The Mysterious Companies Behind Costco’s Kirkland Signature and Trader Joe’s O’s The Hidden Companies Behind Store Brands Like Kirkland Signature The Real Story Behind Store Brands

The Mysterious Companies Behind Costco's Kirkland Signature and Trader Joe's O's The Hidden Companies Behind Store Brands Like Kirkland Signature The Real Story Behind Store Brands
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They have become a force in their own right and make up about 21% of sales in the $1.7 trillion U.S. grocery industry, according to IRI.

But the origin of the store brand remains largely a mystery.

Retailers are generally not forthcoming about the companies that make their brands. And manufacturers, likewise, have little incentive to disclose that they are making products similar to their name brands sold cheaply under different labels.

Many leading national brand manufacturers produce private labels for multiple retailers. In the late 1990s More than half of brand manufacturers were estimated to also produce individual products.
Trader Joe's first private brand product was granola in the 1970s.  As the grocer grew, it shifted mainly to its own brands.

Although store brands obviously compete with manufacturers’ national brands, manufacturers often have excess capacity in their production lines. To generate additional profits, some will use that extra capacity to create private labels.

Other brand manufacturers will create private labels as an incentive for retailers, hoping that they will be rewarded with better shelf space and placement for their own national labels.

“Most manufacturers are not open about it,” said Jan-Benedict EM Steenkamp, ​​a marketing professor at the University of North Carolina who studies private labels and branding. “Manufacturers don’t want it to be known because it dilutes the strength of their own brand.”

But there are some exceptions. Kimberly-Clark (KMB)Huggies, maker of diapers, makes Kirkland Signature Diapers for Costco, and Duracell makes Kirkland Signature batteries. costco (cost) Executives said.
Georgia-Pacific, maker of Brownie and Dixie, also produces store brands. do so Henkel (Hankey)Purex and dial manufacturer.

Eight o’clock coffee and Kenmore

The store label has been around since the early days of retail and The rise of consumer brands In the 19th century.

Macy’s sold stoneware whiskey jugs under its own name. Consumers can return the jugs for refills, according to Christopher Durham, president of the Velocity Institute, a trade association for private brands.

Montgomery Ward produced its own line of aspirin in wooden containers, while Great Atlantic & Pacific Tea Co. (aka A&P) sold branded spices with the slogan “Take Grandma’s Advice, Use A&P Spices.” A&P later created Eight O’Clock Coffee, one of the most famous private labels of the time.

In 1949, Eight O'Clock Coffee was sold to The Great Atlantic and Pacific Tea Company (A&P).
Yet no US retailer has been more successful Develop its own brand Sears, rather than Roebuck.

In 1925, Sears created the Allstate brand of car tires. A few years later, Sears introduced its first artisan wrench, according to Durham. Its Kenmore line, which began as a sewing machine brand in 1913 before branching into vacuums and other home appliances, became the leading home appliance brand in the United States.

These private labels were the exception though.

For most of the 20th century, national brands such as Jell-O, HJ Heinz, Campbell’s Soup (CPB) And Johnson & Johnson (jnj) had power over the shop. These manufacturers flood the airwaves and newspapers with advertisements extolling the benefits of their products.

Most consumers were highly loyal to specific brands, not retailers. A store that didn’t carry the big labels would probably get crushed, which gave manufacturers a lot of leverage.

Additionally, many store brands were considered dull, cheap knockoffs of national brands.

The low point for private labels came in the 1970s, Durham said, when stores were looking to cut costs and rolled out generics with white backgrounds and black lettering to identify the product — beer, soap, cola, beans and other staples.

Customer loyalty

Retailers create private label brands for a variety of reasons, including to increase profitability and sometimes as a tool to negotiate against the brand.

Private brands often carry profit margins that are 20% to 40% higher than national brands because stores do not have to pay advertising, distribution or other markup costs that are attached to major brand prices.

Great Value is Walmart's largest store brand.

In the mid-20th century, many retailers began to develop their own labels to regain bargaining power from dominant suppliers and control their prices. As the US retail industry has consolidated in recent decades, the power dynamics between retailers and suppliers have reversed. Now, stores have more leverage to introduce their own labels — whether the name brands like it or not

“Forty years ago, Walmart taking the piss out of P&G would have been a risky situation. Now, Walmart is much bigger than P&G,” said Steinkamp, ​​the marketing professor.

Today, stores’ private brand operations are more sophisticated than ever and a much bigger focus for chains

Shops today are more likely to develop a distinct private brand or product to stand out against competitors and build customer loyalty, says Krishnakumar Devi, president of client engagement at IRI.

costco (cost)For example, Will decide to create a Kirkland signature product Because a leading brand won’t sell to a retailer. Or Costco believes that name brand prices are too high and it can make its own products of the same quality and sell them for 20% less.
Costco has not lost any relationships with suppliers Introducing its own Kirkland productBut those brands aren’t usually pleased when Costco launches one, company CFO Richard Galanti said in an interview earlier this year.
Costco generates about one-third of its sales from its Kirkland Signature label.
Retailers have been sued for making products that too closely resemble national brands. Owns golf ball-brand Titleist Suede Costco For patent infringement, when Williams-Sonoma (WSM) Suede amazon (AMZN) To sell “knockoffs” under own brand. Both cases were settled.

The US House Judiciary Committee and other lawmakers and regulators around the world have investigated whether Amazon uses data from sellers to build its own brand and illegally advocates its own brand on its website.

There is Amazon said It does not use data from individual third-party vendors to inform its own personal brand development and does not advocate its own products on the site.

Most stores start small with their own brands. For example, grocers often introduce a shelf-stable product such as pasta, flour, sugar or rice that is easy to manufacture and where brand loyalty within the category is not strong.

“You don’t start with the hardest thing,” Steenkamp said. “As stores build more experience and success, they enter new categories.”

How to Find Out Who Makes a Store Brand

So how do you tell who’s behind your favorite store brand?

Product recalls are often the most revealing way to find out which brand manufacturers are behind certain private labels.

Last year, for example, Dole recalled fresh salads and vegetables from Walmart, Kroger and HEB’s private brands.

J.M. smacker (SJM) This year Jiff recalled some peanut butter products, as well as store-branded items made for Giant Eagle, Wawa and Safeway. Large companies eg Congra (CAG) And McCain Foods recalled products from Trader Joe’s.
Then there are the dedicated private label manufacturers as well Treehouse Foods (THS), which makes snacks under the labels of supermarkets, big-box chains and other retailers. About a quarter of the company’s $4.3 billion in sales last year, for example, came from Walmart (WMT).
Target has dozens of its own brands, such as Cat & Jack, Universal Thread and Up & Up
James Walser, who led the launch of the target (TGT) In 2009 Up&Up, a household basics and personal care brand, said that Target had tried to move away from national brand manufacturers during the development of Up&Up to focus solely on private label manufacturing to Nimbler suppliers.

Some major retailers also produce their own private labels. For example, Kroger makes about 30% of its own personal products.

Perhaps the strangest store brand manufacturers are retailers who produce private brands for their…Competitors: Safeway-owned Lucerne Foods produces private labels for Safeway’s competitors.

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