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PLMA

Save 30% By Purchasing Private Brands

This press release and corresponding research from the Private Label Manufacturers Association reaffirms what shoppers and retailers have known for many years, Private Brands are a great value and save money.

New Research Shows Consumers Can Save 30% Purchasing Store Brands

\"grocery-bag\"NEW YORK – New consumer research by the Private Label Manufacturers Association documents that shoppers can save about 30% off their grocery bill by purchasing store brand products on their weekly trips to the supermarket.

On a typical trip to a supermarket to buy 43 basic grocery and household items, the research indicates that consumers saved an average of $46.39, or more than 30% savings when compared to purchases of national brands in the same categories.

The products represented in the typical market basket included cereal, soda, pasta, orange juice and cookies, on the food side, and facial and bathroom tissue, cold and flu medications, dog food and aspirin among the non-foods. The top five products in the study found to have the largest gaps in pricing by percentage were aspirin, sinus spray, soda, saltine crackers and body lotion.

The price differential in soda, aspirin, sinus spray and lotion saved consumers between 50-60%, while items such as cereal and ice cream consumers saw savings of over 30%. Store brand frozen pizza had a price differential of 23%. Dog food saved shoppers 25% over competing brands. In total, 35 of the 43 food and non-food items PLMA examined saved consumers more than 20% off their grocery bills and nearly a quarter of the products saved shoppers over 40%.

Typical Store Brand vs. National Brand Market
Basket Comparison

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* Prices shown reflect 8-week average for the period 1/2/2009 through 2/22/2009.

All prices are net after known discounts, coupons and/or promotions


PLMA\’s 8-week price comparison research was conducted in a typical suburban supermarket located in the northeast. A market basket featuring 43 frequently purchased products from both food and non-food categories was used. A leading national brand product was compared to a similar store brand product in each category and prices were adjusted to account for all known discounts, coupons and promotions available for each of the weeks included in the study.

\”Prices may vary from market to market, but the savings that consumers will achieve will follow the same pattern across the country,\” said PLMA President Brian Sharoff.

The Private Label Manufacturers Association is the industry trade association devoted exclusively to store brands. Founded in 1979, PLMA today represents over 3,000 companies who are involved in the manufacture and distribution of store brand products. The products supplied by PLMA members include food, beverages, snacks, health and beauty aids, over-the-counter drugs, household cleaners and chemicals, outdoor and leisure products, auto aftercare and general merchandise.

The survey was conducted weekly during the 8-week period from January 2, 2009 through February 22, 2009.

Categories
General

The Brand Battle Rages On.

Private Brand and the economic downturn seem once again to be all the rage, I have written on more than one occasion about the war that has begun and every day brings another report on the battle. This report from the Grand Forks Herald in North Dakota seems to spell it out.


Gas is down, but not groceries

\"grocerycart2\"Retailers, who begrudgingly went along when food makers pushed up prices to recoup record-high costs, are flexing newfound muscle and demanding price cuts to match the recent steep retreat in ingredient costs.

Food makers are resisting, saying the uncertain economy and volatile costs make price cuts unwise. But retailers aren’t backing down.

Consumers — who responded to the higher prices by favoring grocers’ in-house products over national brands and by shopping more at discounters — may end up with fewer choices all around.

“We don’t have to carry three brands,” Costco Wholesale Corp.’s Chief Financial Officer Richard Galanti told investors earlier this month. “We can choose between brands that are going to be more aggressive, that help us help our members.”

Costco has been lowering its prices, Galanti said, and is prepared to sacrifice profit margins and cut national brands that won’t negotiate on pricing — if that’s what it takes to drive sales.

“We are not the only ones out there pressuring manufacturers,” he said.

Steven Burd, president of grocery chain Safeway Inc., recently told investors that it has gotten some vendors to roll back their prices. Like many retailers, it is finding its new strength in its in-house brands, including Safeway Select, O organics and Primo Taglio deli products.

“We’re going to chew them up on corporate brands,” Burd said of food makers that don’t lower prices. “And we’re just going to keep driving corporate brands.”

The situation grew so tense last month that grocer Delhaize SA in Belgium said it would no longer stock at least 250 Unilever products because the food maker was making “unprecedented” demands that would force retail prices up 30 percent.

The grocer, which operates Food Lion and Sweetbay stores in the U.S., said Unilever also was demanding it carry some products consumers did not want. The two companies apparently reached an agreement this month, though the terms are unclear.

No drop in price

Food makers, which raised prices last year after fuel and some ingredient costs hit record highs in the summer, are leery of dropping their prices in case commodity costs come back up and pinch their profit margins. They say they’re still catching up with last year’s costs, even as they confront tougher competition from the retailers they rely on to sell their products.

Changes

Producers are making some changes that can provide relief to both consumers and retailers, said Frank Luby, a partner with Simon-Kucher and Partners who consults with companies on pricing.

Some are changing package sizes, often shrinking them while keeping prices steady so shoppers don’t pay more to remain with their favorite brands.

