Tug of War

The front line of building brand identity is now in the store.

A roundtable featuring: Simon Uwins of Fresh & Easy, Tom Britanik of Clorox, Rita Bargerhuff of 7-Eleven, Chris Heye of Welch’s and Masha Sajdeh of Arc Worldwide.

What does the term “store brand” mean to you?

Simon Uwins: It simply means a brand or a collection of products that a customer clearly associates as belonging to the store from which the customer bought it. To a degree, the identities of those products are interchangeable with the identity of the store itself.

In the end, what people really think of your brand, as a retailer, is their experience in your store in total. The products are a key part of it, but so are the other elements of the store experience. That’s really what the store brand is all about.

Tom Britanik: It’s a brand made for a retailer at their request, under their label or their brand name, using a name that they have chosen. The retailer defines and executes the entire value proposition, including what the product attributes are, the pricing, and all of the marketing for that brand. The store brand is only sold to that particular retailer, so the retailer has full control of the brand.

Rita Bargerhuff: It is different from private label and certainly means something different than it did 10 or 15 years ago. Today, it means that a retailer is able to really look at their customers’ needs and wants very closely and provide the products and value that the customer is looking for.

Chris Heye: The store brand term makes me think automatically of a proprietary brand for the retailer, private label. The store brand, to me, really represents a choice for the consumer.

Masha Sajdeh: It can mean anything from the cheap alternative that the store offers, to exclusive private-label brands sold at premium price-points, to the store brand name itself. It can mean any of those three things.

Do you see store brands as a threat to national brands?

Uwins: Not particularly. I come from a background in the U.K. where they have co-existed for a long, long time. From my experience, a national brand that’s very relevant to customers is not threatened whatsoever.

What it puts under pressure are brands that perhaps aren’t relevant to customers or unclearly positioned. What’s best is a combination of both store and national brands because together they tend to grow the category.

Britanik: I would say that store brands are no more or less a threat than any other competitive entry in the category. Store brands have a certain value proposition that appeals to a certain set of consumers, just like any nationally branded product has.

We are definitely seeing growth in store brands, especially in this tough economic environment, more in some categories than in others. Thankfully, most of our brands have a number one or number two position in the category in which they compete, so we’re a little bit more insulated.

Those national brands that might have a weak value proposition are definitely having a tougher time. We are seeing that in the monthly share results. All brands need to ensure that their value proposition remains relevant over time, because you can’t just rely on what the consumers valued six months or three years ago.

Bargerhuff: You’d really have to ask the national brands folks that question. I don’t have the perspective as to whether we area threat. I really couldn’t speak for them.

Heye: Store brands are a threat, but they are also an opportunity. They belong here and serve a purpose for the consumer and for the retailer. Store brands are a greater threat to national brands that have a weak, unclear point of differentiation.

If your value proposition relies heavily on price, then you are probably facing an even greater threat, certainly in this downturn in the economy. Store brand competition can actually help the marketers of national brands continually sharpen their key points of differentiation. 

Sajdeh: When store brands invite a direct price comparison they clearly can be a threat to national brands, and that threat is certainly palpable among price shoppers today.

Store brands also have the ability to create intrigue and mystery among consumers. This can be difficult to do with brands that compete on a national, or even international, scale. National brands may be challenged to find ways to continually create mystique and interest.

However, in some instances, store brands can also help legitimize or frame-up the most popular national brands and have a positive effect. When shoppers look at an Olay copycat, for example, the national brand can benefit from the comparison.

The store brands can give shoppers a visual impression of more facings on the shelf, and lend an advantage to the favorite brands in the category.

Is there anything that national brands can learn from store brands?

Uwins: There is always something that national brands can learn from store brands and store brands can learn from national brands. It works both ways. In the end, a brand will only be successful if it’s clearly relevant to customers.

Is it offering and creating enough value for customers for them to want to buy it again? That, for me, is a good test for national brands against store brands, but also a test for store brands against national brands.

Sometimes the language of whether it’s store brands or national brands can feel like it’s more of a discussion about who owns the brands. It’s very much an inside-looking-out view of an industry rather than about customers and how they see things.

Britanik: Store brands are growing for a reason. So, national brands have a little bit of a wake-up call and need to look at their value propositions. They can’t rest on their laurels to ensure that they are relevant to the consumer or the shopper that they are expecting growth from.

National brands need to look at the store brands and ask themselves whether the store brands are taking their core target consumers away from them and why that’s happening. They need to make sure that they are differentiated enough.

Ultimately, that’s what it boils down to: Your brand has to be differentiated and offer a better value overall, and shoppers have to be able to see that.

