From The Fall 2005 Issue of Natural Grocery Buyer

Natural and organic private labels become recognizable brand names

Cynthia Barstow

Twenty years ago, the big white boxes with bold, black lettering looming on the grocery aisle shouted, “We are really cheap!” Today, natural and organic store brands are as professionally formulated, attractively designed and consumer-friendly as most of their national counterparts, often making bigger and better promises.

Although we all know inexpensive doesn’t necessarily mean cheap (but often does), most consumers now believe store-label products are a fair match for branded items. According to Mintel’s “Store Brand Foods Report,” released in March, “More than half (59 percent) agreed that store-brand quality is the same as national-brand quality but with lower prices, and 55 percent say they never have to worry about quality.”

From boxes of macaroni and cheese to salsas and frozen pizzas, private-label natural varieties are lining up. According to Mintel, Kroger’s “Naturally Preferred” list includes 140 items. And it’s not just the big guys: Pittsburgh-based Giant Eagle features more than 30 items under its Nature’s Basket label.

Wegmans, the award-winning supermarket chain in the Northeast, has taken it all one step further with its “Food You Feel Good About” label. Under this yellow banner, customers can find beef without antibiotics or growth hormones, tuna without flavor enhancers, and products that are low-fat, sugar-free and preservative-free. Interesting new products include omega-3 breads and a line of organic, gluten-free, vegan potato chips.

Mintel’s report also suggests that many successful private-label categories are centered on commodities, such as eggs, sugar and milk. Grocery and dairy private-label items are a hit with shoppers, but seafood, meat, deli and fresh produce may still be waiting in the wings.

Dairy still the bellwether
For many consumers, national brands provide trust. Buying a particular brand for years, the shopper builds a relationship on the belief that the product will be the same at each purchase, that the ingredients are what the label says they are, and that the consumer can depend on its performance. Dairy products have long been the strongest private-label products, with 60 percent of milk selling under a store brand, according to Information Resources Inc. In regions where branded products, such as Horizon Organic and Organic Valley, are the only organic dairy choice, shoppers have to choose between loss-leader pricing on store-brand conventional milk or higher prices for organics. Today, however, there is a new kid in town—the organic store brand. The organic label promises many things backed by federal regulations and, for shoppers who want rBGH- and antibiotic-free dairy for their families, there is now a less expensive version.

Nature’s Promise butter, for example, is a store brand from Stop & Shop that very few consumers actually recognize as a private label. The most common reaction is, “Yes, an organic version in my price range!” When organic butter costs the same as store-brand conventional butter, those of us who understand organic production get a little nervous, knowing the farmer must be the one feeling the squeeze. Most consumers, however, seem grateful to have the option.

During the past two years, private-label yogurt has lost volume share. According to IRI data from 2003, private labels topped the national brands at $358 million in sales. Last year, private label was still the leader, but with $335 million in sales. A cascade of line extensions from established nonorganic brands is likely part of the draw, but note that organic brand Stonyfield Farm posted the biggest gain, nearly 20 percent higher than the previous year.

Perishables show promise
According to the latest “Organic Foods Trend Tracker” from Whole Foods Market, “Produce still remains the No. 1 category of organic food purchases, with 68 percent of the respondents who currently choose organic foods seeking fresh organic fruits and vegetables.”

With continuing and significant consumer interest in fresh organic produce, retailers should be jumping to attach their premium brand to these perishables. Earthbound Farms certainly has been infiltrating my neighborhood store. A local grower selling cabbage as a strict commodity recently came to me for branding advice. Some would say all undifferentiated perishables are considered store brands, but not in the sense of being specifically branded with a marketing program and carefully chosen attributes. A specific-to-the-store, natural/organic fresh brand would make sense. A Stop & Shop representative told me that private-label fresh produce is in the works.

John Maggiore headed up produce for years for Stop & Shop and now runs his own consulting firm. A frequent participant with Bob Burke for the must-see “Hot New Products” sessions at the Natural Products Expos, John knows the ins and outs of the grocery business. His comment: “Clearly the first step in private-label perishables is going to be packaged goods, and then down the line, watch for the move into bulk items.” This seems consistent with the increase in private-label bagged salads.

Produce isn’t the only “please brand me” product lying in wait on the store perimeter. A very bright student in my food marketing class at the University of Massachusetts a few years ago reviewed grocery-buying trends and immediately proposed a private-label sustainable seafood brand. Wild salmon is only the first of many fish to catch the consumer’s attention. Certainly the beef and lamb guys at Coleman Purely Natural Meats and the chicken folks at Springer Mountain Farms will tell you that branded meat and poultry products have a following.

We know the competitive differential for private label is no longer “cheap,” at least not for the natural/organic brands. With bigger and better promises aimed at meeting bigger and more educated consumer demands, watch for store private labels to become just as solid as the best-known brand names.

Cynthia Barstow is an adjunct faculty member in natural products marketing at the University of Massachusetts, Amherst, and the author of The Eco-Foods Guide: What’s Good for the Earth Is Good for You! (New Society Publishers, 2002).