As the recession has deepened, no issue has hovered as menacingly over the grain-based foods industry as the vulnerability of branded products to private label. While early indications from bakers suggested consumer demand for branded products has held up well, the private label drumbeat has persisted.

Supervalu management spoke hopefully last week about prospects for further growth in store brand sales, part of a universal move among retailers toward giving private label greater attention. NPD Group estimated private label products are purchased in 97% of households. Also instructive last week were management remarks by two leading consumer packaged goods companies grappling with the challenging market environment — PepsiCo, Inc. and Danone S.A.

In the case of PepsiCo’s Frito-Lay division, the company’s volume held steady in the quarter ended March 31 despite sharply higher prices. Additionally, the company said it did not lose share to private label or branded competitors, suggesting considerable resilience in its brands. Still, the company said it was taking steps to protect its turf.

PepsiCo in recent weeks has "invested" in reducing price gaps with branded competitors and private label, is adding 20% more product in its take-home salty snacks and has introduced a value line of Munchos and Santitos priced at $2 per bag.

At Danone, the company has reacted to volume erosion in its basic U.S. dairy business through a multi-pronged strategy of price cuts, promotion, advertising and new product introduction. All the while, Danone is maintaining a focus on growing its higher-margin blockbuster products such as Activia. For grain-based foods generally, the actions taken by PepsiCo and Danone suggest the need for action but also for carefully crafted, individualized approaches — a scalpel rather than a hatchet — for companies seeking to emerge from the current difficult climate in the strongest possible condition.