For a microcosm, check the cereal aisle. Nabisco officially abandoned the category last week with the sale of Shredded Wheat and the rest of its ready-to-eat cereal brands to Kraft General Foods. Nabisco, No. 7 in the category, had been getting the squeeze for some time (its sales slipped 3% for the 52 weeks ended Oct. 3, according to Nielsen).
But the more interesting story is the No. 6 player: Private label. Its share has almost doubled, to 4.8%, in the past five years. Industry sources say Ralston Purina, No. 5 by just 0.2 points, has been putting an increasing amount of resources behind its private-label business. Ralston is already the No. 1 private-label manufacturer. "I hear from Ralston's private-label people every month," says one grocery buyer. By comparison, he adds, Ralston's branded sales reps come "twice a year, tops." (Ralston declined to comment.)
Not surprisingly, private-labels are acting more brandlike. Ralston has shrink-wrapped watch premiums onto its Magic Stars store brand and sold trial-size versions of Corn Flakes and Crispy Rice. Sovex, another private-label manufacturer, had store-brand knockoffs of Low-fat Special K on the shelf within three weeks of the product's release.
It's unlikely this pattern will change. Retailers are learning that pruning losers--the essence of category management--can boost profits even as the rise of club stores mitigates traditional advantages of national brands.
Copyright Adweek L.P. (1993)