Destination private label

by Keith Nunes
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Private label is no longer a one-size-fits-all category, TreeHouse said.

 

BOSTON — The future of the private label food and beverage category may be found in such brands as Starbucks, Apple, Ikea and Amazon, said Sam Reed, chairman, president and chief executive officer of TreeHouse Foods, Inc.

“What I discovered sometime in the last year is that food retailing has finally caught up with other retailing segments with regard to the development of the brand, and private label has now segued to become, in some instances, a destination brand,” Mr. Reed said Sept. 3 during a presentation at the annual Barclays Back to School Conference. “The way I like to summarize this is when I think of Starbucks or when I think of the Apple Store, you realize the store is the brand, and that is an extraordinary transformation in the thinking of how to deal with customer brands in our milieu …”

Mr. Reed said the evolution of the private label brand started in 1988 when Wal-Mart Stores Inc. opened its first supercenter.

“Food retailers looked around and thought: I have a Hobsonian choice here of either trying to compete against someone with a better logistics system and lower prices day in and day out of national brands,” he said. “Or my alternative is to go into the unknown and find some different way to compete. And what happened over that ensuing 25 years is that private label have become customer brands and those in turn have become destination brands.”

Today, with the retail category becoming more fragmented, retailers are even more challenged to identify products and services that engender customer loyalty.

“This fit very nicely into the post-recession positive trends in both premium foods and health and wellness …,” Mr. Reed said. “… When we look at, among public companies, those that we regard as strategic in nature where they have tried to take their own brand, combine it with national brands and create an integrated merchandising program, that should their consumers want the national brands, they can get them there at the same value as anywhere else and should that same consumer opt for the house brand, that they can in fact get a value that is not found elsewhere.

“When we look at the performance of these chains whether it is in regard to their total business or their branded business or their private label, you can see that there is an extraordinary and consistent correlation between the development of the private label and overall store performance and that is what is really fueling the resurgence of private label and those stores in turn are basing this on consumer proposition.”

Private label is no longer a one-size-fits-all category. As it evolves, different marketing tiers are forming and some store brands are emerging as businesses unto themselves.

“I’ll give you one example,” Mr. Reed said. “I would just go to Kroger stores. Their Simple Truth and their Simple Truth Organic business has in less than two years’ time will be a $1 billion business in and of itself, all devoted to the health and wellness sector created in the inside of standing stores. I think as much as one single example can possibly illustrate, that tells you the power of linking the store brand to consumer desires and changes in consumer preferences when in fact it can be actuated through a manufacturer like TreeHouse.”
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