COVER STORY: Invasion of privacy
Good customer service isn't unique to one company, and neither are self-service checkout, loyalty cards, information kiosks, or photo developing. But a corporate brand belongs to just one company, which is why aggressive private label strategies are increasingly popular in an industry crowded with retailers eager to stand out.
The business is growing faster than ever. According to ACNielsen's Private Label Trends study, released this summer, store-brand sales have grown at twice the rate of branded sales over the past six years.
Indeed, private label is a $1 billion-plus business in more than 15 product categories. While the larger and more developed side of the business consists of food commodities, the future of corporate brands is in the hands of retailers that are extending into nontraditional categories such as frozen, general merchandise, and organics.
One trigger to this private label explosion is the blurring demographic of the target consumer: Everybody buys it.
"All households and all incomes are buying corporate brands," says Gail Zielinski, ACNielsen HomeScan account director and author of the trends study. "We are seeing private label sales being substantial and deep across major demographics you wouldn't expect, such as two-member households, high-income households, and households with professional occupations."
Retailers are experiencing this shift first-hand. "As an industry, private label has spent years trying to get away from the perception that it produced cheap products, but I believe we have broken out of that and momentum is beginning to show in the numbers," says John Paul, senior director of marketing and sales for Nash Finch, a food wholesaler and retailer based in Minneapolis. "Private label has always been a brand choice for your lower-demographic consumers, but now it has really become the choice of your higher-income demographic. Higher-income consumers are starting to understand the quality is the same as a national brand."
More consumers are willing to try corporate brands, no doubt because the average quality level has improved, due to retailers' holding their manufacturers to higher standards.
Watching Ps and Qs
The private label market is no longer solely about price -- rather, it's about leveraging the retailer's brand and customers' loyalty to that brand, and turning that relationship into customized offerings tailored exactly to those customers' needs. Although this state of affairs has been evolving for years, lately it has reached new levels of sophistication and commitment.
"This is really demonstrated by the number of retailers today that have corporate brand managers," says ACNielsen's Zielinski. "They have a store-brand staff, a private label group or division."
This is exactly what Giant Eagle has done, for example. A longtime customer of Topco Associates, LLC, a Skokie, Ill.-based provider of private label solutions, the retailer only began putting its own name on private label products in the 1990s, when it partnered with Clorox to have the latter's Glad division supply bags and wraps under the Giant Eagle logo. Sales rose simply from that change, which spurred Giant Eagle to extend the effort to the point where today more than 5,800 products bear the chain's name.
Glatter has seen the chain's emphasis on private label intensify substantially since she joined just over two and a half years ago. "We've made a really strong commitment, and we have done that in several ways," she says. "One is by allowing me to develop a staff -- we have about a half-dozen people here today. We have also added two new laboratories. One is where we do QA product testing. The other is a sensory lab, called the Sensory Evaluation Booth, where we actually have consumers who come in, sit in a taste booth, and actually taste products and evaluate them."
Taking a different tack, Grand Rapids, Mich.-based Spartan Stores last year integrated the existing corporate brand team into its category management structure, to focus on private label as if it were a national brand.
"Our strategy was to have the category managers, who are the experts in the category, be responsible for both the branded as well as the private label presence for their categories," explains Sally Lake, v.p. of marketing for Spartan. "They are the experts; they know what the trends are, what we need to be, and how to keep up with manufacturer changes and packaging design innovations."
For Nash Finch, private label strategy extends beyond its own corporate stores to those of the independent retailers it supplies. "We play the role of private label supplier to them, but it goes deeper than just supplier/manufacturer; it is a brand culture that runs wall to wall within our stores," says Paul. "It not only includes the product itself, but also includes go-to-market strategies and merchandising strategies."
The price is right?
This high level of sophistication in private label brand building doesn't mean that price is no longer a factor in corporate brand strategy. In fact, ACNielsen did find a correlation between economic downturns and an increase in private label sales, but Zielinski admits that doesn't prove a causal relationship.
