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Seeking savings, some ditch brand loyalty
Sales of generic products on rise
By Jenn Abelson
Globe Staff / January 29, 2010
The Boston Globe
Over the past six months, Elizabeth O’Herron has banished nearly all brand names from her household.
So long Pampers, Hefty, and Birds Eye. Instead, the pantry is stocked with cheaper imitations of the same goods: Wal-Mart’s diapers, BJ’s garbage bags, and Stop & Shop’s frozen veggies.
“I am not loyal to any grocery store or any brand,’’ said O’Herron, who estimates she saves at least $50 a month by buying generic brands. “I am loyal to savings.’’
A growing number of consumers like O’Herron are ditching their beloved Kellogg’s Raisin Bran and Wonder Bread for less expensive versions without the familiar packaging. Unit sales of private label goods have jumped 8 percent since 2007, while brand names have declined roughly 4 percent, according to Nielsen Co.
Many shoppers are finding that sugar, shredded cheddar, and milk peddled under store labels cost up to 40 percent less and often taste just as good as nationally known brands. Some items are even made by the same manufacturers.
Shoppers’ switch to store brands suits merchants just fine because they make a bigger profit from selling their own labels. This month, Supervalu, which runs several supermarket chains, including Shaw’s, unveiled plans to slash the number of items in various categories by as much as 25 percent so it can display store brands more prominently.
Europeans long ago began embracing private labels, realizing it involved little sacrifice and considerable savings. The recession has nudged Americans to the same realization. More than 40 percent of shoppers reported buying store labels instead of name brands, and 63 percent said they plan to purchase private labels after the economy rebounds, according to a survey of 50,000 grocery shoppers released last week by BrandSpark and Better Homes and Gardens.
“Store brands used to be nothing you wanted to buy. It was a compromise you’d make in quality in order to get something cheaper,’’ said Alan Klein, of the Marketing Agency Paris New York, a consultancy. “But the recession has been an awakening for some consumers. They are realizing that they can get equal or superior quality.’’
Retail analysts say the trend has made it harder and more expensive for national brands to get their products on the shelves at a time when many of these companies have reduced advertising budgets. This month, Procter & Gamble said it is launching an online shop this spring that will sell P&G products like Oil of Olay, Pampers, and Tide. A P&G spokesman declined to comment on the rise in store brands, but the company last fall responded to consumers’ trading down by lowering prices, including cutting the price of Cheer detergent by 13 percent.
Stop & Shop, which is based in Quincy, has added more than 1,000 of its own items over the past two years, bringing the total to 4,000 private label products. These goods are offered under various names, including Nature’s Promise, Stop & Shop’s natural and organic goods line, and Simply Enjoy, the chain’s specialty products meant for entertaining, such as ice cream.
Supermarkets are appealing to consumers by offering additional discounts on already lower-priced store brand products when consumers use loyalty cards. For example, the price of Keebler’s $3.39 fudge stripe cookies paled in comparison with Stop & Shop’s $1.79 fudge stripe cookies. That deal was then sweetened to two packages for $3 with a loyalty card.
“On average, customers can save up to 25 percent when they shop in our stores and purchase corporate brand products,’’ said Faith Weiner, a spokeswoman for Stop & Shop.
Even office supply chains like Framingham-based Staples are ramping up private label products, with an entire Web page devoted to price comparisons of Staples versus other brands. Some featured items include Staples white inkjet, priced at $23.99, compared with Avery’s white inkjet for $38.99. Private labels now make up 40 percent of the inventory at Staples’ shops, and the company has eliminated national brands from some categories, including shredders.
Retail analysts say many merchants have become more sophisticated in producing quality products and packaging. Both Target and Wal-Mart last year unveiled new designs for their private label brands, and expanded the number of products in the grocery, home, and clothing aisles.
Most retailers do not make private brands themselves and instead subcontract the work. National brands are more expensive because they typically have marketing and advertising costs - for everything from coupons to television commercials - built into the price.
Despite the savings and the comparable quality offered by generic brands, some consumers have gone to great lengths to hide the change from their families.
“I have resorted to buying things like ketchup, hot sauce, BBQ sauce, and package syrup in bulk or large containers from other vendors’ labels and reusing the containers from Heinz, Frank’s Red Hot, Kraft, and Mrs. to mask the switch,’’ said Kalixt Smith, of Wilmington. “My kids do not seem to notice the difference.’’
