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Retailers Fire New Shots in the Private-Label Battle

Retailers Fire New Shots in the Private-Label Battle

A spurt of recent retailer initiatives points to new activity on the private-label front.

This comes as overall private-label share has been fairly stable over the past few years, at about 16% of dollar and 21% of unit sales, according to recent statistics from IRI.

Retailers are actively pushing new store-label marketing and merchandising initiatives that are based on real-time consumer trends.

Some of these efforts address niches not otherwise being filled. An SN story earlier this month cited the success of Safeway's O Organics line, a 150-product venture that isn't replicated by any major national brand.

A number of other top food retailers, including H.E. Butt Grocery Co. and Loblaw Cos., have tailored their private-label offerings to a healthy living niche that is unique for their markets, the story reported.

Some private-label categories — such as chocolate candy, frozen meat, pies and cakes, and frozen seafood — are even selling at notable premiums to national brands, according to IRI. This points to successful product innovation. The premiums are good for this segment because store labels sharply discounted from national brands give the wrong message about quality.

There are indications retailers are taking more control over their private labels. Consider that Tesco, a U.K. private-label leader, isn't taking any chances when it invades the U.S. with its Fresh & Easy format this fall. The retailer is reportedly retaining two of its U.K. private-label suppliers to make products for the U.S. market, a clear attempt to replicate its success across the Atlantic. Keep in mind that Tesco operates in a part of the world where private label has far more commanding shares than in the U.S., so that retailer's merchandising moves should be closely watched.

Back at home, U.S. retailers are increasing their focus on multiple-tier store-label programs to appeal to more consumers. In the latest case, SN reported that Delhaize Group will roll out a three-tier program across all of its U.S. banners, with labels ranging from value price to premium.

Retailers are also making a bigger effort to have consumers try store-label products. Publix is running a program that gives select private-label items free to consumers who purchase the national-brand counterpart. This is surely an expensive campaign but potentially invaluable in encouraging trials.

It can't be overlooked that retailers are more serious about overall branding of their stores, a factor that should help boost private-label business if logic plays a role.

What do all these developments mean for national brands? Are they being outmaneuvered on the shelves? Their job, as always, is to be innovation leaders, so they should embrace the challenge. The ball is really in their court because experience shows that private label tends to fill vacuums where national brands fail to innovate. Some bold new initiatives from national brands on fronts ranging from health to ethnic indicate they are stepping up to the plate. The upshot is that consumers are willing to have their needs met by national brands or store labels, so it's up to suppliers and retailers to battle in the market and reach the optimal balance.

TAGS: Center Store