Private Brand: Trading Down or Shopping Smarter?

Christopher Durham Jun 9, 2009 14

Since I began this blog late last year it has provided all sorts of interesting opportunities, the following post is a result of one of those opportunities. After being contacted by several individuals from Daymon Worldwide and having several interesting conversations about the state of Private Brand and its evolution I invited Alex Miller, the president of Daymon, to write a guest post. Less than a week later, I was pleasantly surprised to receive the following post. Alex has some great thoughts on private brand, the economy and consumers.

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We have all been reading in the press over the past several months about how private brands are doing well in the current economy. And while for the most part they are all positive stories about the growth of private brands, I notice there is a common “sub theme” in all of this coverage – and that is that the consumer is “trading down” … trading down to private brands when they are in the supermarket … And I just think that is an erroneous assessment that stems from a general lack of understanding of the private label business and private label products.

The same newspapers and TV broadcasts that are running stories on how consumers are supposedly “trading down” in the supermarket, are also writing and talking about how consumers are becoming SMARTER shoppers when it comes to mortgages … and how they are no longer OVER-BORROWING … and how when they refinance at lower interest rates these days they are not squandering their monthly savings this time around … rather they are saving it or investing it … the story goes that they are BEING SMARTER with their money.

Same thing in the auto industry. We hear every day how consumers are buying hybrids and fuel-efficient vehicles … and that they are no longer buying SUVs and big gas-guzzlers.  But nobody thinks of that as “trading down.” They call that “buying smart.” And I agree. None of us are going to put our families in cars that are not safe, or do not offer a good value for the money.

Yet every time I hear an analyst talk about what is going on in the supermarket … or read a story about the retail industry, at the very top is the mention of how shoppers are “trading down” to private brands in this difficult economy. And that’s where I have a problem. The real story is that people who are buying private brands in their supermarkets are not “trading down” … they are BUYING SMARTER. If you buy a Wegmans Brand basting oil you are not “trading down” from anything – in fact you are probably trading up, and at the same time you are getting a great value … so you are SHOPPING SMARTER. If you go into Kroger store and by a Private Selection sorbet … or into a SUPERVALU store and purchase a Wild Harvest frozen organic pizza, or into a Stop & Shop supermarket and pick up any Simply Enjoy or Nature’s Promise item you are not “trading down” from anything the national brands have to offer. You are buying equal to or better-than-quality products and you are getting a great value. That is all about BUYING SMART.

The recession is NOT driving consumers to “trade down” in quality … the recession is motivating us all to be SMARTER CONSUMERS. And private brands are a very important part of being a SMARTER CONSUMER.

History has shown us that private label sales increase much more precipitously during a recession than they decline in a recovery. That’s because private label wins people over. Analysts from all walks of life and business are saying that this recession will be the most historical ever because it will change the way people live and shop long after it is over. I believe that. And I believe that more and more people will be enjoying the value and quality of private label without “trading down.”

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miller-alex-09-execAlex Miller is the President of Daymon Worldwide the international private brand consumer events company based in Stamford, Connecticut. He has worked in grocery and private brand for more than 30 years. In 2007 Alex was named President of Daymon Worldwide, becoming only the second President in the history of the company.


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Christopher Durham

Vice President of Retail Brands at Theory House

Christopher Durham is the founder of My Private Brand and the VP of retail brands at Theory House, the branding and retail marketing agency. He is a consultant, strategist and retailer with close to 20 years of real-world retail and corporate experience creating, launching and building billion dollar Private Brands.

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14 Comments »

  1. Brian Morris Jun 11, 2009 at 8:06 am - Reply

    Alex Miller is dead on with his comments! Having worked on the “branded” side of the business as well as the Private Label side of the business, I completely understand the value and quality that Private Label products provide. Too many folks who consider Private Label trading down are way behind the curve. They often still see Private Label as the old generic or products that the less fortunate purchase because that’s all they can afford. Nothing could be further from the truth. Private Label is often now the innovator and leader. Buying smarter with Private Label should not be seen as a stigma, but should be viewed as an educated, smart decision. Those of us who regularly purchase Private Label have known this for years, are proud of it, and let others know how savvy we are.

