Grocers' private labels gain market share

Private-label grocery products, long shoved to the back of the shopping cart in favor of national brands like Kraft and Skippy, are gaining acceptance among shoppers as stores take new steps to beef up their own brands. Private labels, also called store brands, are made by the retailer or a third-party supplier to the retailer's specifications. Some used to be awful knock-offs of their name-brand competitors, leaving a sour taste in shoppers' mouths. That reputation is turning around as grocery chains improve the quality of their private-label products as a way to stand out in the increasingly competitive grocery market. "Food retailers are always looking to find a way to compete better in the marketplace and differentiate themselves," said John B. Lord, professor and chairman of the department of food marketing at St. Joseph's University in Philadelphia. "One of the key ways is [to create] store brands that no one else can sell. Other aspects [of a store's strategy] can be duplicated, but a store brand can't." "We're definitely seeing growth in the private-label demand," said Greg Ten Eyck, a spokesman for Safeway's eastern division. "More and more people are seeing that the private label is equal or greater than the quality of name brands." Safeway recently beefed up its "Safeway Select" brand, among its highest-quality private labels, with products such as creme brulee desserts, chai tea and artisan breads. It is also reorganizing its 70 different private-label lines into 10, including Safeway Select, Lucerne and O Organics. Giant Food recently introduced its "Simply Enjoy" line of products, stocked with items such as premium coffees, imported pastas and drink mixes. It's part of parent company Royal Ahold NV's recently announced plans to improve Giant's private-label line, which also includes Nature's Promise and CareOne. "We're promoting private label more so than ever before because we've seen an increased demand for it," said Giant spokesman Barry Scher. Private-label products are one of the ways a grocery chain can stand out when all of its competitors sell the same Coca-Cola, Crest and Charmin, Mr. Lord said. Plus, profit margins are higher on private-label goods because national brands need to include the cost of advertising in their prices; grocery stores' ad costs are distributed among everything in the store, not just the private-label products. Across the country, grocers' efforts to reverse private-label products' reputation appears to be working. About 41 percent of shoppers say they frequently buy private-label goods, up from 36 percent in 2001 and 12 percent 15 years ago, according to a study produced this month by the Private Label Manufacturers Association (PLMA), a New York-based trade group. "Customers have more experience with purchasing private-label products and are realizing it is [national brand] quality," Mr. Ten Eyck said. It's difficult to tell if that improved reputation is translating into more sales, however.

The Washington Times