ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, March 13, 1996 TAG: 9603140001
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
COLUMN: MARKETPLACE
SOURCE: MEGAN SCHNABEL
The two boxes of macaroni and cheese are both blue. And they're shelved next to each other in the grocery store. Both claim to be cheesy; both have similar ingredients listed.
The big difference? One is the supermarket chain's store brand selling for 30 cents, the other a national brand with a 60-cent price.
For most of us, the primary attraction of store-brand groceries is price. While Procter & Gamble is spending $60.6 million to promote Folgers coffee and General Mills is running $174.9 million worth of cereal advertising and coupons, grocery stores can develop their own versions of top sellers and offer them with little hype - and lower prices. And because they provide competition, private-label products help keep down the cost of national brands.
House brands are big business.
According to a study released last week by the Food Marketing Institute, a Washington, D.C.-based grocery trade group, sales of store brands reached $31 billion in 1995, up 3.1 percent from the previous year. Private-label products make up 15 percent of the total grocery market, and analysts predict that share will double in the next 10 to 15 years.
Already, some grocery chains are even deeper into the private-label business: About a third of Kroger's 36,000 total items are store brands.
But retailers have to be careful not to promote their house brands so heavily that customers who prefer name brands will shop elsewhere.
"We don't put private labels in to squeeze out nationals, but to supplement them," said Kroger's Roanoke spokesman Archie Fralin. "If you do go too far, you'll get a backlash."
Ruth Kinzey, a Harris Teeter spokeswoman in Charlotte, N.C. agrees.
"Our goal is offering our customers variety," she said. "A variety of brands, a variety of labels."
Supermarkets also have to make sure customers don't equate house-brand groceries with their distant cousins, the generics that became popular in the 1970s. These plain-label products usually competed only on the basis of price and often were second-quality goods or irregulars, said Robin Kidd, Kroger's Roanoke-based coordinator of grocery and general merchandising. Some grocery stores still sell extra-low-cost lines, but they're usually given a different brand name. Typically only the chain's top-quality house brands carry the store name.
Many store-label groceries actually are packed by the same companies that manufacture national brands; Kroger-label canned veggies, for instance, come from Stokely-Van Camp Inc. and Del Monte. And large grocery chains such as Kroger often produce some of their own private-label groceries in company-owned manufacturing plants.
Store brands, once mainly staples such as bread and green beans, over the last few years have begun to branch into product niches that used to be the domain of national brands, said a spokeswomen for the Private Label Manufacturers Association, a New York trade group.
Just look at the fastest-growing categories of private-label products: rice and popcorn cakes, sugar substitutes, Mexican sauces, adult diapers and health tablets. The list reflects the way the entire marketplace is changing. Consumers are becoming more concerned with their health and their ethnic backgrounds, and the population as a whole is aging. And both national manufacturers and private labels are introducing new products to stay on top of changing trends.
Actually, regional retailers often have a better handle on local preferences than national manufacturers do because they can see first-hand what customers are buying. If consumers aren't crazy about a new kind of extra-crunchy peanut butter, retailers won't bother developing a store-brand version.
"Private label is no different than national brands, as far as consumer tastes and preferences," the association spokeswoman said. "A smart retailer sees where the opportunity is."
LENGTH: Medium: 75 lines ILLUSTRATION: PHOTO: color.by CNB