PRIVATE FIZZLE

Private-label carbonated beverages have taken a hit over the last year, partly as a result of aggressive promotions from national-brand manufacturers.Of the Top 10 private-label Center Store products sold at supermarkets, carbonated beverages accounted for the second highest drop in sales, plummeting 7.12% to $895.3 million for the 52 weeks ended Jan. 4, 1998, according to Information Resources Inc.,

Private-label carbonated beverages have taken a hit over the last year, partly as a result of aggressive promotions from national-brand manufacturers.

Of the Top 10 private-label Center Store products sold at supermarkets, carbonated beverages accounted for the second highest drop in sales, plummeting 7.12% to $895.3 million for the 52 weeks ended Jan. 4, 1998, according to Information Resources Inc., Chicago. The category was second only to frozen juice, whose sales fell 11.20% to $374.7 million. But unlike frozen juice, whose national-brand sales were down as well, overall beverage sales were up 1.08% to $11.753 billion, according to IRI.

Don Stuart, partner with Cannondale Associates, a Wilton, Conn.-based consulting firm, attributed the soda slump, in part, to organizational problems at Cott Corp., Toronto, one of the largest suppliers of private-label beverages.

"The fundamentals of private label are still sound. Retailers want to sell quality product. It's just that the supplier has been on shaky ground," Stuart told SN.

Retailers polled by SN attribute the decline to aggressive promotions by the national-brand manufacturers, who are using 2-liter bottles and 12-packs as traffic builders.

"The national brands lock up endcaps every week with specials," Stuart said.

"In carbonated beverages, national brands were losing market share to store brands, so they took the position over the last year to get the business back," concurred Pat Davis, director of planning and development for Fleming Brands at Fleming Cos., Oklahoma City.

Nevertheless, Fleming's private-label beverage sales are up, though Davis declined to say by how much. Davis credits the performance to vendor consolidation, which enabled the wholesaler to lower its beverage prices.

"We eliminated a couple of vendors, and now we get a steady supply of high-quality products at low prices," he said.

Another way private-label companies can win back market share is to offer innovative products. Take Wild Oats, Boulder, Colo., for example, which is in the process of a significant private-label expansion. The natural-food retailer is having success with its Wild Soda private-label line. Introduced 10 months ago, the soda is made with a special kind of fructose, which creates a beverage that has 25% fewer calories than regular soda and is suitable for diabetics, according to Dale Kamibayashi, director of grocery. The line currently contains six stockkeeping units, including such flavors as cherry cola, root beer and Dr. Wild.

"We wanted to differentiate it from other sodas," said Kamibayashi, citing that sales are good and continue increasing as the company samples the product.

At Piggly Wiggly Memphis, Memphis, Tenn., sales of private-label beverages were up 7.9% in 1997, compared with the year before, according to Newbern Rooks, director of private brands.

One reason for the increase is that Piggly Wiggly offers a large selection of different types of carbonated beverages, such as caffeine- and sugar-free soda, said Rooks.

"A lot of retailers forget about these products when they add new items," Rooks told SN.

Along with innovation, strong promotions are the key for some retailers. To boost its private-label carbonated beverage sales, Big Y Foods, Springfield, Mass., reviewed the sizes that it offers, redesigned its 12-pack packaging and increased the level of its promotions.

Big Y also analyzed its planograms to ensure proper position and space.

"We don't allow national brands to squeeze out private label," said Phil Schneider, vice president of grocery, frozen food and dairy at Big Y.

Schneider said increased promotional spending by Coke and Pepsi makes it necessary for retailers to become more aggressive in the category.

While private-label beverages are in a slump, the overall private-label industry is on a roll, according to the Private Label Manufacturers Association, New York. The growth of store brands is outpacing national brands in the supermarket, drug and mass channels. Supermarkets reached a record 20.6% unit share in private label last year, according figures provided to the PLMA from IRI. The share represents a 0.7% increase to 25.8 billion units. Dollar volume jumped 3.1% to $35.3 billion.

And, while national brands dominate the market, their unit and dollar sales are not growing as fast as private label. Last year, dollar sales of manufacturer brands increased 1.6% to $184 billion, while units slid 2% to 99 billion, according to the PLMA.

Retailers have helped the industry by strengthening the brand identity of their private labels.

