Archive for the ‘Mktg – Brands – Private Label’ Category

Prices: How much for a bottle of Two-Buck Chuck?

January 25, 2013

In California, Two-Buck Chuck has been upchucked … from $1.99 to $2.49.

Is nothing sacred?

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Here’s what’s behind the end-of-an-era pricing move …

(more…)

Macy’s targeting millennials … pssst: so is everybody else.

November 12, 2012

Punch line: Macy’s is launching 13 new brands and expanding 10 other existing labels that it believes will resonate with shoppers in the 13-to-30 age group.

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Excerpted from The Washington Post’s, “Macy’s launches new brand strategy to cater to millennials, the 13-to-30 age group”

style-a-music-video-macys-m-style-lab-pics

Macy’s new fashion offerings, which are being rolled out this fall and next spring, represent the first phase of the retailer’s intensive campaign to attract the highly sought-after … but challenging bunch. The tech-savvy group likes to spend and it likes brands, but shops differently.

In March, Macy’s restructured its merchandise team to focus on those shoppers and plans to make other major changes in the next three years to further rope them in. Those range from infusing tablets and other technology into the shopping experience to changing displays more frequently.

Boston Consulting Group released a study earlier this year based on a survey of about 4,000 millennials.

The research showed millennials trust their Facebook friends more than corporate ads or experts, and tend to favor spending at specialty stores, discount stores, online or outlet stores.

And they put a premium on speed and convenience.

Christine Barton, a partner at the Boston Consulting Group, says the department stores have a big opportunity to grab this customer, but they need to “refreshen their franchise.”

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Walmart marks healthy options with its own “Great for you” icon

February 16, 2012

Punchline: Walmart moms want to buy healthier foods for their families, but are over-whelmed by nutrition labels and options. To simplify the buying process and promote healthier eating, Walmart has made a “Great for you” icon for its healthy products.

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Excerpted from brandchannel.com, “Walmart’s “Great for You” Icon Promotes Healthier Food Choices

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A year after pledging to develop a front-of-pack label that would give its customers an easier way to identify healthier food, and a month after a public commitment with First Lady Michelle Obama to putting nutrition front and center in its stores, Walmart, the nation’s largest food retailer this week unveiled a “Great For You” icon to create a visual system to educate customers ..

Walmart says it will adapt to whatever the FDA’s regulations are whenever that list actually is produced, but will for now add the icon to products with lower levels of fat, sugar, and artificial additives. Plus, the seal will appear on signage in the fruits and vegetable section of its grocery area.

“It helps customers see very, very quickly what healthier choices are for them,” stated Andrea Thomas, SVP of sustainability for Wal-Mart Stores …

“Walmart moms are telling us they want to make healthier choices for their families, but need help deciphering all the claims and information already displayed on products,” said Andrea Thomas, senior vice president of sustainability at Walmart. “Our ‘Great For You’ icon provides customers with an easy way to quickly identify healthier food choices. As they continue to balance busy schedules and tight budgets, this simple tool encourages families to have a healthier diet” …

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Anyone care for a Buck Range Light or a Big Flats?

February 21, 2011

TakeAway: New beer brands from retail giants Supervalu and Walgreens are part of a growing effort by chain stores to make a hit of private-label beer, a category that has proved difficult for retailers.

The retailers are trying to tempt shoppers with lower-priced alternatives to domestic mass-market brews such as MillerCoors’ Keystone Light.

The effort comes amid declining sales volumes for the beer industry, which has been hurt by stubbornly high unemployment.  But store-branded beers have struggled to gain traction for years in the U.S., in part because beer is typically consumed in social settings and brand image is important.

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Excerpted from WSJ, “Private-Label Beers Take a Shot at Earning Joe Sixpack’s Respect” By David Kesmodel, February 8, 2011

Supervalu, the third-largest U.S. grocery chain by revenue, began selling Buck Range Light, a low-priced domestic brew (12-pack of cans for as little as $5.99), in December. Drugstore chain Walgreens recently began offering Big Flats 1901 for as little as $2.99 a six pack. Costco rolled out craft beers under its Kirkland Signature brand in December 2008.

Part of the attraction for retailers is that sales of other store-branded goods—from soap to pasta—have been robust. Revenue for private-label products rose 2% last year in food, drug and mass-merchandise outlets, according to market-research firm Nielsen Co., compared with a 1% decline for branded items.

