PRIVATE LABEL'S POWER PLAY

STEPHEN DOWDELL

It's a new game. The contest for consumer loyalty is getting tougher and more complicated. It's pitting not only supermarket chain against chain, and consumer brand against brand, but also national brand names against the retailers' own names.

Now, retail strategists across the country are making the same offensive move: aggressive private-label marketing. It represents a fundamental maturing

of how supermarkets see the store brand's role in defining who they are.

To score, chains have to beat national branders, the industry's consumer marketing powerhouses, at their own game, and big brand-name companies are also getting tough. Retailers, however, are taking some of their best shots on goal ever, including:

Premium store brands: Using Loblaw International's President's Choice as a marketing model, chains are launching or expanding distinctive premium lines that face off with national brands head-to-head on quality.

Mainline repackaging: Some of the biggest retailers are repositioning labels, making them more uniform to bolster their impact and get more mileage from their marketing dollars.

Advertising: Evolving beyond compare-and-save ads, some programs are assuming a more sophisticated role in retail image-building.

In-store promotion: High-profile signs, electronic point-of-purchase merchandising, increased sampling and other tools are being applied to store brands.

Category management: As progressive retailers rethink categories to improve profitability, their store brands are benefiting from more prominent shelf positions and more frequent displays.

The private-label marketing push is, in essence, the latest escalation in the battle for the consumer, said retailers, suppliers and industry watchers interviewed by SN. It follows a wave of substantial improvements in the quality of many products, and a concurrent steady swelling of private-label market share.

While some chains are ahead of others, the attitude appears industrywide. According to a supermarket survey conducted last summer by Meyers Research Center, New York, 91% of retailers said private-label brands will receive more emphasis in their merchandising strategy over the next two years, and that emphasis will influence unit sales more than any other factor.

For some, this aggressive attitude has been a long time coming.

"As a guy who's been into the management of private label for a couple of decades, I am gratified to see my management, and others in chains around the country, come around to it," said Graham Lee, who until recently had been vice president of the grocery division for Ralphs Grocery Co., Compton, Calif. (He's now vice president of general merchandise for the chain.)

"We certainly are getting more aggressive in marketing, and others are also picking up on the same thing," Lee said. For Ralphs, it's the next step in the evolution of its private-label effort, which earned it an award of excellence as Top Supermarket Chain last year from the Private Label Manufacturers Association.

"We retailers have been watching from a distance the success of Europeans in being fully involved in private label, as well as the far greater penetration in Canada compared to here. And there is the high-power President's Choice marketing program, taking a high-quality label on the road and selling it as a quasi-brand," he said.

"We are starting to believe the old adage that you make an effort at private label primarily because it is something shoppers can only get in your store."

"There is no question that some retailers are becoming more effective with private-label marketing, and it is a fundamental change in the mind-set toward national brands," said Ross Blomberg, director of marketing for DeSoto, a private-label cleaning products manufacturer based in South Holland, Ill. "They are realizing that the business is going to be built in the future on the quality of their name, not on the 'compare and save' appeal of their private label."

"Compare and save" is still integral marketing at many big chains, including Grand Union Co., Wayne, N.J.

But more broad marketing efforts are "bursting forth, adding to the growing awareness of the customers toward the quality aspects of private label," said Ned Meara, Grand Union's corporate grocery merchandising manager. "Naturally, we want to ride the crest of that wave."

"The corporate brand program is now being identified directly with our corporate image," said Curt Lerew, senior vice president and director of the food division at Fred Meyer Inc., Portland, Ore., another devotee of taking the marketing offensive with private label. "Using marketing to tie it solidly with our image in consumers' minds is what we want to do."

It's what a lot of progressive retailers want to do this year. A&P, Montvale, N.J., and Kroger Co., Cincinnati, for example, have both corralled their labels under unified names, and are flexing their advertising and merchandising muscle to support them.

A&P started last fall to regroup its disparate mainline private labels under one name, America's Choice. The company is using television spots to support the label, a first-time move, and will seek other tie-ins throughout this year to the A&P 135th anniversary.

That new program is laid alongside Master Choice, A&P's expanding premium store brand. The upscale label is breaking new ground as well. A&P is using the high-tech in-store marketing firm Actmedia to promote Master Choice at its Farmer Jack units in Detroit.

"Both efforts are very sophisticated, from top to bottom," said Michael Rourke, vice president of corporate affairs at A&P, the chain's point man for marketing America's Choice. "It is very new for A&P, and represents wholly different approaches to marketing and merchandising," Rourke said. "It is certainly more support than normal." The chain also publishes a colorful, glossy periodical magazine to promote Master Choice, mixing articles, recipes and coupons.

Kroger, the biggest private-label food retailer in the country, also is pouring on the marketing juice for private label.

"We have unified our private-label marketing by putting our name on it and calling it America's Brand. We will now try to feature that theme in advertising and merchandising," said Paul Bernish, director of communications at Kroger. "We are saying that this is good quality that will go against any of the national brands."

The label, accompanied by repackaging and some reformulations, is considered an upgrade for the chain and is being treated accordingly. "We have been more aggressive in both the marketing and merchandising of our private label," Bernish said.

Sources close to the chain said Kroger plans a big, coordinated, corporate marketing push. Bernish said each operating division plots its own private-label strategy; there is "no one game plan."

He added, "I don't want to detail our strategies in advance, but given the current shopping environment and mood of the customers,

we want to make sure they have full awareness of what we offer. At whatever level, that is where our efforts will be focused."

However, the America's Brand "upgrade" for Kroger does not mean "upscale," and therein may lie an emerging rift in retail brand marketing strategies.

A number of operators are scurrying to build up premium store-brand programs, following the lead of Loblaw's President's Choice franchise -- in some cases, buying directly into that very program. But some chains are urging caution in the leap toward premium-label marketing.

Kroger is one. "It is our opinion that 'upscale' really has to be something that adds extra value to the consumer. At this point, we will not put out so-called 'upscale' private-label items," Bernish said.

Grand Union launched a premium label, Grand Classics, but will choose its categories carefully.

"Cranberry juice, to me, is a regular item," said Lee of Ralphs, another skeptic of the rush into premium. "I don't see the effectiveness of marketing, say, President's Choice cranberry juice."

On the other hand, soda is not necessarily just soda, as Grand Union's Meara sees it. His chain will market 59 stockkeeping units of Grand Classics soda this year, plus 13 items under its traditional Penguin label, replacing a former assortment of 39 Penguin SKUs.

Other industry sources agreed that soda was ripe for premium-label expansion and more intensive marketing. Cereal, pasta, cookies and coffee were also named as likely targets.

In the store, the stage is being set for the ascendancy of private-label merchandising, and national brands are bound to be pinched.

"We have to give in-aisle prominence to private label to reach our goal of tripling soda volume this year," said Meara. "We are taking a hard look at what's being carried, and discontinue a lot of the dust collectors."

"Shelf positioning is being looked at as a factor in more aggressive marketing," said A&P's Rourke, "with new specific planograms for the major categories involved."

Such strategies are taking hold at every retailer interviewed. "They have an opportunity now to build more consumer loyalty toward their stores, and that is finally becoming tremendously important to them," said John Coyne, a retail consultant in Scottsdale, Ariz.