  2. Rob Long Jun 11, 2009 at 1:01 pm - Reply

    Excellent article Alex. I like how you put it – consumers are buying smarter when they buy private brand. They just don’t realize it or aren’t willing to admit it, thus it could be “trading down”. I believe it’s possible that these same people realize the quality of the private brands, once they try them, are as good or better than the national brands and may be reluctant to admit they’ve been duped in the past.

  3. Jim Cusson Jun 11, 2009 at 1:25 pm - Reply

    Great points, Alex. We believe the attention retailers are paying to the packaging/labeling of their private brand may slow that decline in the recovery. I remember when the bottom shelves of many retailers were filled with the one color generic “Corn Flakes” boxes. Boy we;ve come a long way.

  4. Nick Ehrman Jun 11, 2009 at 1:43 pm - Reply

    I agree with you Mr. Miller on some things, but still think if I’m moving from Kraft blue box mac and cheese to a store brand that is “trading down,” even if it uses asiago cheese and is organic. It’s semantics really, I mean what matters is that the retailer is making a sale, and Kraft is not. I think you are spot on when you say that consumers are shopping smarter, and retailers are now truly building brands and innovating.

    My question is this, what should CPG brand marketers fear more, losing a sale to a house brand or losing more space on the retailer’s shelves?

  5. joel kirstein Jun 11, 2009 at 2:50 pm - Reply

    Definitely smarter! More choices (always a good thing) equals more thought process, that drives comparisons, evaluation and self-edification. Plus I am always amazed and pleased to find out how knowledgeable consumers are and well-receiving of PLBs. The Wegmans. Whole Foods, TECSOs, Loblaws, Safeways, Albertsons, Publix’ etc. of the world have done a masterful job odf proving you can deliver quality for less and in an esthetically-pleasing branded identity at retail.

    When the economy rebounds, national brands and category leaders will be surprised to see that PLBs will not be receding back into the fringes and shadows of retail. They are here to stay and growing in market space.

  6. punchandkiss Jun 11, 2009 at 4:33 pm - Reply

    P&G’s CEO, Mr. AG Lafley would tell us “When times are tough, you build share.” So for retailers, Private Label should heed that advice; but it’s best tackled as a Brand.

    Good, Better, Best is a useful framework, but you can’t win by design against brands that have originality and years of heritage. With cash strapped US consumers trading down and pundits playing up phrases such as “austerity chic” and “luxury shame” the only companies that seem to be cashing in on this vituperative parsimony are McDonald’s and Wal-mart: PL is the center stage for growth. So the big questions for me are what is the future of private label and what is the ‘brand’ opportunity for US retailers to ramp up their portfolios?

  7. thomasmcmillanjr Jun 11, 2009 at 7:00 pm - Reply

    Alex- Great post; however, I think that it probably varies greatly in the supermarket which is likely why the press angles this as such.

    I agree that supermarkets have greatly improved many of the products that are privately branded but I must admit as I walk the aisles of my local supermarkets, I still see a large number of private label products that in my mind are “trade downs”… Have you ever eaten private label macaroni and cheese? I’ve yet to find one that tasted as good as a the leading national brand.

    The problem is then go down another aisle and find a very high-quality private label brand thin crust pizza that looks even more tempting that the national brands. I definitely feel that I am “shopping smarter” when I buy pizza like this. It’s just inconsistency.

    I think supermarkets still have a lot of work to do but I’m happy they are
    embarking on the journey.

    http://www.marketingclimber.com

  8. Carl Sastram Jun 12, 2009 at 11:27 am - Reply

    Alex. I’ll take it a step further. Private label has become the new “cool”. It’s no longer embarassing to have PL products out at a party or pincic. It doesn’t say I’m cheap. On the contrary, it says. I’m smart, open-minded and I don’t follow the crowd.

    Just like driving a Mini or Prius is much cooler these days than driving a Hummer or Mercedes. There’s badge value in Intelligence.

  9. Lisa Radin Jun 12, 2009 at 11:38 am - Reply

    Shopping smarter, or more willing to experiment?