Annual sales for the U.S. beer market are about $96 billion, according to market-research firm Beverage Information Group. MillerCoors, which has a 29% share of the U.S. beer market, argues that house brands can pose downsides for the whole beer category. “Retailers should be cautious about over-proliferating their beer shelf with private label, unsupported brands that can commoditize the category”. Dave Peacock, president of Anheuser’s U.S. division, said “the industry is defined by players who invest heavily behind brands.” Anheuser-Busch controls about 48% of the U.S. beer market by volume.

Industry observers said it could be tough for Walgreens and Supervalu to build a following for their new brews. “I think it’s a hard sell, mainly because nobody has succeeded on the low-end with private-label beer,” said Harry Schuhmacher, publisher of the newsletter Beer Business Daily.

Edit by AMW

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Kenmore – Sear’s jewel – gets modern.

September 29, 2010

TakeAway: By any measure Kenmore has been successful over a long period of time. 

Even in today’s intensely competitive home appliance market, it has managed to stay on top across all major appliance categories. 

Now, the brand is being  overhauled in an effort to modernize.

With customer-focused innovations geared toward a new generation, including appliances that transmit data over a phone line in order to troubleshoot, the brand seems likely to stay on top for the foreseeable future.

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Excerpted from Brandchannel, “Kenmore – A classic appliance brand gets a makeover,” by Barry Silverstein, August 17, 2010

There was a time in the annals of American retailing when Sears ruled the universe in both mail order and store sales. While that era is long gone, the venerable Kenmore brand, originally associated with Sears, has maintained its independent leadership position in household appliances.

First introduced on a laundry appliance in 1927 … The brand’s awareness factor is legendary. Today, more people in the United States buy Kenmore than any other appliance brand, one in every three American homes contains a Kenmore appliance, and Kenmore ranks number one or number two in every major appliance category.

Even its rivals know the unshakeable power of the brand — Frigidaire, LG and Whirlpool all manufacture products that are sold under the Kenmore name.

But Kenmore has not rested on its laurels

The trick, of course, is to modernize the brand while retaining and enhancing its long-standing reputation. … that involves four primary areas:

1. “Premium customer touch points,” such as higher quality handles and knobs that are both elegant and ergonomic.
2. “Premium technology,” including user-friendly interfaces such as color-touch LCD displays that are advanced but intuitive and easy to use.
3. Streamlined modern design.
4. New logo and custom font, as well as a new sound palette on select products.

… Kenmore announced an additional innovation called Kenmore Connect, a technology designed to speed up appliance repairs. Kenmore machines with problems have the ability to transmit data over a toll-free phone line for review by company representatives. …

Product design isn’t the only area getting a … makeover. … Kenmore launched an interactive “Kenmore Live Studio” in Chicago. The studio is equipped with cameras that broadcast video via the Internet and includes demonstrations by chefs, presentations, and unveilings of new products that can be shared in real time on the brand’s Facebook page. …

Obviously, Kenmore is making a concerted effort to gain relevancy with a whole new generation of consumers.
Edit by DMG

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Full Article
http://www.brandchannel.com/features_profile.asp

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Kenmore – Sear's jewel – gets modern.

September 29, 2010

TakeAway: By any measure Kenmore has been successful over a long period of time. 

Even in today’s intensely competitive home appliance market, it has managed to stay on top across all major appliance categories. 

Now, the brand is being  overhauled in an effort to modernize.

With customer-focused innovations geared toward a new generation, including appliances that transmit data over a phone line in order to troubleshoot, the brand seems likely to stay on top for the foreseeable future.

* * * * *

Excerpted from Brandchannel, “Kenmore – A classic appliance brand gets a makeover,” by Barry Silverstein, August 17, 2010

There was a time in the annals of American retailing when Sears ruled the universe in both mail order and store sales. While that era is long gone, the venerable Kenmore brand, originally associated with Sears, has maintained its independent leadership position in household appliances.

First introduced on a laundry appliance in 1927 … The brand’s awareness factor is legendary. Today, more people in the United States buy Kenmore than any other appliance brand, one in every three American homes contains a Kenmore appliance, and Kenmore ranks number one or number two in every major appliance category.

Even its rivals know the unshakeable power of the brand — Frigidaire, LG and Whirlpool all manufacture products that are sold under the Kenmore name.

But Kenmore has not rested on its laurels

The trick, of course, is to modernize the brand while retaining and enhancing its long-standing reputation. … that involves four primary areas:

1. “Premium customer touch points,” such as higher quality handles and knobs that are both elegant and ergonomic.
2. “Premium technology,” including user-friendly interfaces such as color-touch LCD displays that are advanced but intuitive and easy to use.
3. Streamlined modern design.
4. New logo and custom font, as well as a new sound palette on select products.