"It's hard to tell," says Zielinski. "There were other things happening during those times. Maybe one of those times Wal-Mart came out full force with its Equate brand."
More important, the question of a link between hard times and private label surges is likely to become moot. "This is especially true as we move into the future and we talk about private label not being so much about price anymore," notes Zielinski.
Nash Finch's Paul, meanwhile, says it is about price. And it isn't.
"I don't mean to kind of ride the fence -- the store brands program we have here is able to address both," he explains. "There was never a question on our first-tier program -- the Our Family label -- on the quality vs. price issue. That's not to say that we don't aggressively pursue the lowest cost of goods for our retailers as possible, but quality comes first.
"But not all of our retailers are in demographic areas that are higher-income, and for those retailers that need that price proposition, we [have] our strong second-tier program, called Value Choice. I believe doing this is extremely important in today's marketplace, because if you look at what is happening in other classes of trade, the grocery industry is faced with a distinctive challenge to provide value to consumers, as well. In order to do that, you need to have a really strong second-tier program that appeals to that value proposition. We can protect the Our Family label and use Value Choice in those markets, but we do not dial the quality of Value Choice down to the extent that we do not get repeat purchases."
The theme of protecting the store name becomes prevalent as retailers move toward multitiered private label offerings to address blurring consumer demographics. According to ACNielsen's Zielinski, "Retailers tend to leverage their names in the packaging and in the communications for the mainstream products and, in some cases, the premium offering, but never for the value offering, which saves the corporate brand from being identified as a value only."
This is demonstrated at Giant Eagle. The value brand is Valu Time, provided by Topco. The retailer's mainstream brand boldly bears the Giant Eagle name on its packaging. Giant Eagle's premium offering features the Laurenti name in large lettering, with "Exclusively from Giant Eagle" in fine print under the logo.
Pioneering private label
The combination of higher quality and greater acceptance by consumers affords retailers the opportunity to apply private label to new segments -- and that's exactly what's happening. The perishables departments are obvious candidates for increased store-branding efforts. (For a closer look at this, see
FRESH FOOD: "The new frontier")
Grocers are also engaging in aggressive store branding in the GM/HBC aisles, as well as organic and natural products sections.
As part of an overall expansion of its corporate brands program, Giant Eagle last month launched the Nature's Basket line of natural and organic products. The line, which spans a wide array of categories including grocery, dairy, frozen, and health and beauty care, is merchandised in one area, for customer convenience.
Ahold USA's Giant Food, based in Landover, Md., has also launched a line of health-oriented private label products. Called Nature's Promise, the line was created specifically to address Giant Food shoppers' demand for a better value offering in organic and natural foods.
Giant will initially introduce 25 Nature's Promise products in the dairy and grocery categories, with a total of 90 to be available by early 2005.
In an even more innovative step, Ahold USA and Boulder, Colo.-based organic and natural foods retailer Wild Oats have developed a program to leverage the strength of Wild Oats' brand in a mainstream supermarket environment.
Wild Oats plans in early 2005 to run a three-to-five store test of a Wild Oats-branded store-within-a-store with Ahold's Stop & Shop division. "The concept will be our Holistic Health department, as featured in four of our stores," says Wild Oats' director of corporate communications, Sonja Tuitele. "Products will include our private label vitamins, supplements, and lifestyle products, along with our private label grocery line."
Building a store brand
It's an unusual step for one supermarket operator to open a self-branded store-within-a-store concept inside another supermarket, but Tuitele calls it an ideal fit. "We don't believe we are in the same channel as conventional grocers, since we offer natural and organic products that meet the toughest standards in the industry."
Wild Oats also kicked off another collaborative test on Oct. 15, this time in the e-commerce arena, by offering its private label grocery products in the Chicago area through Peapod, LLC, Ahold's Internet grocer. Tuitele says it's a coincidence that Ahold owns both of Wild Oats' partners in its private label merchandising forays.
