Bargain brands on rise: Marketers put premium on value lines

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When Marlboro friday rattled the package-goods industry nearly a decade ago, private labels were the big threat. In the current economic downturn, however, it's not store-brand package goods that are seeing rapid growth. Instead, manufacturers' value brands are stealing the spotlight.

Often priced between private labels and premium brands and sold on looks and performance as well as price, bargain brands such as Dial Corp.'s Purex laundry detergent and Del Laboratories' Sally Hansen and New York Color cosmetics have seen sales rise more than 20% in the past year. Unlike most store brands, both are backed by advertising, albeit at minimal levels. But given their current strength, some brands are considering-or already running-TV ads.

Del, which handles ads in-house, began TV spots in 12 U.S. markets earlier this year. Purex, which now runs print ads via Cramer-Krasselt, Chicago, is considering TV, too, according to Steve Tooker, senior VP-general manager of Dial, who recently moved from overseeing laundry to personal care. Purex, now a $270 million brand according to Information Resources Inc., hasn't had TV support since the 1980s.

`big steps'

"It's something we'll go into lightly, because it's a big expense and a big step," Mr. Tooker said. "But the brand is big now, so it makes sense for us to at least look at it."

The aggressiveness comes as smaller value players are being challenged by mega-marketers such as Unilever and Procter & Gamble Co. that are hedging their bets by developing strong value complements to premium brands. Unilever, following a decade of double-digit growth for its Suave personal-care brand, hopes to repeat that success with All. It's running TV ads from Interpublic Group of Cos.' Lowe, New York that focus on a "smart shopper" as All expands into fabric softeners. P&G, meanwhile, cut prices on Pert and Clairol Renewal 5x hair-care, positioning them to compete with Suave.

Value brands become more of a value as price competition gets brutal. When P&G knocked the price of Pert and Renewal 5x below $2.50 and $2 respectively at Wal-Mart, Suave and Alberto V05 moved from just under $1 to 78 cents. Priced at $1.98 for liquid, Purex is now at parity with Wal-Mart's Sam's Choice private label.

But value marketers insist their success isn't all about price, and the fact that their sales have outpaced private label appears to bear that out. Private-label sales actually fell in 25 of 37 categories tracked by Banc of America Securities analyst Bill Steele in the four weeks ended Sept. 8.

"The value brands are just much more in tune with consumer trends" than private label, Mr. Steele said.

Wal-Mart's much-feared private-label detergent launch in 1999 hasn't ended up hurting Purex. "In most cases, private label just is not done very well," Mr. Tooker said. "It's not well-merchandised like a consumer brand. .... So when there's another alternative out there that doesn't appear that way, it does better."

slowdown's benefits

Value-brand strength isn't new. Alberto-Culver Co., marketer of the value-priced Alberto V05 and St. Ives brands and the downscale Sally Beauty wholesale/retail outlets, has seen compound annual sales-growth rates of more than 11% for a decade. But the economy helps. "I think the drugstores and the discounters have benefited from the economic slowdown," said William McMenemy, exec VP-marketing for Del Labs. That's helped lift all mass cosmetics, he said, but Del may benefit most, since it's generally priced below rivals. "Some of the mass-market brands and competitive brands may have pushed their price points too high."

"When things start to soften and people start to save their pennies, they turn to Purex," Mr. Tooker said.

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