Supermarket GM and HBC departments are seeking to capitalize on the economizing behaviors of consumers in the current environment by expanding their store-brand offerings, improving the quality and variety of their lines and launching more aggressive promotions.
In some cases, the new products are supplanting branded products on the shelves, and in others they are driving branded manufacturers to come up with more aggressive promotions to retain share.
“Overall, the sales numbers in general merchandise and health and beauty care are down, in large part because of the weakening economy,” said John Saidnawey, chief operating officer for the Johnson O'Hare Co., a sales and merchandising company based in Billerica, Mass. “As an example, we know there are people cutting pills in half, and holding onto their razors well after the blades need to be replaced. Consumers are highly aware of their disposable income and are guarding it closely.”
In response, he said, retailers have become more aggressive with their opening price-point brands.
“We are seeing price-value segments get a lot of play,” he said. “As well, store brands are playing a much larger role, with an increased presence at the shelf and promotionally.”
According to Chicago-based Information Resources Inc., health care products saw the biggest percentage gains in terms of market share among all private-label products through September of last year, with penetration up 1.4% in unit sales, to 24.9%, and 0.6% in dollar sales, to 33.7%, across all channels.
General merchandise and personal beauty care private-label products also saw gains ranging from 0.1% to 0.8% in that time.
Last month Aldi, the 1,000-unit, limited-assortment chain that specializes in private label, rolled out its first store-brand beauty product in the U.S., calling it Lacura.
The Germany-based chain, which has its U.S. headquarters in Batavia, Ill., originally introduced the line in the United Kingdom under the name Siana, Aldi spokeswoman Tina-Marie Adams told SN. The chain first rolled out the skin care line — which includes 16 SKUs priced from $1.99-$4.99 — and is planning to follow those products with the Lacura cosmetics line.
The products are featured on special displays within Aldi stores alongside the chain's toiletries offering. The chain promoted the launch of Lacura skin care with ads in the Sunday supplements of newspapers around the country, as well as on its website.
The products are being promoted as having the same efficacy as national brands at prices “as much as 95% lower than big-name brands,” said Joan Kavanaugh, vice president of corporate purchasing at Aldi, in a prepared statement.
Jim Wisner, president of Wisner Marketing Group, Libertyville, Ill., said one of the keys to success in the marketing of private-brand beauty care products is in making an emotional connection with the customer — something drug stores have had some success with and supermarkets are getting better at.
“There's an experiential element with these personal care and beauty care brands,” he said, noting that national-brand prices in the category are often driven by significant marketing budgets. “Many retailers are starting to understand that's where the battle is being fought. They have to be equally competitive there, not just functionally equivalent.”
Functional equivalence, however, has been a key factor in the success of health-related store-brand products, such as OTC medications, which are often subject to Food and Drug Administration approval, he pointed out.
“To a great extent, the specifications of the health-related products are defined by the government,” he said. “Customers understand that about generic pharmaceuticals, and they make the leap into store brands. They understand they are going to get something with the same efficacy of the national brands.”
Tony Harrington, business manager for the Top Care HBC line at retailer-owned cooperative Topco, Skokie, Ill., agreed that consumers are likely to be more willing to try health-related HBC products in store-brand versions because they understand that the products use the same active ingredients, like aspirin or ibuprofen.
“There are some categories in which the resistance seems to be lower for consumers to make that trial to store brands,” he told SN. “The categories like internal analgesics or pain relievers, sinus medications — and a big category with a lot of growth in the past year has been gastrointestinal: laxatives and antacids. That's a category that [historically] has not been that active in store brands, but it has seen a lot more activity in the last 12-15 months.”
He noted that some store-brand beauty care products seem to be enjoying increased trial as consumers find they can trade to private labels without sacrificing the added benefits touted by the national brands.
If a customer has decided not to buy a premium vitamin-enriched shampoo or conditioner, for example, they are increasingly looking at store-brand options that have the same benefits, Harrington said, rather than trading down to another branded product that lacks the desired ingredients.
“Those products [historically] have had a little greater resistance to the store brand,” he said. “But we have seen a big increase in consumers' willingness to try some of those items over the last couple of years.”
Retailers have also been much more aggressive in promoting their store brands, Harrington explained.
“Many of our members have increased their store-brand marketing, with an increase in the number of store-brand items that are appearing in weekly ads,” he said, noting that value-added promotions — such as buy-one, get-one- free and on-pack offers — have been especially popular.
He said retailers have also increased their store-branded displays.
“One of the things we offer our members — and they have been supporting it at a dramatically increased rate — are promotions based on creating secondary placements in the stores, such as displays, power merchandisers and clip strips,” Harrington explained.
Saidnawey of Johnson O'Hare noted that manufacturers are responding to the economizing behaviors of customers with “innovation, increased value position, new technology and by enhancing the image of the brand.”
He also noted that more and more manufacturers are offering store-brand alternatives themselves.
“Our role overall [as brokers] is more important than ever, working more closely with retailers and manufacturers to bring aggressive and value-added programs,” he said. “In the past, we would build long-range plans, but now it's important that we maintain as much flexibility as possible.”