Wal-Mart moving in for the kill
By Owen Morris in News
Wednesday, Mar. 18 2009 @ 11:30AM
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| Flickr: Arobot |
When I think of Great Value products, the cheap clear gallon tub of artificial vanilla ice cream comes to mind. And indeed, ice cream is one of the "750 everyday items" whose recipes the company redesigned to make them more like branded products. Great Value now carries a variety of ice creams like fat-free caramel-swirl, mocha mud slide and cake batter.
The Great Value overhaul begins at the end of this month and the
company expects it to be nearly complete by May. Wal-Mart doesn't hide
that it's competing directly against other, more expensive retailers.
It knows it can beat them in price so it just has to tie them in
taste, which is why the company conducted "more than 2,700 consumer
tests to compare the flavor, aroma, texture, color, and appearance of
Great Value products against leading national brands."
Great Value is what's known as a "private label" brand, which means the store either makes or licenses the product. With no middle man and no marketing, private labels are not only cheaper for customers, they have a higher profit ratio for stores than branded names. According to BusinessWeek, private label sales rose 10 percent in 2008, a number that's certainly going to increase in 2009 as people try to save even more.
In the same BusinessWeek article, Wal-Mart is noncommittal as to whether it will start marketing its store brand or give it more shelf space. It wants to see how many customers are comfortable buying a private label brand. In this economic climate, that's a no-brainer.
Though Wal-Mart doesn't mention it, a growing irritation with normal food suppliers is likely playing a role. Even as fuel, feed and wheat prices have fallen, food suppliers have continued to raise their prices. As mentioned on Breakfast Buffet yesterday, this is making retailers very mad. Safeway was the most blunt, when challenged food suppliers to cut out the price hikes or face more competition from Safeway's already popular private label line, which has nearly as many products as Wal-Mart's, including an organic line.
I count just over 100 Wal-Marts in the Kansas City area, each with thousands of customers. If just a few from each store switch to private label brands and you multiply that by the thousands of Wal-Marts in America, it won't take long for the Krafts of the world to get the message.
Great Value is what's known as a "private label" brand, which means the store either makes or licenses the product. With no middle man and no marketing, private labels are not only cheaper for customers, they have a higher profit ratio for stores than branded names. According to BusinessWeek, private label sales rose 10 percent in 2008, a number that's certainly going to increase in 2009 as people try to save even more.
In the same BusinessWeek article, Wal-Mart is noncommittal as to whether it will start marketing its store brand or give it more shelf space. It wants to see how many customers are comfortable buying a private label brand. In this economic climate, that's a no-brainer.
Though Wal-Mart doesn't mention it, a growing irritation with normal food suppliers is likely playing a role. Even as fuel, feed and wheat prices have fallen, food suppliers have continued to raise their prices. As mentioned on Breakfast Buffet yesterday, this is making retailers very mad. Safeway was the most blunt, when challenged food suppliers to cut out the price hikes or face more competition from Safeway's already popular private label line, which has nearly as many products as Wal-Mart's, including an organic line.
I count just over 100 Wal-Marts in the Kansas City area, each with thousands of customers. If just a few from each store switch to private label brands and you multiply that by the thousands of Wal-Marts in America, it won't take long for the Krafts of the world to get the message.
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