Big retailers embrace private-label branding

Home Channel News, July 19, 1999 by Brae Canlen

Manufacturers serving many masters walk a fine line of differentiation

Martha Stewart is digging into Kmart. Ryobi is creating a buzz at Sears. John Deere and Scotts are making tracks at Home Depot. These and other lawn and garden manufacturers have discovered the benefits of developing proprietary brands that oftentimes are sold only to a handful of high-powered retailers.

Private labeling is nothing new, but consolidation within the industry and economies of scale are redefining the concept. Suppliers and retailers are learning that one manufacturer can effectively serve many masters.

Pursell Industries, an Alabama-based fertilizer company with $200 million in sales last year, supplies private-labeled products for Home Depot, Lowe's, Kmart, and Ace Hardware. Making each product unique - and keeping each retailer happy - can get "a little hairy," said its product manager Judy Teel. Pursell's patented, time-released fertilizer is mixed in different formulas for each private label; these nuances allow for separate names - such as Vigoro at Home Depot and Sta-Green at Lowe's - and distinct packaging.

"We try to make everybody equal but different," explained Teel. Retailers are quick to point out a perceived advantage in a competitor's product, so Pursell tries to keep everyone in the loop. "We tell dealers up front who [else] we private label for," she said. "We even show them [the competitor's] packaging."

Proprietary supply agreements often involve an exclusivity clause, especially if the manufacturer distributes the product under its own name. One of the most recent examples has been John Deere's venturing into the retail realm through a joint licensing agreement through which it is making lawn tractors under the Scotts name that are sold exclusively in Home Depot's stores.

But like everything else, exclusivity is negotiable. Ryobi, which makes the Sears Craftsman-brand gas-powered trimmers, had originally planned to release its new gas-powered blower under the Craftsman name this fall. But its exclusivity agreement, which was scheduled to last one year, fell through when Sears lowered its buy order. Now the new blower will be sold under both the Craftsman and Ryobi labels.

Ryobi makes several types of gas and electric trimmers for Sears and Toro as well as for itself. "Some of the tools are very similar," admitted Frank Coots, director of public relations for Ryobi Outdoor Products in North America. But other products, he said, "just have a few components in common."

Independent retailer's view

Whether this move toward private labeling is voluntary, however, depends on whom one speaks with, as more than one lawn and garden manufacturer interviewed complained about the tyranny of big-box retailers. "You're really at their mercy," said one source, who asked that his name and that of his company's remain unpublished. Some suppliers prefer to do business with independent retailers and their upscale shoppers. Monrovia, a California-based grower with nurseries in Azusa and Visalia, Calif.; and Dayton, Oregon, sells its Audubon Habitat Collection of bird-attracting plants to "select" garden centers in the United States, according to a spokesperson. One such customer would be TruServ's group of dealer-members operating Home & Garden Showplaces.

From a retailer's standpoint, private labeling has few negatives. It often reduces the costs of products and promotion, whose savings can be passed on to customers. The buying group Do it Best works with a variety of manufacturers to make its proprietary line of garden chemicals, hoses, tools and sprinklers. Even its bird seed is private labeled.

"We're looking for products that will differentiate us from other retailers," said Jeff Frazier, the co-op's retail product manager. Manufacturers can even differentiate within a product line: Ames, for example, makes "Do-it" "Do-it Best" and "Do-it Best Professional" shovels for the Indiana-based co-op. The prices, which range from $11.49 to $25.99, appeal to a variety of shoppers.

Not all retailers, though, are enamored of private labels; they loathe the idea of offering a single brand of anything. "Gardeners have become very educated through newsletters, the Internet and cable television shows," explained Virginia Cochran, marketing coordinator for Pike Family Nurseries, a Georgia-based lawn and garden chain with three wholesale as well as 24 retail outlets. "The more-educated gardener knows what he's looking for. He doesn't just buy what's available."

In fact, independent nurseries often turn up their noses at mass-market merchandise. At Westbrae Nursery in Berkeley, Calif., general manager Gerald Acree has yanked pots off his shelf after he saw the same products for sale at a nearby Home Depot.

He also stopped carrying a brand of wind chimes that appeared at Yardbirds.

"Some manufacturers have flooded the market," he said. "I cater to people who have money, and they want something different." Acree was surprised at the deal struck by Martha Stewart, who last January lent her name to an exclusive line of lawn furniture and garden tools sold at Kmart. "I thought it was a step down for her," said Acree. "Of course, some people go to where the money is."