Remember when store grocery brands used to come in generic packaging? You know: plain white packages with black stenciled lettering, no brand names and just a one word descriptor as to the products inside: CAKE MIX, CEREAL, DOG FOOD…
Those days are gone forever. And so is the supermarket practice of merchandising their own brands on bottom shelves covered in dust. Private label brands have steadily grown in volume, sophistication–and respectability.
In tough times, more and more consumers pick up grocery store brands to save money. As long as the quality and packaging speak to them, that is. A recent article in the Houston Chronicle, “House-label groceries are a new brand of thrifty,” points to this growing consumer trend.
How prevalent are store labels now?
* The Private Label Manufacturers Association reported sales of retailer branded products rose to $80 billion in the year that ended in September, up from $73 billion in the preceding year.
* Kroger’s private label brands represented 26% of the chain’s total volume as of this past June. The retailer stocks 14,400 PL products, up from 7,800 in 2003.
* H-E-B, the San Antonio based supermarket chain, reported that store brands continue to outsell national brands in its stores.
* Trader Joe’s has carved a unique niche for its retail operation by making private label offerings a staggering 80%+ of its total merchandise mix. More than 2,000 private label products account for approximately 70% of Trader Joe’s volume, according to Hoover’s.
As the article points out, when consumers feel financially squeezed or unsure of job security, they’re bound to pinch pennies. Still, consumers aren’t just buying store brands to save money. Private label foods have to do more than cost less. According to the article, and corroborated by my own firm’s research, consumers are turned on by:
* A perception of quality and great taste.
* Sophisticated, in-demand new offerings.
* Great packaging that rivals that of national brands.
* The association of PL brands with a particular retailer and the establishment of a preference for that retailer because of its store brands.
If these conditions are met, store brands can ensure increased volume and profit margins, and retailer loyalty. At a time when retail stores are coming under more pressure due to falling consumer spending, doesn’t it make sense for them to invest in their own store brands?
Questions:
* Are you more likely to purchase store brands when your budget is tight, or do you buy private label brands regardless?
* Which store brands do you prefer and why?
* Are there some categories where you prefer to purchase national brands? Which brands, and why?
I’d love to hear from you.
Ted, I remember as a young teenager a tinge of shame as my parents loaded the cart with generic products that had no colored label. Back then, I can even remember there were three classes of product for let’s say a can of corn. There was private “no color” label, private label with pretty packaging, and national brand. Can you imagine the SKU nightmares?
Private labeling sure has come a long way since…
How right you are, Paul. There were basically three groupings of products back when. . .Now, many retailers’ private labels are considered chic as even the wealthy and the trendsetters in our society basically endorse them by purchasing them.
Thanks for weighing in, Paul. I appreciate it.
On a TV show I watch on a regular basis, I have seen an appearance twice of the Wal-Mart “Great Value” brand of frozen peas.
I would buy more store labels if the quality could be improved across the board. Some things, like cheese, I don’t like buying the “off” brand because the taste is different to me.
Some store brands like pasta and chips, don’t bother me at all. There was a time when I would crinkle up my nose at anything that wasn’t a private brand but my opinions have changed as the economy has changed.
Great post!
Thanks for the kind words, Maranda. You’ve made a great observation: as the economy has slowed down, shoppers have increasingly flocked to store brands to save money. If they find the quality to be on a par with national brands, consumers will likely stick to store brands. If, in some categories, they do not think the store brands are as good–and food is a sensitive issue here–they are likely to spend a bit more to purchase national brands.
Thanks for adding your insights, Maranda.
We buy off-brand all the time. Especially since a lot of times things are made in the same factory as the high cost stuff and just labeled differently. If I notice a quality difference I try to stick to the better quality ingredients if it’s worth the difference in price. As things getter tighter though, I do look for more chances to save. I personally probably wouldn’t return to more expensive brands after leaving them even when I have the money again. If the rest of the country is the same as me, this trend may be started by a recession, but could very well outlive it.
When I feel squeezed I will buy store brands. Suck it up!
Thanks for your observations, Matthew. I especially agree with this: “I personally probably wouldn’t return to more expensive brands after leaving them even when I have the money again. If the rest of the country is the same as me, this trend may be started by a recession, but could very well outlive it.” I do believe that once consumers have switched, they may be content to continue to save money and keep on buying private label brands for good.
Succinctly stated, Blog Expert, and many are in agreement with you.
Thanks for weighing in, guys.
I remember a couple years ago being part of a marketing campaign for an open source company. They insisted on using white and black generic labeling for ads, promotions, trade show booth, and product packaging. It was cute, a creative mind toot, but it was a flop. We ended up doing a blind survey and the reactions were that it was considered: a) a joke, b) cheap, and c) tacky
That said, there were some hard core open source geek types that loved it.
Just food for thought [ FOOD ]
http://twitter.com/damphoux
* Are you more likely to purchase store brands when your budget is tight, or do you buy private label brands regardless?
I buy them regardless. To me, the distinction between traditional brands and store brands has blurred considerably.
* Which store brands do you prefer and why?
Well, it helps if I trust the store.
* Are there some categories where you prefer to purchase national brands? Which brands, and why?
Well, frankly, when I look at my purchasing history, green brands tend to be known brands. The reason has to do with my priorities, history, and reputation.
The same is true with vitamins. I purchase the same brand of vitamins (at a premium) because I trust the brand.
Interesting experiment, Michael, but I can tell you that when it comes to packaging, a novelty idea doesn’t generally cut it. The reactions you got to black and white generic packaging: a) a joke, b) cheap, and c) tacky, is exactly what I would have expected from consumers today. . .a good reason to invest in proper research and design before packaging in the first place. It’s never a good idea to launch a new line in today’s ultra competitive marketplace without investing in those things first.
