In defence of national brands: Ten ways to quell the private label threat
As private label continues to take share away from national brands, a Nielsen analyst has identified a number of simple ways for manufacturers to limit the private label threat.
Tom Pirovano, Director of Industry Insights at Nielsen, notes that differentiation is the key, with ten ideas to take on generic brands:
1. Health claims – Look for claims you can make about your product. If it is natural let customers know, if it’s a good source of antioxidants let people know, but make sure what you are saying is factual and not misleading or risk consumer and regulatory backlash. Mr Pirovano also indicated that reformulation by adding nutrients could also be considered to enhance “perceived value”.
2. Unique packaging – Consider packaging options that could make your product more alluring to consumers. Easier to open or easier to re-seal packages are often well received, while innovative packaging design is also vital as it is the in-store visual representation of your brand.
3. Line extensions – Leveraging the brand can be a great way to boost sales, although beware of cannibalisation. Nielsen pointed to the soft drink sector as a case in point.
“Look at the soda category with only 6.1% private label share,” Mr Pirovano said on Nielsen Wire. “Every year we see many new soda flavors, but very few really “new” brands. In most stores, private label is left with limited SKUs and shelf space.”
4. Embrace a worthy cause – Consumers are increasingly looking for businesses that are ethical, and giving back to the community is important. Too many simply give a percentage of profits but embracing a cause or a charity goes beyond money and should be more about building awareness of the cause.
5. Odd sizes – “It’s easy for store brands to copy products sold with the same package size year after year,” Pirovano noted, adding that some products should consider changing package size consistently.
6. Value brand introduction – Private label has made an impact due to its comparative low cost so value ‘national brands’ make it difficult for store brands to get a foothold. This is considered most suitable in sectors where private label has yet to gain traction.
7. Local connections – “Each year have your sales force apply labels to packages in the store, reminding shoppers when a product is grown locally, processed locally, or warehoused locally,” Mr Pirovano advised. “In today’s environment, shoppers are likely to support the local economy.”
8. Treat private label like any other competitor – Private label brands are in many ways similar to your other competitors – they are looking for market share gains. Brand managers must therefore discover what sets their brand apart and communicate this to the customer.
Shoppers must have a valid reason to pay more so understand what offers value to the customer beyond price.
9. “Green” commitment – Most large pack sizes use less packaging per gram of food and, as a result, marketers can combine the traditional value message with the green message. Also, consider other options for making your products/brands more sustainable as consumers are increasingly likely to reward companies with a conscience.
Hollow promises will be punished by shoppers so ensure your commitment is real and not merely a ploy to attract customers.
10. Keep innovating – “Be a moving target,” Mr Pirovano said. “Make your brand difficult to copy. Give shoppers a reason to spend a little more on your brand.”
Look for category leading innovations, which allow you to build share before competitors can replicate your offer. Stagnant brands which rest on their laurels will always be overcome by the competition, be it national brands or private label.
Private label growth
The share of the grocery sector held by private label is now around 23 per cent in Australia; with growth picking up last year as consumers considered alternate ways to reduce their bills. Sales have outpaced national brands for much of the 21st century and analysts are anticipating market share to reach 30 per cent in coming years as retailers enhance their offerings.