Private label: one for all, all for one

High-quality, multi-tier private label programs continue to earn consumer loyalty by offering something for everyone. 

On a busy weekday evening, a Trader Joe’s in Manhattan may be confused with the debut of a new restaurant or club. There is often a line of shoppers standing across the storefront waiting to enter the store. However, for those shoppers it is worth the wait because once inside they can stuff their carts full of products bearing the name of their favorite brand—Trader Joe’s.

With 85-90% of products sold featuring one of its house labels and the highest per-square-foot sales in the national market, according to industry observers, the Trader Joe’s chain epitomizes the fast growth that the grocery industry has seen in the private label segment.

Many observers argue that the chain is going after a different clientele than traditional supermarkets. True or not, the same store brand phenomenon has occurred across traditional, discount and fresh-format retailers alike. Arming their shelves with recognizable store brands, retailers have grown their existing offerings, introduced niche categories and earned themselves consumer loyalty, forever changing the perception of “brands.”

The perception of private label products has shifted dramatically in recent years, says Jennifer Tracy, senior marketing services manager for Mt. Prospect, Ill.-based Mizkan Americas. “Previously, private label items were deemed ‘generic,’ notoriously flavorless foods in basic packaging. Their main appeal was the low price point.

“Today, private brands are seen as a contender in the aisle, offering products of equal or greater value than national brands,” she adds. “In fact, recent studies have reported that the majority of consumers who have purchased private brands plan to stay with the product due to the perceived quality.” 

Staying with store brands is exactly what consumers are doing. Manufacturers recognized an opportunity to innovate their offerings during the economic slump that had shoppers turning to budget-friendly “national brand equivalent” options. This rejuvenation of private label options was just what retailers needed to keep shoppers in their stores, and their brands in shoppers’ carts.

Consumers no longer treat private label as an alternative to national brand products, says Brian Sharoff, president of the New York-based Private Label Manufacturers Association (PLMA). “Whether they are at the bottom of the economic ladder shopping at Aldi, or at the top shopping at Whole Foods, consumers consider the retailer’s brand to be the leading brand.”

Aldi’s private brand differs greatly from Whole Foods, which explains a key point to understanding the new market landscape; there has been a significant shift in shopper behavior resulting in market segmentation.

According to Sharoff, traditional supermarkets accounted for 95% of grocery purchases in 1999; now, he says, that number is about 46%, as fresh markets, discount chains, dollar stores, warehouse clubs and mass merchandise formats have all fought for their piece of the pie.

In an effort to compete, traditional grocery retailers have established multi-tiered private label programs. By offering two or three options—premium, mid-range or discount—and in some cases, an organic/natural range, these retailers are able to offer something for everyone.

Offering a complete line of organic, gluten-free or whatever else the consumer base demands, products across categories can really drive consumer trust. It positions retailers as advocates for their consumers, says Bryan Roberts, director of retail insights for Kantar Retail, based in London. “It plays into the overall reputation of the business, and that is quite important. A lot of side value has become quite important in giving retailers the moral high ground to speak to shoppers.” As an example, he references the respect consumers have for the strong stance on animal welfare and environmental impact taken by the British grocery banner Sainsbury.

A number of U.S. grocery banners have built organic or natural private label programs: Simple Truth Organic at Kroger and Nature’s Promise at Ahold’s Stop & Shop, for example. And non-traditional store formats have followed suit, like Aldi, Target and Walmart—this year Walmart announced a partnership with the Wild Oats brand.

“Five years ago when these products were being launched, the trust was not there and people questioned the legitimacy of private label and organic,” says Andres Siefken, CMO at Daymon Worldwide, based in Stamford, Conn., adding that the USDA logo has helped bring consumers around. “It helped make the claim about private label trust and it drives exponential growth in the industry.”

Along with niche product lines, warehouse club stores have played a big role in redefining the private label segment. Costco’s house brand, Kirkland Signature, for instance, is highly regarded for its quality and unique offerings and recognized as a national brand. Costco built its brand on the idea that the assortment is designed to be “be better than the national brand, or they don’t sell it,” says Siefken. “And if Costco has not developed a particular product, the company will work with a category innovator to offer it under the brand”—or a label with the combined national and store brand.

The warehouse club approach is to drive innovation—not steal market share from national brands. Also, the in-and-out strategy toward their merchandise mix helps drive trial for both the private label and the national brand.

It is this trial that is key. Many supermarkets have come up with innovative strategies to drive trial in their stores. Giant Food, based in Landover, Md., offers its Buy Theirs, Get Ours Free Challenge where consumers who purchase selected national brands receive Giant’s Own Brands equivalent products for free. According to Dean Wilkinson, vice president of sales and merchandising for the banner, the promotion helps consumers learn about the tremendous value the store brand offers. The fourth challenge of the year—which ran from September 28 to October 5—included a number of grocery items and some HBC products, as well as sampling opportunities.

PLMA’s Sharoff says driving trial delivers different challenges across store formats. Where cross-merchandising and sampling works for supermarkets that have developed a reputable store brand, traditional supermarkets that are not offering an across-the-store high-quality brand are at a serious disadvantage.