… Kenmore announced an additional innovation called Kenmore Connect, a technology designed to speed up appliance repairs. Kenmore machines with problems have the ability to transmit data over a toll-free phone line for review by company representatives. …

Product design isn’t the only area getting a … makeover. … Kenmore launched an interactive “Kenmore Live Studio” in Chicago. The studio is equipped with cameras that broadcast video via the Internet and includes demonstrations by chefs, presentations, and unveilings of new products that can be shared in real time on the brand’s Facebook page. …

Obviously, Kenmore is making a concerted effort to gain relevancy with a whole new generation of consumers.
Edit by DMG

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Full Article
http://www.brandchannel.com/features_profile.asp

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Wallet’s are opening … for consumers and advertisers.

April 19, 2010

TakeAway:  Whew.   Consumers are spending again. But this sigh of relief is not heard in the halls of the big CPGs. 

The latest recession provided private-label brands with the momentum needed to overcome consumers’ quality perceptions and induce trial. 

The result: consumers liked or were at least satisfied with the PL products. 

Now that the economy is recovering and consumers have the dough to go back to the brand-name staple goods, companies are hoping that a long-held theory – more advertising will increase market share – will ensure that consumers trade-up for their staple goods.

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Excerpted from WSJ, “Consumer-Goods Makers Pour Out Ads,” By Ellen Byron, April 12, 2010

As wary Americans start to crack open their wallets, household-goods makers like Procter & Gamble, Colgate-Palmolive, Kimberly-Clark and Clorox are cranking up their advertising, hoping to coax consumers farther out of their shells.

Amid signs of an improving economy, recent survey data show consumers are more willing to splurge by eating out or buying new shoes, but the same doesn’t necessarily hold for everyday household goods.

“In consumer staples, you saw consumers trade down” to cheaper products due to the recession, and they were “quite satisfied,” says chief executive of Consumer Edge Research.

To lure them back to premium products—and prices—brand-name manufacturers are churning out “new and improved” goods ranging from more-absorbent diapers, to specialized toothpastes to closer-shaving razors. The strategy relies on advertising to get the word out.

That’s one reason the industry’s ad spending is expected to grow in 2010. So far such spending has been running well ahead of 2009 levels, with year-to-year increases for household products of 15% in January and 11% in February …

P&G, the world’s biggest ad spender, plans a 20% increase in “consumer impressions,” or instances when consumers see its ads … and it will introduce 30% more “significant” innovations in products this year, which its CEO describes as the most in his 30-year career at the company …

The big-name marketers face the challenge of overcoming consumers’s newfound thrift. While U.S. sales of household staples have posted middling gains overall, sales of cheaper private label, or store-branded, goods, have risen more sharply.

In the four weeks ended March 20, overall U.S. sales of household and personal products increased 0.2% from a year earlier, compared with a 5.4% gain in private-label sales …

The new spending will test a long-held theory: that boosting a brand’s share of advertising beyond its market share will raise that market share. Among major household products, market share stayed the same or rose 64% of the time over the past 16 quarters when a company’s advertising reach exceeded its market share by 50% or more …

Some experts say winning over consumers will require not just advertising, but a new approach: emphasizing value.

“For many years, any hint of price was a no-no. It was all about generating emotional connections,” says chief brand strategist at consulting firm Portnoy Group:”Now you’re going to have to work harder to convince me that I’m getting much more value by trading up.. You need to show me that I’m getting more for my money, and it’s not frivolous.”

Edit by TJS

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Full Article
http://online.wsj.com/article/SB10001424052702304703104575174042139131092.html#mod=todays_us_marketplace

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360-degree competition from private-label products

November 11, 2009

TakeAway: Whether it’s due to the economy or consumers’ general frustration with price inflation, private label products are booming.

Accordingly, more and more companies are offering private label products in an attempt to steal sales from their branded counterparts.

Now, this battle has moved from the stores to the Internet. Consumers’ appetite for value is spurring Amazon’s move into the private label business.

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Excerpted from WSJ,”Amazon Is Selling Designs Of Its Own,” By Geoffrey Fowler, September 21, 2009

Amazon.com is quietly expanding its private-label business in a bid to diversify away from its online bookstore roots and become more like a general retailer.

