Private Thoughts

Store brands are thinking beyond price to product and packaging – but not promotion.

National brands don’t need to worry about promotional competition from private label yet. But they’d better keep an eye on product development.

Private-label purveyors are using new products and slick packaging to distinguish their wares from national brands. Few are ready for consumer promotions, and those that have tried it (such as Perrigo) have backed away.

“In such a price-driven market, it’s hard to find a few extra cents to fund promotion,” says David Seiden, director of entertainment services for premiums supplier AdPac, Elk Grove Village, IL.

That even holds true for major national players such as ConAgra, whose August 2000 purchase of International Home Products fattened the ConAgra Store Brands’ business. The Lakeville, MN-based division leaves marketing issues to its Omaha, NE-based parent. National brand managers “can tell you about consumer trends: who buys, what they like to do, all that. Private-label managers can tell you about ingredients, cans, and nozzles,” says ConAgra Store Brands category manager Will Feeney. “We have access to the same consumer research, but we pay more attention to technical product expertise, because that’s what distinguishes our products.”

Take Swabplus. The Pomona, CA, company makes first aid and cosmetic kits with liquid-filled cotton swabs. Users snap one end of the swab and the liquid flows to the other end. Kits are available nationally.

Nature’s Products last month introduced Bear Essentials gummi bear vitamins in the Northeast via in-store sampling and print ads. Single-serve pouches containing five bears come 150 to a box. Sampling through grocer loyalty programs is a first for the Sunrise, FL-based company, which hopes its first branded product will open the door for its private-label offerings, says Dennis Purtell, vp-business development.

Packaging gives store brands a point of distinction. Nice packaging is crucial to help distinguish private label from national brands by more than just price, says Alan Levin, ceo of drugstore chain Happy Harry’s and chairman of the National Association of Chain Drug Stores. Levin’s keynote presentation at the Private Label Manufacturers Association trade show in November urged retailers and manufacturers to develop distinctive packaging rather than mimic national brands.

DreamPak, Alexandria, VA, makes blister packs shaped like a brand’s proprietary package for sampling or trial size. Packs can slip into a cardboard sleeve (providing more space for information) for hanging displays. DreamPak imported the technology from Europe a year ago, says national sales manager Justin Gauvin. The cost is about halfway between a sample pouch and a trial-size bottle.

Still, it’ll take a push from retailers to get private-label manufacturers to develop consumer promotions. Savvy retailers who take national brands’ co-marketing programs as a tutorial likely will lead the way, but it will be years before shoppers see much in-store. “It really comes down to the retailers’ call,” Seiden says.

Some promo suppliers have done well dealing directly with grocers. Brandmovers, Atlanta, makes customized die-cast trucks and other collectibles for on-pack offers. Retailers pay between one and three cents per pack for a self-liquidating offer of a truck with the grocer’s logo. Brandmovers handles fulfillment – and ships a catalog for its own products along with each item. That’s the silver lining if Brandmovers gets more response than profit from an offer: It can make money through direct sales. That lets the company work for a fixed fee – an offer tempting to retailers with thin margins and little appetite for risk.

Kroger has done truck offers on about 30 products, and this quarter breaks an offer for collectable resin teddy bears, says Brandmovers president Andrew Mitchell. Hotel chain Days Inn has done eight offers via quarterly newsletters to its 50-and-older Days Inn Club members. The chain pays nothing; it gets free premiums in exchange for giving Brandmovers access to its customers.