Grocers’ Private Labels Give Big Name Brands a Run for Their Money

Grocers are taking advantage of the economic slump by pushing their own value-friendly private label products. Through mid-November, store brands accounted for 31.4% of food and beverage products purchased in the U.S., which is double 2010 numbers.

Retailers are realizing their window of opportunity and utilizing experienced marketing experts and strategies to get their products out there. Bloomberg quoted Jim Hertel, managing partner at retail consultancy Willard Bishop who said, “Retailers are taking a lot more sophisticated approach to store brand innovation. This is five or six years in the making, and we are now seeing the tipping point.”

Kroger (NYSE:KR), Safeway (NYSE:SWY), and SuperValu (NYSE:SVU) are a few of the retailers making a concerted effort to put their private labels in the spotlight. Kroger has had success in the higher end frozen pizzas market, but is now looking to continue that success with other products. Kroger’s marketing expert, Linda Severin, told Bloomberg, “We need to be focused on building brands, not just introducing products.”

In the past, grocery chains feared the big name brand labels and laid in waiting, but now the tables are turning. Brands such as Kellogg (NYSE:K) and Campbell Soup (NYSE:CPB) have been working to vamp up their product line to maintain their edge after years of easily relying on their traditional items. Despite their efforts, analysts predict that store brands will continue to flourish in 2012. Bloomberg cites McKinsey who says that three out of four consumers who have switched to private label brands due to the recession have no intention to switch back when circumstances improve.

Here’s how grocer stocks are performing:

The Kroger Co. (NYSE:KR): KR shares recently traded at $22.75, up $0.4, or 1.79%. They have traded in a 52-week range of $20.53 to $25.85. Volume today was 4,218,805 shares versus a 3-month average volume of 6,060,220 shares. The company’s trailing P/E is 11.85, while trailing earnings are $1.92 per share.

Safeway Inc. (NYSE:SWY): SWY shares recently traded at $19.83, up $0.74, or 3.88%. They have traded in a 52-week range of $15.93 to $25.43. Volume today was 3,076,994 shares versus a 3-month average volume of 6,226,330 shares. The company’s trailing P/E is 13.40, while trailing earnings are $1.48 per share.

SUPERVALU Inc. (NYSE:SVU): SVU shares recently traded at $7.30, up $0.02, or 0.27%. They have traded in a 52-week range of $6.26 to $11.77. Volume today was 1,784,269 shares versus a 3-month average volume of 5,998,620 shares. The company’s trailing P/E is 54.89, while trailing earnings are $0.13 per share.

Kellogg Company (NYSE:K): K shares recently traded at $48.99, up $0.65, or 1.34%. They have traded in a 52-week range of $48.10 to $57.70. Volume today was 934,625 shares versus a 3-month average volume of 2,294,600 shares. The company’s trailing P/E is 15.14, while trailing earnings are $3.24 per share.

Campbell Soup Co. (NYSE:CPB): CPB shares recently traded at $32.52, up $0.52, or 1.63%. They have traded in a 52-week range of $29.69 to $35.66. Volume today was 780,895 shares versus a 3-month average volume of 2,443,290 shares. The company’s trailing P/E is 13.50, while trailing earnings are $2.41 per share.

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