Here is a fascinating Private Brand article from the daily newspaper the Cincinnati Enquirer. Cincinnati is the home of both P&G and Kroger and is the epicenter of CPG’s in the US so this story has all the more relevance to the Ohio reader who either works for one of the giant employers or is impacted by them. As the popular media tracks the growth of Private Brands and the corresponding discounting and promotion of National Brands I can not help but wonder if the National Brands are sacrificing their brand equity for short terms gains. Perhaps the question Retailers and CPG’s should be asking is not will Private Brands maintain share after the economic recovery but will American consumers return to paying a marketing tax after being heavily subsidized by coupons and promotions for so long. Will you pay full price for Coke, Tide or Breyer’s Ice Cream?
P&G, Kroger aim at choosy buyers
To get at the reasons behind Procter & Gamble’s sales slowdown, go no farther than Aisle 10 at the Landen Kroger.
There, one of P&G’s premium products, Iams dog food, sells for $37.69 for 40 pounds. One shelf down is Old Yeller, a private-label food made for Kroger, offering 10 pounds more for $11.99.
Even the most casual shopper would notice that $25.70 price gap. But power shopper Tara Roark, owner of three German shepherds, doesn’t even think about buying Iams, despite its reputation for quality.
“I’ve never considered Iams because of the cost,” she says.
The worst recession in decades is the backdrop for a showdown in the store aisle involving two of Cincinnati’s biggest corporations. On one end: P&G, which has made a fortune on some of the most popular brand-name products in America. On the other: Kroger, which increasingly is benefiting from the sale of less-expensive private-label or “store brand” products.
As shoppers have become tougher and smarter about saving money, P&G has watched sales of its products, many of them carrying premium prices like Iams, fall. P&G sold 3 percent fewer products in its 2009 fiscal year than it did the year before, and its prices, which it raised across all segments of its global business, were in part blamed.
To battle back, P&G management has promised to cut prices where it sees the need, increase couponing and offer consumers inexpensive ways to try its products.