Store Brands

JAN 2017

Store Brands delivers unprecedented strategic and tactical information needed by retail executives to develop and support compelling, differentiated store brand programs to build customer loyalty.

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Store Brands Exclusive Analysis 3 2 Store Brands / January 2017 / "There is still deflation, but the slope is not nearly as steep," McKeown says. NEXT STEPS: While McKeown is unsure when deflation will end, he is certain that retailers have an opportunity to increase private brand sales by enticing consumers to trade up from low-level to mid-tier store brands by offering more exclusive and quality products, which could then create consumer loyalty. "This is what has me very bullish on private label — that grocery retailers are saying they are going to use their brands to build loyalty with their shoppers," McKeown adds. "That is a critical mindset they must have in building their brand architecture with different tiers and understanding the role of those different tiers. "I applaud the grocery retailers that are looking at their brands as a critical part of generating loyalty," McKeown continues. "This needs to grow." HOUSEHOLD MAINSTAYS u INSIGHT: What private label has going for it is that 96 percent of U.S. households purchase such products at supermarkets and regional grocery chains. Forty- nine percent of household consumers consider themselves medium-level buyers (26 percent to 75 percent of their total purchases) of private brands. McKeown says grocery retailers need to figure out how to best position their store brands and move beyond marketing and merchandising them only as the lowest-priced items on store shelves, which is how they were originally presented in the 1970s and 1980s. "We think those days are over," McKeown adds. NEXT STEPS: By offering multiple tiers of private brands — the key being middle and upper tiers that highlight quality, not low price — retailers can increase the number of heavy buyers of private brands. "Going forward, in order to win in the U.S. private label market, retailers need to [adopt] a multi-tiered strategy," McKeown says, noting that product quality and uniqueness is more reflected in the middle and upper tiers. If grocers can entice shoppers with quality and unique store brands in one area of the store, they can win consumers' trust to do the same thing in other store areas, McKeown notes. Keeping private label relevant Retailers were asked: Which of the following strategies do you use to build competitive advantages? Here's how they responded: Private brand program Customer service Produce program Community support and community ties Meat/poultry program Deli-fresh-prepared program Checkout experience with a focus on speed and friendliness Social media program Organic assortment throughout the store Special events 98% 95% 93% 93% 93% 91% 88% 88% 88% 79% Household mainstays More tiers could lead to increased sales by heavy buyers. Percent of U.S. households Percent of purchases Heavy (76%+) Medium (26-75%) Light (Less than 26%) Not buying 10% 49% 41% 96% Buying private label 4% 98% 95% 93% 93% 93% 91% 88% 88% 88% 79% 10% 49% 41% 96% Buying private label 4%

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