Supermarkets are pushing their own store brands Chains improving quality, packaging of their brands.

January 14, 1992|By New York Times

A&P, like a growing number of the nation's largest supermarket chains, is pushing a fancy new line of cookies, pastas and olive oils: its own.

Store brands have been around for years, but the latest generation is a far cry from A&P's plain, and now defunct, Ann Page bargain line of grocery items. The new ones feature olive oil laced with garlic essence, champagne mustard packaged in handsome ceramic pots and blue corn tortilla chips with sesame seeds. They are likely to be called President's Choice, Sensational or World Classic.

Faced with slow sales growth in the competitive food retailing business, grocers are emphasizing their own higher-quality goods as a way to cement customer loyalty and increase profits. In Europe, where food retailers rely more heavily on their own brands, grocers' profit margins are nearly twice as high as those in the United States.

The sharp interest in what one food analyst calls "non-cheapo" store brands is a significant shift for Great Atlantic and Pacific Tea Co. and other food retailers, whose main selling efforts used to be devoted to national brands like Coca-Cola, Ocean Spray juice products and Pepperidge Farm cookies.

Now, many chains like Kroger, Safeway and Von's have been improving the quality and packaging of their store brands, which are sold primarily under the chain's name. Managers often set up signs that encourage shoppers to save money by buying the store brand of pasta sauce instead of the more expensive Ragu.

[Locally, Giant Foods Inc. has been expanding its range of store label merchandise.]

Profit margins are 4 percent higher on store brands than on name-brand products, A&P executives said. A&P's Master Choice cookies cost 10 cents to 20 cents less than Pepperidge Farm cookies, which are about $2 a bag.

The shift has created tensions between grocers and food manufacturers, who are seeing their products shoved aside to give store brands more favorable displays.

"They are zeroing in on our section," said Mick Sidari, vice president of biscuit sales for Pepperidge Farm, a unit of Campbell Soup Co. "Obviously, it changes the relationship somewhat."

While denying that store brands have nibbled away business, Pepperidge Farm executives complain that store brands are taking over valuable shelf space.

Sidari said Pepperidge Farm cookies had been moved from the most desirable eye-level shelves to make room for A&P's shortbread cookies. "It was somewhat upsetting," he said, to walk into a supermarket and see that his cookies had literally been moved down a notch.

The weak economy has lifted sales of all store or private-label brands, including the inexpensive versions of dog food, paper towels and juice. These low-cost store brands still outnumber their more expensive cousins, although no statistics are kept on the size of the market for premium store brands.

For the third quarter of 1991, unit sales of coffees, cereal and other dry grocery products increased a meager 0.4 percent, compared with the corresponding period the year before, according to the latest data available from Nielsen Marketing Research in Chicago. For the same period, however, private-label sales rose 4.1 percent.

In all, store brands accounted for 13 percent of supermarket sales, for the year ending June 30, 1991, the most recent period for which data are available, according to Information Resources Inc., a Chicago market research firm. During that period, sales of private-label goods grew by 6 percent, nearly twice as quickly as those of the overall industry, the firm said.

Overall supermarket sales increased by only 3.65 percent during that period.

Some marketing experts are convinced that consumer interest in private-label brands will outlast the recession.

"People don't want to pay for the enormous marketing cost of branded products," said Sid Doolittle, a marketing consultant in Chicago. "The times are getting much more like they were in the '50s, when private label was very popular."

To order a warehouseful of pasta, grocers turn to makers of packaged goods, like Hershey Foods Corp. C. Mickey Skinner, president of Hershey's pasta group, said he did not mind selling retailers pasta that would compete with his own Ronzoni brand. The reason, he continued, is that he makes the same profit on a case of Ronzoni pasta as on a case of pasta he makes under contract for a supermarket chain.

A&P's private label business has jumped to 22 percent, from 18 percent in 1990. The company plans for private labels to account for 25 percent, but no more.

"It would be very dangerous to push private label too far," said Peter J. O'Gorman, executive vice president of A&P. Twenty years ago, the company was nearly destroyed by its attempt to sell too many private-label goods to consumers who were in search of national brands.

Skinner of Hershey's is not convinced that premium store brands will be a permanent fixture in America's pantries.

"While store brands might be in vogue in the early '90s, something else will be the vogue in the '90s," he said.

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