All you have to do is google "Private Label" and you'll likely see a number of articles that point to share erosion in National Brands thanks to the advent of PL. There will also be a rehash of what you already know: that this erosion is due to both the economy but also due to the better quality and selection of PL offerings overall. Gone are the days of the tasteless cookies; now, you can find good quality PL sopressata in your favorite grocery store.
I have some first hand experience with this not only as a consumer but also in my time working for a food manufacturer based in Chicago. There is consumer demand for fresh, well made and tasty PL meals with quality ingredients that can be purchased for a good price. The freezer case does not have to be your only alternative to cooking at home! Yay!
If this is something we know and it's no longer novel, why am I talking about it? Well, my friends, it's because of food bags and fenugreek.
In the past week, there have been some interesting news items about WalMart. One reporting the streamlining of its food storage bag offerings to just its own Great Value brand and Ziploc brand from SC Johnson. The other is that WalMart is testing PL spices to compete with and / or replace McCormick (McC) brand spices in its stores (initially picked up here). There was an article in the Wall Street Journal (by John Jannarone dated February 6, 2010) but you have to be a subscriber to read it. If you can find it, it's worth the effort. I'll let you know when I'm referring to it (if not directly quoting) using WSJ.
Frankly, I can't get excited about food storage but the spice story is intriguing in a couple of ways:
- Attitudes. We talked about how buying PL is becoming more commonplace. Many like me don't think anything of buying PL dairy, flour, canned good products when it comes to staples so price becomes the #1 factor in decision making. There isn't enough measurable difference in taste or quality that will make someone like this price inelastic. We're not 100% PL buyers but we're not afraid of it either. If you're skeptical, the WSJ points to PL condiment sconsumption at over 26%!
- Implication: Retailers can test pushing the envelope more and more with consumers. WalMart has the reach and might to measure our resistance to PL spices (beyond salt and pepper) let alone other items.
- Economics. According to WSJ, 11% of McC revenues are from WalMart. Yikes! Even if the test were successful and WalMart carried PL spices in only some of its stores, the margin impacts to McC are obvious. While it is true that McC produces PL spices (as per WSJ), those items are at lower prices and consequently are lower margin.
- Implication: The squeeze may not put McC out of business but it would be painful nonetheless. As WalMart and other retailers continue to expand into PL, this will squeeze many other players in CPG and FMCG. One also wonders what this does to share price, etc.
Certainly some things to think about! To be Pollyana for a second, one potential result in this shift towards PL is that all companies take the time and care to develop products that are better, tastier and high quality and that once the economy rebounds we'll see better selection overall across PL and National Brands. A girl can certainly hope.
What are your thoughts? Please send them my way!
P.S. This post reminds me of Wall-E. If you've not seen this movie, you might want to check it out!