Private Label Resurgence

Grocery wholesalers are boosting margins and market share with private-label brands.

But for many retailers, the real benefit of private label is in the scale more than anything else. That’s been the lifeblood of Topco, whose members, “from an efficiency standpoint, find it’s better to go with a Topco brand because it has volume behind it,” says Mazur. “They’re combining purchases so that they can get better value, packaging, procurement, labeling and distribution of these brands without having to go at it on their own.”

“In the case of these coops, [wholesaler private label] makes perfect sense because the individual members probably don’t have the wherewithal to develop their own private-label programs,” says Pat Turpin, a partner in Los Angeles-based Bayside Ventures, an investment firm specializing in emerging food businesses. “They can turn to their wholesale supplier to give it to them with little or no risk. In a situation like this, I’m not sure what the cons are.”

“We give the retailer high profit margins and the consumer low prices. You can’t beat that,” says Michael Larmon, brand manager for Effortless Entrees, a frozen food brand launched last year by Golden Bay, a subsidiary of Federated Group, Arlington Heights, IL.

Better Than The Real Thing
Choosing private labels are also getting easier from a quality standpoint. In the past, private-label brands weren’t much of a threat for the big national brands. They were considered an inferior, low-cost alternative. Labels and packaging were usually dull and uninviting. But, with the rising entry of grocery wholesalers into the private-label arena, all that has started to change. Because the wholesalers have a vested interest in the success of the brands, they’re paying much greater attention to product quality.

Supervalu, for example, has an entire quality assurance department that has taken extensive steps to ensure that its customers will always have a quality experience with every Supervalu store brands product. The department tests more than 1,600 store brands products each year to guarantee that products are being manufactured to strict standards.

Supervalu, “works hard to provide consumers with a superior product at the best possible price,” says Espelien. “Our goal is to make their experience with our products equal to or better than the most popular national brands.”

“If a customer is staring at a shelf and they see a brand that is cheaper than a national brand, we want him to take it home, try it, like it and come back for it again,” says Espelien. “To do that, we needed to change the image in the mind of the consumer of the brands in terms of quality and value.”

Says Nash Finch’s Poore, “We’re pursuing our labeling and packaging just as enthusiastically as the national brands and now we’re doing a lot of testing for quality assurance. We’re investing significantly in test kitchens to make sure we have the right products and taste profiles for our [private-label] customers.”

“Private brands have come a long way. Our standards are higher than the national brands; our packaging is fantastic; and the variety is unexpected,” adds Golden Bay’s Larmon.

Category Market Share Growth
Refrigerated foods 32% 9%
Paper, plastic, wraps 31% 2%
Frozen foods 25% 3%
Pet foods 21% 11%
Shelf-stable foods 19% 5%
Diapers/feminine hygiene 14% -1%
Healthcare items 14% 3%
Non-alcoholic beverages 12% 3%
Home care 10% 3%
Snacks/confectionary 9% 8%
Alcohol 6% 3%
Personal care 5% 3%
Cosmetics 2% 23%
Baby foods 2% 13%
Source: ACNielsen

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