To get ahead of the competition, grocers tend to hone in on price and product. A well-developed private label strategy can be another solution as it tackles both.
Whether you’re a big chain, or an independent, private label is a key point of difference. Nielsen reports nearly one in every five CPG items sold in Canada is a store brand. A recent survey conducted by the Private Label Manufacturers Association in the U.S. reveals that almost half of all grocery shoppers “always or frequently” buy a private label product.
There’s a mantra execs at retail consulting firm Watt International often use when talking about private label: If you own the stage or write the script, it’s not hard to envision who the star should be. Next to great customer service, private label can be the best way to stand out from competitors.
PLACE YOUR BETS
As a small independent, is the private label business something to consider? The short answer is yes. Tom Stephens, founder of Brand Strategy Consultants and former EVP of President’s Choice International, says that in almost all cases he would suggest a grocer start its own brand. “As an independent, you really have to ask yourself, ‘what am I doing to challenge the major retailers?’ ” he explains. “If you’re surrounded by bigger stores—and you likely are—the reason customers are coming to you isn’t to buy Coke or Tide.” Stephens recommends taking a close look at the kinds of customers shopping at your store and what niche you can fill that surrounding retailers can’t.
Scott Lindsay, president of the strategic private brand agency Product Development Plus, says a private label strategy needs to fit into a grocer's brand. "Know who you are and who you want to be, and then develop your strategy to support those goals," says Lindsay. "Smaller chains can win if they think strategically, give brands priority on the shelf and support them in all marketing efforts. Private label shouldn't be developed in a vacuum."
Watt International, which has helped develop private label strategies for Walgreens and Walmart alongside indies such as Long's and Michael-Angelo's, is usually hired by a retailer for branding purposes—a new logo or product line, for instance. but the project nearly always results in a larger transformation that spans from store design to marketing strategies, including private label. "Every dimension of your retail experience needs to support your brand," says Ian Cooke, VP of client development with Watt.
RAISING THE STAKES
Developing and maintaining a house brand strategy is as important as the initial concept. Sunripe Fresh Market, based in London, Ont., has it down to a science. Co-owner Ingrid Willemsen has final say on what products to add to the Sunripe line of house brands.
Willemsen says she considers five things before adding a new product to the roster: Are the ingredients easily accessible? What would the packaging be, and does that fit the brand? Is it possible to make the product consistently, so there’s no variation in the recipe? “Obviously, having it be tasty is a huge concern too,” she adds.
Finally (and likely the most important), is the product highly consumable? "It needs to be something that a customer will have to purchase often and that they can only get in our store,” Willemsen explains.
While Willemsen is always on the lookout for new products, some stores take a slower approach. Lady York Foods, based in North York, Ont., has been in business for over 55 years, but launched its first private label product only three years ago. “I had thought about getting into the business for maybe 10 or 12 years,” explains owner Gabriele Torchetti. Lady York’s first private label product was a series of tomato sauces, developed with an outside manufacturer to taste as close to the Torchetti family recipe as possible. Today, Torchetti says, Lady York’s sauces outsell name brands in his store.
A quality product is key to any house brand’s success, but it won’t matter if your customers don’t know about it. Standard practice is to use in-store communication and flyers to market your brand. Lady York uses targeted ads in local magazines such as Panoram Italia, which celebrates Italian culture.
Retailers with a more robust house brand strategy may wish to go further . Watt’s Cooke says many grocers now bring in hires from the CPG world, who tend to know more than retailers about making and marketing a product. Another tip: Stephens says, independents should aim to create private label products that can be sold in other stores. “I’d build a brand that wasn’t just the name of my store,” says Stephens. “It’d be something that would be a good fit in other market .”
That’s exactly what The Village Grocer in Unionville, Ont., has done. “So many people wanted to sell our products in their stores that we developed a brand that would be identifiable outside the store or city,” says owner Evan Macdonald. Now, Village Grocer products are available in stores as far as Ottawa and Niagara-on-the-Lake, Ont.
In some categories—paper towels and dried pastas, for example—independents simply can’t compete against big brands. But Stephens says current food trends , such as meal kits or HMR items, are good examples of categories bigger chains wouldn’t be able to replicate on a large scale. “Find a product that will bring people to you, and while they’re in your store trying your meals, prep for the next stage,” he says. “Find trends that will last and evolve.”
HOLD ’EM OR FOLD ’EM?
A benefit to being an independent is that whether a customer likes or dislikes your products you’re likely to hear about it. Fast! So, if need be, you can tweak recipes and packaging right away. “It’s not the big that eats the small, it’s the fast that eats the slow,” says Tom Barlow, president and CEO of the Canadian Federation of Independent Grocers. “Independents aren’t going through a procurement group or a giant distribution centre.”
It’s this nimble nature that means independents should be putting all their creative efforts into their private label strategy, says Lindsay. “Independents aren’t held back by red tape–they have complete ownership over their shelf space and merchandising.
And retailers may have to muster all the creativity they can to attract the newest batch of customers. The most recent Nielsen Homescan survey shows millennials are unsure about private label. They see it as being a “budget conscious” choice, and wouldn’t feel comfortable serving it to guests.
Stephens notes that while shoppers are always looking for value, that doesn’t necessarily mean price. “If you put out a product that doesn’t clearly showcase what it is and its benefits, no one will buy it,” he says. “You need to hone into what your customers want, and give it to them. If it’s restaurant quality at a quarter of the price, all the better.”