Buyers drawn to lower-cost store brands
Posted on Tuesday, August 26, 2008
Consumers seeking to stretch their weekly shopping dollars are turning increasingly to store brands and other private labels.
The trend is a good news and bad news scenario for retailers, who typically make more profit from private labels but could see their monthly sales reports suffer as consumers shift to lowerpriced goods.
Investors watch those reports closely, looking for year-overyear sales gains as a measure of how retailers fare in the marketplace against competitors.
Higher gasoline and food prices and a weakening job market are squeezing household budgets and changing shopping habits.
“Buying a store-brand label is especially effective for people who don’t have a lot of time to clip coupons and such,” said Lynnae McCoy, a Medford, Ore., mother of two who operates a Web site, www. beingfrugal. net that offers money-saving tips.
McCoy said mayonnaise is the only product in which she’s found a significant difference in quality between store brand and name brand.
“Everything else, I pretty much buy store brand,” she said.
The Little Rock market is No. 7 on The Nielsen Co. ’s Top 10 private label markets, measured by the percentage of private label sales to total grocery sales. Nielsen, a market research firm, puts the figure at 21. 5 percent in a region that covers a big chunk of Arkansas, though not the northwest corner, and spills into Oklahoma.
Wal-Mart Stores Inc., based in Bentonville, said it has seen some shifting to its low-price store brands that include Sam’s Choice and Great Value in the grocery aisles.
“We’ve seen double-digit growth for many months in many products, especially in dry grocery, and we’ve introduced a number of new product labels,” spokesman Melissa O’Brien said.
The company has expanded its $ 4 generic-prescription-drug program to several over-thecounter health and wellness products, she said.
And the take-and-bake Sam’s Choice pizza has proven itself as an alternative to eating out, O’Brien said.
“It’s been a very popular item, which we think also reflects the trend to eat in with the family,” she said.
Likewise, shoppers at Springdale-based Harps Food Stores Inc. ’s supermarkets are switching, said Kim Eskew, executive vice president. Harps has 42 stores in Arkansas, nine in Oklahoma and one in Missouri.
“We’re seeing growth in private-label items at a disproportionate rate,” Eskew said. That growth could mean, he said, that instead of buying Del Monte green beans at 88 cents a can, shoppers are buying the Always Save green beans for 44 cents.
“Even though people are still buying green beans, we’re losing sales,” he said.
The Food Marketing Institute, in its research on shoppers’ “economizing behaviors,” identified shifting to private labels as one of the major ways consumers trim their spending, spokesman Bill Greer said.
Among customers surveyed by the organization of food retailers and wholesalers, based in Arlington, Va., 24 percent said they buy store-brand or lower-priced brands “almost every time,” up from 19 percent last year and 17 percent two years ago.
And 60 percent included buying store brands among their money-saving moves, which also included eating out less (71 percent ) and eating leftovers (58 percent ).
Earlier this year, Nielsen found that unit sales of privatelabel goods were down 1. 2 percent, although dollar sales were up 9. 1 percent as a result of food prices pushed higher by the rising costs of fuel and commodities.
Since then, as consumers have dealt with months of higher gasoline prices, the volume of private-label sales has risen slightly above year-ago levels, said Tom Pirovano, Nielsen’s director of industry insights.
At the same time, retailers continue to roll out more private, organic product lines, which tend to sell at higher prices, he said.
“It’s a great effort to come out with those products. I’m not sure premium private label will do well at this time,” he said.
Sales of organic products currently are running about 18 percent above year-ago levels, Pirovano said, after being up 25 percent earlier in the year.
San Antonio, Texas, tops Nielsen’s private-label market list, with a 25. 6 percent market share. Pirovano said top privatelabel markets typically have a few dominant supermarket companies.
The August issue of the trade publication The Shelby Report of the Southwest, based on marketshare data from Nielsen, shows Wal-Mart with 48 percent of the Little Rock market, including its Neighborhood Market stores, and The Kroger Co. with 33 percent.
Statewide, Wal-Mart’s lead is larger, 60 percent to 11 percent.
Kroger spokesman Joe Bell said the nation’s largest traditional grocery company has invested heavily in its Private Selection and other store brands. He said the company owns nearly 30 food-processing plants that produce milk, bread, coffee, cheese, peanut butter and other products to standards as good as or better than national name brands.
Shoppers are buying them, he said.
“We are seeing a shift as the economy gets a little tougher,” he said. Last month, Steve Burd, chairman and chief executive officer of Safeway Inc., told analysts more customers were shifting to the company’s store brands. He said the company would continue to promote the value of the brands, despite the lower selling point, because it is “a major way we bring value to consumers.”
To contact this reporter: spainter@arkansasonline. com
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