Private Label’s Big Push

In today’s economy, consumers’ priorities have shifted: they’re demanding value for money and are cutting back wherever they can. They’re spending more time at home and are, for example, scaling back restaurant spending. People also have an increasingly positive view about private-label grocery brands, which tend to be cheaper than brand-name products.

According to a recent survey of 25,000 Canadian grocery shoppers conducted by BrandSpark International, about six in 10 Canadians believe store-label products are just as good as brand-name products, while 40% believe brand-name products are more innovative. Furthermore, 68% believe private-label products provide extremely good value for money.

A company like Loblaw is perfectly positioned to take advantage of this shift. The grocery chain has been an absolute pioneer in private label, with its highly successful President’s Choice line, which has grown to include PC Green, PC Organics and PC Blue Menu.

Loblaw recently revived its low-priced No Name line and, given today’s tough economic climate, was smart to do so. However, I think its new marketing push sends confusing messages and might actually work against the retailer.

A new TV commercial shows executive chairman and spokesperson Galen Weston positioned between two full grocery carts. He tells the audience these are “challenging times and you need real, no-nonsense ways to stretch your dollar.” One cart is filled with No Name products while the other contains 26 national-brand counterparts. According to Weston, the national brands cost $100.38, while the No Name brands cost just $73.91.

No Name products do offer lower prices and, for those consumers looking only at price, this will be appealing. But in the TV spot, Weston introduces a money-back guarantee if consumers are unhappy with “any” No Name product. Is that because consumers perceive these products to be of lower quality? It’s hard to imagine offering a similar guarantee for President’s Choice products where the quality is understood. In fact, in discussions I’ve had with shoppers, many said they would feel better about buying the brand-name products over No Name because the premium could easily be justified—they think they’re paying a bit more for better quality. A more effective way to market No Name would be to say it offers the best value at Loblaws, without direct comparisons to brand-name goods. Loblaw already has PC to fight the big brands; No Name should be all about value.

I also think Loblaw should take Weston out of the No Name marketing push altogether. Weston has become a very effective and appealing spokesperson for the flagship brands, Loblaws and President’s Choice. He’s shown leadership by focusing on things such as the environment, organics and high-quality innovative PC products. But with his well-to-do image, Weston just doesn’t seem like a good fit to promote No Name, with its low prices and plain yellow and black packaging.

In BrandSpark’s survey, we found that President’s Choice is one of the strongest brands in Canada, second only to Kraft which is the most trusted brand in grocery stores in both Canada and the U.S. I would expect consumers would consider “switching supermarkets” to get PC-branded products since this highly favoured brand is generally only available in Loblaw’s banner stores.

Loblaw should continue focusing on the great value, innovation and trust of the PC brand—a perfect combination that will continue to lure people away from competitors. Currently, this combination is so strong that Loblaw is one of the only major grocery retailers that has managed without a customer loyalty program (aside from its credit card points programs)—a testament to the real strength of the brand.

What does today’s climate mean for name brands? First and foremost, this is not a time for packaged-goods companies to stop innovating, as this is seen as their key advantage. Secondly, they need to make people comfortable with the value equation, whether it’s coupons, rebates or in-store promotions, or highlighting unique benefits and innovations like new healthy or natural ingredients, environmental benefits, or new scents.

Brand-name loyalty and strength are shaky right now, and if people start buying private label and find they’re satisfied, even when the economy gets better they won’t necessarily change their shopping habits. The risk of not doing anything is consumers shifting their loyalty to private labels, and not shifting back.

ROBERT LEVY is president and CEO of BrandSpark International and founder of the Best New Product Awards