Smith, who also gave up national brands for bread, milk, toilet paper, and dish detergent, estimates she is saving up to $50 a month on groceries for her family of four by trying store versions. But there are some store brand items she can’t sneak under the family radar, including attempted replacements for Honey Nut Cheerios and Velveeta Shells & Cheese. And, to her surprise, Spam. It turns out there is apparently no tasty substitute for that, at least not for her brood.
Even when the recession ends, some consumers say they will not go back to paying more money for national products.
“Once I started trying store brands, and the quality, taste, and price was right, I have continued to purchase store brands and try new things,’’ said Lisa Dean, whose shopping cart last week was filled with Market Basket goods - milk, eggs, tomato sauce, tortilla chips, and trash bags, to name a few. She estimated she is saving at least 30 percent on groceries.
“This is absolutely a permanent switch,’’ Dean said.
From CVS to Costco, Retailers Put the Screws to Brands
Coke, Energizer Ditched in Price Fight, CVS Bills to Make Up Profit Deficit
By Jack Neff
Published: November 30, 2009
BATAVIA, Ohio (AdAge.com) -- Marketers are facing the litmus test of whether their brands truly are indispensable as retailers show a growing willingness to boot even major, well-advertised brands to improve leverage, margins and lower prices.
Costco's recent decision to strip Coca-Cola products from its shelves in a pricing dispute is the highest-profile sign yet that the age-old battle between marketer and retailer is escalating, due to the growing power of private label, looming package-goods deflation in the face of falling commodity prices, rising pressure on retailer margins, and softening volumes. Facing those factors and armed with data from loyalty cards, retailers are getting savvier about which brands to keep and which to lose.
CVS/Caremark plans to remove most Energizer alkaline batteries from its stores by early next year, according to Deutsche Bank analyst Bill Schmitz, leaving just Duracell and private label. And Walmart, which stepped up efforts to pare brands from its shelves this year, will reduce assortments even more aggressively next year, according to manufacturers and analysts.
"We found we can better serve our customers with a simplified assortment," CVS said in an e-mail statement. After testing various options, the retailer found customers responded best to a single "national brand" in alkaline, plus Energizer lithium and private label.
But analysts and marketers believe increasing leverage and margin at the expense of brands is another goal of retailers. CVS recently began sending manufacturers "bills" representing the difference between the profit they made on their brands this year and what they expect to make, according to supplier executives, though it's not clear anyone is paying them to the chain. Such bill-back practices have been common in some areas, such as apparel, but rarely if ever applied to branded package goods. CVS declined to comment on whether it was charging bill-backs.
Exacerbated by the recession, the stepped-up U.S environment is starting to more closely resemble the contentious retailer-manufacturer relations of Europe, where Delhaize pulled all Unilever products from stores in Belgium earlier this year in a pricing dispute, though Delhaize ultimately relented.
Higher private-label shares in Europe have gone hand-in-hand with tougher tactics, and rapid growth of private label in the U.S. appears to be tempting retailers to flex their muscles more, too. At CVS, private label was already by far the leading battery "brand," accounting for about half of sales, with the rest split between Duracell and Energizer.
Also contributing to the stepped-up aggression is the Walmart factor—a suspicion by many retailers that they're not getting as good a deal as the world's largest retailer, said one package-goods executive. Certainly it's not lost on CVS that its gross margin fell last quarter while Walmart's improved, helped in part by vendor ad dollars (see related story).
But one package-goods executive warned U.S. retailers not to go too far. "Retailers would be shortsighted to let financial pressures decide vs. consumer or shopper needs," he said. "Many retailers in Europe tipped too far and paid the price for it in lost shoppers."
Even so, some retailers have stuck with decisions to boot big brands for years with apparent success, such as Costco, which removed Procter & Gamble Co.'s Pampers four years ago in favor of Huggies and private label, the latter manufactured by Huggies' marketer, Kimberly-Clark.
Other classes of trade are seeing that club stores have conditioned consumers not to expect every leading brand in every store, said Brendan Langan, director-retail insight for the drug and club channels at WPP consulting firm Management Ventures. Removing Coke is perhaps an extreme test of how far Costco can take that strategy. "Members are going to decide what happens there."
As with Costco's member data, CVS's ExtraCare loyalty program shows it what brands are truly important to its most-profitable customers, Mr. Langan said, and what brands it can do without.
