SURVEY SAYS

STEPHANIE FAGNANI

The notion that European shoppers are more embracing of private-label products than their American counterparts can be put to rest. Retailer reports, along with a recent survey on consumer attitudes, suggest that domestic shoppers are much more cosmopolitan than previously given credit for.

According to "Store Brands Come of Age," a Gallup Organization, Princeton, N.J., survey released by the Private Label Manufacturers Association, New York, Americans' feelings toward private label is comparable to those of the Europeans.

Out of those shoppers surveyed, 54% said they frequently or regularly purchase supermarkets' store brands. And one-third of the respondents said they are more likely to buy store brands now in supermarkets than they were a year ago.

Brian Sharoff, president of the PLMA, said this survey and other recent studies show that private-label market share in the United States is on par with regions like Holland, Germany, France and the Netherlands, and only comes up short when compared to England.

"What the Gallup survey proves is that attitude toward private label is quite comparable," he said. "The consumer really is more aware of private label than they were five years ago. Consumers do see a difference between the private label they buy at their supermarkets and others. The Gallup survey is proving that the consumers really do have a kind of loyalty to their own supermarket products that perhaps we haven't had any evidence to show otherwise," he added.

Retailers that spoke with SN confirm the survey results based on their own stores' experiences.

"We see consumer acceptance of store brands increasing due to several factors," said Duane Martin, president, IGA North America, Chicago. The increasingly palatable quality of the food and the effort to construct eye-catching packaging options are among those factors, he said, adding that the company recently completed a package redesign across all product lines.

To keep store brands as visible as their national competition, IGA frequently features in-store promotions and cross-merchandising tactics that, for example, pair Smuckers' toppings with an IGA ice cream.

"We do a lot of cross promotions with Coca Cola and IGA snack items," Martin said. "There are a lot of terrific opportunities to co-brand complementary items."

Fresh Brands, Sheboygan, Wis., which also encompasses the Dick's and Piggly Wiggly banners, benefits greatly from its membership with private-label cooperative Topco, Skokie, Ill., and has reported private-label growth in the double digits for the last five years, up 16% last year, said Michael Houser, vice chairman, executive vice president and chief marketing officer, Fresh Brands Inc./Piggly Wiggly.

"Collectively, Topco represents almost $40 billion in retail sales, and its primary mission is focused on store brands. We benefit from that participation," Houser told SN.

With more than 2,000 private-label stockkeeping units, Fresh Brands also turns to in-store promotions to boost recognition of store brands. Event merchandising is popular, and the retailer is currently involved in a store brand-focused display contest keyed around March Madness in which younger consumers can shoot hoops for a chance to appear in Milwaukee with the Bucks.

"Our mentality is we always have a program on a weekly basis -- national brands with store brands," Houser said.

At wholesaler Supervalu, Minneapolis, store-brand performance is measured on a variety of levels and, according to Craig Espelien, corporate director of store brands, "On every measure that we have, store brand is outstripping company performance.

"Our penetration at retail is up almost 10% this year relative to company sales, which were up about 9%. Sales were up 3.5% to 4% in terms of purchases."

This success can mainly be attributed to improved quality, he said, as well as the consolidation of different brands across the Supervalu system. All second-label and price-point brands have been rolled under one umbrella, and the company is currently working on moving all nonedibles under one umbrella.

Trial has been successful in persuading consumers of the quality of store brands, evident in the survey results that indicate seven out of 10 consumers agree that the quality of store brands is better or the same compared with the national brands at the supermarket where they shop. Yet, overcoming the perception of low quality due to low cost has been a burden for some domestic retailers.

"In Europe, the approach to branding is much different than ours. We've [U.S. retailers] had a private-label philosophy for years -- that we're trying to sell products cheaply rather than building image and equity in the brands that we're selling," Espelien said. "From a Supervalu perspective, we've really moved in that direction in terms of how do we communicate the image of our program other than through item-price advertising. We've moved more to an image-building campaign. We're still struggling with that a little bit because all of our old-line buyers are saying, 'We need to have it cheap in order to sell it.' But that just isn't reality," he added.

According to Sharoff, a survey recently released by the PLMA International Council shows that European retailers list image building second only to profit margins as a reason for carrying private-label products.

"The price issue manifested itself differently in different places," Sharoff said, noting that in England, a second tier of private label is carried in order to offer up the lower price alternative. France uses price fighters, which are low-cost brands, he added, while "in Italy, Spain, and Germany, the notion is that private label should stay cheap and keep the quality down to standard quality in order to satisfy the customer on the price issue. But that's beginning to break down."

While upgrading labels and quality are successful methods of image building, execution at the store level is the real ticket to boosting perception and capitalizing on the current private-label high in the United States.

"We do ads on TV and outdoor boards for private label. But it's also executed very well at the store level or we wouldn't have the kind of penetration that we have," Houser said. "There are a lot of grocers trying to catch up."

Domestic grocers have often fallen prey to the dominance of the national brand vendors, sources told SN, but, with 17% of those polled for the Gallup survey saying they are less likely to buy national brands within a year, the time is more than ripe for retailers to make even greater strides with their private labels.

"Innovation would appear to be the crucial building block for private label," Sharoff said, noting that innovation doesn't just mean an entirely new product line. "Innovation is a much broader concept, which really means making packaging more exciting and making the quality of the product the best it can be. We're doing a lot of it in the U.S.," he said, referencing retailer's private-label efforts with ethnic foods, wines and spirits, and gourmet products.

"In this country, the national brands have always been very dominant and have done a terrific job in the advertising and marketing area. It's a difficult thing to change because the brands have largely dominated the media. It's up to the grocers to really change, and I think that's happening," said Houser.

Supervalu's Espelien drew comparisons to a ship's bow pressure wave -- the wave created by the forward movement of the ship -- in which dolphins are drawn to swim.

"We're seeing consumers on the forefront of this store-brand bow pressure wave. They've seen a lot of good things going on and it hasn't yet translated into sales. Store brands will continue to become more competitive in terms of image and marketing, and consumers are poised to take advantage of that," Espelien said.

"The question is, can we, the retailer and wholesaler, sustain that for the next two to three years? That will determine whether the consumer rides that bow pressure wave or chooses to go elsewhere."