Brand names not only part of product game

Posted by admin , On January 29, 2012 , in Brand Names , No Comments

Jul. 17–ConAgra Foods makes well-known grocery store brands like Chef Boyardee canned pasta, Healthy Choice frozen dinners, PAM cooking spray, Reddi-wip topping and Orville Redenbacher popcorn.

The company also makes less widely known, private-label products for grocery store chains, including trail mix, fruit snacks, granola bars, cereal and toaster pastries.

Just under $1 billion of ConAgra’s nearly $11.6 billion in annual sales comes from private label items.

“We have about $1 billion worth of private label, and, frankly, have some pretty good margins,” ConAgra Chief Executive Gary Rodkin told analysts earlier this year in New York as he mapped out the company’s business strategy and priorities.

Dean Hollis, president of ConAgra’s consumer foods division, said the company participates in store brand manufacturing with a two-pronged strategy.

ConAgra makes private label products where it has strong brands, such as frozen dinners, canned pasta, cooking spray and whipped topping, Hollis said.

At the same time, about 35 percent to 40 percent of ConAgra’s private label manufacturing involves items in areas where ConAgra does not compete in brands, such as cereal, fruit snacks and trail mix.

ConAgra officials declined to disclose which private label brands it makes, or for which retail chains.

But some of ConAgra’s private label products are strong competitors, including fruit snacks and granola bars, which are No. 1 “in virtually every retailer that you can think of,” Rodkin told analysts.

ConAgra believes the value people put on branded products will remain and even accelerate, Rodkin said.

However, retailers also rely on revenue from their own private labels, and making those products at a low cost helps the company make money while cementing its relationships with its retail customers, Rodkin said.

“Some companies do private label just to fill up capacity. That’s not the case here. It certainly helps in that regard, but that’s secondary to the customer strategy.”

ConAgra’s private label business builds scale and expertise that can be used to help retailers increase sales, company spokeswoman Tania Graves said.

ConAgra learns more about shoppers and their needs by working closely with retailers, and it can offer advice on what to stock, how to put complementary products next to each other to encourage sales, and how best to display products, Graves said.

“When we have a strong No. 1-branded position and also manufacture the private label and grow the category, we — in essence — benefit three times,” Graves said in an e-mail interview.

According to the Private Label Manufacturers Association, store branded products are a large and growing presence, with private label making up about 20 percent of goods sold in U.S. supermarkets, drugstores and mass merchandise outlets.

By contrast, private label products rang up only about 3 percent of store sales in 1970, estimates Daymon Worldwide of Stamford, Conn., which helps supermarkets and other retailers develop and market store brands.

Growth in private label is driven in part by consumers wanting to save money. Generic products often do not get the advertising dollars spent on major brands, so they generally are less expensive. At the same time, retailers have found they can foster customer loyalty to their own store brands and expand into gourmet, organic and other higher-end products, experts say.

“Consumers believe private label is an extremely good value,” Todd Hale of market research firm ACNielsen said during a recent Internet seminar on private label sales. (The seminar was organized by RetailWire, an industry-sponsored, Web-based discussion group.)

Large national brand manufacturers like ConAgra are among companies that make private label products, according to the Private Label Manufacturers Association. Others include small manufacturers that concentrate almost exclusively on private label, as well as retail chains such as Kroger Co. that own manufacturing facilities.

Not every major food company makes private label products.

Minneapolis-based General Mills, maker of cereals including Cheerios, Wheaties and Chex, vegetables under the Green Giant label and Betty Crocker cake mixes, does not do any private label manufacturing, spokesman Tom Forsythe said.

“That’s not what we do,” Forsythe said. “We’re a branded products manufacturer.”