2009 appears to be shaping up as the year of the food fight, grocer vs. grocer; national brands vs. retailers on pricing, as witnessed by the recent Delhaize announcement that it would remove some 600 Unilever products due to pricing concerns, and national brands vs. Private Brands. The consumer stands to gain a great deal through better prices and expanded Private Brand selection.
Both Safeway and Kroger have recently been downgraded by analysts due to the fear of an impending price war. In a report released in January by Interbrand on the “Most Valuable U.S. Retail Brands 2009” traditional grocers, including Kroger, Safeway and Supervalu, were completely ignored. Interbrand contended that the grocery sector scored low in terms of customer loyalty and brand strength because of their dependence on price based promotions and increasing turns, rather than focusing on the customer experience or product differentiation. This is difficult for most grocers to hear, but in it’s kernel of truth it has the opportunity to push grocers to become compelling brands. Instead of constantly pulling the price lever, Private Brand should be at the forefront of this push to differentiation. Grocers must commit not only to consistent quality, but also to consistent branding. The result would certainly be customer loyalty and increased profits.