Consumers’ Love of Generic Items Rising
By Samantha Maziarz Christmann
Normally a fan of brand name products, Kate Klopfer of Williamsville began picking up store brand items in a move to trim her budget.
She started slowly, picking up a package of paper towels here, some body soap there. Eventually she had replaced many toiletries, cleaning supplies and food completely with store and value brands.
As budgets get tighter and food gets more expensive, American shoppers are increasingly switching to store brands — even upper- income consumers who may not have been inclined to give them a try before.
Private-label product sales are up $5.4 billion nationally, making it a $74.2 billion industry, accounting for one in five U.S. supermarket and drug store purchases, according to the Private Label Manufacturers Association. The nation’s biggest grocery sellers all report that sales of their own brands are jumping, as customers can’t stop regularly buying food and household items but need to reduce spending.
“Sometimes products are quite a bit cheaper. It depends what you’re buying and where you go, but you really can save a lot of money,” Klopfer said.
The Food Marketing Institute, an industry trade group, found this year that the number of shoppers who say they are buying more store- brand items has been steadily rising, now up to some 60 percent.
Candace Corlett, president of the consulting firm WSL Strategic Retail, said her group has found that even upper-income shoppers are more willing to buy store brands, which have traditionally been seen as appealing most to people on limited budgets.
That shift comes as the chains are offering more store-brand products of better quality.
Gone, for the most part, are the gray, no-frills cans with nondescript labels such as “peas,” packaging that evoked cheap, bland taste. Many now sport colorful labels with names like Aldi’s “Sweet Harvest,” and Save-a-Lot’s “Diane’s Garden” which don’t shout “store brand!”
The stores have been pushing their own brands in areas such as dairy products, meats and breads where prices have risen especially fast, and are also tapping into increased demand for organics and natural foods.
“Store brands have come a long way,” said Tod Marks, a senior editor at Consumer Reports, which has tested store brands against national brands for quality and customer response. “Over the years, retailers realized that store brands were not just something to be floated out during hard times . . . ‘This is a signature product of ours. We want to be known for this.’ “
Stores generally reap better profit margins by selling their own brands — also called corporate brands, private labels or generics – - and also use them to build customer loyalty.
Surveys have shown that most people were highly satisfied with most store brands, Marks said, and testing found many of them held their own against the national brands.
“I always buy Wegman’s brand. A lot of their stuff is better than the name brands, and it’s cheaper,” Klopfer said. “I’m a Wegmans pepperoni addict.”
Klopfer said she prefers Wegmans pepperoni to the famous brand Hormel, and she can often score two packages for $3 to boot. She also loves Target’s Archer Farms water and prefers Wegmans low- sodium bacon to Oscar Meyer.
But, in some cases, consumers must decide whether “good enough” at a lower price is better than buying a national brand.
Klopfer isn’t crazy about some store brand cereals, but buys them because the price is right, scooping up brand names when they’re on sale.
And though she prefers flavored Smartwater, which costs $1.40 for a single bottle, she buys 24 packs of value brand flavored water from the grocery store for $4.00 instead. Still, she refuses to skimp on Nabisco raspberry Fig Newtons.
And stores, which realize that the attention they’ve paid to their own brands is paying off, are offering more new products of high quality and increasing their marketing.
“Private label products used to be referred to as generics, and they were treated that way. It was the lowest possible quality a customer would accept,” said Wegmans Spokeswoman Ann McCarthy. “That’s not the case any more.”
In fact, Wegmans’ salsa, cereal, pizza, ice cream and frozen vegetables consistently outsell the famous brands. The store also produces items not offered by anyone else, such as its Basting Oil, Pan Searing Flour and the wildly popular Organic Super Yogurt.
Retailers jealously guard quality control, selecting product lines and testing them continuously.
Extreme discounters such as Aldi and Save-A-Lot study consumers’ favorite brands, then contract solely with them to produce premium brands in store brand packaging. They will often then carry nothing but that brand.
Wal-Mart, which said sales of some private-label categories are up 40 percent this year, is rolling out new “All Natural” ice cream featuring such new flavors as blueberry pomegranate.
Burt P. Flickinger III, managing director of the consulting firm Strategic Research Group, said the big U.S. chains are catching up to the long tradition of strong private-brand grocery programs in other countries, such as those of London-based Tesco PLC and Canada’s Loblaw Co. Ltd. — Loblaw 30 years ago introduced a brand called simply, “No Name.”
While companies with the top-selling brands will probably hold up better than runner-up brands against the store competition, he said, “the long-term implications are really cause for concern for every branded manufacturer.”
But Procter & Gamble, which has repeatedly raised prices to offset higher costs for energy and raw materials, has expressed confidence that product innovations and people’s loyalty to its generations-old brands such as Pampers, Tide detergent and Gillette shavers will keep sales growing.
“It’s all about value,” Clayton Daley Jr., P&G’s chief financial officer, recently told analysts. “It’s not just price, it’s all about product performance. . . . It’s about the trust that consumers have in your brands.”
The Associated Press contributed to this report.
Originally published by NEWS BUSINESS REPORTER.
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