But this tactic can make them targets of their competitors — as ice cream maker Haagen-Dazs, owned by General Mills Inc., learned when it announced recently that it will shrink its some of its containers. Rival Ben & Jerry’s, owned by Unilever, said on its Web site — without naming Haagen-Dazs outright — that consumers are hurting just like food makers and they deserve a full pint of ice cream, not just 14 ounces.

Another change food companies are making is to focus promotions — which they negotiate with grocers — on staples like dairy, cereal and soup, BMO Capital Markets analyst Kenneth Zaslow has said.

Eggland’s Best Inc., the nation’s largest branded egg company, is asking supermarkets, “If we give you so many cents off, would you give that to the customer,” said Chief Executive Charlie Lanktree.

House brands

At the same time, many retailers are increasing their promotions of house brands, Zaslow said.

Some 64 percent of shoppers in 2008 said they often or always buy a store brand rather than a national one, according to the Food Marketing Institute, an industry trade group. That’s up from 59 percent the prior year.

Kroger Co., owner of Ralphs, Fred Meyer, Food 4 Less and other chains in 31 states, saw sales of its in-house brands hit a record 27 percent of total sales in the most recent quarter.

The company’s CEO, David Dillon, said after its most recent earnings report that Kroger is pushing producers back on prices. But he also said high pricing of national brands is helping bring customers to store brands — “so we are quite happy in either scenario.”

Food companies say they are cooperating with retailers to the extent they can.

Both Kraft, maker of its eponymous macaroni and cheese and Jell-O, and General Mills expect their ingredient costs to remain volatile and neither is offering broad price cuts.

Kraft’s expects costs to rise about 10 percent this year from $2.1 billion last year as key items like corn and fuel are higher than in previous years. The food maker did drop some coffee and cheese prices last year to align itself with falling input costs, spokeswoman Lisa Gibbons said in an e-mail.

General Mills Inc., the maker of Yoplait Yogurt, Wheaties cereal and Pillsbury products, expects the cost of its ingredients to rise 9 percent in 2009 after a 7 percent hike in 2008, when it raised its retail prices 2 percent to 3 percent.

Luby, the pricing consultant, said cost volatility is a big concern amid other variables, like weak consumer confidence and the stronger dollar, which has dragged down overseas sales by U.S. companies.

“Every penny that I would want to roll back, I’d like to know what I’m going to get for it,” he said. “That’s a complicated question.”

Categories
General

Private Brand vs. National Brand

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This story from CBS News 12 in Mankato, MN seems to be told and retold by TV stations and newspapers all across the country. The question for retailers is really will they be able to convert this economy induced trial into regualar shoppers and private brand loyalists.

Amidst an economic crisis people are looking to save money in a variety of different ways.As News 12\’s Bryan Piatt explains, your choices at the grocery store can be key in your budgeting efforts.As shoppers stroll the aisles at a grocery store, they have decisions to make. One of them being store brand….or name brand.Shopper says, \”It\’s a little tough\”Is the rough economy enough to make people pick that store brand product a little more often now?Marketing professor Shayne Narjes says…absolutely.Shayne Narjes says, \”If they trust their milk as a store brand will be about the same as a name brand they\’ll probably buy the store brand. Particularly if thoughts about the economy are weighing on their family.\”So how much money can you actually save if you choose the product with the store logo on it instead of the name brand?Here\’s how prices compare at HyVee.If you go the store brand route with toaster pastries, oatmeal, cheese, milk and cream cheese you will save $ 5.44 dollars every time you shop.Assuming you shop once a week that adds up to $282.88 dollars a year.This entire shopping cart is filled with basic store brand products. It adds up to just 85 dollars.So what makes them less expensive?Narjes says it\’s basically because store brands don\’t have to spend as much on advertising and marketing.Shayne Narjes says, \”As you walk in, the name is everywhere. If you are at a particular grocery store you see their name over and over again. They probably aren\’t running a TV commercial for their macaroni and cheese the same way you would see Kraft.\”Bryan Piatt says, \”Store brand products look a little different than name brands. So does this affect customers from purchasing the product?\”Shayne Narjes says, \”There\’s some proof that shows the packaging influences us. Kids who see McDonalds bag will believe it\’s better food. That recognition goes along with some of those choices.\”So appearance may deter people from store brands.HyVee store director Dan Olson says if people can see beyond the packaging. There\’s really no difference.Dan Olson says, \”It\’s basically a copy cat of a brand name. Most of the items made for private label are made in the exact same plant a brand name is.\”So all things considered: Store brands can save you a little cash at the checkout line. Whether it suits your taste… or is worth the money… is your choice.In Mankato, Bryan Piatt, News 12.


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Categories
PLMA

PLMA will Feature Innovation.

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This from the Private Label Manufacturers Association:

While \”recession\” is the most popular word in today\’s media, the buzzword at PLMA\’s Private Label Trade Show, to be held Nov. 15-17 in Chicago, will be \”innovation.\”

PLMA is launching its new Innovation Hall, a unique \”show-within-a-show\” at the association\’s annual Trade Show in the Rosemont Convention Center to help retailers and manufacturers maintain store brands\’ growing leadership role in the marketplace.

