I’ve said it before, and I’ll say it again – if price was the prime factor in the purchase decision, grocery stores would be balls to the wall with generics. Most of you are too young to remember, but those plain white boxes labeled with no other words than “spaghetti” didn’t exactly fly off the shelves in the 1980s.
In between generics and the well-known brands we shop today (Kellogg’s, Nestle, et al.) are the private labels. They took some cues from the mistakes generics made, and have been on a steady rise. What has been most significant in private label, though, is the religion retailers got:
“If we can control private label end to end, we can make a killing.”
Instead of enabling other entrepreneurs, one by one the retailers developed their own “house” or “store” brands, and stuck them on their own shelves. Lo and behold, their share of total sales crept up a couple of percentage points each year. Then the Great Recession drove private label market share even higher.
So how come the data just in, from the Private Label Manufacturing Association (PLMA), shows private label in grocery stores went up only two more percentage points in 2010? Millions of home owners are in foreclosure. The number of long-term unemployed, over 52 weeks, over 99 weeks, are at Depression levels. With only 15% or so of Americans with annual income over $100,000 (which Ad Age yesterday categorize as “the rich” – huh?).
Believe it or not, private label’s increase was due to PRICE. On a unit sales basis, private labels DECLINED in 2010.
What. Is up. With that?!?
Three things: Branding, Differentiation, & Value-Add. Fundamentals of marketing private labels can no longer work around. There is formidable competition among real brands. In fact, a report just released by the Grocery Manufacturers Association and PwC claims that branded companies had significant sales increases in 2010.
You can’t start at the preference phase of the marketing cycle. That only gets you the low-hanging fruit – i.e., customers who already shop your store. To keep growing, you need net new buyers, and that requires full branding efforts. See “awareness” and “consideration.”
You can’t be the same, only cheaper. Store brands have spent inordinate amounts on “legit” packaging. That is skin deep. How does that make your spaghetti any better than Barilla?
This is where the game is being won, more and more. What else does your house-branded product bring – Healthy eating? Green production? Recipes? Children’s flavors?