Retailers Told to Take Control of Private-Label Lines

ORLANDO, Fla. Retailers that own their private-label brands and offer different classes of store brands for different types of consumers have the greatest chance for success, a former Tesco executive said at the Private Label Manufacturers Association Leadership Conference here last month. The top private-label retailers do it themselves. It is not necessarily working through agents who supply like

ORLANDO, Fla. — Retailers that own their private-label brands and offer different classes of store brands for different types of consumers have the greatest chance for success, a former Tesco executive said at the Private Label Manufacturers Association Leadership Conference here last month.

“The top private-label retailers do it themselves. It is not necessarily working through agents who supply like product to your competitors,” said Christine Cross, former group business development director for Tesco PLC, and owner of retail and consumer management consultancy Christine Cross Ltd.

“Have 100% control, from concept to delisting,” Cross said. While this does not mean taking over control of the product manufacturing — that is not supermarket chains' business, she pointed out — Cross said retailers should have control over concept, design and pricing to better leverage their brands.

Many top supermarket brands are controlled by the retailers, which has helped differentiate them in their markets, Cross said.

“It is very difficult for an outside company to replicate what you do, if you have control of your own product,” Cross said. She pointed out that H.E. Butt, Meijer and Wegmans have all used private-label brands to differentiate themselves and “defend a regional market proposition,” Cross said.

Another key to success is offering different tiers or levels of private-label lines, depending on the types of products that each retailer's shoppers want.

After surveying consumers and determining preferred products and price points, offer private-label lines that cater to the two or three main groups of customers, Cross advised. Supermarkets with upscale shoppers who are interested in quality, for example, can offer a premium or specialty line, but they may still offer an economy private-label line to reach a portion of their shoppers who shop based on price.

“It doesn't mean multiple segmentation that dilutes the brand,” Cross said.

After segmenting tiers, Cross suggests placing certain tiers into each store, depending on the type of shoppers in that store's area.

“Where appropriate, I'll put in the entry-price-point store brand, and in some stores I'll just have the premium brand,” Cross said.

Also, private-label pricing should be based on “everyday fair pricing,” Cross suggested.

“It is not ever on promotion. Convince consumers that it is the best brand for their money,” Cross said.

At the same time, retailers should encourage trials of new store brands with coupons. Then, after shoppers buy the product for the first time, they should be given a second discount in order to buy it again. “And [let them know], ‘Here are the other products we have,’” Cross said.

Trends Affecting Private Label

Consumers' interest in healthful and organic foods, as well as upscale, premium lines, are influencing supermarkets' store brands, according to Christine Cross, former group business development director for Tesco, and owner of retail and consumer management consultancy Christine Cross Ltd.

These categories have to be managed carefully, she said. Her tips include:

  • The packaging on stores' upscale lines should reflect the higher quality of those lines. For example, Tesco's Finest brand features silver and black packaging. This will help “attract customers with higher disposable income,” Cross said.

  • While retailers promise to be more environmentally friendly and organic with their store brands, Cross cautioned against over-promising to shoppers. “Retailers have been very quick to come out with environmentally sustainable manifestos. They have a short time to make those environmental manifestos a reality before [advocacy groups] come to them and say, ‘Exactly what are you doing?’” Cross said.

  • Be aware of the trend toward fresh products and away from Center Store products. In European stores, fresh products are averaging 50% of supermarkets' product mixes, according to Cross. “The proportion of dry grocery is declining in larger stores at a faster rate than you would have imagined, and nonfood is starting to taper off,” Cross said.
    — C.B.