What should allow this strategy to work is that these retailers' core constituencies are so distinct that Wild Oats' corporate brand will function like a national brand at Stop & Shop and Peapod. It's a win-win opportunity for both: Ahold gets a strong natural and organic brand, and Wild Oats gets the opportunity to boost its brand equity with mainstream shoppers.
"Natural and organic products provide great opportunities for mainstream grocers when it comes to private label programs," notes Brian Alpert, Wild Oats' corporate brand manager. "We don't view our corporate brands as private label, but as leading natural brands. That is the image that enables us to take our products into the mainstream markets, like with Stop & Shop and Peapod."
Like organics, general merchandise is a relative newcomer to the private label scene, but one with tremendous potential for high-margin sales. "Nonfoods -- especially outside of the HBC category -- is where we are seeing a lot of the growth," says ACNielsen's Zielinski. "It's a way to realize additional margin. Food retailers treat a lot of general merchandise categories as convenience categories, vs. routine or destination categories. With convenience items, retailers don't have to offer a variety of brands. So if I can put a store brand in that section of the store and it doesn't have anything to compete against, then there is a lot of margin to be made there -- plus it extends the retailer's corporate brand into yet another section of the store."
Nash Finch has already begun seeing benefits from taking this strategy. "One thing -- and this isn't just a store brands issue -- retailers don't give enough emphasis to the convenience factor," says Paul. The retailer/wholesaler makes a point of merchandising some private label general merchandise categories this way, including coffee filters, light bulbs, and latex items such as household gloves -- each of which sell well and add substantial gross profits to the mix.
This "convenience" merchandising tactic has worked for Nash Finch's Our Family brand of disposable cameras. "We merchandise them on clip strips in strategic positions throughout the store," notes Paul. "A lot of times they are at registers and convenience counters; retailers with photo processing have them in that department, obviously, with the film. Back in the cake-decorating area is another area where we have success, as well as in floral. If there is a seasonal inference or an opportunity for seasonal merchandising, cameras are a good fit."
Finding niches
Another strategic opportunity for private label is fulfilling regional needs that aren't large enough to attract the attention of a big brander. "When you are dealing with regional food tastes and trends, offering corporate brands lets us get into products that the national brands don't offer," says Giant Eagle's director of corporate brands, Richard Cagley. "We are able to bring innovation to the market that a national brand wouldn't."
Giant Eagle's new Laurenti line is a case in point. "We index incredibly high for Italian food, so we knew we wanted to do a program that was Mediterranean," says Glatter. "We are branding our olive bars Laurenti, we will have products in perishables and bakery branded Laurenti, and people will start to understand that you can only get these at Giant Eagle and it is really quality product.
"It looks beautiful in the package," continues Glatter. "I am proud to serve it to my family and friends, and those are the kinds of products that make people come back, and we have enough people in our markets that appreciate those kinds of products. The brands won't go there -- they can't. The volume isn't there for them. It is there for us."
Spartan Stores is taking a similar approach, but for different reasons, by working directly with international importers to procure some private label products. "We have begun relationships with Canada on some HBC programs, for example," says Alan Hartline, v.p. center store merchandising for Spartan. "They have state-of-the-art facilities, they are right across the border, and there is a currency transfer benefit driving down the cost of goods, but they have world-class operations."
Spartan is also eyeing oranges, adds Hartline. "There are importers that actually have product -- mandarin oranges -- in a glass jar. I'm sure that typically, as you shop the store, you find them in the can, but they don't show you the product. It is a pretty bold move to be able to put mandarin oranges in a glass jar."
A retailer can have the most innovative products in its corporate brand stable, but if customers don't know they exist, it doesn't matter. And since retailers generally don't have the marketing budgets of the large CPG companies, they've got to be creative.
