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Consumer packaged goods, such as detergent, paper towels, shampoo, and diapers, are among the first categories in which consumers switch to cheaper private-label versions. Kimberly-Clark and Proctor & Gamble thus are struggling to convince consumers that their products are still better than the private-label alternatives.

Private-label brands grew 0.1 points in the first quarter of 2008, and then 1.3 points in the fourth quarter among households that earn more than $100,000 annually. Across all consumer segments, private-label product volume is 22 percent of goods sold in retail channels and 17 percent of sales dollars. As soon as prices increase, consumers run to buy private-label options, which demonstrates their lack of loyalty to national brand products.

Proctor & Gamble and Kimberly-Clark attempt to communicate the value of their products by focusing on other than promotional aspects. However, in this economic climate, it has been hard, and they are forced to discount.

Walmart profits from the discounting of national brands but also is looking to ramp up its own private label, Great Value bargain brand. In the United Kingdom andCanada, which are ahead of theUnited Statesin their private-label quality and sales volume, these purchases are part of the culture. With a push from Walmart to focus on private-label products, the pressure on the rest of the industry increases.

Retailers hope to refine their assortments by stocking only products that sell well and eliminating the third or fourth ranked products from the shelf. Thus, they can maximize the revenue of their shelf space. A recent test showed that by exhibiting Old El Paso branded taco shells with store-brand cheese, vegetables, and meat, the retailer increased sales of all the products. That is, combining successful national brands with store brands increases sales.

Kraft’s joint programs with Meijer supermarkets put lunch meats and cheese by Kraft on a display with store-branded bread. Such cross-selling benefits manufacturers and the retailer and takes the focus off of a simple price comparison across cheeses on the shelf. A customer also can feel good about buy a mixed brand assortment.

Discussion Questions:

  1. How have the private-label and national brand sales of consumer packaged goods changed?
  2. What are retailers and manufacturers doing to increase the sales of both private-label and national brand products?

Jack Neff, “Private Label Winning Battle of Brands,” Advertising Age, February 23, 2009.