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|278 PART 3 Designing a Customer Value-Driven Strategy and Mix
Store brand (or private brand)
A brand created and owned by a reseller brands have been gaining strength for more than two decades, but recent tighter economic
of a product or service.
The popularity of store brands has soared recently. Walmart’s store brands account for
a whopping 25 percent of its sales, and its Great Value brand is the nation’s largest single hard to establish and costly to stock and
food brand.
SIPA USA-KT/SIPA/Newscom
Brand Sponsorship
A manufacturer has four sponsorship options. The product may be launched as a national
brand (or manufacturer’s brand), as when Samsung and Kellogg sell their output under their
own brand names (the Samsung Galaxy tablet or Kellogg’s Frosted Flakes). Or the manu-
facturer may sell to resellers who give the product a private brand (also called a store brand
or distributor brand). Although most manufacturers create their own brand names, others
market licensed brands. Finally, two companies can join forces and co-brand a product. We
discuss each of these options in turn.
National Brands versus Store Brands. National brands (or manufacturers’ brands)
have long dominated the retail scene. In recent times, however, increasing numbers of re-
tailers and wholesalers have created their own store brands (or private brands). Store
times have created a store-brand boom. Studies show that consumers are now buying even
more private brands, which on average yield a 30 percent savings.34 More frugal times give
store brands a boost as consumers become more price-conscious and less brand-conscious.
In fact, store brands have grown much faster than national brands in recent years. Over
the past three years, annual sales of private-brand grocery goods have grown at twice the
rate of national brands. Private labels now account for more than 18 percent of supermarket
dollar sales and almost 17 percent of drugstore dollar sales. Similarly, for apparel sales,
private-label brands—such as Hollister, The Limited, Arizona Jean Company (JCPenney),
and Xhilaration (Target)—now capture a 50 percent share of all U.S. apparel sales, up from
25 percent a decade ago.35
Many large retailers skillfully market a deep assortment of store-brand merchandise.
For example, Walmart’s private brands—Great Value food products; Sam’s Choice bever-
ages; Equate pharmacy, health, and beauty products; White Cloud brand toilet tissue and dia-
pers; Simple Elegance laundry products; and Canopy outdoor home products—account for a
whopping 20 percent of its sales. Its private-label brands alone generate more sales than all P&G
brands combined, and Walmart’s Great Value is the nation’s largest single food brand. At the
other end of the grocery spectrum, upscale Whole Foods Market offers an array of store-brand
products under its 365 Everyday Value brand, from organic Canadian maple syrup and frozen
chicken Caesar pizza to chewy children’s multivitamins and organic whole-wheat pasta.36
Once known as “generic” or “no-name” brands, today’s store brands are shedding
their image as cheap knockoffs of national brands. Store brands now offer much greater
selection, and they are rapidly achieving name-brand quality. In fact, retailers such as Target
and Trader Joe’s are out-innovating many of their national-brand competitors. As a result,
consumers are becoming loyal to store
brands for reasons besides price. Recent
research showed that 80 percent of all
shoppers believe store brand quality is
equal to or better than that of national
brands. “Sometimes I think they don’t ac-
tually know what is a store brand,” says
one retail analyst.37 In some cases, con-
sumers are even willing to pay more for
store brands that have been positioned as
gourmet or premium items.
In the so-called battle of the brands be-
tween national and private brands, retail-
ers have many advantages. They control
what products they stock, where they go
on the shelf, what prices they charge, and
which ones they will feature in local pro-
motions. Retailers often price their store
brands lower than comparable national
brands and feature the price differences
in side-by-side comparisons on store
shelves. Although store brands can be
promote, they also yield higher profit
margins for the reseller. And they give