Friday, March 27, 2009

Store Brand - Private Label Memo: Store Brand Organic Products Gaining Prestege With Consumers Says New Study of What Shoppers Are Discussing Online

Retailer Store Brands: Special Report

The introduction and aggressive marketing of high-quality retailer store brand organic products is leading to a change in consumer perceptions in a positive direction, according to a soon to be released research report called the J.D. Power & Associates Private Label Industry Report.

The report is from J.D. Power & Associates Web Intellegence Division, which conducts content analysis research using information from a variety of online sites and sources as a way to guage consumer attitudes and perceptions. Most people know J.D. Power for its industry ranking of automobile quality. However, it's a full service research firm which also focuses on consumer package goods in addition to other consumer products research.

Janet Eden-Harris, vice president of J.D. Power and Associates Web Intelligence Division, which is based in Westlake Village, California, offered a preview of the firm's research into consumer attitudes of store brand organic products this week at the IRI (Information Resources, Inc.) Summit in Las Vegas, Nevada.

She said the J.D. Power Web-based research project shows that consumer attitudes about many store brands have shifted in the last couple years. Rather than has has been the case in the past, in which generally store brands, including organics, have been considered by consumers to be of lower-quality, with a low-price focus (including poor packaging quality), private label brands, particularly store brand organics, are now being thought of as unique and as having quality commensurate with that of traditional manufacturer-marketer brands.

"It's clear that consumers have begun to discard the idea that private label brands are of lower quality than traditional brands, which provides an opportunity for retailers to differentiate themselves with high-quality, reasonably priced store brands," Ms. Eden-Harris said in her presentation at the IRI conference.

The firm's report analyzed about 50,000 spontaneous conversations between March, 2008 and March, 2009 in various Blogs and online message and review boards that mentioned and discussed store brand/private label products from a variety of retailers, according to Ms. Eden-Harris.

Retailers with one-half of 1 percent or more of all discussions during the year are included in the report, she said.

The research report is designed to provide insight to retailers on what drives consumers to purchase their private label brands, as well as to help consumer packaged goods manufacturers develop strategies for differentiating and marketing their brands.

Ms. Eden-Harris said in her presentation at the conference that the complete study and its results will be released in April.

Below are a few highlights of the firm's report regarding private label or store brand organic products from Janet Eden-Harris' presentation at the IRI Summit:

>The report finds that the amount of online conversation about private label products has increased steadily during the past year, with volume peaking during the fall of 2008 as the economic crisis was unfolding.

>Organic store brand pricing is a strong motivator for consumers. But the quality and flavor of private label organic products drive the highest levels of positive sentiment, according to the Web-based content analysis study.

> Store brand food products from Safeway, Trader Joe's and Whole Foods garner particularly high levels of positive consumer recommendations, compared with other private label brands, and are perceived as being particularly healthful and flavorful.

>Positive consumer sentiment for store brand food items, especially organics, is higher than it is for non-food products such as diapers, paper products and cleaning supplies. The report's conclusion: This suggests that these products are perceived by consumers as commodities, purchased for their lower cost rather than as a favored brand in their own right.

In her presentation, Ms. Eden-Harris said the improved perception of store brand organic products doesn't mean opportunity has to be lost by brand manufacturers' and marketers.

"While retailers continue to gain ground with their private label products, there is still enormous opportunity for consumer packaged goods manufacturers," she said. "Innovation is still a big growth driver, and CPG companies still lead in that regard. New and differentiated products that are priced to value will win market share."

We agree with that conclusion since at least in "phase one" of store brand organic product development most of the retailer brand products have been versions of products already produced and marketed by brand manufacturers' and marketers. In fact, retailers like Safeway Stores with its O' Organics brand used sales data from its in-house natural-specialty foods department to decide which items to create under the private-label organics brand.

Additionally, most retailers rely on traditional manufacturers not only to produce their store brands but in many cases to offer advice and suggestions on private label product development.

However, we're now seeing what we call "phase two" of retailer brand organic product development in which select retailers like Safeway, Kroger, Wal-Mart, Trader Joe's (TJ's has always been a "phase two" natural-organic product developer and innovator), Target, Whole Foods, Costco and a few others are innovating and actually creating some products under their respective natural and organic store brands that don't exist under manufacturer brands in the retail marketplace.

In our analysis though food company manufacturers and marketers, particularly in the natural and organic segment, continue to be the innovators when it comes to new product creation and development. Retailers still tend to be followers rather than brand innovators overall in the categories.

J.D. Power's Web Intelligence Division analyzes consumer behavior online by using proprietary Natural Language Processing and machine-learning algorithms to dissect the who, what and why of online opinion, offering in-depth insights for some of the world's leading brands, according to Ms. Eden-Harris. It's a form of content and opinion analysis based on what consumers are commenting and opining on on the Web.