There are also mass and discount merchandisers in the mix, adds Sharoff. These retailers have learned that offering a cheap price is not enough anymore; they have to increase their quality—and price—to win over private label shoppers.

Quality and trust

The value of quality is particularly important in light of the increasing influence of the Millennial generation, a group that values quality over all else and has been credited, at least partially, with driving store brand growth.

Seventy percent of all shoppers say that they troll for quality, says Siefken, and Millennials come into play because they are not brand loyal at all. They are a generation that is native to private label and more cost-conscious than Gen Xers and Baby Boomers.

Considering this, a private brand offering can actually help the retailer’s strategy to attract consumers into their store experience, says Siefken. “That’s why it is important to be driving excitement with innovative solutions.”

Naturally, many manufacturers are targeting Millennials with their innovations. Having grown up in an international culture, this generation seeks out globally inspired flavors and cuisines, and they view the kitchen as a playground.

The condiments category is a prime example. Sales for the “national brand equivalent” in the grocery department have always fared well; but in the past ten years the department has undergone a revival. National and store brands have expanded their portfolios to include spicy and ethnic flavors that were previously considered niche or limited to specialty stores.

Millennial consumers have grown up with not only having a voice, but being heard, says Harry Overly, chief customer officer for Bay Valley Foods, based in Oak Brook, Ill. “Because of that voice, their influence on brands and products is stronger than ever before. It is important for private label to be in tune with who the target consumers are for the specific product categories but even more so, what is important to those core shoppers.”

Satisfying the needs and desires of these “core shoppers” has helped hold onto Millennials’ dollars, but with an innate sense of brand independence, this generation is more likely than any other to switch to another store if their trust is broken.

Maintaining trust is a huge task. The retailers’ responsibility is tremendous; even more so as retailers expand their namesake brands into higher risk categories like seafood and produce. “Historically, when a consumer entered the produce department, they were met with a lot of loose bulk fruits and vegetables. With the lack of a label the shopper assumed it is the responsibility of the retailer,” says Edward McLaughlin, director of the Food Industry Management Program and the Robert G. Tobin professor of marketing at Cornell University.

“That is the distinguishing feature of national brands and private label; the responsibility of one lies with the manufacturer and with the other it lies with the retailer,” he adds.

For this reason some observers even believe that creating a private label brand may hurt fresh shoppers. Consumers who value what they identify as the store’s own offerings, may be skeptical of a brand entering the categories.

As more produce growers and commodity organizations are packaging and labeling their product, retailers are finding ways to follow suit successfully. Wegmans, for example, differentiates its produce department by offering only one brand in particular categories, note observers—its own brand.

The same is happening in the seafood and meat departments. As consumers’ purchase decisions are now being swayed by these brands—national and store—retailers are becoming more vigilant in their traceability and supply chain management. Companies like ICIX have developed systems to help retailers manage these risks.

ICIX, based in San Francisco, built a system to track and verify the origin and legitimacy of food and nonfood products. As soon as a retailer submits a purchase, the company works out what the retailer is buying, who they are buying it from and where it is located. By bringing that all together, they can evaluate the level of risk, says Matthew Smith, founder/chief strategy officer.

The biggest challenge in managing supply chain risks, he says, is that most programs use human resources; and with human entry, retailers are not managing the “active supply chain,” and therefore unable to identify any red flags. 

“We see people try to manually identify and reactively manage this process, but the data they are gathering will probably be out of date by the time they gather it,” Smith adds. “The risk is not understanding the transparency, and if retailers do not know where the products and the ingredients are coming from, then they do not know if they are what they say they are.”

Many people say the idea of transparency in the fresh departments has changed with the movement towards value-added products. Consumers buying these packaged products are less interested in where the fruits or vegetables were grown, or where the cattle was raised, but more concerned with how to cook the product and what the nutritional value is, note observers.

There is a convergence of knowledge being demanded from shoppers; and retailers are being challenged with offering it all at once. 

Fresh to market

With nearly 2,700 booths representing more than 1,250 exhibiting companies—an increase of about 7% compared to last year—this year’s PLMA’s Store Brands Reality Trade Show is set to be “the best assortment of products and largest group of manufacturers in 30 years,” says Brian Sharoff, PLMA’s president, noting that the show breakdown is roughly 65% food products and 35% nonfoods.

With such a broad selection, finding the right mix for store shelves will not be an easy task for attendees. Here are a few exhibitors to look out for on the show floor and what they will be highlighting.

Bay Valley has a number of things to share, but much of its focus at PLMA will be on its single-serve business. Two innovations at the show will be its 2.0-compatible single serve cups and the recently launched Single Serve Soups & Sides. The flavors available include Chicken Noodle and Vegetable Beef Soups, as well as a Vegetable & Rice Side dish. These are currently the only single-serve soups and side dishes on the market, says Harry Overly, chief customer officer, and they “offer consumers a convenient new way to make these types of products.”

