consumers, the fact is that many of the
mainstream shoppers in supermarkets
are much more familiar with the name
of the store brand than the name of
most organic brands.
Organic private label categories will
succeed where there is no national
brand presence and retailers can impress with high-quality consistent, convenient, premium food solutions. If
the retail chain can demonstrate outstanding private label quality and consistency across the entire range, it can
build trust in its brand.
The best retailers are becoming
“the consumer’s buying agent” because they are closer to the customer
and can anticipate their needs better
than the competition. National brand
manufacturers, who participate in private label for these retailers can be on
the forefront of these trends and bring
a category solution to the retailer, offer
more innovation and supply-chain efficiency, and develop more inclusive relationships with the retailer, adding to
the solutions which they ultimately
present to consumers.
The price gap advantage. No matter
how high the quality, consumers still
expect private label to be at a notice-ably lower price point that the national
brands. In the over all category of private label, the prices have risen quite a
bit this summer, but according to research from OFI, most organic private
label products that have common distribution among competing retailers
have kept a steady price. OFI conducts
a monthly price survey of 22 organic
private brand food products among
five leading retailers. Price points are
gathered from varying spots around
the country, and all prices are converted to a common package size for
direct comparison. Data collected between April and August 2008 indicates
that with the exception of a few items
such as milk and eggs, four out of five
retailers maintained many of their
price points for most items surveyed.
Competition is the key factor here and
OFI feels that consumers will take notice of those price opportunities.
Selling Against Ourselves—
National Brands Versus
Store Brand
The idea of creating a product that
could, in some cases, sit right next to
yours on the shelf, competing for market share with your brand, may seem a
bit absurd, almost cannibalistic—but
there are many branded companies
that are very happy doing bot h.
The fact i s
Private label offered a
competitive edge for Manzana Products Co.
that any time there is a dynamic force
coming in to play (in this case, rapidly
rising prices) there are going to be
brands and products positioned to
take advantage of the situation. Most
private label is priced on a net basis
without any promotions or marketing
funds, whereas larger organic national
brands may have these marketing
monies built in. These monies can be
trimmed in recessionary times, often
delaying or avoiding price increases
and helping brands compete for market share. Private label is seeing the
same cost of ingredients and freight as
the brands, but have lower margins for
the manufacturer (no built-in brand
tax), and the result is price increases
that can, at times, close the gap with
the brands.
But neither national brands nor private label can build their future on
price alone. For one thing, historically,
consumers tend to be very cautious
about trying new products even during
an economic downturn. The reason is
that at a lower price, there is a perceived risk of lower quality and performance. An example would be
buying a house brand of coffee at
$4.99 versus the consumer’s usual
brand at $6.49. Is the $1.50 savings
worth the risk if the consumer does
not like the house brand and has to go
back to buy the brand usually purchased?
P rivate labels can help bring aware-n ess to organic and encourage con-s umers to try new types of products
a s well. Before Whole Foods
b rought in their 365 label, their cer eal sales were flat; no one really
went into the aisle.
Other companies see this pot ential as well. “Our feeling is
t hat private label will expand
a nd further legitimize the cate-g ory,” said Matt Kiene, the coo wner of Homemade Baby, the
only fresh, refrigerated, puréed organic baby food on the market. Their
organic certified manufacturing facility
is also gluten-free and kosher, which
has been a plus with retailers.
Retailers can also help drive innovation. Because of requests brought to
them by their private label partners,
Homemade Baby is now manufacturing private label gourmet, puréed side
dishes as well as their line of baby
foods. “That’s the fun of working with
other sets of minds; people who have
been in the business for 15 to 30 years
who can help accelerate our R&D,”
Kiene said.
But what about protecting your own
brand in all of this? Spalding of Barbara’s Bakery, says that this is not really
and issue for their brand. “We try to
stay away from products that are too
similar to our branded products. If we
have a proprietary process or ingredient, that is not generally something we
share,” he said. “But innovation can
mean a lot of things, and if your brand
has a specific voice, then there are a
