PRIVATE LABELS REQUIRE EFFECTIVE PRICE MANAGEMENT

BARBARA MURRAY

CHICAGO -- Retailers may be missing out when they price their private-label goods, according to Diane Senese, senior vice president, analytic insights group, Information Resources Inc., who led a session on private-label pricing at the recent Food Marketing Institute show here.

"We're all facing rising costs," she said. "Helping to manage your price can help control the bottom line."

Sometimes taking the price up will mean loss of volume. The way to determine if your private-label goods, or certain products in the line, are price-sensitive is to try it and closely monitor sales to see if they drop, or if another product is being substituted, she said.

IRI looked at 200 national brands in 12 categories -- some food, some health and beauty care products -- and found that there is usually a 45% price gap between a branded product and a private-label product. A 1998 consumer survey found consumers expect to save 20% to 30% by buying private label.

"That says there is an opportunity to leverage pricing. Go to 15% savings and increase your profits," Senese urged.

In one example, IRI found a 32% average price gap of a product, yet 16% of the chain stores surveyed had a wider gap. Another example showed a gap of 24% on average, but with this one, 26% of the chains had a wider gap than needed to be there. Often, the category can sustain a price change if the corporate brand has equity.

"We advocate building brand awareness. You have to have a very good database, and also be aware of what's going on with your competitor," Senese said.

Roderick Stewart, sales manager for Adexus, a retail solutions technology company in Santiago, Chile, who attended the session, said, "Everybody is worried about prices," in Chile or in the United States. "Big chains are working to lower the prices to face new competition. Private label hasn't kept up, as a brand."