The Oak Brook, Ill.-based company has roots in the organic segment and recently acquired Protenergy Natural Foods and Flagstone Foods. “As a leading private brand supplier, when the national brand develops new products, we follow with quality, valued-added solutions that enable our retailer partners to offer the greatest value and choice to their customers,” adds Overly.

Bektrom Foods is giving the pasta category a kick with two new flavors: Spicy Buffalo Wing and Nacho Cheese. Both pasta products come with flavored creamy cheese pouches and a suggested retail price of $1. “It’s a great way to spice up your pasta aisle,” says Tom Barbella, president. “Just add some deli chicken and some chopped veggies and you have a meal.”

The Monroe, Mich.-based company will be featuring its full product line and various packaging styles. All of the company’s plants are GFSI-certified, offering more than 400 items, with many other custom formulas for private label and co-packing customers.

Popcorn is in Cornfields’ roots. The Cretors family has been making popcorn for more than 125 years, ever since Charles Cretors invented the popcorn machine in 1885. Attendees can learn about Cornfields capabilities in popcorn, from wet pop to air pop to its unique flavor profiles in the caramel category.

Additionally, the Waukegan, Ill.-based company will be discussing the gluten-free and non-GMO offerings across its product lines: popcorn, veggie chips and sticks and indulgent holiday items. “Consumers continue to be more nutritionally educated and are increasingly looking for more free-from options,” says Claire Cretors, president. “This is a category we’ve always been active in and we are now seeing a growing demand.”

Officials at JJ’s Bakery know that despite the trend toward healthy eating, consumers still want to indulge in a little something sweet. Made with real fruit and a whole grain crust, Tid-Bits Mini Snack Pies are targeted for just that. Just 2-ounces, the individually wrapped “better-for-you” snack pies are available in apple and cherry, with more flavors to come.

“We’re very excited to announce the addition of our new mini pies product line,” says Byard Ebling, vice president of sales and marketing for JJ’s Bakery, a brand of Erie, Pa.-based JTM Foods. “Tid-Bits are the perfect snack size and a great option for giving everyone in the family a sweet treat, especially those concerned with portion control.” The snack pies are made in a nut free facility, free of trans fats and certified kosher parve.

Recognizing the continued growth in both ethnic food/flavor trends and convenience items, Mizkan Americas set out to develop the “next generation of authentic Hispanic sauces,” says Jennifer Tracy, senior marketing services manager for the Mt. Prospect, Ill.-based company. “Ethnic food and flavor trends have become a permanent part of the conversation.”

The line includes a range of items from traditional red and green enchilada sauces to contemporary sauces, like Blackberry Chipotle, and can easily be incorporated into a number of recipes for a quick meal. Available in a variety of sizes and packages to deliver “just the right size and shelf presence for a store’s brand,” all of the sauces use peppers and chiles grown at Mizkan’s Deming, N.M., facility to guarantee quality, adds Tracy.

The family-run company Red Gold will be spotlighting its specialty: tomato products. Developing tomato products for more than 70 years, the Elwood, Ind.-based company’s product line includes premium pasta sauces, salsa, carton tomato sauce and ketchup, among other things.

Some of the new products attendees can check out on the trade show floor are a 38-ounce Organic Ketchup designed for high-consumption organic ketchup users; new shelf-ready salsa flavors, including Medium Restaurant Style, Chipotle Restaurant Style and Pineapple and Roasted Garlic; a 33.5-ounce Carton Tomato Sauce; and six Premium Pasta Sauces, packaged in a differentiated premium bottle.

Rudolph Foods has been popping up some flavorful snacks. New at the show will be Sea Salt & Olive Oil Popcorn under the Lima, Ohio-based company’s Gaslamp Popcorn Co. brand. Made with California Olive Ranch Olive Oil and verified by the non-GMO Project, the popcorn was inspired by the demand for better-for-you snacking options.

Consumers’ need for heat and growing interest in Mexican flavor profiles has inspired new products under Rudolph Foods’ Pepe’s El Original line. The latest popcorn item is Dulce Caliente, which means “sweet hot” in Spanish, say company officials. “This complex flavor is a light caramel corn with chile de arbol chili pepper flakes incorporated into it,” says Mark Singleton, vice president of sales and marketing.

The voices of  "reality" 

Attendees at the Private Label Manufacturers Association’s (PLMA) 2014 Store Brands Reality Trade Show, taking place November 16-18 in Chicago, are in for a treat.

Martha Stewart will be headlining the show’s educational program at the keynote breakfast Monday morning.

The founder of the namesake merchandising and media company, Martha Stewart Living Omnimedia, Stewart has used her self-made brand to help retailers develop private label programs in categories such as cooking, entertaining, gardening, home renovation, crafts, pet and more.

Sunday, before the exhibit hall kicks off with its record number of booths—nearly 2,700—attendees can hear from a number of industry experts:

Following that, at the PLMA Live! Breakfast on Tuesday, attendees will hear about what happens when retail and technology collide in Digital Retailing by Stephen Mader, senior analyst for Kantar Retail.