Costs, not function, at heart of Wal-Mart private label push

By Neil Merrett

- Last updated on GMT

Related tags: Private label, Brand

Wal-Mart has expanded its range of private label goods with the launch of new products like organic eggs, but says cost saving, not added value, is key to the strategy.

From this month, the retailer says it is rolling out 80 new private label goods, as well as reformulating 750 products from yogurt to breakfast cereals, to provide what it claims are affordable, high quality foods that can better match their branded counterparts.

Recent research suggests that consumer concerns over the impact of the economic downturn on grocery budgets has led to a shift in private label products that offer more additional nutritional or value benefits.

Raison d'etre

A spokesperson for Wal-Mart told FoodNavigator-USA.com that although the company had attempted to meet various consumers needs with its re-launched Great Value range, the rethink was primarily targeted at cost.

“[Good value’s] raison d'etre is to offer national brand quality or better at a lower price point; not to create a new line of organic or "better for you" products​,” stated the spokesperson.

Wal-Mart said that despite this cost focus, the company had moved to play up the prominence of nutritional labels on its private label products with the re-launch.

The retailer claimed this had been backed with an emphasis on daily value information, such as the amount of vitamins a product contains in relation to recommended daily intakes.

Aside from playing up its claims to be supporting cash strapped consumers, the retailer stressed that it also working with manufacturer themselves to ensure they can sustainably produce goods of certain nutritional and environmental quality at reduced pricing.

“We are working closely with our suppliers to help them find opportunities to leverage the scale of our business to find cost savings via ingredients, packaging and logistics etc,”​ the spokesperson stated. “[This is] so we can continue to offer the best quality at the best prices to our customers.”

Value analysis

Some market analyst suggest that cost is just one of a growing number of factors central to pushing private label growth.

Private label sales amounted to $81bn in the US last year, up 10.2 percent over the 2007, with health and wellness claims including no trans fats, no saturated fats, multi-grains and antioxidants among the strongest-growing categories, according to the Nielsen Company.

The current surge of interest in private label products has been driven by quality, rather than price alone, according to a study by the analyst.

The same findings suggested that 63 percent of consumers consider the quality of private label brands to be as high as name brand products, and 33 percent said they were even better quality.

Senior vice president of Nielsen’s Consumer & Shopper Insights Todd Hale said: “While private label products continue to follow the success of consumer packaged goods (CPG) manufacturers’ name brand introductions, more CPG retailers are making private label a priority with messages on quality as strong as messages on value.”

Related topics: Suppliers

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