Commentary From Our President
Breathing New Life into Supermarket HBC
Michael D. Sleeper, Chief Executive Officer, Imperial Distributors, Inc.
Today’s HBC and GM categories offer premium, mainstream and economy brands. But it’s the growth rate of private label brands, compared to national brands, which have created a sea of change in sales for retailers.
Whether it’s the “new normal” or a sign of the current economic climate, private label brand growth is outpacing national brand growth by huge margins. Private label brands increased by 10% vs. only 2% for national brands in 2009. And Wal-Mart, the bell-weather of retail, has set their private label target at 40% by the year 2012. Last year private label products reached 29% of center store sales.
National brands are fighting hard to win back consumers, but it won’t be easy. Limited Assortment Stores and Dollar Stores are growing. Value tiered products for price conscious shoppers continue to expand and global sourcing is expected to increase at record levels in the foreseeable future. A recent consumer survey showed 70% of shoppers view private label brand quality equal to national brands. As one chain executive put it, “there’s no question that the economy has changed the psyche of our customers.”
So how are the national brand manufacturers likely to respond?
The strategies that national brand consumer product manufacturers are most likely to implement include; driving efficiency to lower product costs, promoting key brands to achieve sharper competitive retail prices, redeploying marketing funds for greater consumer value and maintaining a competitive advantage through innovation.
The competitive advantage for most national brand manufacturers is to invest in R&D in order to generate product innovation. Traditionally, private label manufacturers have been less innovative, but very good as fast followers. So how will national brands fight back? Expect to see more new product introductions, stronger promotions and increased market funding. With private label’s momentum, national brands will have to fight hard to recapture market share. Hopefully, this will be an opportunity for healthy growth to include HBC and GM categories.
For comments or questions, contact us by phone at 508-756-5156, or e-mail: msleeper@imperialdistributors.com