Opportunities in Private Label Organics

By Laurie Demeritt


The distinction among food retailers in a heightened and often highly commoditized, competitive environment is often razor thin. While name brands thrive in an environment that encourages freedom of consumer choice, there is a brand of a proprietary type that is crowding name brands off store shelves: private label. This demand for private label, or “store brands,” coupled with the resonance organic has with consumers, makes it easy to envision the opportunities for private label organic brands.

Today’s private label products bear little resemblance to the cheap (in terms of both quality and price) “name brand alternative” generic goods of 20 years ago. Research from The Hartman Group’s “Private Label From a Consumer Perspective” report discovered that out of the 86 percent of shoppers who buy private label, 33 percent of them believe these products to be “as good as national brands” and 13 percent even said that private label products are “better” or “superior.” In addition, the study found that out of all the private label products that customers would like to see more of, organics ranked third highest, with only over-the-counter medications and personal care ranking above it. These combined findings mean that there is a unique opportunity for organic processors and retailers to partner and expand private label offerings.

Marketing Private Label Organics
Twenty years ago, generic store brand goods were literally a world apart from the products being created by the then small-scale organic producers, who tended to labor over issues of quality. Today, however, with the expansion of organic into the mass market, the two formerly polarized classes have drifted toward each other to meet demand.

For mainstream food retailers, the intersection of significant shopper interest in new, high quality private label products and the high consumer interest in organics has already led to a number of branded, private label organic lines that offer everything from milk to cereal to baby food. Unfortunately, in the rush to create store brand products many developers of private label organic lines are not necessarily taking into account two very important ideas.

1. Simply providing organic private label “analogs” of conventional products and brands (e.g., organic corn flakes for conventional corn flakes) is not sufficient for long-term consumer interest in, and allegiance to, a retailer’s in-house organic product line. Consumers want unique store brand products and state an interest in trying new private label products they deem “better” than national brands not just because of price but also because the product offers a unique experience when purchased and consumed. This experience goes as far as “trusting” and “liking” the retailer that sells the store brand products and gets down to the presence and absence of certain ingredients, the perceived quality of the ingredients and even a narrative or “story” on the origins and business practices of the product itself.

2. Consumers purchase organic products for reasons that have nothing do with price. The primary triggers for buying organics center squarely on issues of perceived healthfulness and the fact that organics offer an absence of pesticides, growth hormones, genetic modification and antibiotics. Organics are also generally considered to be “fresher” than conventional products. Other reasons as to why consumers enter into buying organics center on three important lifestyle areas: being diagnosed with a health condition (either in the family or personally), having children (and small children transitioning to eating solid food), and the influence of personal and community social networks. Finally, for many core consumers the purchase of such brands goes beyond notions of health and lies in showing support for organic farming and the “organic movement.”

Organic Private Label Moves Mainstream
Today, food marketers and retailers find themselves at a promising crossroads with 73 percent of the population experimenting with organics and 23 percent regularly purchasing organic products. As organic product availability has spread into conventional channels, so too has the number of periphery organic buyers, that is, those shoppers who are most experimentally inclined to try organics. While store experience, brand narrative and how much shoppers trust and like their retailers are key elements to reach these consumers, it’s also important to understand consumer perspective regarding which categories are essential in the early adoption of organics.

Based on research from The Hartman Group’s “2006 Organic Report,” there are key gateway categories that shoppers adopt when first trying organic products. The first level of organic product adoption is largely based on notions of avoiding hormones and pesticides, an area that resonates particularly with parents who want to protect their children during their developmental years. In addition, the fact that consumers equate “organic” with “fresh” means that the further away from fresh, or perishable, a food and/or beverage is, the less likely early organic product adopters are to make a significant connection to the organic process. Overall, as a consequence of these purchase triggers, the initial gateway organic products are produce, dairy products, meat, poultry and baby food.

As shoppers continue to adopt organic categories, buying decisions become more difficult in that they relate to specific brand choices of packaged goods. The decision is to transition not only from a conventional product to an organic product but also from a perhaps loved, longtime brand favorite to an unknown. This unfamiliarity with organic brands and/or passion for a conventional brand makes this second transition more difficult than the first. When faced with making a choice between an organic version of a conventional brand and a new organic brand, shoppers least involved with wellness lifestyles will typically choose the organic version of the conventional brand. At the same time, for shoppers curious about organics, having store brand options in addition to branded organics gives them more choices, especially along the lines of price and perceived value. Gateway products at the second level include eggs, tomato-based products (pasta sauce, salsa, etc.), cold cereal, soymilk and bread.

Conclusion: It’s Not the Product, It’s the Lifestyle
Out of all organic consumers, 63 percent occupy the midpoint in terms of their interest and experimentation with products like organics. This huge group of shoppers is the same group frequenting the various channels where private label store brands are found and compose the largest buying group of organic store brands. The fact that such large numbers of shoppers are experimenting with first and second level adoption in the organic class of products speaks to the need for careful planning around not only which products are being placed in stores but also the story behind them. The key decision process which occurs at the second level of organic product adoption means that retailers managing organic store brands must make careful decisions about how to market seemingly simple organic categories like eggs, bread and milk. New private label organic brands are doing two things at once: creating brand loyalty, to the extent possible as dictated by the retailer’s choice of ingredients and the uniqueness of such products, while introducing shoppers to an en-tirely new class of lifestyle products.

Laurie Demeritt is president and COO of The Hartman Group, a leading consulting and market research firm. The Hartman Group specializes in the analysis and interpretation of consumer lifestyles and how these lifestyles affect the purchase and use of health and wellness products and services. Their client base includes a number of Fortune 500 consumer packaged goods companies, pharmaceutical firms, and mass and natural food retailers. She can be reached at laurie@hartman-group.com.