• by Karlene Lukovitz  @KLmarketdaily, December 8, 2009

According to "Supermarket Guru" Phil Lempert, next year we'll see major food brands developing co-branded private-label foods with retailers, meaning private-label foods featuring brands' key ingredients.

That's one of several 2010 food brand predictions from Lempert in a press release from ConAgra Foods. The premise: Private-label co-branding will "fuel industry innovation while putting major food companies back in grocery carts."

Private label's growth during the current recession has been well documented: Last year, store brand sales grew 9.3% versus branded foods' 4.5%, according to Mintel. While the numbers vary by source, a reasonable estimate is that private label accounts for roughly 20% to 25% of food sales across categories for most retailers (more in retailers that emphasize store brands).

And while some indicators have been pointing to a slowing of private label's growth this year, some major food manufacturers, including H.J. Heinz, have acknowledged in recent earnings reports that private-label competition continues to be a major concern.

It's also no secret that most major food manufacturers (60%, according to the Private Label Manufacturers Association) manufacture private-label products for stores.

So does it make sense for food brands to take it a step further by providing ingredients for and co-branding store labels?

Not in the opinion of two branding pros contacted by Marketing Daily.

"It wouldn't surprise me if they tried this, because brands are experimenting with all kinds of crazy ideas in the current economic conditions," says Laura Ries of Ries & Ries. "Big brands are owned by public companies that need to show gains on a quarter-by-quarter basis, consumer belt-tightening is a real concern, and it's even possible that co-branding with private labels might generate results for a while, because it might get consumers' attention. But that doesn't make it a good idea. In fact, it's a very dangerous idea."

In Ries's view, the concept would damage brands over the longer term by diluting and weakening consumers' perceptions of them. "You can't try to cover the whole market with one brand -- you can't be both the best and the cheapest," she maintains. "In challenging times like these, marketers have to demonstrate some backbone and stand by their brands and what those brands represent."

A multi-brand strategy in which a company markets higher- and lower-end products within the same category under different names often makes good sense, Ries says. On the other hand, even offering lower-end versions of the same brand is a recipe for undermining the brand's core value in the consumer's mind, she contends. "As a consumer, when I see something like Tide Basic or Bounty Basic, do I wonder if the brand has been overcharging me all these years?" she asks.

Bill Cross, VP, food licensing for Broad Street Licensing, says he can't imagine major food marketers engaging in this strategy, given that they're in a "dog fight" with retailers aggressively pursuing private-label growth.

"National brands want to sell their products to retailers -- and retailers, because of the higher margins they realize on private label, are doing everything they can to expand sales of these lines," he sums up. "As a brand marketer, am I going to help my competitor by strengthening those products with my brand's quality image? If I owned one of the major food manufacturers, I would never consider this."

What can make sense in some cases, Cross says, is cross-merchandising of non-competitive branded and private-label products, such as a branded frozen entrée and a private label prepackaged salad.