After starting with private-label patio furniture in 2004, Amazon has since added its own housewares, including a steamer, frying pan and chopping block … the latest: a wooden chopping block …

Amazon doesn’t say what percentage of its $19 billion in annual sales are from its private-label business, but it already sells more than 1,000 products that are manufactured at its request … this underscores how far the company has moved beyond books, CDs and DVDs …

The company has developed private-label products when it felt customers’ needs weren’t being met by the rest of its catalog … developing private-label products has required new skills for the company, such as managing quality control and meeting product safety regulations. But online feedback from customers who leave product reviews helps the company make improvements…

The company won’t disclose profit margins for its private-label merchandise but it is clear that the effort wouldn’t be feasible if it weren’t for Amazon’s economies of scale …

Private labels are popular with many traditional retailers because they can provide higher profit margins by cutting out the middleman in the supply chain … online-only retailers have been slower to adopt private-label brands because they lack the expertise to design products, and lack a physical store presence to introduce a new brand …

The private-label strategy isn’t without its problems. In particular, Amazon’s own products may conflict with the products and merchants that the company already hosts on its site …

Edit by TJS

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Full Article
http://online.wsj.com/article/SB125323090208821381.html?mod=djemMM

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“On Sale” at Tiffany … doesn’t sound right, does it ?

August 11, 2009

The downturn has forced the likes of Tiffany, Chloé, and Chanel to quietly lower prices, a strategy that could tarnish their glitzy brands.

For example, Business Week reports that Tiffany quietly nudged down prices for engagement rings —one of its biggest sellers — by about 10%. Salespeople tell customers about the reductions, but otherwise there’s no publicity, no signs.

The dilemma that Tiffany and other purveyors of luxury goods face is how to use price cuts to woo customers without tarnishing their brands.

Executives are well aware of the need to woo today’s frugal buyers while trying to maintain tomorrow’s prestige. Some have chosen to be discreet by refusing to advertise sales or by e-mailing “exclusive” offers to select clients.

Retail experts argue that price cuts could prove to be perilous for luxury retailers. “The losers [in this recession] will be the ones who destroyed their brand by discounting them”

Excerpted from: Business Week, In Luxury Sector, Discounting Can Be Dangerous, July 23, 2009
http://www.businessweek.com/magazine/content/09_31/b4141049551979.htm

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The key to fighting private label…innovation

April 2, 2009

Excerpted from Reuters, “Foodmakers tout innovation to battle imitation” by Nicole Maestri, March 19, 2009

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If imitation is the best form of flattery, foodmakers are finding themselves dealing with an inordinate number of compliments these days.

As the recession crimps household budgets, retailers like Wal-Mart  and Target are increasingly looking to woo shoppers with their own private label, or store brand, food items that often look very similar to name brand products but are sold at lower prices.

Foodmakers are defending their turf … they say that they are the ones who develop innovative new products and spend marketing dollars to draw shoppers into retailers’ stores.

They acknowledge that retailers are giving them a run for their money, introducing better products at a faster pace and squeezing out tertiary brands in the process… Seeking to woo frugal shoppers, retailers are giving more shelf space to their own brands and stepping up promotions… The question now looms as to whether retailers will make the leap from simply imitating name brand foods to innovating on their own.

“The entire retail trade has become energized very quickly to bring out products that compete with branded package food,” 

Wal-Mart is relaunching its Great Value private brand, adding more than 80 new products, like double-stuffed sandwich cookies and organic cage-free eggs.

Consumers really take notice of private label products when the price gap between a name brand item and a store brand one reaches more than 30 percent.

Cexclusively on price is potentially a good short-term tactic, but long-term you really want to build your brand and what it stands for in consumers’ minds.”

If you introduce a new product, no one really knows what the price of that product should be,” he said. That allows foodmakers to set an initial price and build in a hefty margin before imitators come into the space, he said. It can also help sell higher-priced items amid a recession.

Unilever’s Bertolli frozen dinners, which are marketed as “restaurant quality.” While they may be more expensive than other frozen dinners, they are priced “at about a 40 percent value to take-out food or restaurant food.”

Shoppers feel like they are getting a deal when they buy Bertolli because they spent less than they would have in a restaurant, even though the meals are more expensive than other items in the frozen food aisle.

With retailers increasingly eyeing private label, it has become crucial for foodmakers to make sure they have the No. 1 or No. 2 brand in their categories. Brands that cannot distinguish themselves face losing shelf space.

“I wouldn’t want to be a number three, four or five brand that wasn’t differentiated.”

While the recession may create chaos as retailers and foodmakers compete for thrifty shoppers, it remains to be seen if private label can keep its allure once the tough times recede.

“As we get out of this recession, will consumers then look back to their favorite brand or not?”

Edit by NRV

Full article: http://www.reuters.com/article/ousiv/idUSTRE52I5P420090319?sp=true

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How about a stimulus package for brands?

