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Grocers' own brands are filling more shopping carts

August 14, 2008|Dan Sewell | The Associated Press

CINCINNATI — After watching the price of her favorite bread rising too quickly, Michele Shores decided it was time for a fresh approach.

She began picking up store-brand breads, Kroger Co.'s namesake brand or Wal-Mart Stores Inc.'s Great Value, when her usual bread went from $2 to $3 a loaf. Less than half the price, and not half-bad.

"My husband takes his lunch to work and we all eat a lot of sandwiches here," said the 30-year-old mother of two from Atlanta. "So that's a lot of money for us."

As budgets get tighter and food gets more expensive, American shoppers are increasingly switching to store brands -- even upper-income consumers who may not have been inclined to give them a try before.

The nation's biggest grocery sellers -- Wal-Mart, Kroger, Supervalu Inc. and Safeway Inc. -- all report that sales of their own brands are jumping as customers can't stop regularly buying food and household items but need to reduce spending.

"There are things we can do to drive less, but how do you eat less? You don't," said Erin Frehner, a Brigham Young University senior.

Frehner said she and her husband, both full-time students with part-time jobs, always try to get the store brand unless they strongly prefer the national brand or the price is almost the same.

The Food Marketing Institute, a trade group, found this year that the number of shoppers who say they are buying more store-brand items has been steadily rising, now up to about 60%. Candace Corlett, president of consulting firm WSL Strategic Retail, said her group has found that even upper-income shoppers were more willing to buy store brands, which have traditionally been seen as appealing most to people on limited budgets.

That shift comes as the chains are offering more store-brand products of better quality.

Gone, for the most part, are the gray, no-frills cans with nondescript labels such as "peas," packaging that evoked cheap, bland taste. Many now sport colorful labels with names such as Kroger's "Private Selection" and "Naturally Preferred" that don't shout, "Store brand!"

The stores have been pushing their own brands in areas such as dairy products, meats and breads where prices have risen especially fast, and are also tapping into increased demand for organic and natural foods.

"Store brands have come a long way," said Tod Marks, a senior editor at Consumer Reports, which has tested store brands against national brands for quality and customer response. "Over the years, retailers realized that store brands were not just something to be floated out during hard times."

Stores generally reap higher profit margins by selling their own brands -- also called corporate brands, private labels or generics -- and use them to build customer loyalty.

"All of us are creatures of habit, and when things are going well, you just buy what you bought last week," said Kroger's vice chairman, Rodney McMullen. "Customers are much more willing to try a corporate brand when the economy gets tough, and when we can get the customer to try it, they like it. It just makes it so much easier for us to get the customer to try it."

Shores has been buying more store-brand diapers, costing about 30% to 40% less, but sticks with Procter & Gamble Co.'s Pampers for use at night because they're more absorbent, she said. She tried store-brand spaghetti sauce, then went back to Prego, a Campbell Soup Co. product she says is thicker and vegetable-rich. But she doesn't taste much difference in the store versions of canned vegetables and many other grocery items.

"For oatmeal, there's almost a $2 price difference," she said. "That adds up."

Surveys have shown that most people have been very satisfied with most store brands, Marks said, and testing found many of them held their own against the national brands. In some cases, he said, shoppers must decide whether "good enough" at a lower price is the best choice.

"Some stores do it better than others," said Sonya Redwine, 35, of Knoxville, Tenn., who usually steers her shopping cart toward store brands.

She does prefer Pampers diapers for her daughter and also P&G's Gain detergent for her heavy laundry loads, so she watches for sales and coupons and stocks up on those items. But she's happy with Kroger and Target Corp. store products for most groceries.

"Just because it's a store brand doesn't mean it's not the best for your family," she said.

Trying to capitalize on what Safeway Chief Executive Steve Burd recently called "an extraordinary shift," stores are offering more new products and increasing their marketing.

Safeway's 2-year-old O Organics line has been so successful, the company has licensed it for sale by other retailers. Supervalu's chief executive, Jeff Noddle, said this month that the Wild Harvest natural/organic line that hit shelves in April has been "our most successful product launch ever."

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