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Private Label Programs Take Off

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Recent research on a number of fronts all point in one direction: difficult economic times have bolstered the rollout and expansion of many retailers' private label lines -- including c-store operators.

According to The NPD Group's "Private Label Perceptions, Usage Patterns and Intentions," 24 percent of all food and beverages served in American homes last year were store brands, up from 18 percent in 1999. Today, 97 percent of all households consume private label foods on a regular basis.

"There is no question that private label foods have become an integral part of American life," said Harry Balzer, chief industry analyst at NPD and author of "Eating Patterns in America." He added: "Furthermore, we do not hide private label foods as an ingredient or as an additive to another dish. Today over half of all store brand food eatings are the end dish."

Price and value are the chief reasons consumers purchase private label or store brands, according to an NPD survey of grocery shoppers. Most respondents, however, also feel the quality of store brands is often equal to, or in some cases better than, name brands. Users of private label foods and beverages span all income levels and demographic profiles, according to the report.

This wave of acceptance supported 7-Eleven Inc.'s expansion of its private label line in recent months. Now with more than 200 private label products, the chain is working to add nearly 100 more items to its 7-Eleven and 7-Select brand lineup by the end of the year.

"We started with product categories that offered the most potential and are now offering private label in just about every category," said Tom Gerrity, 7-Eleven's senior product director, who has been at the forefront of the private label program.

While not walking away from national brands, the chain initially was aggressive in finding space for its store brands on the shelf and in primary store real estate. "We look at it from a total category perspective -- can we grow total units, sales and gross profit? Some suppliers will win, and some will not do as well as we roll out more private label items, but the customer makes the decision at the point of purchase, looking at the branded product and our high-quality private label, which offers a substantial savings," said Gerrity. "Of course, the price is what gets them to try a product, but value, taste, usability and convenience of the product will keep them coming back to it."

Strong brands will continue to dominate their categories, Gerrity said, but 7-Eleven will offer a great value and give store operators and franchisees products and data to help them make informed decisions on assortment, rather than relying too heavily on suppliers' picks.

Initially, 7-Eleven offered private label products comparable to the national brands' key items, "but as we get deeper into it and understand the business, we are making adjustments and our goal is to develop products unique to 7-Eleven with new flavor profiles and unique packaging that is more designed for customers on the go," Gerrity said.

The team at 7-Eleven doesn't expect to bring down a brand like Doritos or Snickers, Gerrity said, "but that's okay. We need those customers too."

And the retailer doesn't expect private label products to lose their appeal as the economy rebounds. "That would give us an opportunity to take our program to the next level," he said. "Some retailers offer three tiers of private label -- economy, mid-tier and premium. Our private label program will continue to evolve beyond the basics we offer today."

Gerrity's theory is well supported by a poll of more than 800 main household grocery shoppers conducted this spring by GfK Custom Research North America for the Private Label Manufacturers Association (PLMA).

As the economy recovers, the overwhelming majority -- 91 percent -- of U.S. shoppers will continue purchasing store brand products, according to the poll. Conversely, only 8 percent of the consumers polled said they would stop buying these products.

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