March 26, 2009

Excerpted from Brandchannel.com, “Time for a brand stimulus package” by Kevin Randall, March 16, 2009

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In the marketing world, our industry is witnessing a diminishing commitment to long-term brand building. The mission of the moment is driven by the CFO, not the CMO, and calls for cost-cutting and short-term revenue-generating activities represent the only immediate focus.

A weighty and consistent body of historical data shows that marketers will do harm in the short- and long-run to their businesses and brands by knee-jerk budget slashing and running scared.

Hundreds of studies of marketing over ten recessions in the 20th century have concluded that not only did sales and profits decline for brands that cut brand-oriented advertising during the recession, but also that performance continued to lag upon the recovery (“Why it is important to invest in communications during an economic downturn,” IVCA.org, 2009).

Today’s brand leaders would be wise to consider and follow these 7Ps of Branding as a guide for the recession and beyond:

1. Profit
Marketers now have a golden opportunity to profit and establish real competitive advantage by exploiting the current situation. They can increase brand value and market share now relatively more easily and cheaply than during good times. With competitive noise levels reduced it is easier for a brand to stand out in the marketplace. Media costs are more attractive.

2. Persistence
Corporate brand directors need to stay the course by going against the grain and not following the marketing herd. Even if budgets are trimmed in some areas, there should be a core of strategic and tactical activities that endure (the former initiatives tend to be less budget consuming even in good times). Such brand perseverance will provide reassurance during uncertainty to both the existing customer base, an especially critical target now, and to internal stakeholders.

3. Planning
Despite the strong economic headwinds, brand builders should remain committed to pursuing long-term visions and executing plans while selectively and pragmatically improvising marketing tactics. IBM during the recessionary early 1990s and Southwest Airlines after 9/11 are examples of brands that never wavered from their long-range strategic compasses and profited enormously by doing so. These brands did not and do not meander based on quarterly results. The strongest, top-performing brands are built to weather the various storms that come along.

4. Performance
Brands (and their communications) will be judged and rewarded now by delivering on “value” over merely price. Some marketers have and will cut prices. Brand leaders do need to (re)define the value of their offering while not compromising the quality and experience customers expect or need. Harvard Business School professor John Quelch also recommends investing in opportunistic, focused market research since there is a real need to define “performance” and “value” and gauge what is relevant to customers in the shifting environment (“Marketing Your Way Through a Recession,” HarvardBusiness.org, 2008).

5. Positioning
Brand owners must uphold and defend their core positioning and resist the temptation to sacrifice quality, reduce innovation efforts or cut prices. A study of more than 1,000 companies showed that firms that cut manufacturing and administrative functions in a recession did tend to reap the benefits while those that decreased spending on new product development, quality and marketing suffered (“What strategic investments should you make during a recession to gain competitive advantage in the recovery?,” Strategy & Leadership, Profit Impact of Market Strategy [PIMS], Keith Roberts, 2003).

6. People
There needs to be an appreciation of the link between top talent and top-performing brands. Hiring, motivating and keeping the best people (who exemplify the brand) while competitors are pruning overhead is a key source of proprietary advantage. Management guru Jim Collins chronicles the cases of Boeing, Hewlett-Packard and Procter & Gamble, who bucked the trend during tough times by investing in talent (when their rivals were shedding critical human capital) only to thrive and outperform the competition (“Crisis into opportunity,” CNN Money.com, Jim Collins, 2009).

7. Principles
Brand leaders should work with CEOs to make sure their brands and organizations are integrated and that employees internalize and externalize a set of values that don’t change. Valued customers and employees will be more loyal if they are reassured on principles—by the brand and by its chief executive and sponsor. This is especially critical in the B2B world, with its large transactions and numbers of stakeholders involved in the customer experience.

Brands by the numbers

McGraw-Hill analyzed 600 companies from 1980 to 1985. The results showed that B2B firms that maintained or increased their advertising during the 1981-1982 recession averaged significantly higher sales growth—both during the recession and for three years following—than those that eliminated or decreased advertising. By 1985, sales for companies that were aggressive recession advertisers had risen 256 percent over companies that did not maintain their advertising (“US Recession”, McGraw-Hill, 1988).

• A study of 1,000 firms during recessions between 1982 and 1999 identified key differences regarding the strategies of the best and worst performers, with the measure of performance being changes in the company’s market-to-book ratios. Notably, the best performers had increased their marketing and advertising spending not just relative to their competitors, but also compared to their own spending in better times. (“Learning to love recessions,” Richard F. Dobbs, Tomas Karakolev and Francis Malige, McKinsey & Co., 2002).  