National brands could also learn from store brands in terms of the types of in-store tactics that can be effective to shoppers at the shelf. Store brands are good at this because they generally do not do any national advertising for specific brands and sell largely off the shelf.

Bargerhuff: They might learn something by looking closely at how store brands define the way retailer customers consume or use the brand. For 7-Eleven, that would be the right portion size for on-the-go eating, or it might be the packaging design.

It could be the flavor profile that our customer is looking for, given the customers that we service. So, to the degree that a manufacturing brand takes a look at that, there might be something to learn there.

Some national brands are very, very good at it; obviously, there have been strong national brands for a long time. But there is a reason that the store brands have made inroads into some of these categories.

Heye: We can learn from all sorts of other brands and competitors.  We try to learn from anything that is growing that retailers and consumers signal are important to them. We can learn from them how to make ourselves better and how we can help solve problems for consumers and customers.

For example, a lot of the most successful store brands have a cost model that supports their margin base. We can learn from that cost model and possibly how we might become even more efficient.

There are a lot of things that we can learn from their top-line growth.  Store brands can be a bellwether for category growth, a leading indicator of consumer sentiment. I’ve seen many examples where store-brand growth is followed by category softness.

Those signs often indicate a lack of innovation in a category. That is often a wake-up call to all of the brands in that category to bring new solutions to the consumer.

Sajdeh: Retailers have done a lot to merchandise and market their exclusive store brands. National brands should recognize that store brands are able to create this cachet without any advertising. There’s a lot of word-of-mouth about some store brands that national brands might envy and perhaps should try to duplicate for themselves.

What CVS has done with its beauty brands, like Lumene and Boots, gives the retailer a certain cachet and exclusivity because these brands are available only at their stores.

The amount of credibility and loyalty that Costco’s Kirkland brand has is envied by many national brands, I’m sure. It’s not just a cheap alternative. It is a very legitimate quality contender and it signifies value for shoppers without any advertising.

Target’s store brands have a lot to teach national brands in terms of the credibility they’ve achieved through designers.

Personal stories, endorsements and bringing a face and a name to the brand really add to the intrigue, mystery and credibility of its brands.

Many national brands don’t have that; they are simply boxes and logos on the shelf.

Are there ways in which the store brands can work with the national brands?

Uwins: There needs to be an alignment of objectives in the sense that both are committed to grow a category and to keep a focus on the category rather than on individual products. But the first point is just making sure that, at the fixture, it just makes sense to the customers.

Why is that national brand there? Why is that store brand there? Both of them need to be positioned clearly. Then it comes down to which one the customer wants to buy.

There’s no reason why both shouldn’t be promoted and there shouldn’t be a joint plan for the category that benefits both. It shouldn’t be viewed as a battle between national brands and the store brands, but rather as an opportunity to grow the category by giving customers more real choices.

Britanik: National brands and store brands can work together to create an efficient assortment on the shelf that satisfies most consumer needs. If shoppers are offered two or three brands — or whatever the category might handle — that’s a simple and more efficient way for them to shop and it’s much more efficient for the retailer.

Many categories have way too many items, or SKUs, making the shelf very confusing for the shopper. When a shelf is confusing to shop, consumers sometimes just throw up their arms, and walk right by because it takes too much time to shop that particular section. So it potentially limits the category growth for that retailer.

There are many of our categories that are open for simplification and greater clarity for the shopper. The bottom line is keeping the choices for the shopper simple and clear, in terms of offering the different price tiers. In my experience, that’s what typically helps drive category growth.

Bargerhuff: We are focusing on the value that we offer the customer. We have a very stringent standard that we’re going to be national brand equivalent or better.

The real advantage for us is to be able to stay in stock, obviously. When we develop our own brand, we have more control over the distribution and the availability of that product.

So, having said all that, the brands can co-exist. I don’t see a challenge with that. 7-Eleven really wants to provide ultimate customer choice in our store, and if someone is particularly manufacturer-brand loyal, we want to offer them that.

Now, obviously, customers will vote with their pocket-books every time, in terms of whether they have a strong preference. But as long as our customers are buying both national and store brands in volume, clearly we are giving them the right choice. Again, the thing that we like is the control we have over the innovation, the product delivery and the pricing.

Heye: There are many ways that they can work together. Doing promotions together is an easy one. This is especially true when it comes to the food and beverage category, since foods are consumed in combinations. So, we can do many things like joint promotions to help bring category growth or cross-category growth.

Both store and national brands are responsible for bringing category growth. If we focus only on winning at the expense of store brands, we may not be optimizing category sales and profits for the retailer.

