Private Label Goes Public

October 1, 2006
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Private Label Goes Public
By JENNIFER ZEGLER

Private label beverages are more innovative and attracting more consumers

Archer Farms Sarsaparilla soda, Vixen energy drink and Braidenwood Estates merlot — from soft drinks to energy drinks to wines, private label beverages are making inroads through innovation. Imitation generics or staid store brands no longer, new private label beverages are, in some cases, out-foxing competitors. Due to improvement in quality and the rising popularity of retailers such as Trader Joe’s, which dedicates stores solely to its own branded merchandise, private label beverages are going public.
“Private Label from a Consumer Perspective,” a study by the Hartman Group, Bellevue, Wash., revealed that consumers increasingly are buying private label products, especially at Wal-Mart and Kroger. In fact, the study’s Top 10 included five Wal-Mart and Sam’s Club private label brands: Great Value, Equate, Sam’s Choice, Wal-Mart and Member’s Mark. Also making the list were brands by Target, Albertsons and Safeway.
Carbonation nation
Private label carbonated beverages are escaping the soft drink category’s imitation reputation. Some stores, especially Target, have formulated unique flavors and brands. Target’s Archer Farms line offers new flavor blends, including Sarsaparilla soda or Blood Orange Italian soda. The national on-the-go chain 7-Eleven, Dallas, Texas, launched its own Big Gulp sodas, leveraging the famous fountain drink name. In addition to regular and diet colas, other flavors are Mint Lime Twist and Ginger Apple Snap, all in wide mouth 20-ounce plastic bottles.
Cornering the burgeoning energy drink market, another convenience store chain, Circle K, launched Talon and Vixen energy drinks. The menacing-looking Talon is available in regular and sugar free varieties, both with a citrus taste. On the other hand, Vixen is targeted toward women – with an edge. Unlike other female-targeted energy drinks, Vixen sports a black can and a logo with attitude. Available in sugar-free Citrus Passion and Foxberry, the drink is formulated with the familiar blend of energy enhancing ingredients in addition to folic acid.
“Others have had some success going after females with pretty pink cans, but we felt that there was another, edgier female consumer segment not being reached,” said Mark Wright, category manager for Circle K, a division of Canada’s Alimentation Couche-Tard in a statement. “Our in store testing confirmed that this was true and we have high expectations for the Vixen brand.”
Full steam ahead
As Americans become more attracted to designer coffee and more educated about the benefits of tea, private label brands are perking up to fill the store demand for coffee and tea.
“The average coffee offering has been turned into a dessert menu,” said Mike Ebert, president of Coffee Masters Inc., Spring Grove, Ill., in a recent issue of Beverage Industry’s sister publication PL Buyer. “Today’s coffee customer is looking for products that create the much sought-after gourmet environment.”
When stacked against Starbucks, private label coffees are not making much of a dent on the giant’s ‘grande’ hold on the market, but that’s just grounds for improvement. The increase in popularity of single-brew or coffee pods has created a new market in addition to the constant appeal of bulk sizes.
Private Label Beverage Performance
CATEGORYDOLLAR SALES (IN MILLIONS) % change vs. YEAR AGO UNIT SALES (IN MILLIONS) % change vs. YEAR AGO
REFRIGERATED TEAS/COFFEES$22.111.7%16.913.0%
READY TO DRINK TEA/COFFEE$30.28.5%17.10.7%
COFFEE$260.59.5%72.7-6.0%
SHELF-STABLE BOTTLED JUICE$587.4-3.2%331.4-9.8%
BOTTLED WATER$890.211.2%653.7-2.0%
Source: Information Resources Inc. total supermarket, drug and mass merchandise sales (excluding Wal-Mart) for the 52 weeks ending Sept. 10, 2006
Private Label Beer Performance
CATEGORYDOLLAR SALES % change vs. YEAR AGO CASE SALES % change vs. YEAR AGO
BEER$12,630,010-19.0%719,027-24.1%
Source: Information Resources Inc. total supermarket, drug and mass merchandise sales (excluding Wal-Mart) for the 52 weeks ending Sept. 10, 2006
Private Label Spirit Performance
CATEGORYDOLLAR SALES % change vs. YEAR AGO VOLUME SALES % change vs. YEAR AGO
VODKA$63,757,230-2.7%1,073,805-5.5%
TEQUILA$6,496,5730.5%59,33511.5%
RUM$21,351,630-5.9%309,312-5.5%
GIN$7,590,815-15.2%126.636-16.9%
SCOTCH$3,270,932-2.3%37,963-5.4%
NORTH AMERICAN WHISKEY$10,269,130-11.0%143,615-12.6%
CORDIALS$8,076,084-10.1%111,746-13.9%
PREPARED COCKTAILS$530,729214.4%8,630225.1%
NON-ALCOHOLIC MIXERS$29,433,9202.8%1,432,149-2.7%
COGNAC/BRANDY$3,747,513-1.3%48,164-7.7%
CATEGORY TOTAL$154,524,500-3.5%3,351,357-5.1%
