National brands, with their rich tradition and marketing savvy, or store brands, with their checkered past and street smarts? The latest statistics from the front lines show that private-label sales in supermarkets reached a record 19.7% in unit market share last year. According to Information Resources Inc., private labels grew 0.8% in unit volume and national brands slipped 0.8% in the same period. Supermarket retailers are caught in the middle of the action. They want both sides to win, and somehow figure out a way for Wal-Mart to lose. Strategic partnerships may save the day for national brands. In such "top-to-top" relationships, a category captain and retailer work together on selecting new items, deleting slow movers and generally growing the business together. At this point, national-brand suppliers are equipped to handle such planning with top chains, and private-label suppliers largely are not. Since category management is the future of the business, score an edge for national brands, right?
Maybe. Several major chains have a hidden agenda for store brands and how they fit into their own growth. Some examples:
· At A&P, a major private-label strategy is taking shape. The various store brands sold under different names at its companies (Waldbaum's, Farmer Jack, Kohl's, Food Emporium and A&P) are being consolidated under the name America's Choice. There are 450 items under this banner, and plans call for about 1,000 more in a year.
· At Kroger, private-label sales as a percentage of total grocery sales were 16.5% in 1990; they were 22% last year.
For those battle-weary national-brand marketers, these trends and developments can be discouraging. Take heart. The proper course of action is simple and all too obvious. Declare victory in the battle against store brands. Then become a supplier of private label, too.
More brand marketers today believe that the issue isn't whether to supply private label, but rather when to start. In strategic partnerships, the same manufacturer could help the retailer plan category growth for both national brands and store brands. That's an enormous amount of clout to bring to the table. This scenario was a hot topic at a gathering of the Private Label Manufacturers Association last month. (See story, Page 1.)
At the conference, PLMA President Brian Sharoff told Brand Marketing, "National-brand manufacturers need to stop thinking of themselves as national-brand manufacturers, and rather think of themselves as 'manufacturers.' You have a mix of products. You have your brand, institutional sales, overseas sales and private-label sales. All of them are part of the bottom-line profits."