Store brands are changing their image and prices
Some folks are partial to peanut butter from Costco Wholesale Corp.; others like the apple juice and cookie products made by Archer Farms, the brand owned by Target Corp. These are not brand names like Jiff from Quaker Oats or Mott’s. Every year, U.S. shoppers buy more generic goods, many of them trading down from more expensive, name-brand labels to save money. But consumers are developing loyalty to store brands for reasons besides price, and that could be a problem for food and consumer-products companies as the economy rebounds.
In some cases, consumers even pay more for store brands, many of which have been positioned as gourmet or specialty items. Private-label products still cost an average of 29% less than their nationally branded counterparts. But they are rising faster in price, at a rate of 5.3% last year compared with the industry average of 1.9%, and can sometimes be the most costly item in a category, says market-research firm Symphony IRI.
Prices of private-label perishable foods are rising even faster, up 12% last year versus an 8% jump for national brands. And some grocery chains are losing traditional, cut-rate white-label approach to generics and investing in new packaging, rebranding and polishing up product formulations into brands themselves, the firm says. Such private labels are also adding to their lines with new flavors and other value-added features, and finding ways to charge more.
For example, Supervalu Inc. is in the midst of replacing all the individual store-name labels at its chains such as Jewel, Albertsons and Cub Foods, with a new, single brand called "Essential Everyday." Target is rolling out its own frozen pizza, ethnic family meals and concentrated "liquid beverage enhancers" later this year. Coming soon from the Southern grocery chain Harris Teeter: store-brand sriracha—the popular Thai condiment—and "Wasabiyaki" sauce.
Along with improving quality, stores are reinventing their packaging with new features such as resealability, and launching new presentations as well as spending more in new product development.