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Walgreens exec: Private label not just matter of cost
June 15th, 2012
DALLAS – The role of private brands has changed, requiring a more sophisticated approach in developing them, according to Laura Sturdevant, director of product development for private brands at Walgreen Co.
"Private brands are no longer just the low-cost solution on the shelf," Sturdevant said at the Food Marketing Institute's FMI 2012 conference in Dallas during a panel discussion called "Building Strong Retail Brands Through Multi-Faceted Collaboration."
Retailers are now behaving more like consumer packaged goods manufacturers by trying to develop products that will resonate with consumers and differentiate themselves from the competition, she noted.
"Product placement has also changed," she said. “Ten years ago, it was not unusual to see the private brand on the bottom shelf. Today it's front and center with many retailers."
All of that has dramatically raised the stakes when it comes to the development of store brands.
"When private brands were just 'me too,' it was really easy," Sturdevant said. "It was just a matter of having the right label profile and the right product quality and putting it on the shelf at the right price. Now we're going down a different road with unique products, and it's much more complicated."
Walgreens last summer introduced a value-focused brand, Nice!, as part of a revamp of its private label program.
As a result, collaborating effectively with design agencies and private label manufacturers is more critical than ever before, according to Sturdevant. Retailers need partners that have excellent category management capabilities and progressive research-and-development departments focused on delivering innovation, she said.
Keeping up with market trends is also critical, and that means going beyond syndicated data on what is selling in the United States to consider ingredients and flavor profiles that may be catching on internationally, Sturdevant pointed out.
"External agencies can provide insight about what the consumer is looking for," she said, adding that it's also critical for the retailer to have a clear understanding of who its target customer really is.
"That's done through talking to your consumers in the stores or to your prospective consumers," Sturdevant said. "Another thing is knowing what you want to be and where you want to play and then going after that business."
Collaboration and communication within the retail company is also key, she added. "You need your internal stakeholders on board, whether it's the marketing team, the merchandising team, the category managers or the supply chain and logistics part of the business. It's all-encompassing," she said.
Having a plan and a strategy in place is another linchpin for success, even if that plan inevitably evolves over time.
"If retailers, working with manufacturers and design agencies, set a very strong strategic position for their private brands and hold true to that, they're setting themselves up for a win," Sturdevant said.
Walgreens has been steadily revamping its store brand program, an effort that gained momentum last August with the introduction of a value-oriented private label called Nice! in its drug stores nationwide.
The Nice! launch included more than 400 grocery and household products at prices up to 30% less than national brands. The chain noted that many items in the line "go beyond what might be expected from a drug store brand," such as soup, sauces and bakery items. Plans called for existing store brands such as Cafe W, Deerfield Farms, W and others to be phased out and transitioned to Nice!.
In the months prior to the Nice! launch, Walgreens also changed the brand name and packaging of the DR Delish premium private label — picked up with the acquisition of Duane Reade — to Good & Delish and expanded the selection of the line's snacks and beverages.
The new label gave Walgreens two distinct tiers for its store-brand program: Nice! for customers seeking value, and Good & Delish for shoppers wanting premium-level products without a high price tag.
The drug chain also has promoted its Walgreens brand health and wellness products, which include over-the-counter medicines, vitamins and supplements, first aid supplies and sun care. The retailer, too, has augmented its petshoppe brand of pet supplies, including more items, new packaging and more prominent placement in stores.
Citing A.C. Nielsen consumer research, the chain said at the time of the Nice! launch that 75% of Walgreens shoppers buy private brands at its stores.