Kirkland signature. Two Buck Chuck. Simple fact. Kat and Jack. Great value. Amazon Basics. Store brands have never been more popular.
They’ve become forces in their own right and make up about 21% of sales in the $1.7 trillion US grocery industry, according to IRI.
With prices rising, store brands—also known as private labels, white labels, or generic brands—are becoming a more attractive option for consumers. Inflation-stressed shoppers who are looking to switch from higher priced name brands. In-store brands can be 10% to 50% cheaper.
But the origins of in-store brands remain largely secretive.
Retailers don’t usually talk about the companies that make their brands. Likewise, manufacturers have little incentive to reveal that they make products similar to their brand names under a different brand that sell cheaply.
Many leading national brand manufacturers create private labels for many retailers. In the late nineties It is estimated that more than half of brand manufacturers also make specialty items.
Although store brands ostensibly compete with manufacturers’ national brands, manufacturers often have overcapacity in their product lines. To make an extra profit, some will use this extra capacity to make private labels.
Manufacturers of other brands will produce private labels as an incentive for retailers, hoping that they will be rewarded with better shelf space and a place for their patriotic labels.
“Most manufacturers aren’t open about it,” said Jean Benedict E.M. Steenkamp, a professor of marketing at the University of North Carolina who studies private labels and branding. “Manufacturers don’t want to be known because it undermines the strength of their brands.”
But there are some exceptions. Kimberly Clark
(KMB)Huggies, maker of diapers, produces Kirkland Signature nappies for Costco
(cost)And Duracell produces Kirkland Signature batteries, Costco
Georgia-Pacific, the manufacturer of Brawny and Dixie, also produces store brands. So does Henkel
(Hinky)Purex and Dial, manufacturer.
Store stickers have been around since the early days of retail and The emergence of consumer brands in the 19th century.
Macy’s whiskey jugs are sold under their own name. Customers can return jugs to be refilled, according to Christopher Durham, president of the Velocity Institute, a trade association for private label brands.
Montgomery Ward developed its own line of aspirin in wooden containers, while Great Atlantic & Pacific Tea Co. (also known as A&P) branded spices with the slogan “Take Grandma’s Advice, Use A&P Spices”. A&P later developed Eight O’Clock Coffee, one of the most popular private label brands of the period.
However, no US retailer has been more successful Develop their own brands From Sears, Roebuck.
In 1925, Sears created the Allstate tire brand. A few years later, Sears released their first literal key, according to Durham. The Kenmore line, which began as a sewing machine brand in 1913 before branching out into vacuum cleaners and other home appliances, has become the leading home appliance brand in the United States.
However, these special signs were the exception.
For most of the 20th century, national brands such as Jell-O, HJ Heinz, and Campbell Soup . were
(CPB) johnson & johnson
(JNJ) He had power over the shops. These manufacturers flooded the airwaves and newspapers with advertisements extolling the merits of their products.
Most customers were fiercely loyal to certain brands, not retailers. A store without major labels would likely be crushed, giving manufacturers enormous leverage.
In addition, many store brands have also been considered fading and cheap imitations of national brands.
Durham said the low point of private labeling came during the 1970s, when stores sought to cut costs and roll out generics with basic white backgrounds and black lettering identifying the product — beer, soap, cola, beans and other staples.
Retailers create private brands for a variety of reasons, including to enhance profitability and sometimes as a negotiation tool against brands.
Private brands often carry 20% to 40% more profit margins than national brands because stores do not have to pay for advertising, distribution, or other label costs that are included in the prices of major brands.
In the mid-20th century, many retailers began developing their own labels to regain bargaining power from dominant suppliers and keep their prices in check. With the consolidation of the US retail industry in recent decades, the power dynamic between retailers and suppliers has reversed. Now, stores have more leverage to offer their own labels — whether brands like it or not.
“Forty years ago, Wal-Mart pissed P&G a risky business. Wal-Mart is much bigger than P&G,” said Steenkamp, a marketing professor.
Today, stores’ private brand operations are more complex than ever and there is a much greater focus on chains.
Krishnakumar Devi, IRI’s Head of Customer Engagement, said stores are more likely these days to develop a distinctive special brand or product to stand out against competitors and create loyalty for shoppers.
(cost)for example, You will decide to make a Kirkland Signature Because the leading brand will not sell it to the retailer. or costco
(cost) You think that the prices for the brand that bears the name have gone up too much and they can make their product of the same quality and sell it for 20% less.
Costco has never lost any relationships with suppliers before Kirkland launches its own productsRichard Galanti, the company’s chief financial officer, said in an interview earlier this year that these brands aren’t usually pleased when Costco offers one.
Retailers have been sued for creating products that look a lot like national brands. Owner of the Titleist golf ball brand A lawsuit against Costco For patent infringement, while Williams-Sonoma
(WSM) lawsuit Amazon
(AMZN) To sell “fakes” under its own brand. Both cases have been settled.
The US House of Representatives Judiciary Committee and other lawmakers and regulators around the world have investigated whether Amazon uses data from sellers to create its own brands and illegally favors its own brands on its website.
Amazon has He said It does not use data from individual third-party sellers to report on the development of its own brands and does not favor its own products on the Site.
Most stores start small with their own brands. Grocers, for example, often offer first a stable product on the shelf such as pasta, flour, sugar or rice that is easy to make and where brand loyalty within this category is not strong.
“Don’t start with the hardest things,” Steenkamp said. “As stores build more experience and success, they are entering new categories.”
So how do you find out who is behind your favorite store brands?
Product recalls are often the most revealing way to discover which brand manufacturers are behind specific private labels.
Last year, for example, Dole recalled fresh salads and vegetables, including Walmart’s own brands, Kroger and HEB.
(SJM) It recalled some of its peanut butter products from Jif this year, as well as branded merchandise it made for Giant Eagle, Wawa, and Safeway. Big companies like Conagra and McCain Foods have pulled products from Trader Joe’s.
Then there are the private label manufacturers, like Treehouse Foods
(THS), which makes snacks under the labels of supermarkets, big box chains and other retailers. Nearly a quarter of the company’s $4.3 billion in sales last year, for example, came from Walmart
James Walser, who led the launch of Target’s game
(TGT) The up & up home essentials and personal care brand said in 2009 that Target tried to move away from national brand manufacturers while developing up & up to leaner suppliers who focus only on making private labels.
Some major retailers also make their own labels. Kroger, for example, makes about 30% of its own products.
Perhaps the strangest of store brand manufacturers are the retailers who make private brands for their competitors: Safeway-owned Lucerne Foods manufactures private labels for Safeway competitors.
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