ROSEMONT, Ill. (FNS) -- Alan Levin, chairman of the National Association of Chain Drug Stores, Alexandria, Va., told those gathered here for the Private Label Manufacturers Association's annual trade show to look to Tesco, the British supermarket conglomerate, as among exemplary operators with a private-label program that sets themselves apart and gives them a competitive advantage.
He sees considerable private-label growth ahead for retail pharmacy operators, particularly the regional chains, in convenience foods as well as health and beauty aids.
Levin, also president and chief executive officer of Happy Harry's, a 49-store drug chain based in Newark, Del., spoke during the opening breakfast of the PLMA's "New Century of Store Brands" trade show held here last week, Nov. 12 to 14. He noted that, of the $64 billion in non-pharmacy sales done by NACDS members, $4 billion is "private brand." This is "a sizeable sum, but it should be more, a lot more," said Levin.
He emphasized regional drug chains as a viable sector where private label could expand. This may translate to the drug channel cutting further into grocery territory, especially in the convenience food area, he stated.
Levin said he is looking for private-label suppliers in food products as well as health and beauty aids, "with convenience foods and snacks consistently making up 15%" of non-pharmacy sales.
Calling on private-label manufacturers to venture beyond the four large drug chains, he said manufacturers "must broaden their horizons" and look at opportunities with the regional chains, which may someday be major players, he said.
Also viewing it as an important way to distinguish one's self from competitors, Levin described private label as "the most valuable category in our store." For example, in today's tight labor market, he said, it is nearly impossible for a retailer to distinguish itself on the basis of service. And, with insurance companies setting the price on 90% of prescription drugs, it is difficult for drug chains to distinguish themselves on the basis of price.
"You need to sell something your competitor does not have," said Levin. "As a retailer, the best thing you have is your name, and, if you have been successful in building any loyalty to your business, then naturally a private brand is the most distinguishable item you have to sell." Also important, he said, is building the consumer perception that the only place to get such items is at that particular chain. Well-designed packaging and private-label prices only slightly lower than the branded competition are steps toward this, he suggested.
As examples of strong private-branded programs, Levin cited British retailers Tesco and Boots.
Tesco, a major supermarket chain, has a private-brand presence in both health and beauty aids and food, including gourmet foods. "With packaging that looked appetizing enough to eat, they, too, did not lower price more than 10% below brand [prices], and, in every cart, it was Tesco products," he said.
Boots, a 1400-store drug chain, makes "no attempt to mimic" the packaging or name of the national brand product, but instead has developed its private-brand packaging with a consistent look across different product categories.
"As far as price, there was very little difference between [private and national brands], at most 10%. And there was no need to go any lower because they had established their product as a brand and not as a substitute," Levin said.
"The British have learned the valuable lesson that their name is not a commodity and that it is just as effective a brand as Procter & Gamble or Revlon or Colgate," he noted. "And they have also realized that their place is the only place you can get it. We need to do the same."
U.S. retailers need to focus more on the efficacy of the product and its packaging and less on its price, he said. "Instead of beating up the manufacturer for price, we need to say that a great package can also sell product and, in many ways, better than price."
Regional drug chains are also poised for growth in pharmacy sales, according to Levin, whose chain will open its 50th store in January then 17 more units over the next two years. A growth in pharmacy sales of 40% annually is projected once a prescription drug benefits plan is passed.