Thanks for sharing this with us, Michael. Your experience reinforces that very important point.
I think you represent most of us in your reasoning in purchasing private vs national brands, Neil. Trust and reputation do matter, as well as the experiences we have when we purchase, regardless of brand. When consumers are “rewarded” by having consistently positive experiences with brands–private or national–we tend to stick with what we like, don’t we?
Thank you for taking the time to think through the questions and answering them, Neil. I appreciate it.
Growing up, my mother always tried to stick to generic brands to save money, even though we were not tight on money. My husband grew up quite the opposite. His mother would not buy any generic brands, though they were tight on money. Now that we are married, he still doesn’t want to eat anything that is a generic brand. I have weaned him off of some of the expensive stuff though. I will buy the store brand and throw away the box. Only after he eats it will I tell him that it was not the expensive brand. It has been interesting to see that he enjoys the generic brand just as much as the more expensive one. I will say, however, that not all generic brand items are good. I will give them a try at least once though.
I think that our financial situation does not always affect what products we buy. As humans, we enjoy familiar things. If our parents fed us a certain brand as a child,we are more likely to buy that brand as adults.
Great input, Holly. As you point out, as humans (and shoppers) we are all shaped by many outside influencers. Our upbringing and traditionally held ideas are hard things to change in the case of brand loyalties at times. “As humans, we enjoy familiar things. If our parents fed us a certain brand as a child,we are more likely to buy that brand as adults.” Exactly.
It’s interesting to note also, that income is only one consideration when it comes to purchasing store vs national brands. Your willingness to experiment with new brands, and test some of them on your husband is one way to hone in on the specific brands you can both agree on. If you find that you like the quality of some store brands, and the value is greater in your perception, then you might switch for good. That’s what many retailers are hoping for.
Thanks for adding some excellent observations to this conversation, Holly. Much appreciated.
I hate to say it but Trader Joes used to be high on my list of trusted store brands until a visiting friend noticed something on the top of a can of black beans — “Made in China.
To be honest, that made me lose a bit of respect for Trade Joes. For one thing, they present themselves as sort of environmentally friendly. Come on, beans from China. How environmentally inefficient can you get? Now, with durable goods and goods that are re-used (e.g., clothing) it makes a bit more sense in that respect. With beans it is absurd.
Second, sorry, I am not eating anything from China until they get their food act together. The latest in a string of insane incidents such as the Melamine (http://en.wikipedia.org/wiki/Melamine) scare: Chinese firms added a toxic industrial chemical to milk to make it seem to have more protein in tests, has made me a bit leery of eating anything from China until they get their food act together.
This does not mean Trader Joes sources all or even most of their food that way. However, with that funky, vaguely counter-culture atmosphere, you’d think they’d buy a little more locally and carefully.
I lost some respect for a store brand the other day. And it will take me a while to go back.
Brand adherence and loyalty are increasingly based on trust, aren’t they? You raise a strong point about Trader Joe’s. The perception of food imported from China right now vis-a-vis safety is a critical concern for many U.S. consumers. Actually, TJ has cut back on some foods from China and that was announced earlier in 2008. If consumer pressure builds, they will likely curtail them even more. And we all know that by pressure, we mean consumers’ refusal to purchase some products. Also: I am aware that some food manufacturers have plans to send their own quality control personnel to China to supervise the manufacture and packing of food products. Others have taken this step already. I wouldn’t be surprised if Trader Joe’s did this, as well.
As you stated so beautifully:
” lost some respect for a store brand the other day. And it will take me a while to go back.” To that I would add “If ever. . .”
Thanks for adding another cogent point to this discussion, Neil. I appreciate your insights, as ever.
As far as I am concerned China has lost the right to sell food to anyone. Period.
If Trader Joe’s et al continue to source it from there, I will stop shopping there. I am sure I am not the only one.
They might be able earn back trust on food in time but it is time to say, “China, it is time to put some earnest money down on that account.”
Many consumers feel as you do, Neil. You’re right: Brand China may have seen extraordinary growth, but the country has a lot of work to do to fix its tarnished image around the world. China has to win back the trust it lost due to selling tainted food to its own citizens and in worldwide markets. Let’s hope the leadership is doing more than paying lipservice when it promises to guard against more of these catastrophes in future.
Thanks, Neil, for adding another important point.
Growing up in Canada, I remember store brands were boring and typically offered lower grades of quality. Until Loblaw’s.
Innovative and trendy, Canada’s largest food distributor, Loblaw’s, introduced its President’s Choice brand of food products in the mid-80’s and never looked back. It was such a huge success, that its products are now sold in stores across the midwestern U.S., too.
In this category, President’s Choice is a paragon of ‘doing it right.’
http://www.presidentschoice.ca
Great store brand to bring up, Elaine. President’s Choice has been very successful. Quality products, strong packaging and good merchandising have paid dividends in the Canadian market, as a result.
Thanks for weighing in on this, Elaine. I appreciate it.
I heard and update from a friend in the food industry that Trader Joe’s does not use single source food from China any more. I am sure this is old news to many but I just found out. What she means by this is I think there would never be a food “made in China” now but ingredients could come from there.
My friend says that the world’s food system is so complex now that it would be very difficult for them to completely avoid some ingredients from China.
Since we are so intertwined with China, I hope they get their food safety system up to par soon. Not that ours is perfect.
Thanks for the update about Trader Joe’s, Neil. Good point about all consumer goods when you state that: “We are so intertwined with China” (and the rest of the world–in a global economy) . . .and parts of consumer goods are sourced from all over the globe, including food products, it has become difficult to discern the origin of many finished products now. Great point, Neil, that should be brought out in any discussion like this one.
Happy New Year, Neil, and to everyone at Marketing Profs, all of the contributors to the Daily Fix and its loyal readers, as well.