06.27.2007

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Pulse Report

PRIVATE LABEL FROM A CONSUMER PERSPECTIVE

The Pulse Report examines the notion of brand parity and tension at the shelf, where the battle for private label dominance is played out. Private Label from a Consumer Perspective presents current insights into whether private label brands have come far enough in the minds of consumers for these brands to compete as legitimate brands in their own right.

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08.30.2006 "Private Label: A Consumer Perspective on Store Brands"



For more Hartman Group articles on ORGANIC, click here...

03.28.2007 "The 'Fiber' of Organics"

11.01.2006 "Consumer Culture and the Future of Organic Usage"

09.27.2006 "Most Recognized Organic Brands"

06.07.2006 "Experience vs. Products: What Is the Value of Organic?"

06.07.2006 "What Makes Food Organic?: The Twinkie Problem"

04.12.2006 "Wal-Mart Goes Organic"

11.18.2004 "The Branding of Organics: What Works & What Doesn't"

04.27.2004 "The Symbolic Power of 'Organic'"

07.12.2002 "The Organic Consumer May Not Be Who You Think It Is"

12.20.2002 "What Does 'Organic' Mean to Today's Consumer"

12.13.2002 "Hanging on to Your Organic Consumers"

10.15.2002 "The True Effects of Regulation on Organic Consumers"

04.07.2000 "Organic Products: How Do Consumers Choose?"

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Making (more) Room For Private Label Organic

One of the most influential trends within the food and beverage industry, not to take anything away from the ever-growing demand for fresh foods, is the demand for private label (a.k.a, store brands or retailer brands) products. According to ACNielsen, private label sales have been growing at a faster rate than their national brand counterparts for the better part of the past 10 years. Couple this with the resonance "organic" has with consumers and one can envision the bountiful opportunities for private label organic brands.

Banned to the pages of marketing history books is the memory of generic products, those cheap, inferior ancestors of today's private label goods. We see in our Pulse Report, Private Label from a Consumer Perspective, that consumers are moving beyond traditional notions of packaged goods in search of unique selections, better quality ingredients and yet products that still delivers on "value" (consumers expect private label to be price competitive with national brands).

Looking back 20 years, generic store brand goods were literally a world apart from products being created by the then small-scale producers of organics, who tended to labor over issues of ingredient quality. Today, nothing could be further from the truth: With the expansion of organic products into the mainstream, the two formerly polarized product classes have drifted toward each other in an intersection with the unceasing consumer demand for foods and beverages of high quality.

Marketing Private Label Organics: 2 Rules to Live By

For mainstream food retailers, the intersection between significant shopper interest in new, high quality private label products and the high consumer interest in organics has already led to a number of branded, organic private label lines, offering everything from milk to cereal to baby food. Unfortunately, in the rush to create store brand products for the 73% of Americans who reported in 2006 (see: Organic2006: Consumer Attitudes & Behavior, Five Years Later and Into the Future) that they had purchased organic food and beverages in the past three months, many developers of private label organic lines are not necessarily taking into account two very important ideas when launching or reviewing existing organic private label product lines:

1. Simply providing organic private label "analogues" of conventional products and brands (e.g., organic corn flakes for conventional corn flakes) is not sufficient for long-term consumer interest in, and allegiance to, a retailer's in-house organic product line. Consumers want unique store brand products and state an interest in trying new private label products they deem "better" than national brands, not just because of price, but because the product offers a unique experience when purchased and consumed. This experience goes as high as "trusting" and "liking" the retailer that sells the store brand products, and gets down at the product level to the presence and absence of certain ingredients, the perceived quality of the ingredients, and even a narrative or "story" that might go with the product itself in terms of origin.

2. Consumers purchase organic products for reasons that have nothing do with price. The primary triggers for buying organics center squarely on issues of perceived healthfulness and the fact that organics offer an absence of pesticides, growth hormones, genetic modification and antibiotics. Organics are generally considered to be "fresher" than conventional products. Other reasons as to why consumers enter into buying organics center on three important lifestyle triggers:
   
   
   • Being diagnosed with a health condition (either in the family or personally);
   • Having children (and small children transitioning to eating food); and
   • The social influence of personal and community social networks.