Each of the retailers has a different approach and so we try to adapt as needed and win together with them. We have to do different things with different customers based on the way they market themselves and the way they try to grow their categories.

Sajdeh: When manufacturers are collaborating with retailers, there is probably a way to look at how to align different shopper segments with national brands versus with store brands.

For example, some segments might include shoppers who are highly brand conscious. For them, the store brand is not the best product strategy or offering. But store brands or private label may be a very viable strategy for price-sensitive shoppers.

So, rather than fight for the same types of shoppers, they can carve out their own spaces for different segments. Then they are not a threat to one another, but instead take a complementary approach.

What do you see ahead for store brands?

Uwins: I come from a background where the store brand has developed over many, many years. Tesco has a whole variety of them as well as the Tesco brand, Tesco Finest brands, and so forth.

But there are also national brands that are still doing well in the U.K. market. Store brands have got a long way to evolve, particularly in the U.S. market, where they’re a bit younger.

Store brands are not the death knell of national brands at all. The strong brands that are clearly relevant to customers, whether store brands or national brands, will continue and prosper.

Britanik: My guess is that store brands will likely continue to grow over time and for a couple of reasons. First, store brands are a good business proposition for the retailer, both financially and as a way to differentiate themselves from other retailers.

Second is that retailers will continue to become more sophisticated marketers. They will continue to improve their store-brand offerings and how they are executing them to the consumer or the shopper.

Every time we’ve had a recession it gives the consumer or shopper an opportunity to evaluate other brands. It’s important for every manufacturer to do some self-reflection and make sure that we are providing the best value to the consumer. It’s not just a focus on price; it’s a focus on the brand’s holistic value proposition.

Bargerhuff: I see us continuing to innovate. March was our official, national launch of our 7-Select brand, but we’ve been feeding products into the market since 2008. Our objective is to become even stronger in terms of taste profile, innovation in products, packaging and affordability.

To the degree that we can, we will continue to build strength at a reduced cost. We’ll do that by sourcing our own ingredients and minimizing the distribution costs as opposed to buying lower quality ingredients. Our standard is high and it is very real. But we can continue to offer a lot of value through both innovation and pricing.

We have also started a global private label initiative with our parent company in Japan, which is very early on. We’re taking a global focus in terms of innovation, product sourcing and ingredient sourcing. This could continue to be a largely successful and relevant program for customers worldwide.

Heye: Store brands are going to continue to grow in sophistication. More and more American retailers are comparing themselves and their store brand development to retailers in Europe.

Store brands, and the percent of sales that store brands represent among total sales, is now a boardroom-level conversation.

When store brands become part of the boardroom conversation, and part of the Wall Street conversation, they are only going to continue to grow in importance. The very best store brands, the best retailers, and the best manufacturers of those store brands, are going to grow in the way they help solve consumer problems. We will see more investment in store-brand innovations.

We are potentially going to see more retailers narrow the price gap with manufacturer’s brands. And I think we will see more innovation from store brands. Some of the forward-thinking people behind a few store brands will adjust their margin structures and try to beat national brands with better benefits and solutions.

We’re going to see some store brands invest more in the premium parts of a category, and that’s going to bring sophistication and growth.

Sajdeh: Because store brands are not likely to gain advertising support, success will rely heavily on creating an authentic brand experience. The element of imagination traditionally created by advertising will lack and other factors will continue to gain importance.

Things such as the product name, ingredient story, packaging and in-store experience will play a large role in legitimizing the store brand and creating a relevant and coveted brand among consumers.

–

SIMON UWINS is chief marketing officer of Tesco’s Fresh & Easy Neighborhood Market, having joined Tesco in 1984 from ACNeilsen. Simon ran Tesco’s bakery, health/beauty and non-foods categories prior to leading its marketing in the U.K.

TOM BRITANIK is svp and chief marketing officer of the Clorox Company, with global responsibility for all marketing functions. Previously he was vp and general manager of U.S. Auto Care and Brita, and spent 13 years with Procter & Gamble.

RITA BARGERHUFF is vp of marketing for 7-Eleven, responsible for the marketing of key proprietary items and enhancing the in-store experience. Previously, she was with Greyhound Lines, Ralston Purina and Price Waterhouse.

CHRIS HEYE is chief marketing officer at Welch’s Foods with responsibility for invigorating innovation and delivering business growth. Previously, he was vp of marketing for BP/Castrol, and held marketing positions with Johnson & Johnson and Nestlé Foods.

MASHA SAJDEH is chief shopper strategist at Arc Worldwide, the marketing services arm of Leo Burnett, specialists in the inter-relationship between shopper, digital, promotion and direct marketing.

–