Client News
'Store Brands' Save Shoppers Money, Boost Grocer Profits (Culinary Circle)
Mike Hughlet, Great Falls Tribune
Dec. 11th, 2008
Store brands have come a long way, and they're paying off for grocers.
Once simply cheap copycats, store brands are looking and functioning more like name-brand products, according to food industry analysts. And they're becoming more important to conventional grocery chains as a tool to help battle tough competition from discount stores and health-oriented retailers such as Whole Foods.
For instance, Minnesota-based Supervalu Inc., the parent company of Albertsons, launched Wild Harvest, a label that consists of more than 200 organic products, and Culinary Circle, a brand for higher-end items such as premium frozen pizzas, earlier this year.
"This is a key strategy for the company, to develop our own brands' business," said Andrew Abraham, Supervalu's vice president for store-brand advertising. The new brands are expected to help Supervalu reach its goal of having store brands constitute 17 percent of total sales this year, up from 14 percent two and a half years ago.
"Both brands have been well-received," said Pat McGuffin, Albertsons store director in Great Falls. "The brands include higher-end products that are a good value and great quality. Our store brands are competitively priced, usually they are priced 10 to 15 percent below national brands."
The Wild Harvest brand also taps into the increasing demand for organic products, McGuffin said.
"It's too early to say if our sales of store brands going up has anything to do with people's concerns about the economy, we haven't noticed a major increase," McGuffin added.
Great Falls Albertsons customer Della Smith said she's buying more store-brand products to help manage her grocery bills.
"The store brands are just as good as the others in most cases," Smith said.
Officials with California-based Safeway Inc. said store brands typically make up 15 percent to 25 percent of a grocer's sales, adding their chain is at the upper end of that range. Sales have been growing at a healthy clip in recent years as Safeway invested heavily in new private labels.
"Even ahead of the economy, we made an investment to drive structural change with the consumer," said James White, Safeway's senior vice president of consumer brands. A recession, he added, would accelerate that change.
There are a myriad of reasons for the store-brand offensive. First, supermarkets reap higher gross profit margins on their own brands compared with name brands — about 8 to 10 percentage points higher, said Jim Hertel, a managing partner with food retailing consultant Willard Bishop.
Additionally, because private-label products are less expensive, a robust private-label program can improve a traditional grocer's "price image" to cost-conscious shoppers, Hertel said.