Behind the growing number of retailer-brand battles also is failure of the prices package-goods marketers charge retailers to fall as quickly as commodity costs. Retailers are watching the resulting rise in their suppliers' gross margins with some envy, said Sanford C. Bernstein analyst Ali Dibadj, particularly given that many have felt forced to step up price promotion in key categories without a commensurate increase in trade support from brands.
This year also has been relatively light for package-goods innovation, something some marketers, such as P&G, have acknowledged. That leaves them with dwindling justification for higher margins, though several, including P&G, also vow 2010 will be better.
They'd better be right if they want to keep retailer margin grabs at bay, said Leon Nicholas, director-retail insight for mass retail at Management Ventures. "You come out with something innovative, you get to charge what the market will bear," he said. "Over time, that gets commoditized, and prices come down."
Saving with Store Brands
November 4/Drug Law Weekly
With the kids back in school and winter just around the corner, a new survey of supermarket prices on 25 commonly purchased items found that shoppers could save more than 35% by buying the retailer's brand instead of the national brand.
Store brand breakfast cereal and refrigerated orange juice cost only $4.91 in the store survey compared to $7.13 for the same national brand products.
Lunch options saved $3 by choosing the store brand. Hot dogs and hot dog buns, along with a 12-pack of soda costs $10.53 for the national brand items, but $7.52 for the private label products.
Store brand savings go beyond the food aisles.
The research, conducted by the Private Label Manufacturers Association (PLMA), tracked the pricing on grocery and household items at a typical supermarket. The results indicate that consumers buying the store brand would save $32.93 on average on the total market basket, representing savings of 35.3% when compared to weekly purchases of national brands in the same categories.
Included in the survey were food items such as fruit cups, peanut butter, grape jelly and juice boxes, in addition to non-foods such as vitamin C, cough drops and facial tissue. Savings on individual products ranges from 13% (hot dogs) to 66% (nasal spray).
A leading national brand product was compared to a similar store brand product in each category and prices were adjusted to account for all known discounts, coupons and promotions available for each of the weeks included in the study. The survey was repeated on a weekly basis during a recent four-week period in a suburban supermarket located in the northeast.
Annual sales of store brands have climbed to $85 billion in 2009, according to the latest industry statistics, and the products accounted for an unprecedented 23% of items sold in U.S. supermarkets. Rather than a temporary effect of the economy, there are indications that retailers are winning new adherents to their brands -- even among die-hard national brand loyalists.
Demonstrating the products' growing appeal to America's shoppers, the October 2009 Consumer Reports magazine documented in blind tests how consumers time and again found that retailer's brands were equal to or better than leading national brands in terms of taste.
A recent study by GfK|Roper found that 91% of shoppers who say they switched from buying name brands to buying store brands during the past year will continue buying the store brand after the recession ends. Based on a poll of 800 grocery shoppers, the survey identified quality as a major factor influencing the decision to purchase store brands.
From the November 9, 2009, Prepared Foods E-dition
Consumer Reports Taste Tests Find Store-Brand Foods as Good as, and Sometimes Even Better Than, Big Name Brands
YONKERS, N.Y., Aug 31, 2009 /PRNewswire-USNewswire via COMTEX/
From oatmeal cookies to frozen broccoli, Consumer Reports blind taste tests found 23 store-brand foods that tasted as good as, or better than, their big national brand competitors in head-to-head tests of 29 food products.
Consumer Reports tasters actually preferred Archer Farms Chewy Soft Baked cookies (Target), Kirkland Signature Organic Medium Salsa (Costco), Great Value Whipped Topping (Walmart) to similar products from Pepperidge Farm, Old El Paso, Betty Crocker and Kraft.
"Our tests should erase any lingering doubts that store-brand packaged goods aren't at least worth a try. In many cases, you'll save money without compromising on quality," said Tod Marks, Sr. Project Editor, Consumer Reports Shopping.
Consumer Reports tests also found 19 other store-brand foods that tasted just as good--albeit a bit different-- as their name brand competitor. Duncan Hines Family Style Chewy Fudge and Target's Market Pantry Fudge brownies, and Grey Poupon and Publix's GreenWise Market Organic mustard are just a few items on store shelves locked in a taste test tie.
