Spicing Up Store Brands

With more customers turning to store brands today, private-label marketers can use licensing to broaden their consumer reach.

More and more consumers are realizing that today's store brands no longer automatically mean "no-frills." According to Star Power: The Growing Influence of Store Brands in the U.S., a survey conducted by Ipsos MORI for the Private-Label Manufacturers Association (PLMA), 70 percent of respondents agreed that the private-label products they buy are as good as national brands, versus five years ago when a little more than 50 percent of respondents agreed with the statement. Moreover, the study found that 41 percent of shoppers now identify themselves as frequent buyers of store brands, versus five years ago when only 36 percent of respondents described themselves as such.

Indeed, Packaged Facts estimates the 2006 total U.S. market for private-label foods and beverages at $48.4 billion, a 1.3 percent increase from 2005 and a 12.9 percent increase over 2002, when the market stood at $42.9 billion.

The percentage of consumers who most often buy private-label products varies widely by food or beverage classification, according to data provided by Simmons Market Research Bureau's National Consumer Study, Spring 2006, which surveyed 24,438 consumers across the U.S. At the high end, 65 percent of U.S. consumers most often buy private-label eggs, translating to 70 percent of consumers who buy eggs. Posting more moderate but still higher-than-average private-label preference rates are other close-to-the-farm products such as sugar (28 percent); frozen or canned/jarred vegetables (24 to 25 percent); and butter, cottage cheese, or sour cream (19 to 21 percent). Conversely, artificial products such as sugar substitutes (2 percent) or diet colas (2 percent) aren't big private-label purchases.

For private-label retailers that are not yet ready for the hefty spending of national brands, cross-promotion offers a big benefit: the potential to connect with and sell more items per buyer, for less proportional cost. H.E. Butt Grocery Co., for example, promoted private-label milk in a coupon promotion. With the purchase of Oreo cookies, Maxwell House coffee, or Grape Nuts cereal, customers were offered as much as $3 off the purchase of a gallon of H-E-B private-label milk.

Private-label marketers also can use licensing to broaden their consumer reach, especially to kids. While few private labels have leveraged licensing to reach out to parents and kids, some deals were done last year. For example, Kroger Co. entered into a partnership with Disney Consumer Products to create Disney Magic Selections, a line of healthy kids' products—including granola bars, fruit cups, applesauce, macaroni and cheese, and Disney-branded fresh fruits—that combines Kroger's Private Selections brand with the Disney brand. Packages feature Disney characters from movies such as The Incredibles; Monsters, Inc.; and The Lion King. Another example, Royal Spring Water Inc.'s National Lampoon Bottled Water and Flavored Water, targeted the 18- to 35-year-old market or "the kid inside every frat boy."

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