WAL-MART STORES SETS MANY PRIVATE-LABEL STANDARDS, TOO

Barbara Murray with additional reporting by Stephanie Fagnani

Some call Wal-Mart Stores the king of private label. The big retailer's own brand of dog food, Ol' Roy, is so well known throughout the country that many consumers do not realize it is Wal-Mart's own label.

"They see it is the best-priced item, it's the product they want, it's merchandised properly and promoted like crazy," said one knowledgeable retailer. Wal-Mart chose not to call it Sam's Choice, its main private-label name.

Wal-Mart also has developed a pattern of acquiring or licensing other brands and selling them exclusively, as it has done with the White Cloud brand of toilet tissue. Several years ago, Wal-Mart acquired the White Cloud name from Procter & Gamble, and has been extending it into diapers and other paper goods. "They have turned it into a major category label," said one industry observer.

It leads to thoughts of how to differentiate the store.

"Retailers can fight for market share on the basis of price, or on differentiation. Wal-Mart owns the price base, so to speak, so supermarkets have to work on building more product and brand differentiation," said Jeff Posner, senior vice president and chief procurement officer for Topco Associates, Skokie, Ill., a cooperative that provides private-label products in a range of categories and which has gained nine new supermarket members this year.

The man who founded the President's Choice label for Loblaws in Canada, Dave Nichol, now president of Dave Nichol & Associates, Toronto, recently told SN: "To be running a supermarket today is a very scary thing. We've never had anybody as aggressive and as efficient as Wal-Mart before. The retailers in the United States can't compete against Wal-Mart unless they have a strong destination-product, private-label program."

Not only the Wal-Mart factor, but also the consolidation craze that saw Kroger, Safeway and Albertsons go on a buying spree, Posner said, "served as a wake-up call to independents that the big guys were getting bigger. Wal-Mart was at the same time expanding the supercenters, and testing the Neighborhood Market concept. They realized the inevitability that Wal-Mart would be in their markets. What was once a theory of Wal-Mart became the reality of Wal-Mart."

In the last year, Bashas' Markets, Chandler, Ariz.; Wegmans Food Markets, Rochester, N.Y.; Coburn's, White Cloud, Minn.; Harris Teeter, Matthews, N.C., Marsh's in Indianapolis; and Wild Oats Markets, Boulder, Colo., have joined at least one of Topco's 11 programs.

"Store brand should be at the front of the bus in marketing for anybody who's competing today," said Wal-Mart watcher Bill Lancaster, vice president, corporate sales, with Associated Wholesale Grocers, Kansas City, Kan. Lancaster is the author of "Then & Now, Survive & Thrive," a guide to competing against mass merchandisers and clubs. Although so much emphasis is being placed on competing with the mass merchants, in an interview with SN, Lancaster warned grocers not to overlook what he calls "the ankle biters," small stores addressing a niche that do big volume and cut into and reduce the supermarket's volume unless the supermarket is watching very closely. The house brand is one way to protect sales.

Store brand products are of high quality, provide a good margin to the retailer, and a good price to the customer, he said. "I think they are underutilized even in our own company. We encourage retailers to promote and display them. I think the customer accepts the house brand very well today."