The store-brand foods that Consumer Reports tested cost an average of 27 percent less than big-name counterparts--about as much as consumers will find across all product categories, according to industry experts. The biggest price difference: 35 cents per ounce for Costco's vanilla extract vs. $3.34 for McCormick's. (Prices are the averages Consumer Reports found across the country.)
However, Consumer Reports says the price gaps have less to do with what goes into the package than with the research, development, and marketing costs that help build a household name. Tasters found America's Choice (A&P) Plus multigrain spaghetti with omega-3 at $1.59 per box to be similar to the costlier Barilla Plus at $2.25 per box (14.5 oz for each box). Testers found the difference to be marginal; both pastas have a mild whole-grain flavor and are quite tasty with a nice sauce.
"Today's store brands are not the no-frills generics folks remember from the 70s. They enjoy more prominent placement on shelves, snazzier packaging, more promotion, and, in general, higher manufacturing standards than in years past," Marks added.
Whatever stores are doing, it's working. In the most recent supermarket survey by the Consumer Reports National Research Center, 70 percent of respondents said they were highly satisfied with the quality of store brands they'd bought.
The taste tests were not a total landslide victory for store brands. Six out of the 29 head-to-head taste tests still went in favor of the national brand. Tasters found Ocean Spray Craisins, KC Masterpiece Original barbeque sauce, Oscar Mayer precooked bacon, Quaker Natural Granola Oats, Honey & Raisins cereal, and Kellogg's Pop Tarts to be better than the store-brand challengers.
Prices will vary, but switching to store brands can be a low-risk way for shoppers to cut their grocery bill--since many store-brand products come with a money-back satisfaction guarantee from the store. Consumer Reports estimated that a family of four could save as much as $1,168 a year on dinner by substituting just four products. For example: Great Value lasagna (Walmart) for Stouffer's lasagna; 365 (Whole Foods) broccoli florets for Birds Eye broccoli florets; Market Pantry (Target) brownies for Duncan Hines brownies; and 365 (Whole Foods) vegetable juice for V8 vegetable juice. This assumes the family eats the same meal everyday, but Consumer Reports finds you could reap similar savings with other substitutions.
Complete results of the head-to-head tastes tests and additional store brand and grocery product recommendations are available at www.ConsumerReports.org. The October issue is on newsstands starting September 1, 2009. To subscribe, consumers can call 1-800-234-1645.
Copyright (C) 2009 PR Newswire. All rights reserved
Grocers Cash In As Americans Eat Cheap
Thanks to growing interest in store brands, the downturn is a blessing, not a curse.
Joshua Zumbrun, 11.11.08, 06:00 AM EST
Food costs have fallen in recent months, but the stalling economy has kept price the top concern for consumers. For many grocery stores, that's been a blessing, not a curse.
The reason: house brands. "Lots of people say they're looking more at generic- and private-label products," says Ellen Davis, a spokeswoman for the National Retail Federation. "That's not a bad thing for the retailer, because their profit margins can be higher in that area."
Yahoo! BuzzInstead of expensive health-food brands, consumers across the industry are turning to the Wal-Mart (nyse: WMT - news - people ), Safeway (nyse: SWY - news - people ) or Kroger (nyse: KR - news - people ) products. Good news for stores, who don't have to share as much profit with manufacturers, keeping money in their pockets.
"Even in a down economy people need to buy food. Groceries are a necessary purchase vs. more discretionary purchases you see. That's why grocery stores have held up fairly well in this economic environment," says Davis.
That and the return-to-earth gas prices. The biggest variable in how much people spend at the grocery store is the price of gasoline, says Pam Goodfellow, a senior analyst for BIG Research, a consumer-market research firm. "Gas prices have an immediate effect on what consumers spend day to day, more so than the stock market. Everyone knows what's going on at Wall Street is trouble, but the price at the pump effects right away how much people have left over to spend on groceries," says Goodfellow.
Yet even as the price of gas slides, shoppers are sticking with the private brands, thanks to economic uncertainty. A year ago, the AAA National Fuel Price average was $3.10 a gallon and 24% of consumers in BIG Research's surveys were buying more store brand and generic products. This number peaked at 37% over the summer.
A gallon of gas has since fallen to $2.24, but, as of October, store brand purchases are still way up--33% of shoppers are buying more store brands. "Customers are aware of how they save money buying private-brand products, says Karen Peterson, a spokeswoman for Food Lion, "and it's definitely a positive for us."
