Quick. Name the largest store brand in the United States. It's not Kraft, Johnson & Johnson or any other giant product supplier. The answer is Great Value, Wal-Mart's store brand. And with Wal-Mart smelling blood among its giant retail rivals like Kraft and P&G, it's getting more aggressive with its brand.
When I think of Great Value products, the cheap clear gallon tub of artificial vanilla ice cream comes to mind. And indeed, ice cream is one of the "750 everyday items" whose recipes the company redesigned to make them more like branded products. Great Value now carries a variety of ice creams like fat-free caramel-swirl, mocha mud slide and cake batter.
The Great Value overhaul begins at the end of this month and the
company expects it to be nearly complete by May. Wal-Mart doesn't hide
that it's competing directly against other, more expensive retailers.
It knows it can beat them in price so it just has to tie them in
taste, which is why the company conducted "more than 2,700 consumer
tests to compare the flavor, aroma, texture, color, and appearance of
Great Value products against leading national brands."
Great
Value is what's known as a "private label" brand, which means the store
either makes or licenses the product. With no middle man and no
marketing, private labels are not only cheaper for customers, they have
a higher profit ratio for stores than branded names. According to BusinessWeek, private label sales rose 10 percent in 2008, a number that's certainly going to increase in 2009 as people try to save even more.
In the same BusinessWeek
article, Wal-Mart is noncommittal as to whether it will start marketing
its store brand or give it more shelf space. It wants to see how many
customers are comfortable buying a private label brand. In this
economic climate, that's a no-brainer.
Though Wal-Mart doesn't mention it, a growing irritation with normal food suppliers is likely
playing a role. Even as fuel, feed and wheat prices have fallen, food
suppliers have continued to raise their prices. As mentioned on Breakfast Buffet
yesterday, this is making retailers very mad. Safeway was the most blunt,
when challenged food suppliers to cut
out the price hikes or face more competition from Safeway's already popular private label
line, which has nearly as many products as Wal-Mart's, including
an organic line.
I count just over 100 Wal-Marts
in the Kansas City area, each with thousands of customers. If
just a few from each store switch to private label brands and
you multiply that by the thousands of Wal-Marts in America, it won't
take long for the Krafts of the world to get the message.
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I know where you work too! Uh....I'm not sure. I'll check into subscribing to comments tomorrow and hopefully by Monday that link will be prominent.
Chimpo- you're absolutely right and even as a 8-year-old I would wonder why store brands weren't packaged nicer. It makes no sense for stores to underplay them when the margins are higher. I hate to admit it but Amway was kind of the innovator in self-products packaged nicely. The fact they have no overhead, volunteers as middle-men and still charge more for their products boggles my mind.
Costco brand Kirkland is sometimes better than real brand-names, even consumer reports says so.
Owen, were is subscribe-to-comments feature, I know where you work, don't make me come down there.
I wouldn't say any store actually makes their own private label. A manufacturer makes it and the stores brand it, but the manufacturer is probably making the private label for multiple store chains.
Private label is the true growth area for these stores. As long as they can make a decent brand name and package design, the product is essentially the same exact formula as one of the brands they carry because a brand manufacturer is also the private label manufacturer.
It's not just Wal-Mart or Safeway, it's every major chain around the country. Frankly, it's surprising how little effort AWG here in KC is putting into it. It's like they are just accepting their fate of being wiped out down the line.
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