The purpose of the Web-based content and attitude analysis research is to glean what consumers are saying online as a way of better understanding consumer behavior, attitudes, opinions and trends.

With so many consumers now using online product review sites, Blogs, chat forums and social networking sites like Twitter and Facebook, we think such research is now essential, along with more traditional methods, in order to better understand consumer attitudes in the food, grocery and consumer products space.

In fact, Natural~Specialty Foods Memo (NSFM) uses our own form of Web-based content analysis often to spot, analyze and write about consumer behavior and trends based on information gleaned from search engines, social networking sites, online review sites and message boards and Blogs.

Using the Web to better understand consumer behavior and attitudes will become even more important sense so many consumers are using the Web to search for products, retailers and related information, along with reviewing products at online review boards, and generally increasingly using the Web as an integral part of overall consumer and shopper behavior.

Below is a linked selection of past stories from Natural~Specialty Foods Memo (NSFM) on and directly related to the retailer store brands topic:

~March 12, 2009: Retail Memo: Whole Foods Market is Selling Brand 'Wild Oats'- We Offer Three Retailers We Suggest Could Benefit From Buying the Brand

~January 31, 2009: Store Brands - Private Label Memo: Smart & Final-Owned Henry's Farmers Market Preparing to Debut New Natural & Organic 'Sun Harvest' Store Brand

~August 24, 2008: Marketing Memo: Store Brands 2.0: Better Store Brands and Brand and Shopper-Marketing Changing How Food Retailers Sell Their Own Brands

~August 6, 2008: Marketing Memo: Safeway's Challenge: Going From Store Brand Marketer to Consumer Brand Marketer With its O' Organics and Eating Right Brands

~April 28, 2008: Marketing Memo: Safeway Stores, Inc. to Market its 'O' Organics' and 'Eating Right' Organic and Healthy Brands to Other Retailers in U.S. and Globally

~April 28, 2008: Retail Memo: Safeway CEO Burd Says Shoppers Buying Store Brands Over National Brands By As Much As Six -to- One in it's North American Supermarkets

~June 4, 2008: Marketing Memo: Ingredients For 'Free Media' Marketing Success: Safeway Stores Finds Them With Announcement of its New 'Eating Right For Kids' Line

~May 9, 2008: Retail Marketing Memo: Safeway Uses Mother's Day Holiday to Launch its New 'mom to mom' Store Brand Baby Products Line in its Stores

~December 27, 2007: Marketing Memo: Safeway's O' Organics Brand in Asia

~December 23, 2007: Safeway's O' Organics Brand: Part Duex

~December 21, 2007: Friday Fishwrap: Safeway's O' Organics Brand

~January 8, 2008: Media Memo: Safeway's O' Organics Brand In Asia

~February 6, 2008: Retail Memo: Raley's Attempts to Come 'Full-Circle' With New Private-Label Natural and Organic Products' Brand

~April 7, 2008: Retail Memo: Wal-Mart, Target, Drug Chains Further Blur the Natural~Specialty Foods' Retail Class of Trade Lines

~October 11, 2007: Thursday Talking Points Memo:
Category Marketing Dominance: How Whole Foods Market, Inc. Became King of the Supernatural Retail Grocery Category and Why it Will Continue to Reign For Some Time

~February 11, 2008: Retail Trends Memo: UK's Asda Pioneering the 'Store-Grown' and 'Store-Raised' Niche: Will Raise its Own Kobe-Style Beef and Grow its Own Truffles

~December 9, 2008: Organics Category Memo: Wither Organics? Organic Food & Grocery Category Sales Down; But Double-Digit Growth Still Possible With Mass Market Lift

~November 28, 2008: Consumer Behavior Memo USA: 'Life, Liberty and the Pursuit of Frugality' - America's New Consumer Frugality

~November 28, 2008: Retail Memo: Target Corp. Launching Major Expansion of Food and Grocery Products in its Target Discount Format Stores

~May 3, 2008: Retail Memo: Loblaw's New President Charts A Course to Return the Grocer to Its 'Glory Days' of Being Canada's 'Best' as Well as Biggest Food Retailer

~December 12, 2007: Mid-Week Marketing Memo: Tesco's Fresh & Easy

~January 28, 2008: Monday Marketing Memo: Cost-Plus World Market Restructuring: We Think Specialty Foods and Beverages Can be the Key to a Successful Repositioning

~July 25, 2008: Retail Field Report Memo: Specialty Retailer Cost Plus World Market Is At A Serious Crossroads: We Offer Analysis and Suggestions For Moving Forward

~January 30, 2008: Retail Memo: A Peak Inside a New Trader Joe's Store

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