BATAVIA, Ohio (AdAge.com) -- For U.S. package-goods marketers already seeing private-label brands eating away market share amid the recession, there's even more sobering news: The British are coming.
Sensing that the U.S. may be on the cusp of a private-label boom akin to what the U.K. saw in the 1970s, one of Britain's largest package-goods design shops, Blue Tagg, recently set up shop in Chicago and already has landed its first retail client. Meanwhile, the biggest manufacturer of private-label household and personal-care products in the U.K. and Europe, McBride, also appears to be eyeing a play in the U.S. market, according to a person familiar with the matter.
Interest from British players comes as the profile of private label has been rising along with its shares in the U.S., turning what had largely been a marketing backwater into a strategic focus and career springboard.
In the U.K., sophisticated retailers long ago pushed private-label shares above 30% in many categories, well above levels under 20% in most U.S. categories.
Blue Tagg, which has the U.K.'s well-regarded Sainsbury house brand as a client but has maxed out its roster with clients in every retail segment there, quietly set up its first U.S. operation in Chicago in October. Already, it's landed the account of an undisclosed U.S. retailer, said managing partner Bruce Drinkwater.
Meanwhile, McBride, the U.K.-based company that ranks as Europe's largest manufacturer of private-label household and personal-care products, is said to be looking to increase its involvement in the U.S., possibly through acquisition or in an advisory capacity.
European players could change game
One reason private label has stayed particularly underdeveloped in household and personal-care categories in the U.S, according to people familiar with the industry, has been because of a private-label manufacturing industry consisting largely of small, highly leveraged companies that have been particularly vulnerable in the current credit crisis.
But entry of European players could change that, just as private label attracts added interest from marketers and agencies. In an unusual move for the U.S. or Europe, Walmart recently appointed ad agency Publicis & Hal Riney, San Francisco, to overhaul its entry-level-priced Great Value brand.
It's the latest sign private label has assumed a higher priority at the nation's and world's largest retailer. In 2007, Walmart appointed Andy Ruben, who had headed the giant retailer's high-profile sustainability efforts, to head its private-label program. He's been staffing up his group with package-goods marketers since then.
Chief Merchandising Officer John Fleming and Chief Marketing Officer Stephen Quinn see an opportunity to transform private label at Walmart from mainly a tactical effort aimed at restraining price hikes by brand marketers to a strategic effort aimed at building Walmart's own brand and margins, according to people familiar with the retailer.
More private-label proof
Further proof that private label has gained status came late last year when chain Jamba Juice appointed James White as its new CEO. Mr. White had headed the private-label program at Safeway, including its closely watched O Organics line. For what may be the first time, running a private-label business became a springboard to the CEO suite.
Of course, prophesies of doom for brands and ascendance for private labels have come and gone before. Gabe Lowy, who as a consumer-products analyst in the 1990s was perhaps the chief prophet of private-label ascendance then and is now a technology analyst with Noble Financial, believes private-label growth fizzled before for several reasons, including a relatively quick economic turnaround and more innovation by manufacturers.
But the biggest reason, he believes, was lack of sustained commitment by U.S. retailers to building their own brands through marketing as European or Canadian retailers do. That's something that looks to be changing fast.