• by Sarah Mahoney , June 29, 2010

Look out, national brands: Private-label sales are gaining on you in ways you'd never imagined. Thanks to high-quality generics from such chains as Target, Safeway, Kroger and Whole Foods Markets, SymphonyIRI reports that consumers are increasingly likely to buy these store brands -- and the more categories they dabble in, the more likely they are to be satisfied.

"It's all about branding and positioning with the customer," Sean Seitzinger, SVP/Consulting and Innovation Group at SymphonyIRI Group, tells Marketing Daily. "The concept of a store brand just being the cheaper, value choice doesn't really apply anymore -- consumers are happy with these products." In fact, he says, the likelihood that they will experiment with private-label offerings in a new category doubles after they've had a positive store-brand experience.

And stores are becoming bolder in their attempts to woo shoppers away from national brands. "Publix, for example, is currently running a media campaign where a young mom approaches a yogurt case and reaches for a national brand, and a store employee says: 'Why buy that brand, when we've made this yogurt just for you, and are right here to back it up?' The concept is to position the manufacturer as this detached third party, and it is really flipping all the dynamics of retail."

That positioning, he says, feeds into increasing levels of consumer distrust. "Some 80% say they don't believe what national brands tell them about products, anyway," he says. And the market research company has found that some 65.8% of shoppers agree that store brands are often made by the manufacturers.

"Today, most large manufacturers realize that the retailer truly is becoming a competitive threat, and that they need to rethink what kind of collaboration they will have. The large CPG companies are already working on the next wave of how to do that."

At this point, Symphony IRI reports that 99% of U.S. households purchase at least one store brand regularly, 83% are wiling to try a private brand at least once, and 75% of store-brand shoppers purchase 30 or more categories each year.

And surprisingly, the most affluent shoppers are the fastest-growing fan group, with households earning $100,000 showing the most growth in the first quarter of this year, adds Brent Baarda, SymphonyIRI's director of consulting and innovation. "For now, lower income shoppers have leveled off, sometimes trading back to national brands, and sometimes just stepping away from categories entirely." Drug stores and dollar stores are the fastest growing channels for store brands.

Retailers that have excelled at building their own brands include Home Depot, 7-11, Kroger, and Wegman's, while Walmart, which repositioned its Great Value brand last year, has struggled. "Post-launch, it barely moved the dial on sales," Baarda says, over-pruning national brands without making a strong enough impression with the store brand.

"For example, within sandwich bags, it formerly sold Glad, Hefty, Ziploc and Great Value; after the repositioning, it was just Ziploc and Great Value, and consumers weren't happy -- they went to other stores looking for their favorites. It's important for stores to make sure they still maintain their core proposition for shoppers -- variety and value."