    It’s easy to experiment with private label that looks like a niche, specialty brand, or high end packaging at a lower price. Think more sales will move from major brand to private label that looks good vs. major brand to low priced ugly private label. That depends on HH economics/budget.

    With mindset on saving money – consumers more willing to experiment with trying different brands – be them speciality or store brand. Don’t know if drive is true interest in new brand, or saving money for ‘same great taste’, or ‘similar great taste’.

    If shopping smarter is the outcome – price is the driver. The winner can be the private label if it maintains quality, perceived value and the customer who gets what she/he wants at lower price.

    Private label pricing is key – as upscale private label pricing seems close to national brands — should the gap narrow – the swith to national can go back.

  10. Lisa Radin Jun 12, 2009 at 11:49 am - Reply

    As a grocery shopper, I might disagree that ‘more choices’ is a good thing. Becomes ‘sea of color’ – almost overwhelming for shopper who enters store on ‘mapquest overdrive’ – with limited time and wanting to get chore done. More choices demands more in-aisle reading — and while I go to the library – don’t expect to do this in the grocery aisle.

    The only ‘reading issue’ which has impacted me – finding foods for allergic child — forced me to read packages and always seeking new foods to introduce.

    Perhaps, a food / consumer researcher — those with special needs interests – from lactose intolerant, gluten-free, food allergic, or even gourmet cook – might be more of package/label reader than casual shopper. In that case, more is better. But for most, ‘less is more’.

  11. Michael Chrisner Jun 15, 2009 at 11:20 am - Reply

    Enjoyed the post, Alex. Private labels have certainly come a long way. I remember when Milton Glaser was challenged with the in-store packaging and identity of the now-defunct Grand Union grocery stores, making their understated look its own clever cache—it was brilliant! Or when famous New York City’s Strand Book Store relies on a heritage of brand presence by NOT being designed at all—rather a “non-designed” look that has distinguished its place in the crowded marketplace.
    As for the Trading Down/Shopping Smarter discussion, I find it somewhat irrelevant. The packaging and overall private label look is so well designed that it’s really camouflage now. Whereby the consumer can simply choose their brand of choice for a perfectly fine, comparable product—and today, that’s likely to be price-based. Is there any research out there that shows what percentage of private label buyers are unaware of their “in-house” allegiance?
    I believe this discussion could easily resurface as to whether good design is the compelling second purchasing factor after price. Status of a popular “name” brand is still an influence, but a beautiful package can parlay its smart design into an impulse purchase and temporarily belie its not-a-household-name-yet handicap. The proof will be in luring that new-bie into your tribe for that follow-up purchase. Design matters.

  12. Thomas Becker Jun 17, 2009 at 2:26 pm - Reply

    Mr. Miller is spot on. Private Label is no longer a negotiation with oneself to accept less by paying less. The market leaders in Private Label are offering more for less — especially where there is top-notch talent in place with a clear track and vision.

    The evolution of Private Brands from white label generic to upscale, better-than-national brand is continuing. In many companies, smart marketers are leading the charge and building very strong brands — and it is not all due to the fact that the store controls shelf placement and promotional plans.

    In other stores, however, there is still the “good enough” approach with the expectation that consumers will accept less because the product is a private brand. I encourage that we, as guardians of private label, continue to push for better, more innovative products within the private brands we manage — not settle for “good enough”. Such work will not hurt strong national brands — it will only help them to produce better, more innovative products as well.

    Thanks Alex — excellent commentary.

  13. carl bortle Jun 24, 2009 at 1:11 pm - Reply

    I think the quality of private label has risen to the level of being close to the national brands, but the (basic) label quality leaves alot to be desired but are going after the lowest price shopper. Unfortuately, sopme of the chains are cutting back on the shelf space for the national brands in lieu of their private label.

  14. Kevin Mahon Nov 5, 2009 at 8:11 am - Reply

    It is a trade-down when a consumer spends 20% less on a private label brand than a national brand; the retailer is generating less dollars.

    Private Brands enable consumers to spend less dollars. They have not been proven to enable retailers to grow a larger category or attract swithchers from competing retailers.

    Retailers have been very aggressive in expanding Private Label share of shelf and promotions. We need a better understanding of net category growth from all of this activity.

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