A partner at brand strategy and design agency CBX told analysts at a recent investment conference in New York to pay close attention to the potential for store brands to create new winners and losers in retail and CPG.
“We’re seeing a shift toward truly brand-led strategies, as opposed to merely securing a place along the spectrum of ‘good,’ ‘better’ or ‘best’ relative to competing products at shelf,” Todd Maute said during a panel discussion, part of the conference organized by Stifel Financial Corp.
“Retailers that fail to grasp the need to fully commit to their store brands risk missing out on an opportunity to drive loyalty to their stores and create meaningful differentiation in the markets they serve,” Maute said.
He added that investors are rightly focused on understanding how store brands could change the calculus in retail and CPG.
“National CPG manufacturers are already facing stiff competition from brands launched by the likes of Costco, Kroger and Target,” he said. “Amazon, which is only in its infancy with respect to store brands, could eventually make a major dent as well.”
With headquarters in New York City, CBX is an independent agency specializing in brand strategy and design services.
During his talk, Maute highlighted the success of the Kroger Co. in driving sales of its Simple Truth, Private Selection, Kroger and HemisFares brands. He also pointed to the efforts of traditional supermarket cooperative Wakefern Food Corp.—known for banners such as ShopRite, Price Rite and The Fresh Grocer—to craft a brand-led strategy.
Last year, Wakefern announced the launch of two new food and household brands, Bowl & Basket and Paperbird, and it reportedly will invest heavily in building support to transform its approach to store brands.
“It’s the difference between ho-hum, ’25 percent cheaper’ potato chips and, say, garlic-infused, kettle-cooked chips in a gorgeously designed, matte-coated bag,” Maute said. “You’re talking about a radical shift.”
In evaluating the prospects of retail companies, investors should consider whether those chains are committed to their store brands, Maute advised.
“If the retailer doesn’t have personnel focused specifically on brand-building, the company will likely struggle,” he said. “Some retailers need to restructure their store-brand operations around the concept of ‘win, differentiate and compete.’ They should be looking for categories where they can dominate.”
According to Maute, even store-brand leaders such as Target, Costco and Kroger must continually innovate. He cited Kroger’s ongoing test of plant-based products in the meat departments of 60 stores as an illustration of how quickly retailers can respond to today’s market trends
“Kroger jumped on the plant-based thing right away,” Maute said. “That’s something that would have taken years to happen before, if at all. Investors should take note: Store brands are giving CPGs a run for their money.”
The session at Stifel’s investment conference was titled “Private Label: Threat to National Brands or Overblown Concern?” It included independent marketing consultants Roberto Ramos and Tammy Gianfortune, with hosts Chris Growe and Jim Duffy, Stifel managing directors based in St. Louis and Denver, respectively.