Store Brands Squeeze Big Food Firms
After Profiting From Higher Prices, ConAgra and Other Makers Are Rethinking Strategy as Volume Falls
Wall Street Journal
March 27, 2009
By ILAN BRAT and ANJALI CORDEIRO
The slumping economy has begun to squeeze big food makers, forcing them to rethink their pricing strategies.
After a year in which they boosted prices to help offset higher costs for transportation and commodities such as corn, food companies are finding that consumers are increasingly trading down to cheaper "private label," or store-branded, food.
That's making it harder to continue raising prices. ConAgra Foods Inc. reported Thursday that its sales in the fiscal third quarter ended Feb. 22 increased 6.1% to $3.1 billion because of the higher prices, and profits exceeded analyst forecasts. But the company said it recently had to cut the prices of its Pam cooking sprays, Wesson cooking oils, Egg Beaters and some other products to compete.
Amid the slumping economy, consumers are increasingly trading down, substituting cheaper "private label," or store-branded, foods for big brand names. Above, a woman shopping for groceries in New York earlier this month. .In addition, in ConAgra's consumer-foods segment, sales volume -- the amount of food sold -- fell 4%. The company, which also makes such brands as Chef Boyardee pasta, Hunt's ketchup and Peter Pan peanut butter, blamed the recent peanut-butter salmonella scare and its decision to discontinue its less-profitable packaged-popcorn lines. But even excluding those factors, ConAgra, which gets about 6% of its sales from private-label products, said sales volume in its consumer-foods segment was flat compared with last year.
Kraft Foods Inc. lost about 2.5% of its sales volume in the fourth quarter because people bought fewer of its products. Since then, the Northfield, Ill., company has lowered prices on some nuts, cheeses and coffee.
Sales volume at H.J. Heinz Co. declined 6% in its most recent quarter as consumers and retailers bought fewer Heinz products.
"It is clear that top-line growth from both volume and price will be tougher to come by over the next three to six quarters," Art Winkleblack, Heinz's chief financial officer, said at a recent investor conference.
"The pricing window that opened for packaged-food companies last year is now closed," Credit-Suisse analyst Robert Moskow wrote in a recent note to investors. He added that "rising unemployment and the rising savings rate will cause a long-lasting shift to austerity in consumer spending, even in the grocery store."
Last year, the food makers pushed through price increases as high as 10% for the first time in a decade, said Andrew Lazar, an analyst with Barclays Capital. The prices continued to rise even as the U.S. economy soured. Meanwhile, prices of such commodities as wheat and corn were dropping, though to levels that were significantly above those of just a few years ago.
Now the food companies are in a bind. Boosting prices further could drive consumers to buy even more private-label goods, reducing the companies' sales volume and squeezing their profit margins at the factory level by raising the cost of production per unit.
"The greatest risk for branded packaged-food companies in the near term is the extent that consumers will accelerate purchases of private-label food products," said Fitch Ratings Director Judi Rossetti in a report released Thursday. "Food retailers' increasing investment in their own brands will provide formidable competition for packaged-food companies."
She added that food companies will increasingly have to rely on increased productivity to bolster margins.
In the past year, consumers have been trading down to private-label foods substantially faster than in recent years. According to Nielsen data from the Private Label Manufacturers Association, private-label sales of food and other grocery products in the U.S. grew 10.3% to $82.9 billion in the twelve months ended in November.
Several big food companies make products for retailers to brand as their own, but that usually represents a small percentage of their sales.
In recent days, Mr. Moskow, the Credit Suisse analyst, has lowered his earnings projections for Kraft, Kellogg Co., ConAgra and Hershey Co., predicting volume declines will hurt earnings. Investors who kept food-company shares above the broader market last year have been selling of late. Shares of both Kraft and Kellogg are down 14% this year.
To boost its margins, ConAgra, based in Omaha, Neb., is banking on commodity costs rising at a slower pace in 2009, Chief Executive Gary Rodkin said in a conference call with investors Thursday.
ConAgra said it expects its overall volume to improve as it benefits from improved marketing for key brands like Healthy Choice ready meals, which have been battling price-cutting on Nestlé SA's Lean Cuisine frozen entrees.
ConAgra's fiscal-third-quarter net income fell 37% from the year-earlier period, which included gains from discontinued operations, including profitable commodity trading and merchandising operations.
