SCOTTSDALE, Ariz. -- These are heady days for private-label suppliers and retailers.
Their optimism showed through at the Private Label Manufacturers Association's leadership conference in mid-March. In speeches and panel discussions, the industry's leaders scoffed at recent claims that store-brand growth plateaued last year.
In addition, industry consultants took the conference podium to predict more growth in 1994 and a leadership role for private label in making product innovations.
"1994 will be the first year private label will go over 20% of unit volume," predicted Burt Flickinger III, a widely known management consultant with A.T. Kearney and the great grandson of a private-label pioneer. He said private-label marketers "can afford to be relaxed, when you are in the lead of positive trends."
Flickinger, the conference keynote speaker, said "exclusive brands have seized the initiative and will be innovation drivers," and that store-brand suppliers will generate "news and innovation" this year and further into the future.
The industry already attracted plenty of news coverage last year, from which it benefited significantly, said PLMA officials.
"Store brands gathered a lot of attention from a lot of people, and PLMA gathered attention as well and has grown. We had standing-room-only crowds at our meetings," said Rick Witherspoon, PLMA chairman and executive vice president of sales and marketing at Merico, Carrollton, Texas. "At the show, the profile of people has risen. We are seeing the chairmen of top customers, the top management of national brands companies."
Witherspoon also said that in
the coming year, "shelf space will be the battleground for loyalty and dollar shares from the consumer. The battle will intensify."
Meanwhile, Brian Sharoff, PLMA president, fired back at earlier attempts by the national-brand community to portray private label as stagnated.
"Most interesting, this was also a year when national-brand companies became concerned about the future of their products on the shelves. We saw press releases coming out showing private label was dead in the water -- except for the 10 fastest growing categories and except for HBC," Sharoff noted with irony. "Anyone saying private label is flat is doing a disservice to the retailer."
In his talk, Flickinger said national branders have done "largely very little innovation" in the last 10 years, resorting instead to pushing sales with trade money. "Some people say the trade dollars are cannibalizing brand equity. But I'd say retailers are spending the money more effectively," he added. The path to innovation for national brands likely lies with cobranding, in some cases linked to a retailer's store brand in noncompeting categories.
Flickinger also said that even as retailers take over the industry's marketing and consumer research functions, their store-brand margins will continue to expand. "The pretax margin for national brands is heading south, while retail-brand margins are heading north," he said.
The consultant looked to the European model of private-label development as an indication of its continued potential for expansion domestically. "European companies will continue to acquire companies in the United States and the Americas, and will spread private-label expertise. Retailers will have more power and greater resources to develop products."
He even urged chains to consider building up their store-brand tobacco and liquor programs. "A lot of retailers are afraid to get into that, but there is a big opportunity there. At Safeway, private-label cigarette cartons are a big seller," he said.