Retailers revisit cheap brands

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Chicago, November 10: : Penny-pinching shoppers are increasingly giving up brand name toilet paper, trash bags and other household goods, leaving manufacturers to rethink how to sell their pricier brands in a tough economy.

At the same time, retailers such as Wal-Mart Stores and Walgreen are emphasizing their own low-cost lines, pressuring the top names in household products to prove why their brands should command higher prices.

For now, shoppers are buying cheaper products mostly where there is less of a personal connection. Kimberly-Clark saw North American shoppers switch to store-brand paper towels from its Viva and Scott brands in the third quarter, while Colgate-Palmolive saw little evidence of its consumers opting for lower-priced goods like toothpaste.

Still, Colgate will increase advertising spending next year to promote its higher-margin, higher-priced goods.

It may be too early to sound the alarm that private labels are dragging big dollars away from household names, which have generally posted sales gains even after raising prices.

"They're just a little more defensive in terms of consumer tradedown versus (categories) like food. It's not to say it won't happen; it's just it's early in the cycle," said SunTrust analyst Bill Chappell.

Major manufacturers and their brand-name goods still control the market, with private label products accounting for 5.4 per cent of total US household care product sales in 2007, up from 5.2 per cent in 2006, according to Euromonitor International.

The rise of private label products has been steeper in areas such as paper products. Private label items accounted for 15 per cent of US toilet paper sales in 2007, up from 14.1 per cent in 2006. Private label products made up 15.7 per cent of US tissue sales in 2007, up from 13.9 per cent in 2006, according to Euromonitor.

Over at Walgreen, sales of items such as its own four-roll packs of toilet paper are "just skyrocketing," President and Chief Operating Officer Greg Wasson said in a recent interview.

"We're going to promote them more and make sure we've got prominent space and location devoted to the products," Wasson said of private label items. "I think you're going to see more and more people willing to use private label than they have been in the past."

NEW SHOPPING PATTERNS

While private label items carry lower prices, leading to lower sales figures, they are typically more profitable for retailers, since the retailers can control the costs.