I just returned from the annual private label manufacturers (PLMA) trade show. It’s where retailers go to find generic manufacturers who can credibly place the retailer’s name or house brand on a “quality” knockoff of the category leading brand. Compared to the high energy of the natural products expo (east or west), the pulse bordered post apocalyptic. Except for the keynote address…….
Imagine my surprise that the keynote address was by the queen of branding; Martha Stewart. Instead of exorcising the gathered crowd to add brands (thorough licensing her brand….) in order to create real value, she told the story of how blending media formats was the key to her brand’s success.
I’m willing to bet that there was not one company there whose social media budget exceeded her speaking fee. An alternative would have been hearing from an online retailer about what they are doing to crush brick and mortar grocery, which would have led to the discussion of how the manufacturers can help traditional brick and mortar retail (the vast majority of the audience) compete in this new world. But clearly someone wanted a photo op and the crowd cheered at the brush with fame… so back to private label and the real world.
For most retailers, private label is the hammer they use on the national brands to gain pricing leverage. The secondary purpose is to make higher margins and generate a perception of the retailer’s unique value. It works in high turn commodity areas such as peas and milk. But in categories with real innovation, it struggles unless the retailer is disciplined and has the heft of someone like Trader Joe’s or Costco who keep their private labels extremely focused on the moving intersection of new product trends, value and quality.
Private label has failed in most personal care categories such as anti-perspirants, body wash and shampoo because consumers believe in the constantly improving efficacy and price value of the national brands such as ours. They are not willing to risk “dandruff” on a house brand that is not “believably focused” on the problem which is “guaranteed” solved by the nationally recognized brand. Walmart uses its Equate brand to some effect, but you can hear Sam Walton rolling in his grave reminding everyone that consumers choose Walmart for price and the only way to compare price is through brands shopped across different retail channels in which Walmart “always” has the lowest price.
There were a few gems at the private label show that made it worthwhile. In the corners and deep recesses of the convention center, I found some terrific innovation in different categories. Hidden in the small first time visitor booths and in the foreign company booths who have European or South American brands, are those willing to try anything, including private label to enter the US market. In a world of “walkers,” there are always those who stay alive.