For the period ended Feb. 22, ConAgra posted net income of $193.2 million, or 43 cents a share, down from $309.1 million, or 63 cents a share, a year earlier. The company said earnings from continuing operations, excluding the effects of hedging and recalls, rose to 40 cents from 34 cents a year ago.
Net sales increased 6.1% to $3.13 billion, and the company reaffirmed its fiscal-year earnings outlook. Analysts polled by Thomson Reuters had expected earnings, excluding items, of 37 cents on revenue of $3.11 billion.
Private-Label Food and Beverage Sales Set to Soar Past $56 Billion by 2011
NEW YORK, Jan. 31 / PRNewswire -- Leaving behind the nondescript packaging and "generic" identity of a decade ago, private-label or store-brand food and beverage sales are soaring, according to Private Label Food and Beverages in the U.S., a new report from market research firm Packaged Facts.
The report estimates 2006 sales at more than $48 billion, and projects that sales will top $56 billion by 2011.
Dairy and grain foods lead the pack, with 2006 U.S. retail sales reaching more than $7 billion and $5 billion respectively. Yet these segments showed some of the slowest growth during the 2002-2006 period, unlike smaller segments such as pizza, which grew at a CAGR of 9.7%. In the beverage category, store-brand bottled water and energy drinks top the list, with bottled water growing by more than 12%. Only the juice segment showed an overall decline during the same period.
Market growth comes as no surprise as retailers and manufacturers have replaced the low-quality "generic" products with high-quality products and packaging that rival national brands. Report findings show that 41% of shoppers now identify themselves as frequent buyers of store brands, versus five years ago, when only 36% did. The current wave of high-visibility private-label products -- including organics and other premium fare -- has effectively contributed to both the building of brand equity and relationship building with core customers.
"The idea that a 'local' retailer can offer products as good or better than a national brand at a lower price only helps to build consumer confidence and loyalty towards the retailer," notes Don Montuori, the publisher of Packaged Facts. "The consumer gets a greater value and the retailer is more profitable."
Economy, price gains hit beverage market, help private label
The economy took a toll on the beverage industry in the third quarter of 2008, according to scanner data reviewed by Morgan Stanley Analyst Bill Pecoriello.
Pecoriello said volumes declined as post-Labor Day price hikes made their way to consumers’ wallets. CSD volumes fell by 7.8 percent as the average price increased by 6.8 percent. Sports drinks suffered a small volume decline of 0.7 percent while prices went up 2.5 percent, and bottled water slipped down one percent – standing in stark contrast to its 14 percent growth rate of one year ago. This one cannot be tied to higher prices, as on-shelf water prices declined by 7.4 percent.
The “big three” beverage companies traded market share as volumes shrank, with no clear winner, but private label brands saw their position rise.
Private label beverages picked up a 1.6 percent share gain on the overall beverage market on the strength of smaller price increases than their name-brand rivals. The bulk of private label’s gains (52 percent), Pecoriello said, came from bottled water, a realm that the big beverage companies have been moving out of. However, private label also drew 28 percent of its gain from CSDs.
Aldi Looks to U.S. for Growth
By Cecilie Rohwedder and David Kesmodel
German store chain Aldi is so cheap that Wal-Mart Stores Inc. closed its discount outlets in Germany two years ago partly because shoppers found the U.S. giant too expensive in comparison.
Now, the U.S. arm of Aldi is cranking up expansion in Wal-Mart's home turf and seizing on the economic downturn to lure consumers to its Spartan stores and cheap groceries. The discount chain will open at least 75 U.S. stores this year, well above its typical pace, including its first Aldi store in New York City.
Aldi's U.S. push relies on new layouts and more produce. A Geneva, Ill., store showed the changes last spring. The company is counting on the economic downturn to crash a traditional barrier to the U.S. grocery business: Americans tend to be loyal to big-name brands.
Store-brand goods generally make up 22% of U.S. food sales in terms of unit volume, according to research by Nielsen Co., while in some European markets, they account for about 30%. At Aldi, 95% of the goods are the retailer's own brands.
Aldi's expansion shows how the tough economy is changing the competitive landscape across industries. Aldi first arrived in America in 1976 and began opening what has now become a collection of 1,000 U.S. stores, mostly in the Midwest and Northeast.
"This is the perfect confluence of factors for us," says Jason Hart, president of Aldi's U.S. division. He is charting a push into the Dallas-Fort Worth area next year with 25 new stores and a $40 million distribution center that will serve stores planned for Texas and Oklahoma, prime Wal-Mart territory.
