Store Brands 2012: Drug Interactions

Walgreens is on track to double its private-label sales to $8 billion within the next five to seven years.

“It’s at the top of our list to grow private brands,” Laura Sturdevant, Walgreens’ director of product development, private brands, said at the annual Private Label Manufacturers Association’s trade show, held in Chicago in November.

(This article is part of SN's "Store Brands 2012: State of the Industry Report," which examines trends in private-label products and marketing. See the Related Articles list below for more stories in this report. Read Carol Angrisani's Store Brands 2012 introduction here.)

To do so, the drug chain is in the midst of a major private-label consolidation that will pare the 75-brand program down to just a few core lines.

Key to the effort was the recent launch of Nice, a 300-item line of grocery and household products.

At the same time, the Deerfield, Ill., chain is phasing out many second- and third-tier private brands. For instance, in household products, the company will reduce some 23 brands to about one or two.  And 22 consumer packaged brands will be cut to about six or seven.

“W” is among the brands being dropped because consumer research showed that shoppers didn’t relate to the brand.

It opted to keep Patriot candles due to strong brand recognition, but update the packaging.

“Consumers recognize the brand as being from Walgreens,” she said.

Pet Shoppe, a 60-item line of pet food and accessories, will also stay, though it underwent a major packaging upgrade to give it a national-brand feel.

Along with Nice, other new brands have emerged. One is a no-name store brand that will launch soon.

The brand will be defined by its imagery: “fresh and clean” graphics and a smiling sun, known internally as “Sunny Smile,” according to Sturdevant.

“We purposely didn’t put a name on it,” she said.

Priced at Walgreens’ opening price point, the  brand will have functional quality and the lowest cost.

“Sunny Smile” will comprise about 50 stockkeeping units of household products like paper towels, and select consumables like cookies.

Building private label is a smart move considering private brands in all outlets accounted for $88 billion in sales in 2010, double the amount of 2000, she said.

“That’s pretty phenomenal, especially in this economy,” she said.

What’s more, one of the fastest-growing segments of private-brand buyers is consumers who make over $100,000 a year.

“It’s no longer the cheap option,” she said. “People feel it’s smart to buy private brands.”

That’s why CVS and Rite Aid are also revamping existing lines and creating new ones.

At CVS/pharmacy, Woonsocket, R.I., store brands could account for a whopping 20% of front-end sales within the next few years. The drug chain is on track to achieve that goal, with store brands currently comprising 17.5% of front-end sales.

“Drug stores are doing good work in private label, from packaging to the quality of the product,” noted Todd Hale, Nielsen’s senior vice president of consumer and shopper insights.

Drug chains have shown they don’t want their private labels to be merely an alternative to national brands. Rather, they want their brands to stand on their own.

“They’re creating their own unique look,” said Hale. “They’re not just copying what the brands have done.”

Five to 10 years ago, private label in drug stores consisted mostly of over-the-counter medicines that were national-brand-equivalents, said Jim Wisner, president of Wisner Marketing Group, Libertyville, Ill.