Virtually every retailer in the grocery business today is talking about the need to push private label as a means to keep prices down for consumers while building sales and profits for themselves. Retailers are looking to be less dependent on national brands and not have to go through the back-and-forth with suppliers to roll back prices as fuel costs have moderated.
The truth of the matter is that for private label to really gain the types of market share that retailers are talking about will require a much greater investment in advertising and merchandising than many have been willing to make.
As an exec at a top 10 grocery chain recently told us in a moment of candor, "It's the national brands that pay for the flyers. We're going to try and get more of our store labels in there to promote a price image right now but we wouldn't be putting the flyer out if it wasn't being paid for by the brands. We may not like needing them, but we do."
It was with this statement in mind that we did a quick and completely unscientific survey of flyers put out by supermarket chain operating stores in Northern New Jersey for the period of April 12 - 18. Much to our surprise, Wegmans' flyer had only five national brands listed in eight pages. It did have 83 store brand items under the Wegmans or TopCare labels.
As a point of comparison, Pathmark, ShopRite and Stop & Shop all had more national brands on the first two pages of their flyers than Wegmans' total.
Discussion Questions: Are retailer complaints about national brand pricing not taking into account the contributions vendors make in areas such as advertising? Can retailers that say they want to build private label do it without a substantial investment in advertising like Wegmans did with its flyer?