A Wal-Mart spokeswoman said Aldi's plans wouldn't affect its price strategy or operations.
Supermarket chains such as Safeway Inc. and Kroger Co. are reporting higher sales of store-branded products. Mr. Hart and other Aldi executives say they had planned to expand before the downturn, but the moves have new urgency.
The push comes as the retailer is running out of room to grow in its German home market, where an estimated 90% of households shop at its stores, and Aldi and other deep discounters account for 40% of all grocery sales.
For expansion in the U.S. and Britain, where it is also building new stores, Aldi tweaked its retail formula. New stores have higher ceilings and more windows to make the 17,000-square-feet outlets feel less cramped. It is adding more fresh produce, designed to lure middle-class shoppers.
But the essence of the business is low prices through store-brand foods. It buys in bulk from suppliers and commissions them to make its own store brand of groceries cheaper than rivals. In the U.S. Midwest, for example, its prices are between 15% and 20% less than Wal-Mart and 30% to 40% cheaper than regional chains, said David Livingston, a supermarket analyst with DJL Research in Waukesha, Wis.
Aldi has been able to grow quickly under the radar, in part, because the company is so private. The two branches of the family-owned company, Aldi Süd and Aldi Nord, are controlled by a series of Albrecht family trusts. They don't report results, but consultancy Planet Retail estimates $66.38 billion in combined annual sales. Aldi Nord owns California-based Trader Joe's specialty food stores.
With the latest expansion, Aldi is correcting its past mistakes in the U.S. and U.K. In the years after its launch in the U.S. and 1990 arrival in Britain, Aldi opened unattractive stores in low-income areas and sold very few products with hardly any fresh food, for instance.
In Germany, Aldi eventually improved its food ranges and offered more upscale products in its twice-weekly non-food promotions. The changes brought in middle-class shoppers with more disposable income.
The retailer aims to repeat this strategy in the U.S. and Britain. But Aldi has a long way to go to attain the type of influence it does in Continental Europe, where it has shaped shopper habits. Planet Retail expects Aldi's U.S. 2008 sales climbed 21% to $7 billion. Wal-Mart has $374.5 billion in U.S. sales, although much of that business comes from nonfood items. Kroger, the largest grocery store chain in the U.S., has $70.2 billion.
Shoppers pick up store brands
By Mike Hughlett
Chicago Tribune (MCT) - On a recent grocery shopping outing, the chicken broth and applesauce in Julie Ernst's cart bore the Safeway label instead of familiar brand names such as Swanson or Mott's.
"Normally, I would have bought a name brand," she said, pushing her cart through an Elmhurst, Ill., Dominick's, a chain owned by Safeway. "But these are on sale _ and then there's the economy."
The economy _ a roiling caldron of evaporating jobs and soaring food prices _ has caused shoppers to migrate to cheaper store brands at rates not seen since the last recession in 2001, according to market researcher Nielsen Co. Back then, they shifted right back to name brands when the economy perked up.
But this time, the shift may be more permanent, potentially benefiting food retailers at the expense of packaged-food manufacturers, industry analysts say. Since the last recession, supermarket chains have poured millions into beefing up their private labels, launching new brands, improving packaging and bolstering quality.
"I do think we are in for some very fundamental long-term shifts for private label just because so many retailers are getting behind it," said Todd Hale, a senior vice president at Nielsen. "And, without question, consumers have a more positive attitude toward private label."
The upshot: When shoppers such as Ernst switch, they may be more likely to leave a name brand behind permanently. "I think if I don't see any difference, I'll stick with the store brand," she said.
Shoppers increasingly find little difference between name brands and store brands, which typically cost 25 percent less. A recent Nielsen survey found that 63 percent of consumers said the quality of most store brands is as good as that of name brands, up from 60 percent three years ago.
And a successful store brand can lure customers from one chain to another, experts said. Take Andriani Siavelis, who was shopping this week at the Elmhurst Dominick's. She has become partial to the O brand, which Safeway has put on more than 300 organic items, from fresh produce to cookies to frozen pizza.
Siavelis' cart carried several O items _ black beans, navy beans, eggs. The brand has changed her shopping behavior, she said, giving her less incentive to shop at chains that focus on organic. "Now I don't have to go to Whole Foods or Trader Joe's," she said.
