Imitate Or Innovate?

Despite some challenges, retailers can go beyond national brand equivalent — and succeed — in certain health and beauty care categories.

These days, you don't have to search high and low to find premium store brand food and beverage products. Most retailers within the food, drug and mass merchandise channels have gone beyond national brand equivalent (NBE) in certain food and beverage categories as a way to set them apart from competitors. Brands such as Kroger's Private Selection, Target's Archer Farms and Walgreens' Good & Delish differentiate through innovative recipes, premium ingredients, upscale packaging and more.

But you might have to dig a bit deeper to locate private label health and beauty care (HBC) items that go beyond NBE — or national brand better (NBB). Although some retailers have had some success here, particularly on the personal care/ beauty side, opportunities for going NBB remain largely untapped.

Where opportunity knocks

A starting point for uncovering those opportunities is to pinpoint any HBC categories in which store brands already command a large share — more than 30 percent, Sam Hacohen, vice president of sales and marketing for Israel-headquartered Albaad, believes.

"Categories where there is no real dominant player and where the overall retail price is not too high can allow private label players to take initiatives and come [up] with innovations and new product development," he says.

But Hacohen adds that going beyond NBE generally makes sense only for niche store brand items, as store brand products are limited in their ability to build consumer needs and open categories.

"Therefore, the product has to sell itself [without] too much exposure," he notes.

As an example, Hacohen points to a private label niche product launched in Europe awhile back — a bikini razor. He says the product's packaging "said it all," so consumers had no trouble understanding the product's functionality. Another possibility could be makeup removal wipes that feature anti-aging ingredients — or baby wipes that help prevent/treat diaper rash.

"Thus, private label can build a subcategory without the use of ad money," he says.

Another NBB niche bright spot lies in personal care — specifically, health care and incontinence wet wipes, notes Tom Hill, vice president, sales and marketing for Diamond Wipes, Ontario, Calif.

"As the aging population continues to increase in the U.S., we expect this market to experience steady growth," he says. "At the retail level, the disposable baby care aisle is dominated by just a few CPG companies. This has yet to be the case for health care or incontinence care."

But "natural" baby care products do have NBB potential, maintains Steve Berry, founder of Auburn Hills, Mich.-based Greenblendz.

"New parents are more informed than ever and want the safest products for their newborns," he explains. "[National brands] with questionable ingredients will not cut it, opening the door for retail brands to shine."

On the oral care side, manual and power toothbrushes, dental floss, whitening items and "flossups" represent the best NBB opportunities, with emphasis on the latter two items, contends Duff Lewis, senior director of marketing for Ranir LLC, Grand Rapids, Mich.

"Consumers are just looking for the least-expensive, best-performing whitening product on the market, regardless of brand or even product type," he says. "For flossups, the category is fragmented, with no dominant national brands on the shelf. Therefore, consumers are looking [at] these products for the features they desire — for example, floss type, flavor, pick and attractive price points."

Although private label's share of the skincare, shampoo and conditioner segments is very low, retailers shouldn't dismiss a chance to go NBB here, suggests Len Smith, vice president of sales and marketing, retail division, for St. George, Utah-based Deseret Labs. Retailers could win here though true innovation — not only in products, but also in packaging.

"Some of what I've seen on the personal care side in shampoos is just a stamp; it's a downgraded package from what the brand is," he says. "We've got to have the sleek curves and countours, which means we've got to work with the bottlers who can do that."

Berry also sees skincare as a potential NBB growth area.

"Natural moisturizers that can nourish the skin cells used to be in specialty brands," he says. "Now the retailer can make it their brand."

Where challenges lie

But going beyond NBE is more difficult in some other HBC categories. Although retailers such as CVS have had some success in developing exclusive cosmetic items, Hill believes the cosmetic category presents a real challenge for store brands.

"We find that consumers are still very much loyal to the brand they trust on this front," he says. "Even if they are on a budget, they may not trade."

That said, Hill believes the area still represents an opportunity for retailers that are able to form a strong partnership with a supplier and a branding agency to develop a truly unique store brand. If they can pull that off, consumers might be persuaded to try something new.

And high-end anti-aging skincare also poses difficulties on the store brand side, Berry says. The amount of marketing and education required to get the sale mean it remains a national brand market for anything other than NBE.

Over-the-counter (OTC) medicines such as cough and cold products also are a challenge, as consumers still rely on a "compare to" statement for store brand product selection.

"Consumers are going to say, 'If the brands aren't out with it, why are we trying to do private label?'" Smith says. "Because it has to be tested, so I think that's one place where we don't want to step outside."

Still, retailers will find plenty of room to innovate in OTC outside without coming up with new formulations. Smith points to packaging innovations from his company such as effervescent stick packs and even packaging reductions that still make an impact but take up less space so retailers can get more items on the shelf.

Connect with consumers

Traditionally, consumers have used the national brand to guide them to the store brand equivalent. But without a national brand counterpart, NBB products need other ways to "speak to the consumer."

"This is the area in which a retailer must act and think like a brand marketer," Hill stresses. "Leverage the unique access to shoppers that each retail location has, and reach out to them with a customized message catered to the specific needs and wants of these consumers."

Hacohen notes that unique packaging and trial packs work well here, while Berry suggests that retailers consider third-party endorsements, quick-response codes that lead to informational videos and specialized web pages to help convey the message.

And the package itself must also communicate the product's message effectively.

"Messaging hierarchy on the primary display panel of the packaging is critical to communicate the NBB positioning to the consumer," Lewis says. "It is the primary communication vehicle unless you implement shelf talkers, aisle violators [or] secondary placement with displays.