So, do you fancy yourself as an expert on branding? You should have no problem with the following question, then. What's the biggest FMCG brand in America?
The answer isn't Coke, Gillette or J&J - it's Great Value, Wal-Mart's own-label range. Thanks to its presence in every one of Wal-Mart's 4100 US stores, and the fact that more than 5000 stock-keeping units are sold under the Great Value label, it is the biggest grocery brand in the US by both sales and volume.
And it's about to get a lot better.
Wal-Mart has announced the conclusion of a year-long project to improve the appeal of its own-label line. The world's biggest retailer doesn't do anything on a small scale, and has conducted 2700 consumer tests to guide the overhaul. The result is a range of product introductions, improved formulations and fresh packaging.
It's a massive strategic operation, but one that was long overdue. Own-label success has never been one of the items on Wal-Mart's astonishing list of achievements. Currently, only 16% of its sales come from this area. That's well behind other US food retailers such as Krogers and Safeway, which attribute about a quarter of their sales to own-label products. It's even punier when contrasted with Tesco, which earns half its sales from own-label, and Aldi, where the figure is 94%.
That's why Wal-Mart, which typically hires from within, went outside the company and country last year to recruit Jack Sinclair, a Scottish marketer with Safeway and Tesco experience, to oversee the overhaul.
Traditionally, US consumers have exhibited greater manufacturer-brand loyalty than Europeans. Own-label sales in the US have consequently been limited to a national penetration of less than 20%. However, a slew of recent data now suggests that the global credit crunch is eroding US brand relationships in favour of own-label goods. According to market research group GfK, three out of 10 US shoppers are now 'buying more store-brand products' than they did a year ago, and 75% cite 'current economic conditions' as playing a big role in this decision. Nielsen says sales of own-label goods rose by 10% in 2008, a trend likely to increase this year.
Wal-Mart is also now better placed to offer a strong own-label line thanks to the recent successful revitalisation of its corporate brand. After years of exclusively communicating its low prices to consumers, the retailer has changed emphasis onto what those prices enable the US family to achieve. This subtle shift in positioning has enabled Wal-Mart to offer Great Value as more than simply a range of cheap, commodity products - they are equivalent-quality products which represent Wal-Mart's commitment to helping families.
Aside from brand differentiation, an improved Great Value also carries the more traditional own-label benefits. Despite lower prices, the reduced production costs and zero marketing expense of Great Value mean it will always deliver more profit per unit to Wal-Mart than the equivalent manufacturer brands. And as the penetration and market share of Great Value increase, the space and sales available to manufacturer brands are reduced, and Wal-Mart's already legendary bargaining position with suppliers is strengthened.
Too many people incorrectly call the past decade the 'age of private label'. The one that's coming will make that seem a very gentle introduction, and Wal-Mart will be in the vanguard of the 'great value decade' ahead.
Mark Ritson is an associate professor of marketing and consultant to some of the world's leading brands
30 seconds on Wal-Mart's Great Value range
- Wal-Mart introduced Great Value in 1993 and it is available in more than 100 categories, including bread, canned food and light bulbs. Prices are around half those of national brand equivalents. Lines to be introduced include free-range eggs, beef jerky and fat-free ice cream.
- The company is attempting to calm suppliers' nerves by claiming that an increase in Wal-Mart's own-label sales won't necessarily affect the market share of national brands thanks to an overall rise in demand for products generally.
- As to whether the newly launched Great Value items will receive more prominent shelf space inside Wal-Mart's stores, senior vice-president Andrea Thomas is non-committal. 'The Great Value items earn their position just like the branded stuff does,' she says. 'We pay attention to what sells.'
- Deborah Weinswig, a retail analyst at Citigroup, forecasts that Wal-Mart's own-label sales could reach 40% of total grocery sales by 2012.