Title: THE ART
1THE ART SCIENCE OF PRIVATE LABEL PRICING
- W. FRANK DELL II, CMC
- OCTOBER, 2003
2AGENDA
- INTRODUCTION
- ISSUES DIFFERENCES
- PRICING APPROACH
3Objectives
- Provide an understanding of Private Label
- Identify common pricing mistakes
- Present a better approach
4The Starting Point
5Private Label - USA
- Initiated by
- Necessity
- Pride
- Lower priced commodities
- Second tier quality
- Second tier packaging
- Follow the Brands lead
Commercial TV
6Sales by Channel
Mass Merchants exceed 7B
7Private Label Share
8Top Categories - Sales
CATEGORY SALES
1. Milk 6,500.0
2. Fresh Bread Rolls 2,300.0
3. Natural Cheese 2,000.0
4. Fresh Eggs 1,700.0
5. Ice Cream / Sherbet 1,100.0
6. Carbonated Beverages 848.5
7. Vegetables 746.6
8. Fz Plain Vegetables 702.0
9. Rfg Juice/Drinks 633.3
10. Sugar 628.0
9Top Items - Growth
ITEM SHARE
1. Non-Carbonated Water 7.2
2. Fz Orange Juice Concentrate 16.9
3. Tomato Paste/Sauce/Puree 3.5
4. Rfg Orange Juice 5.5
5. White Granulated Sugar 20.7
6. Tomato Paste/Sauce/Puree 1.9
7. Rfg Butter 16.0
8. Cream Cheese Spread 1.1
9. Evaporated/Condensed Milk 17.2
10. Dry Macaroni Cheese Mix 1.1
10External Drivers
Consolidation
Channel Blurring
11Internal Drivers
Competitive Sameness
Gross Margin
12Private Label Response
Upgrade Quality
Upgrade Packaging
Expand Assortment
Gourmet Products
13AGENDA
- INTRODUCTION
- ISSUES DIFFERENCES
- PRICING APPROACH
14Retailers Goals
High
- Gross Margin
- Quality Ratio
Low
15CONSUMERS PERSPECTIVE
- Recall up to 200 item prices
- Frequently purchased items
- High consumables
- Translates to 500 - 1,000 items creating the
retailers price image
16Observation
- Much of retail pricing seems to be follow the
leader - Not unlike a dog chasing its tail
17Private Label Not Comparable
- Differences
- Manufacturer
- Formula
- Size
- Positioning
- Packaging
- Excludes commodities
18Low Prices Not The Answer
19Price Elasticity
20Retail Price Space Interrelated
21Private Label Price Discount
CHAIN DISCOUNT
Safeway 18
Kroger (Ralphs) 22
Ahold (Stop Shop) 22
Albertsons (Jewell) 23
Wal-Mart 25
Delhaize (Hannaford) 27
Safeway (Dominicks) 28
Price Chopper 30
Source Supermarket News
22Channel Pricing Strategies
23AGENDA
- INTRODUCTION
- ISSUES DIFFERENCES
- PRICING APPROACH
24Not Just One Private Label
- Commodity (sugar)
- Alternative (soup)
- Gourmet/Super-premium (cookie)
- Natural/Organic (juice)
- Unique (Trader Joes)
25Retail Strategy
26Category Role
- Destination - To be the primary category provider
and help define the retailer as the store of
choice by delivering consistent, superior target
consumer value. - Routine - To be one of the preferred category
providers and help develop the retailer as the
store of choice by delivering consistent,
competitive target consumer value.
27Category Role (Cont.)
- Occasional/Seasonal - To be a major category
provider, help reinforce the retailer as the
store of choice by delivering frequent,
competitive target consumer value. - Convenience - To be a category provider and help
reinforce the retailer as the store of choice by
delivering good consumer target value.
28Category Strategy
- Strategies
- Traffic Building
- Transaction Building
- Profit Contribution
- Cash Generating
- Excitement Creating
- Image Creating
- Turf Defending
- Characteristics
- - High share, frequently purchased, high of
sales - - Higher Ring-up, impulse purchasing
- - Higher Gross Margin, turns
- - Higher turns, frequently purchased
- - Impulse, lifestyle oriented
- - Frequently purchased, highly promoted, impulse,
unique - - Used to draw customer base
29Pricing Philosophy
- Velocity
- Faster selling priced lower than slower
- Size
- Larger sizes priced lower than smaller
- Flavor/Pattern
- Priced as group
30Understand The Category
- Purchase frequency
- Solo, multiple or joint purchase
- Competition
- Inside store
- Outside store
31Product Factors
TYPE QUALITY PACKAGING
Commodity
Alternative
Gourmet
Organic
Unique NA
32Set Item Objective
33Honest Assessment
- Product quality
- Product performance
- Packaging
- Retail space allocation
34Honest Value Determination
PRICE
VALUE
QUALITY
35General Private Label Pricing
QUALITY DISCOUNT
11 10
10 15
9 15
8 17
7 20
6 Discontinue
36Commodity
37Alternative
38Gourmet
39Organic
40Unique
41Summary
- Art
- Strategy
- Tactics
- Design
- Assessment
- Science
- Share Objective
- Retail Space
- Price Point
42Thank You
43- W. Frank Dell II, CMC
- President
- DELLMART Company
- 125 Hardesty Road
- Stamford, CT 06903 USA
- Tel 203-968-8609
- Fax 203-968-8613
- e-mail Wfdell2_at_msn.com