Through a special arrangement, presented here for discussion are excerpts of a current article from Refrigerated & Frozen Foods Retailer magazine.
Hang onto your hat. Wal-Mart has significant plans for its private label program, with the unveiling of its redesigned Great Value line expected any day now.
According to Andrea Thomas, the company's senior VP of private brands, "We're building from a position of strength. Great Value is the largest brand at Wal-Mart. It plays across more than 100 categories, making it the largest food brand in the country. In this economically challenging environment, we have seen our customers turn to us even more this year. We have plans to make this brand even stronger with improved value and quality."
She adds, "The packaging is being redesigned to improve our communication of the brand. The new design has a much better brand billboard and much more appetizing food photography. We aren't just dressing up the outside, we have also worked hard on what we are putting on the inside. We have tested over 5,500 products against the national brands and we are in the process of reformulating 1,200 items."
Ms. Thomas notes that the new packaging will have much more visible product guarantees, adding that, "We'll have a professionally staffed 1-800 number, along with online product support. We've also recently staffed the team to focus on gaining efficiency across the supply chain. They are looking at logistics, raw ingredients, and packaging to find cost savings that will be invested into price leadership and brand building."
According to Information Resources, Inc., the Chicago-based market research firm, private label accounts for 17.6 percent of dollars and 22.5 percent of units at Wal-Mart. One securities analyst - Deborah Weinswig of Citigroup - has been quoted as saying that private label might skyrocket to 40 percent of dollars at Wal-Mart within the next three years. She figures that if Wal-Mart carries the top three branded products in a given category, it could substitute one of them with its own brand.
We think the 40 percent number is too high. After all, Wal-Mart already follows this strategy in many categories. And, beyond that, many shoppers go to Wal-Mart precisely because it carries so many well-known national brands - at the lowest price. We expect a surge in private label by Wal-Mart, but would expect it to go no higher than 30 percent dollar penetration in three years. Beyond that, and it risks damaging a perceived core competency.
Discussion Question: What do you think of Wal-Mart's Great Value private label brand? Which feature - quality, value or packaging - most needs to be improved to further establish the brand? Secondly, what level should Wal-Mart's private labels ultimately represent as a percent of sales to maintain a healthy balance with branded assortments?