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. With The branding of the unbranded
Honestly I’m too busy to say this well, but just a quick word or two about a recent Wall Street Journal story about improved sales of private-label products as proof that “frugality trumps branding.” (Mentioned also here and here.)
First, private-label sales have been rising steadily for many years. This is not a break with recent trends, it’s a continuation of it.
Second, while many people still describe private-label products as “generics,” the fact is that the broadest trend in the private-label business has been to make such products more brand-like. I get the feeling that some of the people who write about this think you can still walk into a store and find the kinds of totally brand-free generic products, like cereal boxes marked simply Corn Flakes, available in the 1970s (and preserved forever in Repo Man). Obviously, you can’t. Moreover, the familiar tactic of crafting packaging that simply apes brand-name goods, but clearly bears the name of whatever store is selling the stuff, has increasingly been supplanted by strategies that seek to position private-label goods as brands.
It happens that I’ve dealt with this subject in various ways in Consumed:
- In a 2004 column about Ol Roy, a Wal-Mart private-label product that is the nation’s top-selling brand of dog food
- a 2005 column about private-label products at Wegmans, which are actually invented by that chain, and don’t knock off any brand-name product at all;
- a 2006 column about the package-design strategy for private-label goods at Publix, which quite intentionally pop from the shelf as something much more like a unique stand-alone brand than an echo of traditional branded merch;
- and, finally, a 2008 column about Safeway’s O Organics private-label brand, which the chain has actually supported with traditional advertising, and is selling in venues other than Safeway. (Target has also supported some of its private-label goods, such as the Choxie line, with traditional advertising.)
What unites all of these things is that they’re all very much branded goods. They were simply branded by a retailer, not a manufacturer.
Are they cheaper than manufacturer-branded goods? Often. And yes, that’s partly because, in general (I’ve just noted some exceptions) the brand-building isn’t done by way of traditional advertising, which can be expensive. But they’re also cheaper because there’s no middleman: Stores are dealing directly with production facilities to get this stuff made.
So, sure, private-label goods are probably doing great because more people are being “frugal,” but it’s not just about competing on price alone, or about improvements to the quality of private-label goods. I am certain that the profit margins work out quite nicely for the retailers — and much better than they did back in the days of “generic” goods — precisely because private-label goods today increasingly include something very much like a brand premium.
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Reader Comments
II haven’t been to a Wegman’s (which I think is predominately northeast), but I’ve definitely imbibed the Trader Joe’s Kool-Aid. I know you mentioned them in the Wegman’s piece, but I’m surprised how infrequently the store is mentioned in the media. They sell high-quality food that other stores would charge a ridiculous premium for, at prices lower than what other stores charge for chemical-laden crap — and with a FAR better in-store experience than pretty much every grocery store I’ve been to.
Their in-store branding is smoots ahead of other stores: their playful variants of the brand name, like Trader Giotto’s for frozen pizza, Trader Jose’s for salsa, Trader Ming’s for frozen dumplings, Trader Darwin’s for vitamins; also their copy in Trader Joe’s Fearless Flyer, which is some of the best copy I’ve seen. Part of the brand positioning, too, is the ease of returning items to the store. They encourage you to try new items and remind you that you can always just bring it back if you don’t like it.
The WSJ also had a review last week of “Cooking with All Things Trader Joe’s”.
Indeed, the “new, new” white label retailer threat to big manufacturers is very real and growing fast. You have to wonder just how far this will go. And, at what point will the manufacturers start really responding?
In truth, the same manufacturers that create both the name brand for themselves and the white label products for retailers. In my consulting experience this is certainly true in most of the food aisles. For consumers the choice comes down to the perceived value of the brand, the price and the innovation…in short, the value proposition that has always played in the aisles.
As brand purists, we may think it is folly to create a lower-priced competitive product. From a business perspective when facing the knowledge that a store is going to start selling white label products (that will inevitably eat into your sales)…would you rather process and package that product for them, and others, taking part of the cut or would you rather have your competitor do it?
It’s hard to say whether or not the strenght of a brand can outweigh a low price alternative. Personally, I believe it depends on both a person’s preference and how easy it would be to adjust to a similar product. I’m not a marketing expert, just a college student who works at a Hannaford supermarket, but it seems to me that during the over a year period that I’ve been bagging groceries, I’ve packed an equal amount of boxes of Lucky Charms with the more generic “Magic Charms” or as I jokingly refer to them “Budgety Marshmellows”. I know that I would prefer Lucky Charms as my breakfast cereal because for some reason it means something to me. Yet, if I needed to buy something like glass cleaner I could easily purchase a no-name brand because I don’t really care about cleaning products, so I’d rather get something cheap than Mr. Clean because the sight of his bald and cocky persona means nothing to me. Also, there’s the inclusion factor that comes with some brands. My parents are health-nuts, so growing up I rarely got junk food. I remember one time though, I got to bring Hydrox Oreos to summer camp for lunch and a couple kids made fun of me because they weren’t real Oreos. Maybe the reason I buy Nabisco Oreos today is so that nobody I might encounter from my childhood can make fun of me.