Big retailers boost own-label ranges

25 November 2011

NEW YORK: Retailers such as Kroger, Safeway, Whole Foods and Walgreens are enhancing their private label brands, part of a clearly discernable trend across the industry as whole.

Kroger currently derives 27% of overall sales from its proprietary products, measured against 23% in 2003, and is seeking to make further progress going forward.

"We need to be focused on building brands, not just introducing products," Linda Severin, the company's vice president, corporate brands, told Business Week.

As an example, after modifying its in-house range of pizzas to mirror a more premium positioning, the number of affluent shoppers buying them rose by 60%, even though they retail at $5.99, the same price-point as Nestlé's DiGiorno.

Figures from Packaged Facts, the market research group, based on statistics provided by Datamonitor, showed 31.4% of food and beverage launches in the US this year were own-label items.

This effectively doubled the total lodged in 2010, and marked an improvement from a modest 8.7% in 2009, according to the information compiled by the two companies.

Safeway recently introduced a new line of meat that is free from artificial ingredients called Open Nature, and has created brand manager roles for this and other ranges, like O Organics.

"We continue to grow private label sales faster than national brands. Our private label sales are outpacing national brands by about 3:1 on this factor," Steven Burd, Safeway's CEO, said. "We think, should the economy get better, we'll continue to outpace national brand growth."

Whole Foods, the organic grocery chain, has also increased its number of relevant stock-keeping units from 2,200 to 2,600, and has repackaged various offerings in categories like household cleaning.

"The rate of growth is similar to branded growth," said Walter Robb, Whole Foods' co-CEO. "Some of that is because of the efforts of the team here to put that momentum there, but I think it does reflect that people turn to private label when they're looking for value."

Walgreens is actually consolidating its in-house stable from 75 brands, as it attempts to double the $4bn in sales attributable to this area in the next seven years.

"We are on pace to do that," said Laura Sturdevant, director of product development, private brands, adding that the goal is to establish a "private-brand consumer packaged goods organisation within Walgreens."

Data sourced from Bloomberg, Seeking Alpha, Supermarket News; additional content by Warc staff