For instance, beginning next month, Sam's Club, the wholesale club division of Wal-Mart Stores, Bentonville, Ark.,, will introduce a new private label, according to a published report. Member's Mark will be used on products that are better than the leading brands.

For instance, its cranberry juice will contain 33% juice, up from 27% that the top national brand offers. Wal-Mart officials did not return repeated phone calls by SN.

Fleming also has taken several steps this year to push its private label. Along with consolidating its vendors and, as reported in SN, its private labels under one first-quality brand, Fleming has conducted a significant amount of category analysis. To date, about 25 categories have been reviewed.

The wholesaler has used this information to introduce new products, such as its Living Well premium frozen-entree line, which Davis said is exceeding expectations.

"We've looked at the decision tree -- why consumers make the purchases they do -- to determine the right mix of items for the store, " Davis said. "We've formed strategic alliances with suppliers over the last couple of years. They're investing with us in the growth of Fleming brands. It's brought us stability."

SN analyzed the Top 10 private-label products sold in Center Store, including frozens. Dairy, perishables and health and beauty care were excluded.

Of the Top 10, sales of bottled juices improved the most, climbing 3.82% to $514.7 million. Not far behind were shelf-stable vegetables, jumping 3.75% to $669.3 million.

One of the reasons vegetables are doing well is that consumers are using them as part of meal solutions, industry observers told SN.

Schneider said Big Y has put a lot of backing into its store-brand vegetables. "Our private-label vegetables, both frozen and shelf-stable, have responded very well to our promotional calendar," Schneider said. " Our manufacturers have kept with the downsizing of shelf-stable product, thus keeping us competitive with branded products."

Ice cream is the No. 1 category in dollar sales, which rose 1.94% to $984.4 million. As for the strong performance of ice cream, Stuart of Cannondale attributes it to the growth of premium-quality offerings. At the same time, retailers have embraced the category.

As for frozen juice, Schneider of Big Y said innovative packaging could help revive the category. Schneider said frozen juice is the next area on Big Y's list for category management review.

For now, though, frozen juice is not a priority for Big Y consumers. "We've noticed that the Northeast is now a chilled market, not frozen," he said.

Big Y has reduced the space allotted to the frozen juice to make room for more profitable frozen categories. "There are many other items in frozen food that need space," he said.

Stuart of Cannondale Associates attributes the strong performance of bottled juices to the fact that people are switching from carbonated and powdered drinks to juices.

"The quality is great, and the variety is comparable to branded," Stuart said.

Piggly Wiggly Memphis, which operates 739 stores nationwide, is in the process of redesigning its private-label packaging. The last time it redesigned the packaging was 10 years ago. "We felt it was time to get a more attractive design," said Rooks.

Canned vegetables and fruit and paper will be redesigned by the end of the year, he said. "We just got the samples in and we're playing around with them to see what the design will be," Rooks added.

Though it has not decided what the changes will be, it most likely will change the logo on several products, including canned vegetables.

"Right now, our pig logo is too big and is all in white. It looks ghostly," he said. "We'll probably make the pig head smaller and make it black."

Next year, carbonated beverage, cereal and possibly sugar and flour packaging will be redesigned.

Piggly Wiggly's private-label promotional calendar includes a January stock-up sale, a dairy program in June and National Frozen Food Month participation.

Brand News

Private-label dollar sales are continuing to rise at supermarkets, outpacing national brands. But some of the Top 10 highest-volume Center Store categories, including carbonated beverages, had a difficult time over the last year.

Category Dollar Volume % Change

in millions

Ice Cream $984.4 + 1.94

Carbonated $895.3 - 7.12

Beverages

Frozen Plain $719.4 + 0.04

Vegetables

Sugar $673.6 - 2.73

Vegetables $669.3 + 3.75

Cold Cereal $535.8 - 0.21

Bottled Juices $514.7 + 3.82

Canned/ $463.3 - 1.79

Bottled Fruit

Cookies $455.8 + 0.99

Frozen Juice $374.7 - 11.20

Source: Information Resources Inc., for the 52 weeks ended Jan. 4, 1998.

Note: List includes only Center Store products. Dairy and health and beauty care products are excluded.

Growth Rates

While national brands dominate the market, private-label dollar volume grew at almost twice the rate of national brands in 1997

National Brands $35.5 billion (+3.1% change)

Store Brands $184 billion (+1.6% change)