IN MY OPINION 1994-03-07

Brian Sharoff

As far back as retail merchandising goes, con sumers have looked to the name on the package or the "brand" to choose the best product. The "brand name" allowed them to identify familiar products in which they had confidence.

Over the years, several types of "brands" emerged. There have been the manufacturer's own brands; local, regional and specialty brands; celebrity brands, and the retailer's store brands.

To succeed, all have had to have certain common characteristics.

First, quality: No brand can expect to keep consumers coming back without attaining a high level of performance and satisfaction. Second, the level of quality has to be consistent over many years of a customer's purchasing experience. Third, (regardless of any survey) brands need to be attractively packaged, and, fourth, produced by a company that consumers recognize and in which they have confidence. Last, a good brand must offer consumers good value.

By the last count, nationally advertised manufacturer's brands, including regional, specialty and celebrity brands, comprised about 85% of supermarket sales, and the retailer's store brands nearly 15%.

These statistics, of course, mask the real dynamics of today's supermarkets. In many categories, the retailer brands challenge or lead their national brand competition. Indeed, store brands are now ranked as the number-one, two or three sellers in nearly half of all IRI categories. Sales have reached $30 billion and 86% of all consumers use some store brands, according to Gallup. Recent data show that even in a sluggish grocery economy, store brands grew at 2.4% while national brands growth was only 0.35%.

Retailer store brands have set new standards for themselves, too. Loblaw's President's Choice, A&P's Master Choice and Wal-Mart's Sam's Choice have transformed the level of quality that consumers can expect from store brands.

No wonder many manufacturer's brand managers are concerned. No wonder that even an 85% to 15% split of dollar market share doesn't seem enough of a cushion. But just as statistics mask the true dynamics of supermarkets, the numbers also obscure the winners and losers.

Obviously, the consumer is a big winner. The growth of store brands has meant more choices on the shelves and, through competition, better prices at the checkout.

Retailers are also big winners. Store brands have given supermarkets the profitability that they haven't been able to gain with many national brands. They have also offered supermarkets a much needed way to differentiate themselves from their competition.

Manufacturers have been big winners, too. With the costs of marketing, advertising and R&D getting higher, only a select group can afford to play the game. With number-three, four and five brands falling by the wayside, reincarnation as suppliers of store brands has allowed many manufacturers to survive and even prosper.

Clearly, store brands start out with certain advantages. Equally, however, nationally advertised brands enjoy advantages. They have immense national recognition and are often the traffic builders for all retail formats. They can create markets for entirely new product categories and popularize them to everyone's benefit. They are the standard against which most consumers and retailers alike judge what a product should be.

I don't know many retail executives who believe, for an instant, that manufacturer's brands are doomed dinosaurs. They all see the tremendous role that brands have always played and will continue to play. Likewise, they see themselves as part of a "family of brands" that are offered to consumers day in and day out, all around America. The only question now is whether branded manufacturers are willing to accept them as part of the family.

Brian Sharoff is president of the Private Label Manufacturers Association.