Are Private Label Products Brands?

posted by Al Haberstoh on July 22, 2010.

There is no doubt that consumers have embraced private label products.  In fact, Symphony IRI reports that 99% of U.S. households purchase at least one store brand regularly, 83% are willing to try a private brand at least once, and 75% of store-brand shoppers make at least 30 store brand purchases each year.

This week we were working on a proposal to a client that offers private label products.  Most of the products this retailer sells as private label are the equivalent to the national brand goods and in some cases, identical.  The question arose, do we just put it on the shelf or should we devote some of the ad spend dollars to brand it to potential customers?

Before you can answer this question for your own retail business, it is helpful to look which retailers do this well, and which not so well.  The place to start is with a store’s brand image.  A good brand image greatly increases the likelihood of the consumer trying a store’s brand. In fact, the likelihood that they will experiment with private-label offerings in a new category doubles after they’ve had a positive store brand experience.  Clearly, the store’s brand image has a great effect on the success of private label offerings.

Wal-Mart vs. Whole Foods

Consider two retailers, Wal-Mart and Whole Foods.  The Whole Foods 365 Everyday Value brand is an acknowledged success.  As sales dipped at the natural foods chain when the recession took hold, they aggressively promoted this brand.  Their “organic value” promotion was a success and helped the chain regain sales momentum.    Wal-Mart’s experience with its “Great Value” brand, by contrast, has been less then stellar.   The brand has not taken off and, in fact, the chain was forced to bring back national brands they had removed from their shelves in favor of Great Value.

What accounts for the different private label experience of the two retailers?

The most obvious reason is the store brand image.  Whole Foods has an image tied to healthy eating and lifestyles.  The devotion of Whole Foods fans (and they really are fans, not just customers) is based on lifestyle connections, giving the store brand credibility with its core audience.  Wal-Mart, in contrast, is all about low prices, with almost no lifestyle component to their brand image.  So the brand credibility consumers assign to the two companies’ private label brands are quite different: for Whole Foods, quality and healthy at a value price point; for Wal-Mart, cheaper than their already low prices.   When it comes to feeding the family, quality, healthy and value are appetizing but cheaper may be harder to swallow.

Package Perfect

Packaging is also an issue.  Whole Foods 365 logo and package designs have a quality look and feel while Wal-Mart’s “Great Value” design looks … well … cheap.  It would have made better sense for a retailer whose image is low price and not much else to come up with a package design for its private label brand that says “quality”.

In the last blog we talked about the importance of good logo design, and the processes used in logo creation.  It is very important to have a logo and package design that communicates your core message to the viewer.

In Wal-Mart’s case, that message is almost entirely low price.   The stark white background and simple block letters remind me of the early “white box,” cheap non-branded items that were on some grocery retailers’ shelves 20 years ago.  You saved money but sacrificed taste, often to a great degree.  Today’s private label products are far superior to those early offerings and are often as good as national brands, so why would Wal-Mart, with their already “low price” image, choose a package design that harkens back to a low-quality private label past?

Regarding whether a store needs to promote its private label brand, the answer is a resounding “yes.”  Retailers who have intelligently promoted their store brand have yielded impressive gains in market share and margin.  Whole Foods certainly did it with the 365 brand.  Another excellent example is Home Depot’s Behr paint brand.  Home Depot is so committed to branding this private label that they gave it its own web site, http://www.behr.com.

So our advice to our client was, by all means promote your private brand.  A credible branding campaign will pay dividends every time a consumer chooses your brand over the national brand.