Source: Information Resources Inc. total data from food and drug outlet sales for the 52 weeks ending Aug. 13, 2006.
“For private label, the biggest thing right now is single-brew products,” Ebert said. “Much importance also has been placed on the types of products that accompany coffee – this can be anything from pastries to coffee filters. As long as it’s gourmet, customers want it and retailers want to put their name on it.”
As a population forever in search of better-for-you products, the U.S. tea market has grown as more benefits are uncovered. From antioxidants to sleep benefits, Americans are lining up to steep their teas – and private label is ready to fill the cup.
“There is a demand for natural and organic teas right now, particularly green tea and Rooibos teas,” Lalith Guy Paranavitana, owner of Empire Tea Services, Columbus, Ind., told PL Buyer. “These types of tea are much sought after primarily for their health benefits.”
Paranavitana predicted the next trend in private label teas will be nylon, pyramid shaped tea bags, which were recently mainstreamed by Lipton. The pyramid-shaped tea bags allow room for the tea leaves to unfurl without escaping into the brew. Tea also is primed to escape an old stereotype.
“Specialty tea is reaching out to all demographics,” Paranavitana says. “Gone are the days when tea was appreciated by the ‘older folk.’ Knowledge is key. More information is available in easy access thanks to the Internet. Therefore, private label has a great opportunity to appeal to different demographics, particularly college students, in an effort to fuel the category’s growth.”
Universal appeal
Consumers thirsting for better-for-you beverages would most likely begin searching in the bottled water and juice aisles. Both categories have seen great growth from consumers searching for healthier drinks for themselves and their families.
“The juice and water categories cross all demographics and lifestyles,” said Shawn O’Connell, marketing manager for Clement Pappas, Seabrook, N.J., in PL Buyer. “The subcategories offer something for each individual or family. Children are the largest opportunity; however the baby boomers probably offer the largest growth opportunity.”
In this category, private label is expanding due to the desire and education of consumers.
“People are drinking less soda and are looking for healthier alternatives such as juice and water,” O’Connell said. “Staying ahead of the trends with new and exciting flavors, and allocating the proper resources to grow items is one way to increase sales. Store brands are the perfect way to help retail drive the health and wellness trend.”
Flavored water and antioxidant-rich juice blends provide new frontiers for private label bottled water and juices. Light juices also are an opportunity as parents search for lower calorie, lower sugar options for their children. In this segment, product packaging, quantity and placement within the store will increase the private label appeal for families as well as grab-and-go consumers.
Great grapes
Research also has led to an increase in wine consumption thanks to studies that reveal the health benefits of the fermented fruit. Wine’s popularity has had an effect on beers and spirits, as sales of private label products has remained steady, neither increasing nor decreasing. Yet with an average price point of $4.70 per bottle, private label wines are creating a new generation of afficianados.
Quite possibly the most famous private label wine is Trader Joe’s Charles Shaw. Affectionately known as “Two-Buck Chuck,” the Monrovia, Calif.-based chain’s private label line is available in Cabernet Sauvignon, Chardonnay, Merlot, Sauvignon Blanc and Shiraz varieties. The Shaw line has inspired a cult-like following who have created a ‘Charles Shaw for President’ campaign.
Grocery store chain Food Lion, Salisbury, N.C., uncorked its Braidenwood Estates Wines in 2005. In order to make the line accessible, the store launched the Cabernet, Chardonnay and Merlot in 11.25-ounce bottles, which are the equivalent of  two to three glasses of wine. Braidenwood Estates is made for Food Lion by New York’s Canandaigua Wine Co.
Spirits are not about to be left out of the private label trend. The customizability trend has increased the appeal of spirits, which has caught the attention of retail giant, Wal-Mart, Bentonville, Ark. Wal-Mart’s Web site reported it plans to triple the shelf space for spirits in some stores to appeal to the home mixologist.
Whether it’s pick-me-up energy drinks or better-for-you beverages, the appeal of private label is going public. Formerly ‘blah’ store brands are innovating to create an enhanced appeal on the shelves for their own beverage brands, and consumers are responding.

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