Fortunately retailers are finding that, while television and radio do help to raise awareness, some of the most powerful tools are right inside the stores: loyalty data, the shoppers' own taste buds, and -- surprisingly -- the national brands themselves.
Giant Eagle collects a tremendous amount of data on its customers through its loyalty program and leverages the database to send targeted private label offers. The goal is to grow sales, but also create long-term relationships.
Spartan uses Catalina Marketing coupon printers at the front end, and will often have a trigger point off a national brand to try a coupon against its private label products.
Nash Finch turns in-store demos into platforms for marketing private label. The retailer is allocating resources to an in-store compare-and-save program. "Through demos -- that's really where you can win the battle. Once the consumer understands that the quality of your woven wheat cracker is every bit as good as Triscuit's, you've got them. And the way to do that is to win that quality battle at the shelf."
With cross-merchandising, retailers can actually leverage national brands to encourage private label trial. "Retailers sometimes find themselves in a position where, to be competitive in the marketplace, they have to give a national brand item away," says Paul. "What better way to turn that drain on gross margin into a positive than by cross-merchandising store-brand items that they can make some money on? If you have to give spaghetti sauce away to be competitive, cross-merchandising spaghetti, grated parmesan cheese, and related store brand items is a very strategic way to drive profits. It also addresses a meal solutions issue, which offers convenience to the shopper."
Big brands belong
None of these private label innovators say they expect their efforts to sweep national brands into the dustbin, and no supermarket operator would want to: As crucial drivers of traffic to the store, big brands provide the assortment necessary to meet the widest array of customer tastes and needs.
"There should be very few categories where there are only one or two competitive items to private label," says ACNielsen's Zielinski. "Assortment is key in building consumer loyalty and interest, and they might be upsetting niche groups of consumer needs and/or consumer demographics with that type of approach. There may be some categories where that makes sense -- like convenience categories -- but certainly, in your larger categories, it is very important that the total mix be quite varied."
But as retailers continue to consolidate and the private label movement continues to grow, retailers will keep innovating in the corporate brand arena. Says Zielinski, "It's not showing signs of slowing any time soon."
The business is growing faster than ever. According to ACNielsen's Private Label Trends study, released this summer, store-brand sales have grown at twice the rate of branded sales over the past six years.
Indeed, private label is a $1 billion-plus business in more than 15 product categories. While the larger and more developed side of the business consists of food commodities, the future of corporate brands is in the hands of retailers that are extending into nontraditional categories such as frozen, general merchandise, and organics.
One trigger to this private label explosion is the blurring demographic of the target consumer: Everybody buys it.
"All households and all incomes are buying corporate brands," says Gail Zielinski, ACNielsen HomeScan account director and author of the trends study. "We are seeing private label sales being substantial and deep across major demographics you wouldn't expect, such as two-member households, high-income households, and households with professional occupations."
Retailers are experiencing this shift first-hand. "As an industry, private label has spent years trying to get away from the perception that it produced cheap products, but I believe we have broken out of that and momentum is beginning to show in the numbers," says John Paul, senior director of marketing and sales for Nash Finch, a food wholesaler and retailer based in Minneapolis. "Private label has always been a brand choice for your lower-demographic consumers, but now it has really become the choice of your higher-income demographic. Higher-income consumers are starting to understand the quality is the same as a national brand."
More consumers are willing to try corporate brands, no doubt because the average quality level has improved, due to retailers' holding their manufacturers to higher standards.
Watching Ps and Qs
The private label market is no longer solely about price -- rather, it's about leveraging the retailer's brand and customers' loyalty to that brand, and turning that relationship into customized offerings tailored exactly to those customers' needs. Although this state of affairs has been evolving for years, lately it has reached new levels of sophistication and commitment.
"This is really demonstrated by the number of retailers today that have corporate brand managers," says ACNielsen's Zielinski. "They have a store-brand staff, a private label group or division."
