CHICAGO -- The adoption of premium store brand programs at many of the nation's supermarket retailers may be leading the industry to a new, higher level of parity in which only true marketers will survive into the next century.
"It is true, all retailers are going to have their own premium programs," said David Nichol, president of Cott Corp., speaking here at the Grocery Manufacturers of America conference on "Co-Marketing and Coexistence of Brand and Private Label."
"The retailers who are going to win are going to be those people who really are marketers," he continued. "If retailers think they are going to take these products and just put them on the shelves and they are going to sell, they are crazy."
Nichol's remarks suggested an emerging strategic marketing imperative for supermarkets, which goes beyond the tactical addition of store-brand products, regardless of their levels of quality and value. It also foreshadows a competitive issue of concern to national brand marketers.
"This is the easiest time ever for retailers and manufacturers to gain or lose customers," he said, reciting a list of factors he said he believes define the marketplace of the 1990s.
Consolidation is inevitable, for both manufacturers and retailers, he said. Wal-Mart is applying increasing pressure on the grocery marketplace. New technological and logistical systems are increasingly a factor.
Manufacturers, he said, are "acting rational" about their relationships with the trade, while wholesalers are "abandoning smaller, less efficient retailers."
Finally, he declared that large programs -- private-label or technology based -- are too costly for small chains.
Against this backdrop, said Nichol, is an increasingly cynical and sophisticated consumer base for whom "loyalty is merely the absence of a better value alternative."
"The issue of the '90s is not 'Will brands survive?' The real question is, 'Who will own those brands?' " he said.
Nichol said that for the retailer, "The key is to differentiate by branding the store. Retailers have to shift demand from price-driven products towards higher margin products."
He added, "The ideal marketing strategy will attract your competitors' customer but be impossible to your competitors to follow." To the national brand community which has expressed skepticism that store brands could grow in the United States to achieve levels comparable with those in Europe, he debunked three myths:
Myth number one is that U.S. supermarket companies are not like the Europeans. "Foreign supermarkets control 25% of the supermarket business," he said.
Myth number two, that private-label sales are recession-driven, is belied by the store brand market share in the United Kingdom, he said, which today is 37.1% in a strong economy.
He rebutted myth number three, that store brands can never grow as important in the United States because of a lack of retail concentration, saying, "The U.S. is seven countries. Concentration within major markets is high."
But Nichol said his strong outlook for store brands was not inconsistent with national brand success -- at least in the top tier.
"If I were the president of a major national brand I would accept the real reality, which is that by the year 2000, the No. 1 brands are going to get stronger, not weaker. Coke and Pepsi are going to get stronger, not weaker," Nichol said in response to an audience question.
"The No. 2 brand may be there, and with enlightened retailers, like Shaws, etc. All the rest of that category is going to be owned by the retailer. That's the picture for the year 2000."
Nichol also couldn't resist taking another jab at Coca-Cola USA president Douglas Ivester, with whom he has traded rhetorical barbs several times in recent months regarding the value of private labels in the soft drink industry.
Standing before a projected image depicting packages of
Coca-Cola's Powerade and Quaker Oats' Gatorade, Coke's Fruitopia and Quaker's Snapple, he asked the audience, "Who is the parasite?" a reference to a characterization by Ivester in a speech this Winter.
He continued, "Quaker must say Coca-Cola must be the biggest parasite in the world."
As for all those Wall Street analysts who have been citing Presidents Choice as evidence of a store brand revolution and the demise of national brands, they may want to recalculate their spreadsheets -- and check their wallets.
Nichol, grocery marketing's showman of the 1990s, is finally admitting he's been blurring the store brand and national brand line a little.
In a classic bit of marketing mis-direction, Nichol has managed to keep the eyes of the investment and marketing community on the private-label trend, while he not-so-quietly slipped a new national brand into America's supermarkets: President's Choice.
"It's a national brand that is handled, that is, the right to handle it, is handed out exclusively on a geographic basis," he said in response to a reporter's question.
He also was asked whether the success of President's Choice at gaining share in key categories such as soft drinks and cookies suggests that 100% ACV distribution is no longer the only relevant strategic goal for a "national brand." Could a scenario of focused distribution through exclusive retailers represent a possible solution for secondary brands?
