There was a time when private-label products in white packages with military-style black lettering were sandwiched in between the "real" brands on the supermarket shelves and appealed to those people whose only concern was saving money.
Times certainly have changed.
Now, private-label products are so attractively packaged and the quality is so good that supermarket shoppers sometimes do not know the products they are buying are a supermarket's own label. Those who are aware that what they are purchasing can only be bought in that particular supermarket are often seeking it out because of the high quality, as well as the competitive price.
Indeed, private-label products have improved so much in recent years that the sales are outstripping sales of national brands, a trend that will probably continue due to several factors.
Demographic and lifestyle changes that took place in the 1990s prepared the way for a surge in private-label sales as savvy retailers and manufacturers tailored appeals to the desires of modern shoppers.
"The population is aging. As baby boomers retire, value is going to come into play, but they are also looking for quality," said Marcia Mogelonsky, a demographic-trend tracker. "There is a point at which seniors become more aware of how much they are spending. Since the private-label products now have a reputation for good quality, that is where they are going to turn.
"There also is a whole new generation of Generation Y, which is almost as large as the baby boomers. This 'echo boom' now has about 73 million people compared to 76 million baby boomers and Generation Y is still growing," said Mogelonsky. "They represent a good market for private label because they have no preconceived notions about private label lacking quality. They weren't shoppers when many private-label products were of lower quality, so to them private label is just another brand."
Private-label manufacturers and retailers are giving products a new, higher profile to take advantage of these and other demographic changes that are taking place around the country.
"We have had a bit of a shift in gears as Shaw's Own Brand has matured," said Bernie Rogan, spokesman for Shaw's Supermarkets, based in East Bridgewater, Mass. "It used to be called Shaw's Own Label but we changed it. Our products are as good or better than the targeted national brand. Shaw's Own Brand is responsible for much of Shaw's profitability."
Shaw's Own Brand generates 40% of the chain's sales, far above the sales level of any of its competitors' private labels. Shaw's now owns Wild Harvest and Star Markets and has 170 stores, mostly in the eastern United States.
"Every category in the store has a Shaw's Own Brand," Rogan said. "We are always in the process of evolution and of developing new products."
Albertson's, based in Boise, Idaho, has found that private label can make inroads into the market by starting with one category, such as paper products, and then expanding.
"You can market one product that the consumer will accept and when they are satisfied with that product you transfer the buying habit to other products," said John Strong, vice president of corporate brands for Albertson's 2,500 stores, located in 37 states.
"Albertson's has developed its own line of baby foods and pet foods," Strong said. "The health consciousness of baby boomers has allowed us to market such things as olive oil, which has appeal both because of its healthiness and its gourmet qualities. We have also added health claims to our cereals."
Albertson's recently added stockkeeping units to its spring water because customers want to be able to buy larger quantities, he said.
Private-label products in most supermarkets have been making rapid gains, according to Information Resources Inc., Chicago. Supermarket sales of all private-label categories outstripped the total supermarket sales increases every year for the past six years.
Private-label sales in supermarkets increased 4.9% by dollar volume in 1995 compared with the previous year, while general supermarket sales increased 2.5%. The following year sales grew by 8.4% for private-label products and then returned to the 4% range, while total supermarket sales hovered in the 2% range.
For the 52-week period ended March 26, 2000, private-label sales increased 4.1% to $37.5 billion, while supermarket sales increased 3.9% to $239 billion, according to IRI.
The biggest change in private-label products that was made during the 1990s was the improvement in quality.
"We have our own test kitchens and develop all of our own products," explained Rogan. "We monitor the production and require that the items be sold only to Shaw's. People have learned we have higher quality products than many national brands."
The next step after developing good products is to educate the public.
"As private labels have improved their quality, they are seen by consumers as a way of shopping smart," said John P. McManus, associate publisher of American Demographics magazine in New York City. "There is an abundance of information available to consumers now, and they can more easily see parity between the brands.
"Consumers are hip to the fact that a lot of the costs they shoulder for products are marketing costs, so if they can eliminate that cost they are better off," he added.
Private-label products can be marketed less expensively because of the savings not only in advertising but in distribution as well, which can amount to 30% of the selling price, said Bill Finicle of Los Altos Food Products Inc., City of Industry, Calif.
Los Altos is a private-label developer that is taking advantage of another demographic change that has boosted sales for private-label products, and that is the growth in ethnic populations in the United States, particularly the Hispanic population.
Earlier this month the company came out with an entirely new line of food products known as Comida Sabrosa, or flavorful food, which will be marketed in Albuquerque, N.M.-based Furr's Supermarkets in New Mexico and in other stores that are not announced yet. Los Altos also produces Buena Comida, or good food, which is marketed in all Kroger Co. and Ralphs units, in Price Chopper stores in Las Vegas, Smith's Food & Drug Centers in the Salt Lake City area, Fred Meyer in the Pacific Northwest, Quality Food Center stores in Seattle, Fry's Food Stores of Arizona, King Soopers in Denver, City Markets in Colorado and Dillon's in Kansas.
"When the census is completed this year, if the Spanish population is counted at anywhere close to the real number, you will find everyone thinking about how to sell to the Hispanics," Finicle said. "I am very proud of the work we have done with these supermarkets to develop these products."
Buena Comida has numerous kinds of salsas, jalapenos, hominy or maize blanco, and rice and beans.
"The Hispanic population has always been one of the most brand-loyal," Finicle continued. "Many Hispanics do not trust brands they do not know to be good food. Putting good food on the table is very important to them, so educating the consumer is important.
"Giving demonstrations is a key for retailers," he added. "The retailers also are developing packaging that is Spanish first and English second."
Another key to developing private-brand loyalty lies in the retailer getting involved in the Hispanic community, said Mogelonsky.
"The growing Hispanic population is not just in the Southwest and New York and Florida," she added. "It is all over the United States. Having point-of-sale information available, including recipes, is important. Having a good shelf presence is also key."
Other ethnic pushes present in private-label categories in recent years have been Oriental products and even traditional Italian products, such as in the spaghetti-sauce category. Exotic salad dressings are also being developed by private-label manufacturers in an effort to appeal to upscale tastes developed by many middle-aged baby boomers.
Lynn Dornblaser, director of New Product News in Chicago, agrees education is a key for private-label sales and says it is a concept being employed successfully by many retailers.
"The lines between private label and national brands are blurring," Dornblaser said. "Products are turning into ones that people trust and ones they do not trust. Private labels are becoming known as high quality, such as Master's Choice and President's Choice. Even shoppers in whole-food stores are selecting the private-label brands."
As baby boomers and younger shoppers develop loyalty to private-label brands, retailers are becoming aware that there are many subgroups within each generational category. Retailers recognize their need to market to large groups but baby boomers are far from a homogenous unit, noted the Private Label Manufacturers Association, based in New York City, which recently held a seminar on changing demographics in the United States.
Demographic changes will accelerate in the years ahead, according to the PLMA. Baby boomers born between 1946 and 1964 already cover the range from retirees with limited incomes, families with children at home or in college who also have to watch spending, and empty nesters who are still working and have more disposable income. The latter category is in the market for the more upscale products but still wants to be a smart shopper, the consultants said.
The U.S. Census will show "the profound nature of the demographic and cultural changes that are already under way in America," a blue-ribbon panel convened by the PLMA concluded. "The private-label industry is well positioned to master the ensuing changes in consumer demands."