This is exactly what Giant Eagle has done, for example. A longtime customer of Topco Associates, LLC, a Skokie, Ill.-based provider of private label solutions, the retailer only began putting its own name on private label products in the 1990s, when it partnered with Clorox to have the latter's Glad division supply bags and wraps under the Giant Eagle logo. Sales rose simply from that change, which spurred Giant Eagle to extend the effort to the point where today more than 5,800 products bear the chain's name.
Glatter has seen the chain's emphasis on private label intensify substantially since she joined just over two and a half years ago. "We've made a really strong commitment, and we have done that in several ways," she says. "One is by allowing me to develop a staff -- we have about a half-dozen people here today. We have also added two new laboratories. One is where we do QA product testing. The other is a sensory lab, called the Sensory Evaluation Booth, where we actually have consumers who come in, sit in a taste booth, and actually taste products and evaluate them."
Taking a different tack, Grand Rapids, Mich.-based Spartan Stores last year integrated the existing corporate brand team into its category management structure, to focus on private label as if it were a national brand.
"Our strategy was to have the category managers, who are the experts in the category, be responsible for both the branded as well as the private label presence for their categories," explains Sally Lake, v.p. of marketing for Spartan. "They are the experts; they know what the trends are, what we need to be, and how to keep up with manufacturer changes and packaging design innovations."
For Nash Finch, private label strategy extends beyond its own corporate stores to those of the independent retailers it supplies. "We play the role of private label supplier to them, but it goes deeper than just supplier/manufacturer; it is a brand culture that runs wall to wall within our stores," says Paul. "It not only includes the product itself, but also includes go-to-market strategies and merchandising strategies."
The price is right?
This high level of sophistication in private label brand building doesn't mean that price is no longer a factor in corporate brand strategy. In fact, ACNielsen did find a correlation between economic downturns and an increase in private label sales, but Zielinski admits that doesn't prove a causal relationship.
"It's hard to tell," says Zielinski. "There were other things happening during those times. Maybe one of those times Wal-Mart came out full force with its Equate brand."
More important, the question of a link between hard times and private label surges is likely to become moot. "This is especially true as we move into the future and we talk about private label not being so much about price anymore," notes Zielinski.
Nash Finch's Paul, meanwhile, says it is about price. And it isn't.
"I don't mean to kind of ride the fence -- the store brands program we have here is able to address both," he explains. "There was never a question on our first-tier program -- the Our Family label -- on the quality vs. price issue. That's not to say that we don't aggressively pursue the lowest cost of goods for our retailers as possible, but quality comes first.
"But not all of our retailers are in demographic areas that are higher-income, and for those retailers that need that price proposition, we [have] our strong second-tier program, called Value Choice. I believe doing this is extremely important in today's marketplace, because if you look at what is happening in other classes of trade, the grocery industry is faced with a distinctive challenge to provide value to consumers, as well. In order to do that, you need to have a really strong second-tier program that appeals to that value proposition. We can protect the Our Family label and use Value Choice in those markets, but we do not dial the quality of Value Choice down to the extent that we do not get repeat purchases."
The theme of protecting the store name becomes prevalent as retailers move toward multitiered private label offerings to address blurring consumer demographics. According to ACNielsen's Zielinski, "Retailers tend to leverage their names in the packaging and in the communications for the mainstream products and, in some cases, the premium offering, but never for the value offering, which saves the corporate brand from being identified as a value only."
This is demonstrated at Giant Eagle. The value brand is Valu Time, provided by Topco. The retailer's mainstream brand boldly bears the Giant Eagle name on its packaging. Giant Eagle's premium offering features the Laurenti name in large lettering, with "Exclusively from Giant Eagle" in fine print under the logo.
Pioneering private label
The combination of higher quality and greater acceptance by consumers affords retailers the opportunity to apply private label to new segments -- and that's exactly what's happening. The perishables departments are obvious candidates for increased store-branding efforts. (For a closer look at this, see
FRESH FOOD: "The new frontier")
Grocers are also engaging in aggressive store branding in the GM/HBC aisles, as well as organic and natural products sections.
