In January of this year, Interbrand released their “Most Valuable of US Retail Brands 2009” report and just today they released “Best Retail Brands 2009“. Both reports attempt to define brand value and and rank retail brands accordingly. Private Label is mentioned no less than 27 times in the 26 page “Most Valuable of US Retail Brands 2009” report. Below is an excerpt from “Best Retail Brands 2009“. In this excerpt Interbrand attempts to explain why they excluded grocers from the list. Part of this is explained due to the inability to obtain financial data the other part “is that the largest chain supermarkets lack a defined identity and value proposition-something beyond the ubiquitous “fresh” and over promised “service”… I wish I could argue this point but by and large it is true, take any grocery store, remove the signage and most customers would be hard pressed to identify the brand.
So what can grocers or retailers in general learn from the report, differentiate, differentiate, differentiate.
Retailers who are able to commit to Private Brand with consistency and clarity, who are able to innovate at all tiers and use Private Brands to tell their brand story have the ability to tell compelling retail brand stories. They have the ability to convert their generic retail brands into clearly defined brand identities and value propositions.
Private Brand should be the cornerstone of this change!
Scale Alone Does Not Make a Grocery Brand
Traditional grocery earned the weakest customer loyalty scores. Over-reliance on discounts, rewards and promotions undermines any move towards a meaningful proposition and results in low brand strength.
In their 75-year history, U.S. supermarkets have been lauded as bringers of freedom (by allowing shoppers to pick directly from the shelf), contributors to economic growth and enablers of a higher standard of living (by John F. Kennedy), savers of time in the form of one-stop shopping and pioneers of innovation, from the invention of the wheeled shopping cart to bar-code scanning. Some have even credited the American supermarket with helping win the Cold War, since visitors from communist countries envied our grocery as much as they feared our military.
It seems surprising, therefore, that having been on the retail scene for decades, carrying the most goods of any category, and ever failing to optimize the problematic “center store” aisles, supermarkets seem to care the least about-or have simply chosen not to pursue-management by brand. Emblematically, financial reporting methods are another reason supermarket chains do not make the Most Valuable U.S. Retail Brands list. Generally speaking, grocers such as Kroger, Safeway and Supervalu report their numbers in a way that prevents us from a clear assessment of revenues generated by brand.
Except for Whole Foods Market, the largest chain supermarkets lack a defined identity and value proposition-something beyond the ubiquitous “fresh” and overpromised “service” which at best are table stakes. Brand’s advantage becomes even more important when households are reevaluating their spending patterns, since brands act as touchstones of trust, assets that transcend marketing.
How the supermarket business came to be a strictly operational play is understandable. An average store carries 45,000 items, most with hair-thin margins. Maintaining this variety requires a substantial firm-level investment in specialized systems that allow products to flow continuously from warehouse to store, a model that lends itself to scale. But scale alone does not make a brand.
Kroger, the largest of the U.S. grocers, is a victim of scale. The biggest proof point of this is its method of acquiring other brands without rolling them into their own banner. A raft of names-Ralph’s, Smith’s, Baker’s, Dillons, Fry’s-have been left as stand-alone brands, reducing Kroger’s marketing scale and giving them more brands to manage. The fact that they haven’t made the leap to brand shows up in their financials, which are unclear about the number of stores operating under which banners.
In general, the value proposition of a brand and the products sold should be able to stand on their own when it comes to attracting shoppers. In the absence of a proposition, supermarkets depend heavily on promotions, trapping themselves in the same vicious cycle suffered by Detroit automakers. For the last few years, GM has deeply discounted cars and trucks, giving consumers no reason to purchase at full price. For supermarkets, too, promotions themselves can-and have-become more important than the brand.
The grocery sector also often misses out on opportunities for product differentiation, since small entrepreneurial manufacturers can’t afford to supply supermarkets due to the cost of supporting their promotions and the payment of slotting fees. In the U.S., there are a trillion dollars moving from the manufacturer to the grocer every year. As long as their vendors continue to pay for play, supermarkets may see no need to understand and serve the shoppers in their stores. Brand thinking begins with the idea that addressing shopper needs increases frequency and basket size. Without it, a store is simply a box full of the makers’ brands, and a master of none.