Private label goods on rise throughout all formats - Wal-Mart Stores Inc - Wal-Mart

Discount Store News, June 7, 1993

Wal-Mart's success may be rooted in its history as a brand name retailer, but its future seems to be liked to the growth of its private label business.

Private label goods at the nation's largest retail chain are on the rise in virtually every department While most programs are quietly being expanded, the headline grabber for Wal-Mart is the growth of its private label food program. These products fill the shelves in Wal-Mart's discount stores, supercenters and Sam's Clubs.

But Sam's American Choice, the chain's premium food label, and Great Value, the generic label, aren't the only private label brands Wal-Mart executives are diligently building.

From just a few skus a little over a year ago, Wal-Mart's Popular Mechanics hardware program, under license from Popular Mechanics magazine, is several hundred skus strong now. No longer limited to automotive hand tools, Popular Mechanics is now broadly represented throughout the hardware department, from a package nail program to various plumbing supplies including faucet sets for the kitchen sink in a good, better, best selection reminiscent of product lines at home centers.

Also, Wal-Ma3rt's forthcoming Better Homes & Gardens line of lawn and garden supplies, a licensing program with Meredith Publishing, publisher of Better Homes & Gardens magazine, will debut next year. While the exact number of items has yet to be determined, the labels will grace a host of products.

Apparrel, now 25% private label, is heading for a substantial increase in skus to fill the company's growing need for merchandise. in fact, Alex. Brown & Sons, the Baltimore-based firm, predicts that Wal-Mart's private label program will grow to half of all apparel offerings "over time." Among Wal-Mart's current crop of private label apparel brands are Simply Basic, Huntington Ridge, Bobbie Brooks, White Stag and Ash Creek.

Wal-Mart's other private label programs include 'Ol Roy and Special Kitty in pet foods and supplies, Equate in health & beauty care, and generic Wal-Mart labeled merchandise sprinkled throughout the store, incorporating such diverse merchandise as pet supplies, housewares, toilet paper and automotives.

Exactly where the balance between private label and branded goods will be in the future is still uncertain.

But what is clear is that Wal-Mart is committed to developing and supporting both aspects of its merchandising mix, national brands as well as private label.

"Let me emphasize this: Wal-Mart is a national brand company. We will continue to carry and feature national brands in hard lines and across the board. Private label provides us with a competitive weapon to spice up the assortment," asserted Don Soderquist, vice chairman of Wal-Mart, during an exclusive interview with Discount Store News.

At the recently concluded International Mass Retail Association show in Orlando, Soderquist made a similar declaration during a seminar on food. "The basis of our business is still built upon and will continue to be built on national brands," he said. "They will continue to be the base of all our operations. There's a danger of overemphasizing private label."

Soderquist did not say at what point private label would be overdone.

One Wal-Mart expert, who asked to remain anonymous, said a secret to Wal-Mart's success with private label is that they don't get greedy by fattening the margins. The expert said Wal-Mart applies the same margin on private label goods as it does on national brands, enabling the shopper to buy at a sharp price.

At least with respect to food, Wal-Mart appears on the cutting edge in private label development. Wal-Mart knows that no grocery store chain can succeed without a quality private label program that emphasizes value. Wal-Mart is working on the development of two private label food programs while it builds its combination grocery/general merchandise store chain, something never before undertaken by a retailer.

Currently, private label food products account for one in five items on grocery shelves in the United States, according to a recently concluded conference in Chicago on private label titled, "The Changing Role of Private Label." That ratio may grow to one in every two products 10 years from now.

Certainly, Wal-Mart's food program is lining up for such a competitive environment.

Wal-Mart launched its second private label food line, Great Value, in April, and opened its Clarksville, Ark., distribution center, built expressly to service supercenters.

Great Value, said Soderquist, was created largely to replace the private label brand supplied to the chain by Fleming Co., a food distributor. The Great Value line currently has 350 skus of mostly packaged foods. Recently, it was augmented by a selection of frozen foods, including whipped topping and pizza.

Sam's American Choice, the premium food label launched in 1991 for Wal-Mart discount stores, features about 40 items, mostly juices, soft drinks, candy and cookies. However, a few non-food items such as potting soil, also are in the mix. Select merchandise under the Sam's American Choice name is now available in both the supercenters and Sam's Clubs. For the clubs, a new packaging program has been created, offering the private label line in larger club packs.