularly drawn to the show because it centers on the relatable topic of consumer.
An interesting session will focus on the co-existence of strategies used to promote private labels and national brands. The topic is a hot one. On Friday the Wall Street Journal reported that national brands could take back share lost to private labels amid food-price deflation, since it will allow them to offer substantial discounts.
But what about the low-cost reputation that private brand marketers have spent the last few years so diligently building? Surely that’s got to count for something.
In categories, like pasta sauce, I’ll never part from my favorite $8 a jar gourmet brand, but my price sensitive brain automatically seeks private labels when it comes to the pasta I'll pour it on. I'm sold on the organic and whole wheat Wegmans brand versions.
I don’t have to compare private-label prices with national brands. It’s already been ingrained in my mind that the private label version is cheaper. Since I’m satisfied with its quality there is no reason to stray.
Having reached a high level of promotional sophistication, private label marketers will likely lower their price too. In some cases, that’s how they strengthened their low-cost reputation in the first place.
While one national sandwich bag supplier heavily discounted its product instead of permanently lowering price last year when the cost of fuel came down, Associated Food Stores took the more permanent approach of reducing the price of its Western Family sandwich bags. The retailer handed down (three separate times) 100% of the reductions passed on from its store-brand supplier, Presto. But the national sandwich bag brand's approach was more common.
The vast majority of grocery categories (88%) experienced increased merchandising activity in 2009, as marketers experimented with ways to provide value without lowering price, according to a recent IRI Times & Trends report.
Maybe the national brands were wise to take the experimental approach. Now as consumers begin to loosen their purse strings they might spring for the national brand, especially if they can get it at a lower price. I'll let you know what I learn at the show.