More shoppers choosing stores' private label groceries

More shoppers choosing stores' private label groceries

April 20th, 2010 by Tamara Best in Businesstopstory

Staff Photo by Angela Lewis/Chattanooga Times Free Press Private label Southern Home products can be found next to name brands throughout the Bi-Lo on Lee Highway.

Staff Photo by Angela Lewis/Chattanooga Times Free Press Private...

There's a battle raging in the aisles of supermarkets in Chattanooga and across the nation as brands fight to make it to the kitchen tables of American families.

And as the country climbs its way out of an economic slump, checkout lanes nationwide are seeing a shift in consumer spending.

Economic conditions are playing a role in 75 percent of shopper decisions on brands, according to GfK Custom Research North America. To save money, 62 percent of consumers are branching out and trying private labels, saving $21 billion as a result, according to the Private Label Manufacturers Association.

"I'm shopping more by the store flyers and buying more of the Southern Home dairy products, side dishes and juices," said Jessica Thomas, of Chattanooga, who often shops at area Bi-Lo supermarkets, which carry Southern Home as one of the chain's private label brands.

The willingness of the customer to try private labels creates a unique opportunity for supermarkets, according to Chris Durham with My Private Brand, an industry blog on private labels.

"Their goal is to get it in your mouth and show you the price because they think between taste and price that creates value and you'll purchase," he said.

Officials with top supermarket retailers say their private labels are becoming more popular with customers.

"We're finding that customers are trying them at a higher rate than they have before," said John Gianakas, a Bi-Lo vice president. "Customers are realizing that our brands taste just as good if not better than the national brands and are of good value," he said, adding that the brands have experienced considerable growth over the last 18 months.

At Publix Super Markets, among the most popular items helping drive the increase are milk, yogurt, bread, water and ice cream.

"We've seen a trending uptick for the last five years with our private label products," said Brenda Reid with Publix. "Our goal is to make our stuff as good as everybody else's if not better."

However, national brands are still holding their ground, according to Mark Hamstra with Supermarket News.

"National brands are still very popular with consumers. People are still retaining their preferences in part due to the trust they have built up over time," he said of the relationship between consumers and national brands.

But in at least one way, private label brands have a slight edge in creating brand loyalty.

"If they can create a great private brand product that no one else sells, the customer has to come back for it," Mr. Durham said.

Private labels date back to the beginning of the 19th century. During the tough economic climate of the late 1970s and early 1980s they became mainstream, with the 1990s marking a significant turning point.

"Grocers realized they could get more margin, better penetration, more differentiation, so they started spending a little more money and time on it and it created a better product," Mr. Durham said.

Grocers then adopted a tiered approach offering value brands, national brand equivalents and a premium tier aimed at specific categories, and slowly private labels are gaining.

According to a 2008 Nielsen release, private labels account for more than $81 billion in sales in the U.S., a 10.2 percent increase from 2007 that continues to rise. Nearly one in four items in supermarkets is of a store brand, representing $88 billion in sales, the PLMA reports.

The combination of extra emphasis on low prices and prominent placement within stores has been key in aiding the expansion of store brands in the market, according to the Food Marketing Institute.

As private label brands ramp up, the PLMA said the battle between them and national brands increasingly will take place on store shelves.

"Traditionally 20 years ago, private label brands would have been on the bottom shelf. Now they pair them up," Mr. Durham said of product placement.

At Publix, consumers can take part in the "Brand Challenge" program in which they receive a private label brand with the purchase of a national brand.

Though supermarkets have home field advantage with in-store placement and advertisement because they own the stores, their decision on whether to capitalize on it will determine who gains an advantage in the next round as brands fight for the dollars -- and loyalty of American consumers.

Supermarkets also are offering other incentives such as coupons and recreational vouchers for customers purchasing private label brands. At area Bi-Lo stores, customers receive two free baseball tickets to see the Chattanooga Lookouts upon purchasing four participating Southern Home/Top Care items, according to Bi-Lo.

Mr. Durham said that despite the economy showing signs of improvement, the recession has made customers re-evaluate how they spend their money.

"Americans are going to continue to be skittish about the economy for the foreseeable future," he said.


* 57 percent of shoppers identify themselves as "frequent" private label shoppers

* Private label sales totaled $81 billion in 2008

* 33 percent of consumers say the private label brand is higher quality than name brands

Source: Private Label Manufacturer's Association and The Nielsen Co.

"Private brands have the advantage in that if they can create a great private brand product that no one else sells, the customer has to come back for it."

-- Chris Durham, My Private Brand

View Time2Save articles