Study: Store brands save customers money, even if they don't buy them - East Valley Tribune: East Valley Local News

Study: Store brands save customers money, even if they don't buy them

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Posted: Saturday, June 5, 2010 3:00 am

Candice Guadagnino shopped Friday at a Tempe Fry’s Marketplace, buying a variety of store and brand name items. In her basket, she had three boxes of Kroger brand cream cheese.

The 25-year-old student from Chandler said she was using the cream cheese to make a dessert. However, she would have bought a brand-name cream cheese if she was buying it to spread on bagels.

“I’ll also buy Fry’s brand sodas, butter and canned vegetables because it’s cheaper,” said Guadagnino, whose first child is due July 31. “But I prefer national brands for items like cereal, ice cream and pasta sauce because of the taste.”

Buying generic or store brands saves consumers money. However, a new study from the W.P. Carey School of Business at Arizona State University suggests that by stores simply providing their own brand name items, the consumer also saves because brand names lower their prices.

“Consumers benefit because the whole idea is for retailers to provide a value option to customers,” said Professor Timothy Richards, the Marvin and June Morrison Chair of Agribusiness and Resource Management at the W. P. Carey School of Business, in a statement. “Also, when grocery stores offer these competitive store-brand products, it forces the brand-name companies to lower the wholesale prices they charge the grocery stores. Part of the savings is then passed on to the customers who buy the brand names.”

The store brand items are typically right next to the brand name items, including at Fry’s, which sells it’s own Fry’s, Kroger Value and Private Selection labels, said Pam Giannonatti, a Fry’s consumer/community relations manager.

“The store brands are next to the national brands to show the value,” Giannonatti said. “We’ve seen a 29 percent increase in store brands sold” because of the down economy.

The study, which was published in the Journal of Agriculture and Resource Economics, notes that private labels account for almost one quarter of all consumer spending on food, beverages and personal-care items.

To entice more customers to buy store brands at Fry’s, if a customer buys a store brand item and doesn’t like it, they can return it and get a national brand for free, Giannonatti said.

Safeway has many different store brands, including O Organics produce and products, Eating Right frozen entrees, Safeway Select grocery products and Waterfront Bistro seafood, said Cathy Kloos, a Safeway public affairs and government relations director.

Rancher’s Reserve meat products are some of the most popular items with customers, Kloos said.

“Our customers trust our brands and are very loyal to them,” she said. “Store brands are a better value, and we pass those savings on to our customers.”

The ASU study shows that private labels are a common way for grocery stores to differentiate themselves in a crowded grocery market industry. Safeway was named as having done an “excellent” job creating and promoting store-brand products, Richards said.

“Many stores also offer good, better and best labels, like a super-premium brand, to help cater to a wider variety of consumers,” said Richards in a statement. “All store brands offer the grocery chain a higher profit margin than the brand-name products.”

The study also shows that the private label items are often identical to the brand-name versions. Richards said some items are “even created in the same manufacturing plants when brand companies have spare capacity to cheaply rent out.”

Target’s grocery-owned brands include Archer Farms grocery products, Market Pantry snacks, cooking ingredients and drinks, Sutton & Dodge meat products, Wine Cube wines, and Choxie chocolates, spices and teas, said Michaela Gleason, a Target spokeswoman.

“While we can’t share specific sales figures, our owned brands continue to play an important role in our grocery assortment,” Gleason said. “They offer our guests access to quality products at an affordable price.”

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