Multiple PL Lines Strengthen Customer Connection

CHICAGO — Having multiple private-label tiers not only expands overall private-label sales, it also strengthens a retailer's connection with its most valued customers, according to a new study.

Conducted by private-label sales and marketing firm Daymon Worldwide, Stamford, Conn., and Catalina Marketing, St. Petersburg, Fla., the study analyzed the 2006 vs. 2005 purchasing behavior of 110 million households, based on loyalty card data from nearly 3,800 grocery stores offering at least three of four private-label tiers: value, national-brand equivalent (NBE), premium and organic. All major categories were assessed except for high-volume purchases like bread, milk and eggs.

Results show that consumers who buy multiple tiers are more valuable to chains. Nearly two-thirds (64%) of “high-loyal” consumers, which Catalina defines as those who spend more than 80% of their total available grocery dollars at a certain store, buy multiple private-label tiers.

“Retailers who invest in differentiating tiers are better able to compete with all types of retailers and channels,” Trish Brynjolfsson, Catalina's retail partnerships vice president, told SN.

The expansion comes at a time when other chains are also growing their private-label reach.

Delhaize Group will soon launch a three-tier private-label offering across all its U.S. banners, Pierre-Olivier Beckers, president and chief executive officer, said earlier this month.

The line is to include premium items under the Taste of Inspiration brand and value-priced products under the Smart Options label. Mid-tier store brands merchandised by Delhaize banners will retain their names but will share unified design and procurement.

Safeway is adding baby and toddler items to its O Organics line, while Giant Eagle has expanded its new Market District line.

Officially released at the Food Marketing Institute Show earlier this month, the study found that interest in multiple tiers is strong. While 45% of private-label shoppers buy only NBE, 55% purchase two or more tiers.

“While NBE is the cornerstone, having multiple tiers is essential to meeting consumers' needs,” Pam Boynton, Daymon's marketing director, said in an FMI presentation.

Catering to multi-tier shoppers is important, as consumers who are engaged in all four segments spend an average of $5,178 annually in food stores, as opposed to $934 for those who buy from only one tier.

“Retailers who offer multiple tiers are satisfying their consumers' needs, therefore alleviating their need to go to another store,” said Catalina's Brynjolfsson.

Private Profits

A multi-tier private-label program can boost shopper spending