Is Walmart Coke?

According to this article, Walmart thinks its Great Value brand is on a par with Coke.

Forgive me while I pick myself up off the floor laughing.

Andrea Thomas, senior vice president of private label brands for the Bentonville Behemoth, says:

The Great Value brand is the largest consumer packaged goods brand in the United States, on par or bigger than national mega brands such as Coca-Cola, Tide, Cheerios and Ocean Spray, which each tally more than $200MM in annual sales. We are right there with them, the Wal-Mart private brand is every bit as big, sometimes even bigger.

Thomas is touting the re-launch of Walmart's Private Label business, which frankly has fared poorly in comparison to rivals Safeway, Kroger or (overseas) Tesco. It's one of the few areas in food where the retail giant has stumbled. And some of her hyperbole is part of the erosion of the word "brand" which used to mean something, but now is applied to everything:

The Britney Spears "brand."

But the real problem is that Walmart is equating size with brand status. Yes, consumers buy a lot of PL products, and the new packaging likely will improve sales. Yet it's unclear whether over the long haul consumers are going to remain loyal to private label products to the same degree they are to national brands, and aren't just buying these products based on price. Stats show, for example, that shoppers won't switch when it REALLY matters, such as health & beauty products for themselves or food for their kids. The PL people, of course, insist we're in the midst of a "paradigm shift" in retailing (let's hope for their sakes it's not like the shift to driving slower and buying gas-sipping cars that was predicted when prices at the pump reached $4 a gallon last Summer). They back up their claims with reams of stats and studies (I know, because it's part of my job to wade through the sticky goo). Then, if you listen to the apologists for the organic movement, everything is rosy and organic products are continuing to expand and succeed.

There's no question shoppers like saving money, and they're buying PL products in record numbers. But discussing "private label" is like talking about "public opinion" or other convenient fictions. There are many house brands, and they're not all created equal. What's more, their supporters fail to differentiate between several factors:

1.) Many consumers purchase PL products simply to save money, and often return to their favorite national brands when times get better. So comparing PL products ACROSS THE BOARD doesn't give us a true picture of the strength or weakness of house brands. It's comparing apples to oranges.

2.) House brands vary enormously in quality, not only between retailers, but across product categories. Partly this is a reflection of the supplier process, where retailers commission co-packers to make products for them (almost no retailer that I know of owns their own production facilities, unlike most of the large CPG houses). So in that respect, the Walmart "brand" isn't a brand at all, but an in-store selling cooperative.

3.) National brand push-back: brands are finally waking up to the fact that PL is taking a greater and greater share of their business. Some brands are sitting back, waiting for the Recession to fade and the old rules to return. If brand managers think shoppers will mindlessly go back to their ranks after any recovery, they're smoking crack. Without increasing value and innovation, it's hopelessly naive to think that people will give up those PL prices. Unless, of course, the retailers start raising THEIR prices, which today's NY TIMES says is exactly what's happening, LOL!

The solution for brands is to get creative and innovative. More on that in a future posting.

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