In an article from the Arkansas Democrat-Gazette, Sunday, January 25, 2009, by Steve Painter a little more light is shed on the upcoming rebranding of the Great Value brand at Wal-mart. It had been reported that the rebranding would be seen in stores as early as January, this will apparently be delayed to the second quarter. If this rebranding is truly focused on quality and can deliver a significant brand promise to consumers frightened by the economic environment it has the potential to dramatically change packaged goods sales in the US.
Private-label products continue to gain market share in the grocery business, even among higher-income shoppers, recent research shows.
The share of private-label items, also called store brands, is expected to grow even more if Wal-Mart Stores Inc successfully revamps its Great Value brand as planned later this year, with hundreds of reformulated products and more appealing packaging.
Shoppers save about 30 percent across all product categories by buying private label products, but the price gap varies substantially among categories, according to Information Resources Inc., a Chicago-based market research and services firm. Grocery is the category with highest penetration of such products, with about 24 percent of unit sales and a 19 percent share of money spent, according to Information Resources\’ figures.
\”Private label is one of the primary strategies that is being leveraged by consumers who are struggling under the recessionary economy,\” said Sue Viamari, lead researcher for private label at Information Resources. \”Consumers across all income segments are really feeling pinched.\”
In the most recent quarter Information Resources researched, shoppers with household incomes above $100,000 were the fastest-growing segment of private-label buyers.
Wal-Mart told analysts last fall that it would reintroduce Great Value in the company\’s fiscal first quarter, which begins Feb. 1. A spokesman said last week that the timeline has been pushed back, and the reformulated products are now expected to be on store shelves before the company\’s second quarter ends July. 31.
If the move is successful, it should pay off well for Bentonville-based Wal-Mart, said Patricia Edwards, a retail analyst and founder of Storehouse Partners LLC in Seattle.
In the grocery business, retailers typically have a 20 percent to 25 percent margin on national brands, and 40 percent to 45 percent on private labels, she said.
\”For Wal-Mart, it makes perfect sense,\” she said.
For Wal-Mart\’s stores, Information Resources puts private label unit sales across all categories at 22.5 percent and dollar share at 17.6 percent.
Market research firm The Nielson Co. of New York shows in a 2008 year-end report that private label\’s strength in the grocery aisles is in staples such as fresh milk (67.1 percent), granulated sugar (65.4 percent), frozen poultry (56.2 percent), dry beans (52.4 percent), butter (50.2 percent, though margarine is only 6.7 percent), and salad and cooking oil (45.5 percent).
Frozen prepared foods were a particular weakness for private label, which could change with Wal-Mart\’s reformulated Great Value line.
Addressing analysts last fall, Andrea Thomas, senior vice president for private brands, said Wal-Mart\’s largest brand with more than a thousand items across 100-plus categories will be upgraded in content and presentation.
She said the company had tested more than 5,500 products against national brands and was reformulating 1,200 items.
Viamari said the move is likely to change the private-label food market.
\”We all know that Wal-Mart is the powerhouse,\” she said. \”It certainly could have an impact on overall private sales in the future.\”
National brands that have maintained or gained market share have been the most innovative, including some that produce margarine and other spreads, yogurt, pet foods and new natural products, she said.
\”That\’s what\’s really been most successful in thwarting private-label growth,\” she said.
Information Resources\’ report shows nearly all shoppers buy some private-label goods, but a third of them are responsible for two-thirds of privatelabel purchases.
Edwards said private-label foods often come from the same production and processing facilities that turn out national name brand products.
She expects Wal-Mart to do well with the private-label move.
\”If they are good with the positioning of the product, the merchandising, the value proposition and the quality – which they have gotten so much better at over the last three to four years – it could be extremely valuable for them because people\’s budgets aren\’t getting any better,\” she said.