As part of an overall expansion of its corporate brands program, Giant Eagle last month launched the Nature's Basket line of natural and organic products. The line, which spans a wide array of categories including grocery, dairy, frozen, and health and beauty care, is merchandised in one area, for customer convenience.
Ahold USA's Giant Food, based in Landover, Md., has also launched a line of health-oriented private label products. Called Nature's Promise, the line was created specifically to address Giant Food shoppers' demand for a better value offering in organic and natural foods.
Giant will initially introduce 25 Nature's Promise products in the dairy and grocery categories, with a total of 90 to be available by early 2005.
In an even more innovative step, Ahold USA and Boulder, Colo.-based organic and natural foods retailer Wild Oats have developed a program to leverage the strength of Wild Oats' brand in a mainstream supermarket environment.
Wild Oats plans in early 2005 to run a three-to-five store test of a Wild Oats-branded store-within-a-store with Ahold's Stop & Shop division. "The concept will be our Holistic Health department, as featured in four of our stores," says Wild Oats' director of corporate communications, Sonja Tuitele. "Products will include our private label vitamins, supplements, and lifestyle products, along with our private label grocery line."
Building a store brand
It's an unusual step for one supermarket operator to open a self-branded store-within-a-store concept inside another supermarket, but Tuitele calls it an ideal fit. "We don't believe we are in the same channel as conventional grocers, since we offer natural and organic products that meet the toughest standards in the industry."
Wild Oats also kicked off another collaborative test on Oct. 15, this time in the e-commerce arena, by offering its private label grocery products in the Chicago area through Peapod, LLC, Ahold's Internet grocer. Tuitele says it's a coincidence that Ahold owns both of Wild Oats' partners in its private label merchandising forays.
What should allow this strategy to work is that these retailers' core constituencies are so distinct that Wild Oats' corporate brand will function like a national brand at Stop & Shop and Peapod. It's a win-win opportunity for both: Ahold gets a strong natural and organic brand, and Wild Oats gets the opportunity to boost its brand equity with mainstream shoppers.
"Natural and organic products provide great opportunities for mainstream grocers when it comes to private label programs," notes Brian Alpert, Wild Oats' corporate brand manager. "We don't view our corporate brands as private label, but as leading natural brands. That is the image that enables us to take our products into the mainstream markets, like with Stop & Shop and Peapod."
Like organics, general merchandise is a relative newcomer to the private label scene, but one with tremendous potential for high-margin sales. "Nonfoods -- especially outside of the HBC category -- is where we are seeing a lot of the growth," says ACNielsen's Zielinski. "It's a way to realize additional margin. Food retailers treat a lot of general merchandise categories as convenience categories, vs. routine or destination categories. With convenience items, retailers don't have to offer a variety of brands. So if I can put a store brand in that section of the store and it doesn't have anything to compete against, then there is a lot of margin to be made there -- plus it extends the retailer's corporate brand into yet another section of the store."
Nash Finch has already begun seeing benefits from taking this strategy. "One thing -- and this isn't just a store brands issue -- retailers don't give enough emphasis to the convenience factor," says Paul. The retailer/wholesaler makes a point of merchandising some private label general merchandise categories this way, including coffee filters, light bulbs, and latex items such as household gloves -- each of which sell well and add substantial gross profits to the mix.
This "convenience" merchandising tactic has worked for Nash Finch's Our Family brand of disposable cameras. "We merchandise them on clip strips in strategic positions throughout the store," notes Paul. "A lot of times they are at registers and convenience counters; retailers with photo processing have them in that department, obviously, with the film. Back in the cake-decorating area is another area where we have success, as well as in floral. If there is a seasonal inference or an opportunity for seasonal merchandising, cameras are a good fit."
