Monday, May 11, 2009

Costco, Safeway Ensure Private Labels Won't Fade With Recession

According to, Richard Galanti, Costco’s CFO said that, when the company sees independent brand testing, its Kirkland Signature products consistently are competitive with any label when quality, value and price are weighed. Once, private labels were considered step-down merchandise that didn’t really deserve the term brand, but that has changed. “I don’t want to be so arrogant about it, but the Kirkland Signature has become a brand,” he said.

According to The Nielsen Co. store brand dollar sales at food, drug and mass merchandise stores grew 10.2 percent last year compared to just 2.6 percent for national brands. Worse for national brand manufacturers, private label dollar sales gained 2.6 percent in units as their own unit sales fell by 2.2 percent. Those trends have continued into 2009, Todd Hale, Nielsen senior vice president for Shopper and Consumer Insight, noted. He added that private label versus national brand growth during 2008 was similar in pattern to what was observed during the 2001 recession, but, back then, retailers weren’t making the kind of strides in packaging, quality, on-shelf presence and all-over brand building – a la Wal-Mart and its Great Value label – that we see today.

Retailers are becoming increasingly aggressive in building store brands. Safeway is among those companies that have been expanding private label initiatives to other retailers, but it isn’t alone. For example, Wakefern, the cooperative that supplies ShopRite supermarkets in the New York Metropolitan area, has opened up its wholesaling services to non-competing retailers outside its own system in significant part to drive sales of its private label products.

For the full article, please click here.

What strategies should retailers put in place when selling private labels?

1 comment:

  1. I think it would be wise for all owned brands to look at Target and the Archer Farms brand. They've spent the money and squeezed their suppliers in a way that gives them license to use great packaging ideas, have product supplied for their lines, and they have developed key positioning that is shopper-smart: they've book-ended the aisles and with Target's plans for growth in food and bev, this is a great start.

    To think, now these brands stand for value and style, not discount. The name generic doesn't even apply anymore. These brands are so well done and the reason why is because the brand is distinctive to begin with as opposed to other grocery brands that have no continuity and look cheap: it's a big difference and Target knows how to announce, amplify, and extend.