Organics and High Quality Private Label Moves Mainstream

Food marketers and retailers find themselves at a promising crossroads: three-fourths (73%) of the population is experimenting with organics; one-quarter (23%) are regular buyers (see: Organic2006: Consumer Attitudes & Behavior, Five Years Later and Into the Future). Within store brand buying behavior, we found in our recent private label report, Private Label from a Consumer Perspective, that 10% of shoppers say they buy private label products when "shopping for organics," and another 21% say they do so "occasionally." In the same report, we also found that when asked to select from 20 food, OTC and non-food private label categories, those products they might want more variety in, the third top choice after OTCs and beauty products, was organics.

This trend in demand for organics is juxtaposed on the seemingly insatiable desire that shoppers appear to have for high quality store brands. With millions of shoppers experimenting with organics, it would seem like it's "a great time" to simply create organic versions of many existing products and watch them "fly off the shelf."

Recent market metrics might support the notion that many organic store brands are indeed flying off of grocers' shelves; a big caveat, however, would need to accompany such analysis: For how long will such products fly off of shelves? The answer lies somewhere close to "for as long as another retailer doesn't offer similar organic store brands at similar prices."

As it turns out, just as established, national brands differentiate themselves from one another by having unique attributes, consumers are indicating that they are starting to expect that same from private label itself. Although private label organics are still a relatively new product class, it won't be long before the same expectations come to rest on store brand organics, too. To avoid an almost inevitable commoditization of sameness among organic store brands (e.g., organic milk is the same retailer by retailer), several criteria will need to be addressed as private label organics become steadfast elements of retail product sets:

The most unique organic private label products will cultivate differentiating features that lend themselves "naturally" to the organic category. Examples would include:

• Understanding that a number of organic products are bought by parents for children, so marketing along these health lines, and linking such marketing to other store initiatives as far flung as pharmacy, can prove a distinguishing feature.

• In fresh products, any attempt to cultivate a local narrative (e.g., sourcing via local organic dairy farms) and stories of sustainability that relate to the retailer will in turn bolster a unique brand.

• Understand that other important elements concerned with buying organics have to do with store experience, and how much shoppers trust and like their retailers: In this case, any effort to upgrade store experience by design should also include organics in the strategy.

• Finally, understand that there are basic entry points to organic categories that derive from consumer beliefs and concerns, especially when shoppers are first experimenting with buying organics. As a first step, in reflection of triggers to purchase that center on concerns for health, hormones and worry about pesticides, the initial organic products to stock are produce, dairy products, meat and poultry, and baby food.

It's Not the Product, It's the Lifestyle

There are other entry points to organics, of which regular buying signifies that a shopper has fully "adopted" an organic lifestyle and will be seeking out products like organic apparel or coffee. While the shoppers that might embrace such a lifestyle are the minority in the American population (roughly 13% of Americans are "core" organic shoppers), another 63% of shoppers occupy a mid-point in terms of their interest and experimentation with products like organics.

This huge group of "mid-level" wellness shoppers is the same group frequenting the various channels where private label store brands are found and compose the largest buying group for organic store brands. The fact that such a large number of shoppers are experimenting with entry point organics (e.g., organic produce, dairy products, meat and poultry, and baby food) speaks to the need for careful planning around not only which products are being placed in stores, but the story behind them. Those retailers who craft unique, differentiated products and stories in their offering of private label organics will gain advantage over those who risk commoditization by producing analogues of conventional products. Ironically, new private label organic brands are doing two things at once: Creating brand loyalty, to the extent possible as dictated by the retailer's choice of ingredients and the apparent "uniqueness" of such products, while simultaneously introducing shoppers to an entirely new class of lifestyle products.

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