Finding niches
Another strategic opportunity for private label is fulfilling regional needs that aren't large enough to attract the attention of a big brander. "When you are dealing with regional food tastes and trends, offering corporate brands lets us get into products that the national brands don't offer," says Giant Eagle's director of corporate brands, Richard Cagley. "We are able to bring innovation to the market that a national brand wouldn't."
Giant Eagle's new Laurenti line is a case in point. "We index incredibly high for Italian food, so we knew we wanted to do a program that was Mediterranean," says Glatter. "We are branding our olive bars Laurenti, we will have products in perishables and bakery branded Laurenti, and people will start to understand that you can only get these at Giant Eagle and it is really quality product.
"It looks beautiful in the package," continues Glatter. "I am proud to serve it to my family and friends, and those are the kinds of products that make people come back, and we have enough people in our markets that appreciate those kinds of products. The brands won't go there -- they can't. The volume isn't there for them. It is there for us."
Spartan Stores is taking a similar approach, but for different reasons, by working directly with international importers to procure some private label products. "We have begun relationships with Canada on some HBC programs, for example," says Alan Hartline, v.p. center store merchandising for Spartan. "They have state-of-the-art facilities, they are right across the border, and there is a currency transfer benefit driving down the cost of goods, but they have world-class operations."
Spartan is also eyeing oranges, adds Hartline. "There are importers that actually have product -- mandarin oranges -- in a glass jar. I'm sure that typically, as you shop the store, you find them in the can, but they don't show you the product. It is a pretty bold move to be able to put mandarin oranges in a glass jar."
A retailer can have the most innovative products in its corporate brand stable, but if customers don't know they exist, it doesn't matter. And since retailers generally don't have the marketing budgets of the large CPG companies, they've got to be creative.
Fortunately retailers are finding that, while television and radio do help to raise awareness, some of the most powerful tools are right inside the stores: loyalty data, the shoppers' own taste buds, and -- surprisingly -- the national brands themselves.
Giant Eagle collects a tremendous amount of data on its customers through its loyalty program and leverages the database to send targeted private label offers. The goal is to grow sales, but also create long-term relationships.
Spartan uses Catalina Marketing coupon printers at the front end, and will often have a trigger point off a national brand to try a coupon against its private label products.
Nash Finch turns in-store demos into platforms for marketing private label. The retailer is allocating resources to an in-store compare-and-save program. "Through demos -- that's really where you can win the battle. Once the consumer understands that the quality of your woven wheat cracker is every bit as good as Triscuit's, you've got them. And the way to do that is to win that quality battle at the shelf."
With cross-merchandising, retailers can actually leverage national brands to encourage private label trial. "Retailers sometimes find themselves in a position where, to be competitive in the marketplace, they have to give a national brand item away," says Paul. "What better way to turn that drain on gross margin into a positive than by cross-merchandising store-brand items that they can make some money on? If you have to give spaghetti sauce away to be competitive, cross-merchandising spaghetti, grated parmesan cheese, and related store brand items is a very strategic way to drive profits. It also addresses a meal solutions issue, which offers convenience to the shopper."
Big brands belong
None of these private label innovators say they expect their efforts to sweep national brands into the dustbin, and no supermarket operator would want to: As crucial drivers of traffic to the store, big brands provide the assortment necessary to meet the widest array of customer tastes and needs.
"There should be very few categories where there are only one or two competitive items to private label," says ACNielsen's Zielinski. "Assortment is key in building consumer loyalty and interest, and they might be upsetting niche groups of consumer needs and/or consumer demographics with that type of approach. There may be some categories where that makes sense -- like convenience categories -- but certainly, in your larger categories, it is very important that the total mix be quite varied."
But as retailers continue to consolidate and the private label movement continues to grow, retailers will keep innovating in the corporate brand arena. Says Zielinski, "It's not showing signs of slowing any time soon."