Imbibe warmly received at 2008 PLMA
Imbibe thanks everyone who contributed to our success at this year’s 2008 PLMA in Rosemont! With over 350 people visiting our booth in the course of two days, The Drink Tank is filled to the brim with beverage initiatives for the upcoming year. If you are interested in seeing what you may have missed, please check out some photos from the show in our gallery.
We have already begun shipping full truckloads of Wild Stallion 16 oz energy drinks, offering consumers a variety of taste profiles they already know and love, the functional energy boost they crave, and a price they can afford. We also launched at the PLMA our Kickstart™ line in both 2 oz shots and stick packs, a selection of five different condition specific formulations: Virility, Slim, Rebound, Joint and Energy. These products can also be developed as private labels with sufficient volume. Finally, building on its seven year track record in over 10,000 retail locations, Wild Stallion® has become the 1st Energy Brand in the world currently offered in Bag-In-Box Concentrate, Ready-To-Drink Cans, 2 oz Shots and Stick Packs. Trot faster, freer and farther.
The Sopranos Italian Sodas
Written by Adrianna Ramirez
Friday, 06 July 2007
"The Sopranos" may have seen its last episode, but its name lives on. If not in a movie, then at least in a soda. Imbibe, Inc. has launched a line of old-fashioned Italian sodas in "honor" of the Sopranos featuring three (more to come) classic Italian beverage flavors--Limoncello, Amaretto and Chianti. HBO has been working in conjunction with Imbibe for the creation of the sodas, which launched last month. The Sopranos, which has no artificial ingredients, preservatives or high-fructose syrup, is being distributed to grocery stores, supermarkets and convenience stores in addition to select sandwich shops and restaurants across the country. Come on, you know Tony wasn't about to let the family name disappear.
Product: The Sopranos Old-Fashioned Italian Sodas
Marketer: Imbibe, Inc.
Packaging: 12-ounce glass bottle
Varieties: Limoncello, Amaretto and Chianti
Contact information: Imbibe, Inc. 3201 Old Glenview Rd Suite #50 Wilmette, IL 60091 USA
Website: drinksopranos.com / www.imbibeinc.com
Exclamation Energy Drink is Now Available Nationwide
Consumers can now consume less calories and less sugar in a 12 oz can of Exclamation Energy without sacrificing any of the active energy ingredients found in most 16oz energy drinks.
Exclamation Energy is a great tasting option in an energy drink market saturated with medicinally flavored 16 oz cans. Exclamation Energy is a well-balanced citrus-based energy drink. "By creating a great tasting and uniquely branded 12 oz energy drink, we present a new opportunity for some well established distribution channels such as vending" states Andrew Rashkow, President of Imbibe.
While most energy drinks are known for their aggressive names in hopes of conveying energy, Exclamation Energy drink dares to be different, choosing to use one of the best known symbols in society: an exclamation point!!! This is the first time a beverage has distilled its brand into a single character - !. "We think the promotional opportunities are practically limitless. Grab it! Share it! At this stage in the game, you have to go beyond traditional branding to make your mark in a competitive marketplace," explains Rashkow.
Exclamation Energy drink is also setting itself apart from its competition with wholesale and suggested retail pricing below the industry norm. Imbibe believes there is a large group within the energy drink market seeking an alternative for less than $2 per can. "We've created an energy drink with tremendous value. A taste consumers actually love rather than tolerate and the same kick as a 16oz energy with 25% less calories, sugars and carb - swhat could be better" asks Mr. David Marcheschi, Senior VP of Sales.
Exclamation Energy drink is currently available online at www.drinkexclamation.com and ships 24 cans to a case.
Jolly Rancher Soda Review
Jolly Rancher Soda is a new beverage derived form the very popular Jolly Rancher Candy.
Jolly Rancher Soda is currently available in 5 flavors: -Green Apple -Raspberry -Watermelon -Grape -Orange
It comes in 20 oz plastic bottles, 24 to a case. You can find photos and specifications at www.BevNET.com.
The soda truly smells and tastes like Jolly Rancher Candy. All you have to do is taste it and you'll be hooked. From the moment you open it you get the smell of the candy. It brings back memories! Jolly Rancher has been around since 1949. Almost everyone remembers the candy from their childhood. Some of us still buy it today.
You can find the new beverage in convenience stores across the USA although not every city has them right now.