In Shift, Wal-Mart Puts Focus Back on Private-Label Growth

Retail Giant Seeks Exec to Oversee Product Development, Downplays Sustainability

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BATAVIA, Ohio (AdAge.com) -- After de-emphasizing private label for more than a year, Wal-Mart Stores is looking to ramp up its program by adding package-goods marketing talent, and the move could present a substantial new challenge to marketers who rely on the world's biggest retailer as the economy worsens.
Andy Ruben
Andy Ruben

Cincinnati-based executive search firm Wiser Partners, which specializes in recruiting package-goods marketing talent from the likes of Procter & Gamble Co. and others, last week circulated a solicitation for a director-portfolio strategy, private brands, for Wal-Mart.

The new position, focused on product development, would oversee three existing direct reports and an unspecified number of new additional hires. It reports to Andy Ruben, VP-private brands, an executive with a knack for being where the zeitgeist is. Mr. Ruben took the private-label position late last year after serving as the retailer's high-profile VP-sustainability for three years.

$30 billion in sales
At the time of the move, Wal-Mart and Mr. Ruben positioned it as helping focus the retailer's sustainable packaging and sourcing program on its vast private-label business, which has estimated annual sales of more than $30 billion in package goods in its namesake U.S. division alone.

In an interview with the environmental blog Treehugger.com shortly after he made the move, Mr. Ruben called his transition a "continuation of what I've been focused on in a new way."

But the new director position appears more squarely focused on growing sales, market share, cash flow and brand awareness -- all of them included in the performance metrics of the job description, while sustainability metrics aren't. Wal-Mart is specifically seeking an executive with experience using consumer package goods-style "stage-gate" product-development processes, signaling a focus on more new products consistent with premium private-label brands Wal-Mart largely lacks today, unlike most of its competitors.

A Wal-Mart spokesman forwarded a query for comment to a spokeswoman in food merchandising for the chain, who did not respond by deadline.

Ramping up the private-label team signals a significant directional shift for Wal-Mart, which has de-emphasized private label in the past 18 months as it focused on national brands. One exception is White Cloud in paper products and diapers, which recently got rare backing with a national coupon drop. Unlike most Wal-Mart private labels, however, the company doesn't own that brand, licensing it instead from Paper Partners, a Boca Raton, Fla., company that laid claim to the brand after P&G abandoned it in an efficiency drive in the early 1990s. White Cloud has since, ironically, become a billion-dollar brand at Wal-Mart by some estimates, joining other even bigger brands such as Great Value and Equate.

Will move succeed?
Wal-Mart's private-label unit shares declined throughout 2007 and into the first quarter of 2008, according to a June report by IRI, even as private-label shares were rising overall across the package-goods industry. Wal-Mart private label has been losing share consistently among shoppers described by IRI as "doing well," though they started picking up in the first quarter among those described as just "getting by."

Private-label shares 2007
  Wal-Mart Package-goods generally
Q1 -0.4 points +0.2 points
Q2 -1.6 points +0.3 points
Q3 -1.6 points +0.4 points
Q4 -1.2 points +0.5 points
Source: Information Resources Inc., Times & Trends, based on consumer-panel data

But it's not clear a new push by Wal-Mart into premium private label can succeed. Some package-goods marketers noted that having good prices on national brands is key to the retailer's core value proposition, as price comparisons among individual retailer private brands carry little or no weight.

Particularly in household and personal-care areas, Wal-Mart will likely have trouble getting traction with premium private-label today, much as it has in years past, said Deutsche Bank analyst William Schmitz. "There are already some very strong value brands [in household and personal care]," he said, adding that past efforts to build the more premium Sam's American Choice in non-food categories have foundered.
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