Brand Killers : Branded Products vs.Private Label and Store Brands in Retail and Foodservice

Heinz plans big push for products

Go Heinz!  Go Heinz!  

While many manufacturers react to an economic downturn with drastic cuts to marketing, clearly Heinz knows better. 

Can branded manufacturers afford not to advertise when consumers are looking for any excuse to save money by switching to private label?  

And once they switch, how will you ever get them back?

The H.J. Heinz Co. plans to push its products even harder in the second half of the fiscal year, increasing its marketing budget to combat intense competition in the frozen food and condiments aisles as well as pressures from private label rivals.

William R. Johnson, Heinz chairman, president and CEO, said yesterday that consumers continue to be intensely focused on bargains.

But he also said the market seems to be stabilizing and that makes this a good moment to invest in gaining market share.

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SYSCO Puts New Emphasis on Private Label Brands

Here are a couple of interesting quotes from a recent earnings call with Sysco, where analysts sought clarification on Sysco's internal brand focus.

The response shouldn't surprise anyone.  Sysco is only looking out for its own best interest by reemphasizing private label products with its national sales force.

Jason Whitmer (Cleveland Research Company):  Last question on your own brand, the Sysco brand, is there any return of a focus on that to drive that business again? Or to kind of continue to define that platform and anything that could change the mix shift or even the margin components of branded versus your own brand versus the national brands?

Kenneth F. Spitler (President and COO, Sysco):  Yes, we've just begun a reemphasis of brand and brand sales, reemphasis in our sales force and in our sales meetings start driving those numbers back up.

Meredith Adler (Barclays Capital):  I'd like to go back to the answer you just gave about private label and I wasn't sure, you said a reemphasis of brand and brand sales. Did you mean your own brand or did you mean national brands?

Kenneth F. Spitler:  No, I meant our brand that we're reemphasizing it with our sales force and our customer base.


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QSR Magazine Touches on the Rise of Private Label Brands

Well, well.  Look who's talking private label?  None other than QSR Magazine, one of my favorite print publications.

In his blog post, Steffen Weck touches on several good points about private label's insurgence and rapid acceptance on the retail side.  His point that private label products are no longer considered inferior rings true, as consumer-based surveys have proven time and time again.

But what about foodservice?  The other half of the food dollar?

This happens to be the industry that QSR Magazine covers.

As broadline distributors introduce additional products, and ramp up sales efforts to emphasize their own labels through aggressive marketing and in-kitchen taste comparisons, the foodservice industry will also witness similar patterns.

After all, who's visiting the restaurant more than anyone else? 

The food manufacturer?  No way. The direct sales force is focused primarily on the big chains.

The food broker?  Not quite.  Their sales force is way too small to influence all operators.

It's the DSR (distributor sales rep).  The distributor makes contact with the foodservice operator more than anyone, and is often driven by attractive incentives to promote private label alternatives – not branded product.

Discussions about the shift in product quality and market share are healthy to have, but let's not pretend that it's limited to retail.

I would argue that it's even easier to transition away from branded products in the foodservice industry.  Since  brands are unseen, would a consumer truly know the difference between a Tyson chicken breast and a private label alternative from US Foodservice?

QSR Magazine is supported by advertising dollars, most (if not all) from branded product manufacturers. 

How long would they survive if the brands disappeared tomorrow?

We all need to wake up, and acknowledge the facts.  Left unchallenged, private label brands will continue to grow in both retail AND foodservice.  Business as usual is no longer business as usual.

Advertising Age announces America's Hottest Brands

And the winner is...

Walmart Great Value?

Absolutely.  It's one of the top brands of the year, with Andrea Thomas overseeing the stewardship of the Great Value private label.

The re-staging of the Great Value brand began in April, and two months in, Walmart's private label share was already up .02 percentage points. 

Expect this to continue, as they have clearly differentiated themselves with new, crisp packaging that stands out from the crowd of branded manufacturer alternatives.

Marketing costs remain low, as Walmart focuses efforts internally through in-store promotions.  According to Ad Age, they've also started to branch out into social media by courting bloggers.

It's this type of marketing savvy that propelled Walmart's Old Roy brand to surpass Purina as the top selling dog food in the nation years ago.

Read the Ad Age article