Strength of the Store Brand

Retailers employ private label programs for a number of different reasons. Some use a store brand strategy focused on offering the lowest price. Others use store brands to incorporate innovation and build their own brand identity. Some retailers use a combination of both strategies. 

No matter which a retailer uses, the strategies seem to work, as it was another banner year for store brand sales. Across all product lines store brand sales topped $118 billion, according to the Private Label Manufacturers Association’s (PLMA) recently released 2016 Private Label Yearbook, which contains statistics provided by Nielsen. 

“Consumers no longer see private label products as a less appealing alternative to the national brand, and this increased consumer awareness is a major driver in private label sales,” says Pippa Peterson, brand manager for Portland, Ore.-based Clean Ones, maker of household gloves. 

More than half of private label sales went to supermarkets, cites the Yearbook. While logically food and beverages make up a large portion of private label sales in the grocery channel, retailers would be remiss if they overlooked private label general merchandise and heath and beauty care items. 

Traditionally, nonfoods items generate better margins than their edible and drinkable counterparts. When margin-rich store brands are added to the equation, the potential for profits are increased exponentially. Of course, success in the category is dependent upon retailers paying close attention to the products they carry on-shelf. 

Industry observers say the products that seem to do best are those associated with health, safety, convenience or savings. One of the reasons consumers are drawn to health care products—more so than most general merchandise products—observers say, is because today’s consumer is so much more savvy and better understands that the national brand and the store brand equivalent are essentially the same product.  

The increasing role of the pharmacist and the trust consumers have with their pharmacist has helped private label sales as well. As shoppers take healthcare into their own hands, they are asking their pharmacists questions and listening to what their pharmacist recommends. Since most pharmacists are dedicated to providing their patients with the best care at the cheapest cost, if store brand is scientifically the same as a national brand, then they have the obligation to direct consumers to that store brand option.  

Of course, price is also a factor. Harkening back to the origins of private label, the products that have the biggest price difference between the national brand and store brand also usually sell well. “Private label cleaners and disinfectants do well because they usually have the largest price savings versus national brands,” says Judith Albazi, president and CEO of Chase Products Co., based in Broadview, Ill. 

The PLMA 2016 Private Label Yearbook supports Albazi. The top gaining dollar volume private label category in supermarkets was fresheners and deodorizers, up 112.8 percent for the 52 weeks ended Dec. 26. In fact, five of the top six biggest private label dollar volume growth categories at supermarkets were nonfoods. Insecticides and repellants was third, up 19.5 percent; followed by candles, incense and accessories, up 16.9 percent; housewares and appliances, up 12.6 percent; and buckets, bins and bath accessories, up 11.6 percent. Grooming aids also made the top 10, placing ninth, up 7.2 percent.

On the units volume side, private label products accounted for seven of the 10 gainers, and once again, five of the top six. The top gainer was buckets, bins and bath accessories, up 15.9 percent. Fresheners and deodorizers was third, up 13.1 percent; followed by feminine hygiene, up 12.3 percent; candles, incense and accessories, up 10.4 percent; and laundry supplies, up 6.2 percent. Cookware placed eighth, up 5.4 percent and baby needs rounded out the list, up 3.7 percent. 

Some may be surprised by the growth these nonfoods private label categories have enjoyed at supermarkets, based primarily on the difficultly nonfoods has in the channel generally. According to officials at U.S. Nonwovens Corp., based in Brentwood, N.Y., selling private label general merchandise and health and beauty care products can also be harder because of supermarkets’ inherent DNA to put their resources toward food stuffs. They add that some chains do well focusing on nonfoods, while for others it is more of a side business.

Others say it makes complete sense. “We don’t find selling private label products at grocery more difficult,” says Krista Shaw, marketing manager for Ontario, Calif.-based Calico Brands, supplier of pocket and utility lighters. “Grocery tends to be more receptive to private label in comparison to brand.”

Pack(age) mentality

Improved store brand packaging is also getting credit for increased sales. However, fancy packaging will only go so far; a product must perform as well.  “More sophisticated, eye-catching private label packaging is driving product trial, and high-quality store brand products are driving repeat sales,” says Peterson.  

  In fact, it is the high quality of many retailers private label items—often food items—that can stimulate sales in other categories. “The successful trial of a store brand product in one category can create positive associations for the label, increasing the likelihood of cross-category trial and sales,” says Peterson. She adds that there are opportunities for cross promotion of food items with complimentary general merchandise items to increase sales of both.      

Other ways to increase store brand sales, say observers, is to increase variety with offerings that have unique features and benefits that differ from the national brand equivalent. “Providing the right mix of private label products at a variety of price points is sure to appeal to the needs of a wide customer demographic,” says Peterson.