Supermarkets’ private-label GM and HBC goods give national nonfood brands a run for their money
It is no surprise nonfood private label will get a boost in poor economic times. But retailers add a caveat — nothing sells without quality and value.
Bi-Lo, Mauldin, S.C., is capitalizing on the opportunity to boost its nonfood private-label profits through its Top Care and Paws Premium brands. The retailer also offers private-label metal bakeware, batteries, light bulbs, pet supplies and photo supplies.
“We position our corporate brand as a value alternative to the name brand,” said Bill Fishking, manager of nonfood merchandising, Bi-Lo. “However, our corporate brand is periodically tested to ensure that the quality is equal to or better than the national brands.”
Without quality, a supermarket's products simply won't sell well, regardless of the price point, he added. Fishking reports a tremendous growth in sales of Bi-Lo products throughout the store over the past few years, including general merchandise and health and beauty care.
Some of this rise can be attributed to promotional activity. The chain routinely advertises its store-brand products in circulars and offers temporary price reductions on occasion.
But having the right product in the right location at the right time has sold more of the retailer's corporate brands than any other method, he noted.
“High-impulse categories like GM and HBC often have not responded as well to ads and price as they do to cross-merchandising displays,” he said. “Retailers can also benefit from exclusivity. In some categories, such as metal bakeware or cookware, where there aren't as many major national brands, you can offer your own brand alone, thus reaping all of the benefits.”
Some supermarkets have caught on to the potential that cookware presents. According to data from the Nielsen Co., Schaumburg, Ill., sales of private-label cookware products increased 21% to $28.5 million in supermarkets, excluding supercenters, during the 52 weeks ending Oct. 4.
Food retailers are cashing in on other nonfood products as well. During the same period, private-label GM dollar sales rose 1% to $504 million, and health and beauty care sales increased 6.1% to $1.5 billion.
During a recent Citi Investment Research Fall Food & Drug conference call series, Tom Pirovano, Nielsen's director of industry insights, cited several reasons for such sales jumps.
“Last summer is when private-label sales really started taking off,” he noted. “This coincided with talks of food-price inflation, the economy and higher gas prices.”
Pirovano cited H.E. Butt Grocery Co., Kroger Co., Wegmans Food Markets and Safeway as supermarkets that have some of the highest private-label-to-national-brand ratios across categories. With regard to GM and HBC, he calls attention to big-box retailer Wal-Mart Stores, Bentonville, Ark. with its wide array of private-label and exclusive brands.
For example, Wal-Mart has Equate HBC products and Spring Valley vitamins. It also stocks Ever Active batteries, Kid Connection toys, ReliOn medical test kits, HomeTrends home products, Holiday Time seasonal items and Durabrand electronics, to name just a few.
“[Wal-Mart's] strategy is different from retailers like Kroger, because they don't come right out and advertise that these are private label,” said Pirovano. “Consumers get that some of them are private label, but many just look like value brands. I like this strategy and could see other retailers doing the same thing.”
Pirovano doesn't disparage self-branded goods. They have their place, he said. But some shoppers who are averse to the idea of private label but might consider a less expensive brand if labeled with a non-corporate brand.
Last week, Wal-Mart announced it was instituting guidelines of quality control and safety standards for imports from China, including private-label and non-branded products from direct import suppliers. Wal-Mart is requiring suppliers to provide the name and location of every factory that makes the products.
“Despite representing only 2.8% of the total assortment, the GM SKUs that are out there are pretty productive,” Hertel told SN. “GM private brands represent 3.7% of all GM sales and 4.7% of GM adjusted gross profits.”
Some categories with above-GM-average private-brand SKU proportions include batteries, brooms and mops, cleaners, grill accessories, kitchen accessories, lightbulbs and school and office supplies, he said.
Meijer, Grand Rapids, Mich., has a host of private-label general merchandise items. Its At Home with Meijer and At Home with Meijer Organics bedding, bath and kitchen textiles take up several hundred linear feet in most stores. In March of this year, the chain launched its Grand Gourmet line of kitchen appliances, gadgets, cookware, bakeware and cutlery.
Health and beauty products include everything from Meijer-branded vitamins, sleep aids and antacids to toothbrushes, shampoo and razors.
“We have a Meijer substitute for just about everything you can buy from Crest or Colgate or Suave. We have an even bigger selection of medicine,” a store employee told SN during a recent Meijer visit in western Michigan. “People have really been stocking up on the lower-priced products, like Meijer brands, in both of these departments lately because they can't afford the big brands anymore.”
Most shoppers there admit that the struggling economy is pushing them to lower-priced HBC items. Some have even complained to the store employee about having to choose between filling their gas tanks or buying groceries. When tight on cash, the vast majority stick with basic personal hygiene products, bypassing non-necessities like the latest lip gloss and salon-quality hair care items, she said.
Shelf-talkers throughout GM and HBC at the Meijer location point out private-label prices. An occasional “Price Drop” sign also hangs near the retailer's products, calling attention to items on promotion each week. In weekly circulars, Meijer typically divides pages into sections with a separate space dedicated specifically to its own nonfood goods.
Other industry participants are being recognized for their private-label efforts. Topco, Skokie, Ill., recently received a nod for its private-label school products and bakeware. The company's Topco Academix junior craft and school products and Topco Domestix Masterpiece Bakeware pizza pan won the Private Label Manufacturers Association's 2008 Salute to Excellence Home & Health Award. Wakefern Food Corp., Elizabeth, N.J., was also awarded the prestigious PLMA honor for its Upgrades by ShopRite mixing bowls and Non-aspirin Rapid Tab for kids.
Brian Sharoff, PLMA president, said these companies were selected because they created private-label goods with impressive product concepts, innovation, packaging, presentation and value. In stores, such quality GM and HBC goods stand to attract a lot of shoppers, especially when the economy is weak, he said.
“The economy has started to drive many consumers to more budget-minded purchases,” said Sharoff. “Whether someone is trying private label for the first time or making a repeat purchase, retailers have to be ready with high-quality products at low prices so they can capture their share of the market during these tough times.”
Don Stuart, managing director, Cannondale Associates, Wilton, Conn., urges retailers to present consumers with clear, direct messages about their private-label lines.
Bi-Lo does this on its website. Statements about the chain's Top Care products include one-liners like “you can save up to 30% and more by purchasing Top Care over national-brand equivalents,” and “Top Care OTC medicines have the same active ingredients as national brands — FDA law requires it.”
Such declarations are exactly what shoppers are waiting to hear, said Stuart.
“A message like this is the defining permission for shoppers to buy,” he said.