Wal-Mart adds products as store brands boom
PORTLAND, Ore. - Wal-Mart is stepping up the competition to draw cost-conscious shoppers, promising that store-brand products from cereal to cookies will be tastier, smell better, and look more attractive.
The world's largest retailer outlined plans yesterday to reformulate hundreds of items in the Great Value store brand that it says is the country's biggest food brand by both sales and volume.
Wal-Mart, responding to the increasing popularity of store-brand products among cash-strapped consumers, is also introducing nearly 100 products like fat-free caramel swirl ice cream and thin-crust pizza as it tries to better compete with national brands.
"We don't feel we are messing with success, we are enhancing our success," said Andrea Thomas, Wal-Mart Stores Inc.'s senior vice president of private brands.
The company is also introducing a consistent design across the line to help shoppers better identify its products and added new elements like labels in both English and Spanish. It declined to disclose sales figures for the Great Value line.
Wal-Mart's move underscores the importance of lower-priced store brands and ups the ante in the competitive grocery industry.
The company's launch of some of its in-house products more than a decade ago put pressure on traditional grocers, said Brian Sharoff, president of the Private Label Manufacturers Association. Grocers took notice and made their in-house brands - traditionally cheaper than national brands but once a blandly packaged and little-marketed product line - an integral part of their business.
Over the years, companies like Costco Wholesale Corp. showed it could be done on a larger scale and Trader Joe's proved a national business could be centered on in-house brands.
The Private Label Manufacturers Association said a basket of 40 average store-brand products runs about 30 to 35 percent less than a basket of comparable national brands.
Stores are doing more to promote such items as well. While the margins on such items are lower than on name brands, they have helped drive sales at retailers and earn customer appreciation for their lower prices.
Costco said private label sales hit record highs in its most recent quarter.
Nearly every grocery chain across the country is pushing its in-house brand development.
Whole Foods Market Inc., which already carried an expansive store-brand food line, expanded its range of personal care products earlier this month.
Convenience store chain 7-Eleven Inc. is planning to roll out more than 100 new and redesigned products - roughly quadrupling its store brand offerings. The company is moving from Big Gulps to sandwich bags, cooking oil, and private label jerky.
Experts say the most popular items for store brand sales are the most basic and often-used goods, like eggs, milk, and paper products. But the latest growth in the industry seems to be in unique products that consumers might be more willing to try out, like a specialty coffee.
"I think the price drives the trial and quality keeps them coming back," said Kevin Elliott, a 7-Eleven's senior vice president.