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ConAgra CEO: Private brands are ‘not cheap generics’ anymore

By Elaine WATSON , 20-Feb-2013
Last updated on 20-Feb-2013 at 15:00 GMT

ConAgra: Private brands are ‘not cheap generics’ anymore

Growth in the US private label market will continue to outpace growth in branded products as retailers recognize that unique, premium and innovative store brands can help them boost profitability, differentiate themselves and increase consumer loyalty, says ConAgra CEO Gary Rodkin.

“Some people may still view private brands as cheap generics,” Rodkin told delegates at the Consumer Analyst Group of New York (CAGNY) conference yesterday. “But that is absolutely not the way we see it.”

While store brand penetration rates in US food retail (around 18%) are still well below those of many European countries, retailers such as Trader Joe’s had shown US rivals that store brands did not have to be simply copycat products, he added.

The reason we have started to call them private brands is because that's exactly what they are

According to Trace One and Planet Retail, private label represented an estimated 25% of food sales at Safeway, 18% of food sales at Costco and Walmart, 27% at Kroger and 20.5% at Walgreens in 2011.

“Leveraging our best-in-class innovation skill set… will certainly be a differentiator as retailers look to take their [store brand] product offerings up market over time”, added Rodkin, who said the acquisition of Ralcorp had turned ConAgra into the largest private brand maker in North America with annualized private label sales of $4.5bn.

And forward-thinking retailers want to work with companies that understand consumer brands when developing private label ranges, he said.

“The reason we have started to call them private brands is because that's exactly what they are.  

“We're focused on high-quality products that retailers can be proud to call their own; products that help differentiate the store's brand equity, products that expand category appeal, products that help grow a customer's top and bottom lines.”

The US is far from a mature market when it comes to private brands

Growth in private label products has outpaced that of branded products in the US for some time, he added. “While there will always be some ups and downs, we expect that outperformance to continue over the long term.

The US is far from a mature market when it comes to private brands and we are extremely well positioned to meet those growing demands from customers and consumers.”

While some analysts argue that national brands and store brands don’t mix, ConAgra was able to improve its private label proposition by bringing expertise in innovation, packaging, category shopper insights and shopper marketing gained from its consumer branded products business, he said.

In nutrition bars, our private brand growth has outpaced a strong category

There has been a lot of consolidation in private label ranges recently, with Kroger consolidating Naturally Preferred and Private Selection Organic into one brand (Simple Truth) and SuperValu consolidating instore brands under the Essential Everyday banner.

Partnerships with retailers on private brand health and nutrition bars show what can be achieved with this approach, he added.

“Health and nutrition bars have propelled overall expansion of the bars category posting an 8% compounded annual growth rate over the last couple of years.

“We've helped retailers take advantage of white space and growing consumer demand with strong insights work, innovation and category management expertise.

“This is a great story for nutrition bars in particular, where our private brand growth has outpaced a strong category. We will look to be a very close partner here with retailers and we see more opportunity ahead with this type of approach across more categories.”

Bosses will soon be embarking on customer visits “to take this dialogue to the next level”, he added.

Frozen resurgence: You'll still see us get very, very big in breakfast sandwiches in fiscal 2014

Much of the rest of the presentation at CAGNY was devoted to the potential ConAgra sees in the frozen food market, with consumer foods president André J. Hawaux telling analysts that frozen food aisles were “poised for a growth resurgence”.

New frozen entrees, desserts and breakfast sandwiches are in the pipeline, he said.

We have plans for additional innovation with Bertolli and P.F. Chang's that will expand our frozen reach even further… and you'll still see us get very, very big in breakfast sandwiches in fiscal 2014.”

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