RETAILERS SAY QUALITY'S DRIVING GROWTH

Lisa Saxton

Ask retailers why private label made gains in top grocery categories such as cereal, soda and diapers last year, and they'll probably offer a simple answer, like this one:

"It all boils down to price and quality . . . that's it in a nutshell," said Ned Meara, corporate grocery merchandising manager at Grand Union Co., Wayne, N.J.

Meara's explanation of private label's successes in 1993, at his company and others, reflected a more general recognition among supermarket operators that the quality of many store brands has reached a critical level of acceptance.

Store-brand carbonated beverages, cookies, diapers and cold cereals are especially notable because they are chiseling away at the dominance of national brands in leading categories, said retailers contacted by SN.

Their comments were in line with trends reflected in scanning statistics compiled by the Private Label Manufacturers Association.

The chain that sells more private label than any other, Kroger Co., Cincinnati, saw sales of those categories grow considerably in 1993, said Paul Bernish, director of public relations.

Bernish cited more aggressive promotions, as well as the introduction of new products and new packaging, as reasons for this growth.

"Across those categories, there's also obviously the price difference; private label is sold at retail at a lower price. And once people tried our Kroger brand, our sales picked up and have done very well," Bernish said.

"We've upgraded our packaging in the last several years, so that when they carry the Kroger name, they're modern looking and attractive," he added.

Bernish said that in 1993, Kroger brought line extensions into the cold cereal category. It also broadened its store-brand soft drink program by introducing private-label iced teas.

Private-label cold cereal sales increased at Jacksonville, Fla.-based Winn-Dixie Stores, said John Pecnik, director of purchasing and recycling programs, who handles the chain's private-label cold cereal.

Pecnik said he expects that progress to continue in the near future for cold cereal and other important grocery lines because improved private-label quality and a reasonable price has turned many consumers around.

"I think private label will keep moving along an upward trend, like it's been going," he said.

Another leading chain, Safeway, Oakland, Calif., placed emphasis on the premium end of the store-brand spectrum, introducing 255 Safeway Select private-label items in 1993, according to its annual report.

"Select, our newest private-label line, offers today's value-conscious consumers premium, quality products at lower prices than comparable national brands. Customer acceptance and sales have been strong. We plan to introduce many more Select items in 1994," said the report.

At Grand Union, private-label carbonated beverages stacked up "colossal gains," said Meara. He credited the high-quality soda formula created under the auspices of President's Choice vendor Loblaw International Merchants for stimulating the category's growth in his stores. "Essentially, it's a superior formulation to anything that has been out there in private label. That superior product is being translated into a tremendous reception by the public, and in many cases, sales have doubled and even tripled over the prior year."

The premium sodas, labeled Grand Classics, are counterbalanced by the continuing presence of the chain's traditional private-label brand "for people who want that price point and product. There's nothing wrong with it. But the new product, in many cases, is better than the branded."

Now, Grand Union has turned to Loblaw again Decadent chocolate chip product as the beginning of the uptick in private-label cookie business.

"Many retailers have gone with some of the domestic suppliers and played off of that. Others have taken that brand and put it into their lineup," he said. "But we at Grand Union and some others have gone to private-label companies and have come up with the same quality product, which is superior to any branded product that's out there."

Meara said cold cereal is another area where he has seen private label increase its share, "especially as the branded people have taken their price points higher. Their costs are up and, necessarily, their retails are up. The difference in price point between the branded and private label is enormous at this point in time." Meanwhile, Meara noted that with the likes of Ralston Purina manufacturing private-label cereals, quality now stacks up favorably beside the national brands.

"I think this has come home to roost, with General Mills' recent announcement that they're turning their marketing efforts, lowering their prices, cutting back on their couponing. They realized there is a tremendous loss in this area to the private-label monster that keeps biting at their heels."