Average U.S. household sales totaled $3,637 for all retail outlets (graphic) BRANDS FOLLOW NEW SHOPPING PATTERNS NEW VENUES EAT INTO SUPERMARKET SHARE; STORE BRANDS AREN'T TAKING OFF

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Americans are shopping differently.

And these new shopping habits have very interesting implications for the major brands.

Research undertaken by the Grocery Manufacturers of America tells us that the $360 billion grocery industry has made the transition when it comes to where and how people shop.

Grocery manufacturers now offer for sale 644,782 bar-coded items. Consumers can choose to buy these items from any combination of more than 50 different retail formats-supermarkets, convenience stores, tiny specialty shops or huge Wal-Mart Supercenters.

We're undergoing a landmark shift right now in where people are spending their dollars. According to Willard Bishop Consulting, in 1980 there were 96,000 small mom-and-pop stores with under $2 million in annual sales. In 1992 there were 53,000. Three years from today, projections are, there will be only 39,000.

Compare that decrease to these numbers: In 1980 there were 920 warehouse stores. In 1992, there were 2,100. Warehouse clubs are exploding! And so are other forms of food-and-drug combination stores-they totaled 475 in 1980, compared to over 2,000 in 1991. Finally, 12% of the $360 billion industry has moved from supermarkets to places like Kmart and Wal-Mart. That's $43.2 billion through s distribution channel that, for all practical purposes, didn't exist 10 or 15 years ago.

If you truly want to understand what's going on in this business, you can't just look at supermarket sales any more.

There's been a lot of noise lately to the effect that private-label products have the national brands on the run. Don't buy into the fallacy that brand equity is fading...the facts won't back you up.

Today's "private label" brands aren't the black-and-white "generics" of days past. What we're talking about is multi-billion-dollar companies like Wal-Mart or Loblaw's doing exactly what the national brands do: They design a package, they give the product a name and identity, and they promote it, just the same as Coca-Cola or Pepsi.

The correct terms to use in describing these products are "store brands" or "controlled brands."

According to Information Resources Inc., 80% of the growth of controlled brands falls into only 15 of the 240 grocery product categories. Cut out those 15 and there is no such thing as controlled-brand growth. Their sales are flat.

In fact, 1993 wasn't even the high point of popularity for controlled brands. During the recession year of 1982, according to SAMI/Burke data, store brands peaked with 15.3% of the market.

What the numbers show is that consumers are very value-conscious, not cost-conscious. The issue isn't price, it's quality, performance and price-adding up to value.

That means it's up to manufacturers to differentiate their products clearly and deliver value competitively. That means the national brand has to sell a distinct characteristic-it has to get your clothes cleaner, or taste better, or be nutritionally superior, or be packaged to meet lifestyle and convenience demands.

Nobody knows the American consumer like the national brand manufacturers do. And nobody else can serve the market's needs like we can.

Store brands can't do what needs to be done. They can try to copy, but they can't innovate. They can't respond to the changed tastes and circumstances of today's rapid-fire competitive environment. And they can't challenge the national brands when it comes to trust and reliability.

Simply put, national brands build the business.

They generate the traffic. They create the excitement that drives the sales.

In supermarkets, 81 of the top 100 best-selling items are national brands; 14 of the remaining 19 store-brand items are in the dairy case. In drugstores, 92 of the 100 best-selling items are national brands. With mass merchandisers, 87 of the 100 best-selling items are national brands.

Demographics may change, channels may change, lifestyles may change, the very definition of the word may change-but delivering value is what we do best!

Mr. Molpus is president-ceo of the Grocery Manufacturers of America, Washington. This article is excerpted from his speech Feb. 12 to the International Food & Lifestyles Media Conference in Chicago.

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