private label

Private label brands are ubiquitous across supermarket, mass and club and dollar channels now, but lower prices aren’t cutting it any more in delivering a competitive advantage to retailers.  As several members of IMC’s team note in Progressive Grocer’s recent article, Cobranding and Licensing: Differentiatorsmore sophisticated partnerships, such as co-branding through licensing, are needed to differentiate private label brands, not just against national brands, but also against other retailers’ private label offerings.

Discerning Grocery Shoppers

Megan Pellegrini sites as an example of the higher bar on licensing differentiation Kroger’s Disney Magic Selections’ store branded food, health and beauty products featuring Disney and Disney/Pixar characters. She notes the program “fizzled out, and these products currently are being phased out and replaced with Kroger brand products.”

From the article:  “Kroger’s partnership with Disney didn’t do well because consumers weren’t willing to pay more for store brands because of the licensed characters on their packaging, which didn’t provide more flavor equity, a premium value or bring other features to the table,” says Todd Donaldson, vice president, IMC Licensing, based in Louisville, Ky.

But Cincinnati-based Kroger did find success with another licensed character. The retailer’s Disney’s Old Yeller dog food, which was introduced in 2005, quickly became one of its top-selling dog food brands, according to Kroger press releases.

Although licenses and cobranding certainly can enhance store brands within a variety of grocery categories, retailers need to be sure they are appropriate and not too costly.

“As you look outside the food and beverage aisle, you can see licensing partnerships taking place because the categories – toys, apparel, etc. – have more room and flexibility, and consumers are not as price-sensitive in these areas,” Donaldson says.

Double Branding As Differentiator

Pellegrini highlights the Costco practice of cobranding its Kirkland Signature store brand products with well-known national brands such as Campbell’s, Martha Stewart, Starbucks and Borghese.

From the article: “When Costco is cobranding with other brands, the retailer is looking at increasing its brand [equity] by leveraging the other brands,” says Kim Steadman, senior director, partner development, IMC Licensing. These partnerships also can allow the retailer to put a slightly different spin on the product. For example, Costco offers a Kirkland Signature/Mission cobranded tortilla strip that is unlike any of Mission’s products sold at other retail outlets.

Category Management 

Pellegrini highlights Todd Donaldson’s insight that “some retailers are moving beyond cobranding to acquire or lease brand rights as a form of category management in categories that could benefit from increased competition and interest.”

From the article:  “Most categories have three to four major players, but stuffing, for example, at Walmart was dominated by Kraft’s Stove Top brand,” Donaldson says, “and Walmart’s private label brand never did a lot to impact it. So we think Walmart took a look at the category and decided that triangulation with Betty Crocker – by introducing a new stuffing product – would provide it more freedom to effectively manage the category.”

Donaldson further argues that , going forward, “…convenience stores and drugstores will be competing with grocery retailers for licensing partnerships.”

Conclusion

As the article quotes me saying, “There’s been a major shift in the licensing world that is creating subtle, sophisticated partnerships. Retailers should look for properties that will translate and deliver their brand promise, even if they are not exclusive.”

In other words, all bets are off on hoping private label products are competitive only on price. Retailers are not standing still, and companies that want to work with them need to be more creative in finding ways to help them differentiate their offerings.

 

From Progressive Grocer, November 2012

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