ANOTHER VIEW ON PRIVATE LABELS; THEY'RE NOT GOING TO FADE AWAY

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The latest IRI sales figures for private labels indicate that store brands may be stalling, news that is being greeted with great enthusiasm by national brand marketers. Leading the cheer is C. Manly Molpus of the Grocery Manufacturers Association of America, who declared on this page that "there is no such thing as controlled-brand growth."

Our own TradeSmart Survey of retailers at chains accounting for approximately 40% of the All Commodity Volume suggests that the GMA's champagne ought to be kept on ice. Retailers continue to be bullish on store brands, predicting that private label unit sales will outpace national brands vigorously over the next two years. Indeed, retailers see store brand unit sales increasing up to 14%, with unit sales of leading national brands hovering under a 4% uptick in any category. Unit sales of non-leading national brands are expected to decline 2%.

Seventy-four percent of retailers have concluded that price cuts by brand marketers have been moderately successful at best. Only 9% said the lower prices had a significant impact. Retailers feel that either the brand marketers haven't lowered prices enough or they simply will lower the prices of their store brands to keep the price gap sufficiently large to continue to attract consumers.

Some comfort is sought by Mr. Molpus in the notion that store brands cannot really compete with national brands because "Nobody knows the American consumer like the national brand manufacturers do." To the contrary, our research shows that supermarket retailers believe they understand consumers better than package goods marketers in several key areas, especially their knowledge of consumer needs and shopping habits.

Mr. Molpus goes on to assert that store brands ultimately will fall short because "They can try to copy but they can't innovate." Truth is, store brands don't need to do what national brands do because they are building their brands using a different set of blocks. Grocery retailers do not view product innovation as the key to the kingdom. Fully 91% of the retailers we interviewed see in-store merchandising as the vehicle of increased store brand sales.

Early evidence of this trend is supported by Master Choice, the flourishing store label being marketed by Great Atlantic & Pacific Tea Co. As reported in the Dec. 13, 1993, issue of Advertising Age, Master Choice is being backed by ActMedia shopping carts, freezer vision and instant coupon machines in 72 Farmer Jack stores in Michigan. Then comes word, in Ad Age's Feb. 14 issue, that A&P is marketing its America's Choice store brand with a television advertising campaign.

The store label push does not end with merchandising and advertising. Increased consumer demand (85%), better quality products (80%) and a wider selection of store brands (80%) are also expected to increase private label sales, according to our survey. Mr. Molpus offers as reassurance that 80% of store brand growth in 1993 came from just 15 out of 240 grocery product categories, but retailers appear intent on intensifying their penetration, category-by-category, in the years ahead.

The trade offers one other clue about a major point of difference their brands may accentuate versus national brands: environmental responsibility. Most retailers are not demanding environmentally friendly products or packages from manufacturers, but some are suggesting that a "green" standard may be applied to store brands.

The challenge by store brands to their national counterparts, especially the non-leaders, is not a mirage. Nothing is to be gained by denying the power and potential of store brands. If national brand marketers are to compete effectively in an environment where premium quality store brands are aggressively merchandised-and even marketed-they must pay closer attention to the loud and clear signals being transmitted by their biggest customers, the retail trade.

Mr. Meyers is president of Meyers Research Center, New York.

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