NEW YORK -- The Private Label Manufacturers Association's annual show taking place in Chicago this week is a milestone. It marks the 20th anniversary of the debut of generic products.
Part of what makes the occasion so rewarding is how private label has grown since its inception, Brian Sharoff, president of PLMA here, said in a preshow interview with SN. "Twenty years ago, generics had much different treatment. They were on the bottom shelves, and often dusty. No one knew where to put them," he said.
But today, companies that once looked down on private label are overwhelmingly embracing it, he said.
"Twenty years ago, A&P proclaimed itself a national brand retailer. And it was. Now, you'd be hard-pressed to see that," Sharoff said.
This year's show, themed "Store-Brand Wonders of the World," which began Nov. 17 and runs through Nov. 20, is expected to attract about 3,500 retailers and wholesalers and others from the industry, such as brokers. The exhibit hall at the Rosemont Convention Center is featuring 1,500 booths, 46% devoted to food products; 28%, health and beauty care, and 26%, household items.
SN asked Sharoff various questions about the state of the private-label industry.
Following are excerpts from SN's interview:
SN: How do private-label products fit into home meal replacement and meal solution programs?
SHAROFF: There are two separate answers. FMI's MealSolutions show in Phoenix showed that there is an immense amount of interest in home meal replacement.
But this often means different things to different retailers. For some retailers, it can mean a series of microwavable products, with a shelf life of three or four days. For other retailers, there are plenty of products on their shelves, but throughout several different areas of the store.
It's a question of offering ideas for lunch and putting them in one place. That would support shelf-stable products.
Other retailers have an enormous investment in their frozens. So it's not impossible for retailers to use a frozens approach.
There's no one absolute way to do home meal replacement -- frozen, shelf stable or ready-to-serve.
I think the industry is still feeling its way. Part of the motivation that I detect is supermarket concern that they will lose dollars of consumers who want a meal that doesn't take hours and hours to prepare. They don't want those dollars to go into the restaurant business. Likewise, the restaurant business is concerned that supermarkets are going to counterattack. There's obviously a rivalry being created here.
How it's evolving is still two to three years away. It also depends on the region and the economic nature of the clientele. It's definitely a major growth area.
SN: Retailers have told SN that the cereal price wars have had a significant impact on private-label products. Many say that consumers who once bought private-label cereal are now buying national brands because they are cheaper. How do you think private label will hold up?
SHAROFF: Short-term, there will be erosion. That's not unusual. Consumers will go back and try the [national brand] product.
In the long term, though, it won't make a difference. But that will be true with the very best retailers, like Kroger and Publix, for example. Their cereals are as good as everyone else's. For retailers that offer a less-than-comparable private label to the national brand, there could more of a loss of sales.
The bottom line is that if it's a comparable product, it will be a short-term loss. You might see some drop, but it won't be significant.
What's interesting is what Ralston did. It decided to jettison its branded products and concentrate on private label. I think that's a telling indicator of where the industry is going. Also, there's still room for a major shakeout on the branded side. That is by no means a finished battle. Kellogg's, Post and [General Mills] are the ones having the battle. Private label is mostly on the sidelines.
SN: PLMA's 1996 Yearbook listed fast growing private-label categories. Among them were baby formula, Mexican sauces and natural foods. Why are categories like these becoming more popular?
SHAROFF: One reason has to do with demographic and taste changes across the country. Salsa is big not because America's Mexican or Spanish-speaking population has grown. It's because non-Mexicans and non-Spanish-speaking Americans now like to use it.
Those kinds of eating-habit changes are much more significant than the ethnic mix of the United States.
SN: CVS and Kmart are two examples of competitive retailers that are expanding private-label grocery selections. How can supermarkets compete?
SHAROFF: My reading is that most of the drug chains and mass merchandisers still have to concentrate on core business and don't have freedom to expand edible products in a broad way. So, while it may have an impact on snack foods and beverages, it won't significantly impact other categories.
As for competition, I'm not sure that supermarkets need to do anything more than be competitive with products they have. Just because CVS has cola and potato chips doesn't mean the supermarket has to do anything different. [Supermarkets] may have to promote them more and offer them in certain ways they haven't before, such as gondolas. But they've got all the equipment, it's just competition.
They won't have to change fundamentally what they do. It's not that kind of threat, in my opinion. When discount warehouse clubs came in, it changed the nature of the game because of the larger quantities and discount prices. For supermarkets to compete, they had to offer the same larger sizes and the same price discounts. Supermarkets had to change what they were doing to be competitive. Here, that's not the case.
SN: What chains have done a good job merchandising private label this year?
SHAROFF: Wegmans clearly and prominently brands its products with its name, so there's no confusion about whom to thank. They make sure they're promoting it on television, taste tests, cross promotions, buy-one-get-one and co-branding. Then Wegmans goes another step, by introducing new product categories, like the Foods You Feel Good About line. They've responded to consumer needs with a group of products.