Edit by NRV

Full article: http://www.brandchannel.com/brand_speak.asp?bs_id=214

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If you can’t fight ’em join ’em … brand names chum it up with private labels

March 6, 2009

Excerpted from WSJ, “Brand-Name Food Makers Woo Retailers With Displays” By J. Jargon and A. Zimmerman, Feb 18, 2009

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Seeking to combat stiffer competition from cheaper store brands, big-name food manufacturers, including Kraft Foods Inc. and General Mills Inc., are joining forces with retailers to promote their brands alongside private-label goods.

In the past, big food companies didn’t worry too much about cheaper store brands encroaching on their turf, because consumers were more loyal to name brands and generally believed better quality justified their higher prices. But in recent years, retailers have improved their store brands, often mimicking the innovations that national brands have introduced …

As private-label items have improved and the economy has slowed, many consumers are wondering why they should pay more when they view a store brand as equally or almost as good. Last year, sales of private-label food and other consumer products jumped 10% to $82.9 billion in 2007 … Meanwhile, sales of branded products increased just 2.8%.

Now, brand-name manufacturers are trying to boost sales and defend their market shares in part by working with retailers to create special displays that allow name brands and store brands to share the promotional spotlight. Their strategy acknowledges that the rise of store brands has been a boon to retailers, whose overall sales have slumped and whose gross profit margins on store brands typically exceed those on branded items by 10% to 12%.

General Mills, for example, is using in-store grocery displays to promote “full meal solutions” that include its brands as well as store brands … [For example], A “pizza night” display featured General Mills’ Pillsbury dough with the retailer’s store-brand tomato products.

The new collaboration with retailers comes as Wal-Mart Stores Inc. prepares for a relaunch next month of its own private brand, Great Value, with improved packaging and qualityBy raising the profile of its private label, Wal-Mart could undermine some of the competitive advantage that has set it apart from other food retailers … Gains by private-label products have come largely at the expense of smaller brands. To cut costs and make room for a greater assortment of Great Value products, Wal-Mart has begun removing slower-selling brand names from its shelves …

Until recently, Wal-Mart’s private-label brands didn’t pose much of a threat to branded-food manufacturers. The products’ packaging was lackluster and the quality and consistency of many of them was uneven …

At an analyst meeting last fall, Wal-Mart said it would retool its Great Value line, in an effort to spur sales … The company tested 5,000 Great Value products against national brands and reformulated 1,200 of them.

Edit by SAC

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Full Article:
http://online.wsj.com/article/SB123491694183004377.html

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Luxury brands get Sak’ed …

February 10, 2009

Excerpted from WSJ, “Saks Upends Luxury Market With Strategy to Slash Prices” By V. O’Connell and R. Dodes, Feb 9, 2009

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When Saks Fifth Avenue slashed prices by 70% on designer clothes before the holiday season even began, shoppers stampeded …
Saks’s deep, mid-November markdowns were the first tug on a thread that’s now unraveling long-established rules of the luxury-goods industry. The changes are bankrupting some firms, toppling longstanding agreements on pricing and distribution, and destroying the very air of exclusivity that designers are trying to sell.

The problem Saks faced last November is one that haunts the U.S. economy as a whole: From car makers to home builders, companies are stuck with inventories that are far too fat.  Saks’s risky price-cut strategy was to be one of the first to discount deeply, rather than one of the last. Managing high-fashion inventory is tricky. Clothing can go out of style in just months, so stores don’t want to keep it around. But cut prices too soon or too deeply, and shoppers start to expect it …

Pressured by Saks, and hit by the worst holiday season in almost 40 years, rivals including Neiman Marcus Group Inc. and Barneys New York slashed prices, too. They cut much more deeply and aggressively than usual … That, in turn, clobbered smaller boutiques …

Saks’s maneuver marked an open abandonment of the longstanding unwritten pact between retailers and designers over when, and to what extent, to cut prices. Those old rules boiled down to this: Leave the goods at full price at least two months, and don’t do markdowns until the very end of the season.

That worked fine in the good times. Demand was high, and so were everyone’s profit margins. But Saks’s surprise discounting forced companies and brands that have their own retail operations … to follow suit or forfeit sales. Giving designers a heads-up wasn’t an option, Saks says, without risking that rival department stores get wind of its strategy …

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Perhaps the biggest consequence is that customers are now questioning the entire premise of luxury goods: Why pay top dollar today if big markdowns could be coming tomorrow? … Designers are starting to fight back … Some are thinking about splitting their product lines or withholding some top items from department stores in order to feature them in their own stores … Diane von Furstenberg says another solution might involve producers leasing space in department stores

Mr. Sadove [Sak’s CEO] says he’s working on damage control with designers … Still, he and Mr. Frasch, defend their actions, saying they needed to swiftly fix a big problem that no one saw coming … The change happened “over as short a period of time as you can possibly imagine” … The result: a huge disconnect between Saks’s inventory and shoppers’ appetite …

So [Sadove] floated the idea of deep price cuts. Some colleagues urged drawing the line at 50%. But Mr. Frasch felt strongly that wouldn’t be enough … Their decision: A 70%-off sale would be used, but only in a worst-case scenario, if sales kept declining and shoppers remained bored by less eye-popping 40% rollbacks.

