Canadian Private Label Looks Upscale, Costs Less
THERE'S something in a name. Especially if that name is ``President's Choice'' on a package of decadent chocolate chip cookies.
Much to the chagrin of Nabisco, which makes a rival cookie called ``Chips Ahoy!,'' the upstart President's Choice cookie from Canada was recently ranked the top chocolate chip cookie in Chicago. It also beat out Chips Ahoy! and Pepperidge Farm in last October's Consumer Reports magazine. The secret to its success? Pure butter instead of shortening, many more chocolate chips, and a lower price.
No, the President's Choice label does not mean that the cookies or any of the hundreds of other foods carrying the logo are Bill Clinton's personal favorite. They are, however, the brainchild of Canadian marketing whiz David Nichol.
Mr. Nichol introduced President's Choice as an upscale ``private label'' in 1984 - a premium store brand whose products look and taste like national brands but are sold at ``no name'' prices. The President's Choice label initially was only on food sold by Loblaw's International Merchants, one of Canada's largest grocers. But the line of premium foods - priced for the less affluent - now numbers 1,300 items.
From Italian-made bakeware to cheeses and meats, Nichol hunted down products from sources around the world. He marketed them as the best in the world for less money - winning over millions of Canadian shoppers and pulling Loblaw's out of a deep recession.
``Before Nichol came on the scene in the 1980s with his President's Choice line, no-name brands were seen as low-quality and cheap,'' says Margaret Wilson, senior vice president of Kubas Consultants, a Toronto retail marketing firm. ``Nichol did away with the yellow boxes with big black labels, [put] food that was as good or better than national brands into nice packages, and offered it at a better price.''
In the process, he changed the way Canadians thought about private-label or ``no name'' brands, Ms. Wilson says. In Canada, for example, large United States companies like Atlanta-based Coca-Cola and the H.J. Heinz Company in Pittsburgh are now playing catch-up to President's Choice brands in some markets.
Heinz is reportedly running behind President's Choice in some areas of Toronto. Among soft drinks, Coca-Cola once dominated. But recent numbers show it in third place behind second-place Pepsi in national market share. Both trail the private-label segment in the Canadian soft drink market, where the largest player is President's Choice.
President's Choice arrived in US supermarkets five years ago; today it is in 12 grocery chains, with Loblaw's US revenues at about $150 million. Star Market, a major Northeastern grocer, like others, has exclusive rights to President's Choice in its market area and has mounted a major marketing push for the brand.
Still other major chains are moving their private-label brands up-market, industry analysts say. The Great Atlantic & Pacific Tea Co. Ltd., which operates 1,100 A&P stores in 26 states, is pushing its own ``America's Choice.''
``President's Choice appears to be creating its own wave,'' says Richard De Santa, executive editor of Supermarket Business, a trade magazine that tracks the supermarket industry. The A&P America's Choice brand is clearly patterned after President's Choice, while Kroger and other large US grocery chains are also reappraising their own store brands, he says.
Private-label brands now represent about $25 billion in US supermarket sales and 18 percent of supermarket unit volume, compared with 15 percent in 1988. ``Moving these private labels up-market is a major strategic development for these chains,'' Mr. De Santa says. ``It's a thing that helps a store develop its own identity.''
Cott Corporation, which specializes in private-label soft drinks, has become North America's largest supplier of this market segment in part by producing President's Choice soda. Cott's sales grew from $31 million (Canadian; US$22 million) in 1989 to $502 million in the first nine months of the company's fiscal year.
Loblaw's Nichol and others involved in creating President's Choice helped Wal-Mart start its own Sam's American Choice and Great Value store brands. Now President's Choice is expanding to Australia.
While some analysts say the private-label phenomenon is something that will fade as the recession fades, and consumers will return to national brands, others counter that the food fight between private-label and national brands will continue.
``No one envisions that the private labels will take over the food business,'' De Santa says. ``But there's also no question a change has occurred. Before a customer looked at a private label as a cheap product. The new thinking is that it is often higher quality, lower price.... [President's Choice has] become a franchise all its own.''