Store Brands 2012: Drug Interactions

Private Label Becomes 'Branding Component'

That’s certainly no longer the case. Take Walgreens, whose entire approach to private label has changed.

“It’s now using private label as a branding component of the entire store,” he said.

Walgreen’s acquisition of Duane Reade has helped in the effort because it enabled Walgreen’s to bring in Duane Reade’s popular “DR Delish” line of premium snacks and beverages to its Walgreens stores. (Walgreens renamed the brand “Good & Delish” so that it would be marketable in Walgreens banner stores.)

 Walgreens’ private-brand initiative comes at a time when drug stores are seeking out new ways to differentiate their stores. This has resulted in expanded shelf stable grocery, refrigerated and frozens sections, as well as increased availability of section and sandwiches and other grab-and-go items.

“They’ve begun to operate almost like a convenience store,” Wisner said.

This is especially true in urban areas, where drug stores serve almost as a secondary food outlet, said Wisner.

“Drug stores are becoming a place where you can get a sandwich as easily as you can from a fast-food chain,” Wisner noted.

Private label fits into that strategy because it gives drug stores another way to build brand loyalty. By offering proprietary products in multiple categories, they can give shoppers a reason to choose their stores rather than another outlet.

Take beauty products. CVS recently introduced Nuance Salma Hayek (right), a line of skincare, cosmetics, haircare and body products. The brand is a partnership between CVS and Hayek, a film actress/director/producer.

“Brands like that create word-of-mouth buzz,” Wisner said.

CVS has other new offerings. Last year, the chain launched Just the Basics, a 100-item line of household, beauty, baby, personal care and other basics.

Rite Aid Corp., Camp Hill, Pa., is also on the private-label move. The chain recently announced that its private-brand penetration increased to 16.8% from 15.6% last year.

Over the past year, Rite Aid has introduced several new lines, including Renewal personal care and beauty line, Pantry foods and household goods (left), Tugaboos baby line and Simplify, a value-priced brand.

“The three chains are competing for primacy,” Jay Forbes, a consultant and former publisher of Drug Store News, said in November at the PLMA annual trade show.

Walgreens is particularly aggressive, Forbes said.

“There’s been a lot of experimentation at Walgreens, especially since the acquisition of Duane Reade,” Forbes said. “It has an aggressive movement toward private label.”

Indeed, Walgreens has significantly invested in private label. What was a mere five-person private-brands department two years ago is now a 40-person team aimed at creating a best-in-class, private-brand program.

Key to staffing was the hiring two years ago of former Kraft Foods’ executive Maurice Alkemade as divisional vice president/general merchandise manager for private brands, as well as Sturdevant, whose resume includes private-brand development at Aldi and Topco.

The mission of the department is clear: create private labels with a powerful brand identity.

“We want to build brands, not labels, that’s first and foremost,” said Sturdevant.

Walgreens also sells its own beers, including Big Flats 1901, a premium lager; and Playa de la Cruz (right), a Latin import.

Walgreens is investing in core brands with consumer research and marketing. Along with national advertising, it’s also built up in-store marketing. It’s using in-store media to explain the private-brand consolidation. Shelf signs explain to shoppers that some of the products they love will still be available, only under a different brand.

“We don’t want to lose customers who are already buying our private label,” she said.

Its goal is to create a consistent look and feel of its products so that when customers see them in their medicine cabinets or pantries, they immediately identify them with Walgreens, Sturdevant said.

“It’s about profits,” she said. “Private brands are a profit player, and we hope to bring a profitable solution to Walgreens and to our shareholders.”