Extreme discounting of luxury goods is perilous. Not only does it potentially leave your best customers feeling duped for paying full price, it also erases fat profit margins of 50% or more … Part of the problem is the designers’ own fault. Over the past 15 years, their products have become so ubiquitous — Gucci is sold in airport, Hermes has mall shops — it’s undermining the image of exclusivity. In a January survey of rich shoppers … roughly half of high-net-worth consumers said luxury brands are becoming commoditized; 64% said they were overpriced …

In hindsight, Saks executives say they may have cut too much in some areas. “We didn’t need to do what we did in accessories” … High-end shoes and handbags would probably have sold out, even at higher prices, because shoppers see them as more practical wardrobe updates than another new outfit …

This year, Saks is spending about 20% less on merchandise to keep inventories lower, but Mr. Frasch acknowledges the number is only a guess. The luxury-goods business is “absolutely flying blind,” … Mr. Sadove, agrees. “One of the big questions that people are asking,” he says, is: “Will people ever buy at full price again?”

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Full Article:
http://online.wsj.com/article/SB123413532486761389.html?mod=testMod

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Luxury brands get Sak'ed …

February 10, 2009

Excerpted from WSJ, “Saks Upends Luxury Market With Strategy to Slash Prices” By V. O’Connell and R. Dodes, Feb 9, 2009

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When Saks Fifth Avenue slashed prices by 70% on designer clothes before the holiday season even began, shoppers stampeded …
Saks’s deep, mid-November markdowns were the first tug on a thread that’s now unraveling long-established rules of the luxury-goods industry. The changes are bankrupting some firms, toppling longstanding agreements on pricing and distribution, and destroying the very air of exclusivity that designers are trying to sell.

The problem Saks faced last November is one that haunts the U.S. economy as a whole: From car makers to home builders, companies are stuck with inventories that are far too fat.  Saks’s risky price-cut strategy was to be one of the first to discount deeply, rather than one of the last. Managing high-fashion inventory is tricky. Clothing can go out of style in just months, so stores don’t want to keep it around. But cut prices too soon or too deeply, and shoppers start to expect it …

Pressured by Saks, and hit by the worst holiday season in almost 40 years, rivals including Neiman Marcus Group Inc. and Barneys New York slashed prices, too. They cut much more deeply and aggressively than usual … That, in turn, clobbered smaller boutiques …

Saks’s maneuver marked an open abandonment of the longstanding unwritten pact between retailers and designers over when, and to what extent, to cut prices. Those old rules boiled down to this: Leave the goods at full price at least two months, and don’t do markdowns until the very end of the season.

That worked fine in the good times. Demand was high, and so were everyone’s profit margins. But Saks’s surprise discounting forced companies and brands that have their own retail operations … to follow suit or forfeit sales. Giving designers a heads-up wasn’t an option, Saks says, without risking that rival department stores get wind of its strategy …

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Perhaps the biggest consequence is that customers are now questioning the entire premise of luxury goods: Why pay top dollar today if big markdowns could be coming tomorrow? … Designers are starting to fight back … Some are thinking about splitting their product lines or withholding some top items from department stores in order to feature them in their own stores … Diane von Furstenberg says another solution might involve producers leasing space in department stores

Mr. Sadove [Sak’s CEO] says he’s working on damage control with designers … Still, he and Mr. Frasch, defend their actions, saying they needed to swiftly fix a big problem that no one saw coming … The change happened “over as short a period of time as you can possibly imagine” … The result: a huge disconnect between Saks’s inventory and shoppers’ appetite …

So [Sadove] floated the idea of deep price cuts. Some colleagues urged drawing the line at 50%. But Mr. Frasch felt strongly that wouldn’t be enough … Their decision: A 70%-off sale would be used, but only in a worst-case scenario, if sales kept declining and shoppers remained bored by less eye-popping 40% rollbacks.

