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Archive for Monday, August 4, 2008

Shoppers switch to store brands

Kroger brand premium cookies are stocked on a shelf with a customer-satisfaction guarantee at a Kroger store last month in Cincinnati. As budgets get tighter and food gets more expensive, American shoppers are increasingly switching to store brands.

Kroger brand premium cookies are stocked on a shelf with a customer-satisfaction guarantee at a Kroger store last month in Cincinnati. As budgets get tighter and food gets more expensive, American shoppers are increasingly switching to store brands.

August 4, 2008

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Comparing prices

A recent visit to the grocery aisles of three stores in suburban Cincinnati underlined the lower prices chains are offering on their own brands alongside national brands:

Kroger Co. store

Diet-oriented cereal, 12-ounce box: Kellogg's Special K $4.34; store brand two-for-$4.

Bleach in 1.42-gallon container: Clorox $3.89; store brand $2.99.

Wal-Mart Stores Inc. store

Butter pecan ice cream, 1.5 quart: Edy's $3.96; store brand $2.50 for 1.75 quart.

One can, cut green beans: Del Monte 82 cents, store brand 52 cents.

— After watching the price of her favorite bread rising too quickly, Michele Shores decided it was time for a fresh approach.

She began picking up store-brand breads, Kroger Co.'s namesake brand or Wal-Mart Stores Inc.'s Great Value, when her usual bread went from $2 to $3 a loaf. Less than half the price, and not half bad.

"My husband takes his lunch to work, and we all eat a lot of sandwiches here," said the 30-year-old mother of two from Atlanta. "So that's a lot of money for us."

Can't eat less

As budgets get tighter and food gets more expensive, American shoppers are increasingly switching to store brands - even upper-income consumers who may not have been inclined to give them a try before.

The nation's biggest grocery-sellers, Wal-Mart, Kroger, Supervalu Inc. and Safeway Inc., all report that sales of their own brands are jumping, as customers can't stop regularly buying food and household items but need to reduce spending.

"There are things we can do to drive less, but how do you eat less? You don't," said Erin Frehner, a Brigham Young University senior.

Frehner said she and her husband, both full-time students with part-time jobs, always try to get the store brand unless they strongly prefer the national brand or if the price is almost the same.

Taking pride in store brands

The Food Marketing Institute, an industry trade group, found this year that the number of shoppers who say they are buying more store-brand items has been steadily rising, now up to some 60 percent. Candace Corlett, president of the consulting firm WSL Strategic Retail, says her group has found that even upper-income shoppers are more willing to buy store brands, which have traditionally been seen as appealing most to people on limited budgets.

That shift comes as the chains are offering more store-brand products of better quality.

Gone, for the most part, are the gray, no-frills cans with nondescript labels such as "peas," packaging that evoked cheap, bland taste. Many now sport colorful labels with names like Kroger's "Private Selection" and "Naturally Preferred" that don't shout "store brand!"

The stores have been pushing their own brands in areas such as dairy products, meats and breads where prices have risen especially fast, and are also tapping into increased demand for organics and natural foods.

"Store brands have come a long way," said Tod Marks, a senior editor at Consumer Reports, which has tested store brands against national brands for quality and customer response. "Over the years, retailers realized that store brands were not just something to be floated out during hard times ... 'This is a signature product of ours. We want to be known for this.'"

Economy facilitates shift

Stores generally reap better profit margins by selling their own brands - also called corporate brands, private labels or generics - and also use them to build customer loyalty.

"All of us are creatures of habit, and when things are going well, you just buy what you bought last week," Kroger's vice chairman, Rodney McMullen, said in an interview. "Customers are much more willing to try a corporate brand when the economy gets tough, and when we can get the customer to try it, they like it. It just makes it so much easier for us to get the customer to try it."

Shores, the Atlanta mother, has been buying more store-brand diapers, costing about 30 to 40 percent less, but sticks with Procter & Gamble Co.'s Pampers for use at night because they're more absorbent. She tried store-brand spaghetti sauce, then went back to Prego, a Campbell Soup Co. product she says is thicker and vegetable-rich. But she doesn't taste much difference in the store versions of canned vegetables and many other weekly grocery items.

"For oatmeal, there's almost a $2 price difference," she said. "That adds up."

Good enough or the best?

Surveys have shown that most people were highly satisfied with most store brands, Marks said, and testing found many of them held their own against the national brands. In some cases, he said, consumers must decide whether "good enough" at a lower price is better than buying a national brand.

"Some stores do it better than others," said Sonya Redwine, 35, of Knoxville, Tenn., who usually steers her shopping cart toward store brands.

She does prefer Pampers diapers for her daughter and also P&G's Gain detergent for her heavy laundry loads, so she watches for sales and coupons and stocks up on those items. But she's happy with Kroger and Target Corp. store products for most groceries.

"Just because it's a store brand doesn't mean it's not the best for your family," she said.

More products

Wal-Mart, which says sales of some private-label categories are up 40 percent this year, is rolling out new "All Natural" ice cream featuring such new flavors as blueberry pomegranate.

Kroger has new lines of steaks, bread and pizzas besides more organic items. Within the past five years, the company has nearly doubled to 14,000 the number of store-brand products it offers. It also gives free samples and runs blind taste tests against national brands in its stores, and has increased direct mailings to regular customers with coupons and recipe ideas for its brands.

Like other chains, Kroger now uses a tiered approach, offering a sharply discounted "Value" brand, its namesake store brands, and what it calls "premium" brands such as Private Selection. Kroger says it puts that label only on products that meet or exceed the leading national brand in quality; Private Selection sales are projected to hit $1 billion this year.

While companies with the top-selling brands will probably hold up better than runner-up brands against the store competition, he said, "the long-term implications are really cause for concern for every branded manufacturer."

'All about value'

Kroger's McMullen said he thinks there's plenty of room for both store and national brands to do well as people cut back on restaurant spending. Kraft Foods Inc., the nation's largest food and beverage maker, on July 28 reported second-quarter growth, citing price increases and more consumers eating at home.

P&G, which has repeatedly raised prices to offset higher costs for energy and raw materials, has expressed confidence that product innovations and people's loyalty to its generations-old brands such as Pampers, Tide detergent and Gillette shavers will keep sales growing.

"It's all about value," Clayton Daley Jr., P&G's chief financial officer, recently told analysts. "It's not just price, it's all about product performance. ... It's about the trust that consumers have in your brands."

Comments

bearded_gnome 6 years, 1 month ago

and in other news, dogs were heard to bark in Lawrence. video and updates coming soon!***again, LJWorld, this is news? people just do what they need to do. you want to do something helpful for the people shown in this article? push for real measures that will lower energy prices, like dramatic increase in drilling; release from the strategic reserve isn't going to help, because it doesn't really change the supply side. it is a democrat party joke. democrats on the wrong side of this. barry h. obama favors high gas prices, he said so, because of his environmentalism! he just thinks prices went up a little faster than they should've!

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meggers 6 years, 1 month ago

bearded gnome,Please produce a quote that backs up your claim regarding Obama's view of the higher gas prices. Drilling won't do squat to alleviate the gas prices. A few pennies per gallon in ten years is a joke. As it is, the oil companies aren't drilling in areas that they hold leases. Perhaps instead of opening up new areas to drilling, they should try drilling where it's already been authorized. The drilling argument the republicans are making is a gimmick, pure and simple.

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