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Seeking savings, some ditch brand loyalty

Sales of generic products on rise

By Jenn Abelson
Globe Staff / January 29, 2010

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Over the past six months, Elizabeth O’Herron has banished nearly all brand names from her household.

So long Pampers, Hefty, and Birds Eye. Instead, the pantry is stocked with cheaper imitations of the same goods: Wal-Mart’s diapers, BJ’s garbage bags, and Stop & Shop’s frozen veggies.

“I am not loyal to any grocery store or any brand,’’ said O’Herron, who estimates she saves at least $50 a month by buying generic brands. “I am loyal to savings.’’

A growing number of consumers like O’Herron are ditching their beloved Kellogg’s Raisin Bran and Wonder Bread for less expensive versions without the familiar packaging. Unit sales of private label goods have jumped 8 percent since 2007, while brand names have declined roughly 4 percent, according to Nielsen Co.

Many shoppers are finding that sugar, shredded cheddar, and milk peddled under store labels cost up to 40 percent less and often taste just as good as nationally known brands. Some items are even made by the same manufacturers.

Shoppers’ switch to store brands suits merchants just fine because they make a bigger profit from selling their own labels. This month, Supervalu, which runs several supermarket chains, including Shaw’s, unveiled plans to slash the number of items in various categories by as much as 25 percent so it can display store brands more prominently.

Europeans long ago began embracing private labels, realizing it involved little sacrifice and considerable savings. The recession has nudged Americans to the same realization. More than 40 percent of shoppers reported buying store labels instead of name brands, and 63 percent said they plan to purchase private labels after the economy rebounds, according to a survey of 50,000 grocery shoppers released last week by BrandSpark and Better Homes and Gardens.

“Store brands used to be nothing you wanted to buy. It was a compromise you’d make in quality in order to get something cheaper,’’ said Alan Klein, of the Marketing Agency Paris New York, a consultancy. “But the recession has been an awakening for some consumers. They are realizing that they can get equal or superior quality.’’

Retail analysts say the trend has made it harder and more expensive for national brands to get their products on the shelves at a time when many of these companies have reduced advertising budgets. This month, Procter & Gamble said it is launching an online shop this spring that will sell P&G products like Oil of Olay, Pampers, and Tide. A P&G spokesman declined to comment on the rise in store brands, but the company last fall responded to consumers’ trading down by lowering prices, including cutting the price of Cheer detergent by 13 percent.

Stop & Shop, which is based in Quincy, has added more than 1,000 of its own items over the past two years, bringing the total to 4,000 private label products. These goods are offered under various names, including Nature’s Promise, Stop & Shop’s natural and organic goods line, and Simply Enjoy, the chain’s specialty products meant for entertaining, such as ice cream.

Supermarkets are appealing to consumers by offering additional discounts on already lower-priced store brand products when consumers use loyalty cards. For example, the price of Keebler’s $3.39 fudge stripe cookies paled in comparison with Stop & Shop’s $1.79 fudge stripe cookies. That deal was then sweetened to two packages for $3 with a loyalty card.

“On average, customers can save up to 25 percent when they shop in our stores and purchase corporate brand products,’’ said Faith Weiner, a spokeswoman for Stop & Shop.

Even office supply chains like Framingham-based Staples are ramping up private label products, with an entire Web page devoted to price comparisons of Staples versus other brands. Some featured items include Staples white inkjet, priced at $23.99, compared with Avery’s white inkjet for $38.99. Private labels now make up 40 percent of the inventory at Staples’ shops, and the company has eliminated national brands from some categories, including shredders.

Retail analysts say many merchants have become more sophisticated in producing quality products and packaging. Both Target and Wal-Mart last year unveiled new designs for their private label brands, and expanded the number of products in the grocery, home, and clothing aisles.

Most retailers do not make private brands themselves and instead subcontract the work. National brands are more expensive because they typically have marketing and advertising costs - for everything from coupons to television commercials - built into the price.

Despite the savings and the comparable quality offered by generic brands, some consumers have gone to great lengths to hide the change from their families.

“I have resorted to buying things like ketchup, hot sauce, BBQ sauce, and package syrup in bulk or large containers from other vendors’ labels and reusing the containers from Heinz, Frank’s Red Hot, Kraft, and Mrs. to mask the switch,’’ said Kalixt Smith, of Wilmington. “My kids do not seem to notice the difference.’’

Smith, who also gave up national brands for bread, milk, toilet paper, and dish detergent, estimates she is saving up to $50 a month on groceries for her family of four by trying store versions. But there are some store brand items she can’t sneak under the family radar, including attempted replacements for Honey Nut Cheerios and Velveeta Shells & Cheese. And, to her surprise, Spam. It turns out there is apparently no tasty substitute for that, at least not for her brood.

Even when the recession ends, some consumers say they will not go back to paying more money for national products.

“Once I started trying store brands, and the quality, taste, and price was right, I have continued to purchase store brands and try new things,’’ said Lisa Dean, whose shopping cart last week was filled with Market Basket goods - milk, eggs, tomato sauce, tortilla chips, and trash bags, to name a few. She estimated she is saving at least 30 percent on groceries.

“This is absolutely a permanent switch,’’ Dean said.

Jenn Abelson can be reached at abelson@globe.com.

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Photos
Price wars

Price wars

Comparing generic and name brand products.