Extreme discounting of luxury goods is perilous. Not only does it potentially leave your best customers feeling duped for paying full price, it also erases fat profit margins of 50% or more … Part of the problem is the designers’ own fault. Over the past 15 years, their products have become so ubiquitous — Gucci is sold in airport, Hermes has mall shops — it’s undermining the image of exclusivity. In a January survey of rich shoppers … roughly half of high-net-worth consumers said luxury brands are becoming commoditized; 64% said they were overpriced …

In hindsight, Saks executives say they may have cut too much in some areas. “We didn’t need to do what we did in accessories” … High-end shoes and handbags would probably have sold out, even at higher prices, because shoppers see them as more practical wardrobe updates than another new outfit …

This year, Saks is spending about 20% less on merchandise to keep inventories lower, but Mr. Frasch acknowledges the number is only a guess. The luxury-goods business is “absolutely flying blind,” … Mr. Sadove, agrees. “One of the big questions that people are asking,” he says, is: “Will people ever buy at full price again?”

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Full Article:
http://online.wsj.com/article/SB123413532486761389.html?mod=testMod

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Battling Private Label Rivals with Innovation …

January 28, 2009

Excerpted from BrandWeek,”OTC Drugmakers Seek Cures” by Elaine Wong, November 9, 2008

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Makers of branded cold and flu remedies are seeking their own antidotes for flagging sales. But will cash-strapped consumers cough up more money for “innovation?”

Tylenol is launching Tylenol Warming Liquids … that treat cough, sore throat and other cold symptoms via a formulation that delivers a warming sensation…

P&G is introducing Dayquil Plus Vitamin C, which includes 150% of the daily dose of the vitamin in the mix…

Robitussin … is promoting its DM Max mucus relief formula…“Robitussin DM Max has a double dose of mucus-fighting medicine”…

The efforts come as sales of most major OTC brands have declined by low-to mid-single and double digits thanks to advances by private label competitors. Sales of Children’s Tylenol, fell 14.2%…Robitussin’s … medications dropped 8.8%. Private label also prevailed in the tablet and packet category, up 18%…

Meanwhile, retailers have stepped up marketing efforts for their brands. Unlike previous cold/flu seasons … the drugstore is experiencing significant private label growth. The uptick reflects a mix of savvier retail marketing efforts, combined with a smarter and cash-strapped consumer, according to industry analysts.

“It’s the one category where it’s very clear and easy to see that the active ingredients in both national and store brands are identical” … Efforts like these are nothing more than attempts to gain greater market share. Research on vitamin C, in particular, shows no real effect in fighting or preventing colds. “It’s a cheap and easy way to distinguish your product from someone else’s”…

Edit by SAC

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OTC drugmakers know the benefits of choosing a private label OTC product with the same ingredients is clear for cash strapped consumers and are using innovation to add value to their products.  The brands must give consumers a reason to purchase their brand over less-expensive labels. This is becoming increasingly difficult as a recent Neilsen study showed that 62% of consumers perceived private label brands to be equal to name brands. 

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Full Article:
http://www.brandweek.com/bw/content_display/news-and-features/shopper-marketing/e3i8a864b21b4f19fc5d31ca97a9df8da2f

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Private Labels Paying Off

January 20, 2009

Excerpted from the Chicago Tribune, “Shopper Pick Up Store Brands” and “Private Labels Part of Grocer’s Strategy”, both  by Mike Hughlett, November 21, 2008

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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 … 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. Since the last recession, supermarket chains have poured millions into beefing up their private labels, launching new brands, improving packaging and bolstering quality.

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Shoppers increasingly find little difference between name brands and store brands, which typically cost 25 percent less. The upshot: When shoppers switch, they may be more likely to leave a name brand behind permanently.

And a successful store brand can lure customers from one chain to another, experts said. The O brand, which Safeway has put on more than 300 organic items, from fresh produce to cookies to frozen pizza, has changed some consumer’s shopping behaviors — giving them less incentive to shop at chains that focus on organic. Says one, “Now I don’t have to go to Whole Foods or Trader Joe’s.”

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Store brands are looking and functioning more like name-brand products and are becoming more important to conventional grocery chains as a tool to help battle tough competition from both discounters.

There are myriad reasons for the store-brand offensive. First, supermarkets reap higher gross profit margins on their own brands compared with name brands—about 8 to 10 percentage points higher.

Then, there’s the Wal-Mart factor. The grocery behemoth and other discount grocery concepts continue to snatch market share from higher-price conventional chains. But because private-label products are less expensive, a robust private-label program can improve a traditional grocer’s “price image” to cost-conscious shoppers.

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Full articles:
http://www.chicagotribune.com/business/chi-fri-private-labels-consumersnov21,0,3045032.story

http://www.chicagotribune.com/business/chi-fri-private-labels-stores-nov21,0,7919897.story

 

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