The new exhibition space will feature an array of companies that offer innovative products and services for private label that go beyond product development.

\”The Innovation Hall represents the next logical step in the evolution of store brands,\” says Brian Sharoff, President, PLMA. \”Over the past decade, store brands have expanded to annual sales of $80 billion. This has been driven by remarkable gains in product quality and assortment. But as business gets larger, more complex and demanding, there is a strategic need by both retailers and manufacturers for more than just products.\”

PLMA\’s Innovation Hall will concentrate on services and ideas that are necessary for growth to continue:

  • Laboratory testing and certification: to ensure product quality, consistency and safety.
  • Market research, marketing services, business consulting: sophisticated data and expertise to manage store brands as brands.
  • Software and technology: information systems that can be applied in all aspects of sales, marketing and supply chain operations.
  • Packaging design and graphics: to reflect the greater importance of premium products and expansion into new categories.
  • Logistics and supply chain: to guarantee superior service and greater efficiency.
  • International sourcing: to give retailers and manufacturers access to the global marketplace.
  • Manufacturing equipment: to increase the capability of suppliers to produce new products quickly and achieve higher volumes.
  • Financial services: to allow retailers to offer their customers financial services that round out the shopping experience.

\”If store brands are going to sustain their success in the decade ahead, retailers and manufacturers will have to commit themselves to innovation in products and services,\” PLMA\’s Sharoff says.

PLMA\’s new Innovation Hall will occupy the mezzanine hall. In addition to company exhibits, there will be demonstrations and classes open to all trade show attendees. The new Innovation Hall will also open the day before the regular show floor starts so that exhibitors and visitors alike can participate.

PLMA\’s annual Private Label Trade Show is the nation\’s largest marketplace for store brand products. Over 4,500 visitors attend the show annually, including buyers and executives from virtually every major retail chain and wholesaler.

The show, held at Chicago\’s Rosemont Exhibition Center, presents more than 2,000 exhibit booths from the leading manufacturers of private label products. All major product categories are represented, from food and beverages to health and beauty care and household.

Categories
General

Generic is . . . Cool! Did Tropicana Make a Mistake?

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Last week I wrote about the dramatic decision by Pepsico and Tropicana to scrap their new package design in a post entitled “The Future of Orange Juice?” and the subject has continued to be all the rage on the Internet. In a February 28, 2009 article in Brand Week entitled “Top of Mind: Tropicana Scrapped A Terrific Redesign” by Todd Wasserman. Mr. Wasserman’s article presents an interesting theory on the Tropicana redesign and the strategy, which it evolved from, here is an excerpt. Let’s face it, the most obvious thing about PepsiCo’s $35 million redesign of its Tropicana orange juice brand in January was that it made the venerable orange juice look like a private label-brand—granted, a really nice looking one, but a private-label brand nonetheless. This was a brilliant strategy. The whole idea behind the repackaging was to reinforce the idea of value, and there was no better way to do that than by making Tropicana pretend to be a half-gallon of Safeway’s O Organic brand.

Consumers recognize such brands for value, of course, but consumer packaged goods manufacturers are realizing that some shoppers actually prefer store brands because generic is . . . cool, these days.

\"trop-new\"Only recently have most retailers begun to take their private-label brands seriously, which means that they were able to jump on the most modern design trends—if only by default. It’s the branding equivalent of the old story about what happened to East Germany after the Berlin Wall came down: The once-divided city soon boasted the most advanced telecom system in the world because it could start from scratch in 1989 rather than trying to update relays built in 1910. This is why most good private-label brands look a lot hipper on their shelves (and yours, for that matter) than the ones that the CPG giants developed in 1950, tweaked in 1977 and are afraid to mess with further in 2009. For evidence, I submit the Whole Foods 365 design for egg carton, which is a thing of beauty better suited for the Museum of Modern Art gift shop than the diary aisle. So it’s plain to see why private labels have the upper hand, marketing-wise. Let’s not forget that business-wise, retailers would much prefer that you buy their brands and that, in a recession, they’re only going to push those brands all the harder. Witness Wal-Mart’s stated recommitment to its Great Value brand, which will get new packaging and more marketing dollars from Bentonville’s coffers. For CPGs, it doesn’t make sense to keep swimming against the tide. So many of those brands are based on the model of the 1950s, when Leo Burnett (the man and the agency) created icons like Tony the Tiger and the Jolly Green Giant in order to sell packaged foods. It made sense back then, when TV was the only form of mass media that really counted and moms weren’t yet hip to the fact that good ol’ Tony was feeding their kids three teaspoons of sugar with each bowl.

But in 2009, it’s a losing strategy. That’s why Tropicana was on the right track when it dumped the old packaging and ushered in something new and different. It was bold, but then Pepsi showed how risk-averse it really is when it turned tail a month later. Will others learn from Pepsi’s “mistake?” I’m afraid they will. Brand managers will look at what happened with Tropicana and hold off any bold initiatives. But they shouldn’t. Because just as the recession is likely to change the economic geography of this country, it will change the landscape of supermarket aisles as well.