The Public's Crush On Private Labels

For years many shoppers turned up their noses at "private label" goods, those moderately priced and stingily promoted items that carry the store's own brand name instead of the manufacturer's. Cautious consumers, unsure of their judgment, usually sought out the costlier, more lavishly advertised "national or brand name" products. Now these buying patterns are shifting. The popularity of private-label goods--food, clothes, whisky, appliances, household furnishings--is rising. The change is creating a big, rich and occasionally wacky sales trend in U.S. marketing.

The National Retail Merchants Association estimates that private labels account for a phenomenal 60% of the annual $42 billion in department-store sales. More than 90% of Sears, Roebuck's volume is in its own private labels, making it the largest outlet for such brands. In supermarkets, 10% to 15% of the grocery items are "house brands," and the figure is rising. A. & P. is the front runner; 30% of the items on its shelves, many of them manufactured by the firm itself, are familiar house brands, including Ann Page and Jane Parker.

Look Alikes. The quality of many private-label items is equal to or only slightly below that of the high-priced "name" brands. Leading corporations--Heinz, Armstrong Rubber, Westinghouse and many others--are allocating more and more of their output to products that are sold under cut-rate private labels. Often manufacturers use the same materials in these brands as in products sold under their own labels.

About two-thirds of Whirlpool's sales come from house brands in Sears, Roebuck and other stores. General Electric makes private-brand appliances for J.C. Penney; refrigerators sold under Penney's Penncrest labels are strikingly similar to G.E.'s models but are usually priced lower. Sears' $187.99 Celebrity portable typewriter is made by SCM Corp., which markets a machine with almost identical works under its own name for $219.50.

Some manufacturers, notably Polaroid and Maytag, refuse to play the private-label game. But for many others, the temptation of greater sales is irresistible. Notes Rodger Gibson, a G.E. brand manager, speaking of the company's private-label operations: "It helps keep the factory busy, and the more units we make, the lower the cost." There is also a growing band of little-known producers who specialize in private labels. One of the biggest, San Francisco's California Canners and Growers, generates annual sales of $102 million by turning out canned goods and other foods mostly for major retailers, including Safeway, Acme and Food Fair.

Well-known producers even supply goods for their competitors' major brands. One such arrangement came to light after the highly unusual botulism death of a man who had eaten vichyssoise made by Bon Vivant Soups of New Jersey. When the Food and Drug Administration ordered the recall of all the company's products, the public learned that Bon Vivant had also produced soups for other companies under 34 different labels, including the widely distributed and prestigious S.S. Pierce, White Rose and S & W Fine Foods.*

Exclusive Edge. Private labels usually return a fatter profit to retailers than national brands. The savings come from the elimination of costs for national advertising, sales forces and distribution (the store deals directly with the manufacturer).

For consumers, too, private labels are often a good deal. Says William Burston, a vice president of the National Retail Merchants Association: "The difference in price between private labels and national brands in department stores is often anywhere from 20% to 30%." Trouble is that shoppers can never be certain of the private label's worth. Sometimes a store switches manufacturers while continuing to market the product under its own label. Humble Oil's Atlas tires are made in various states by different manufacturers.

The growing importance of private labels reflects marked changes in consumer attitudes. Brand loyalty is waning, particularly among young people. Consumers have become more knowledgeable and are willing to trust their own buying judgment. "They read the back label more," says Walter P. Margulies, partner in Lippincott and Margulies, marketing consultants. Indeed, there is considerable irony in the increasing prominence of private-label products. Some of them, including Sears' Coldspot and Kenmore appliances and A. & P.'s Eight O'Clock coffee, have become so well known that they now eclipse many vigorously promoted national brands.

*Bon Vivant is now in receivership, but company officials still hope to get back in business despite FDA charges, made after a thorough examination of the company plant, that its products were often improperly sterilized and were not fit for consumption by "man or animal." Up to 4,000,000 cans of Bon Vivant products remain in warehouses round the country, while the company continues to press the drug agency for a test to determine whether or not these products can be put back on the market.

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