Top Brands: handful of product categories drives rebound in brand growth at discounters

Discount Store News, Oct 4, 1993

National brands increased their presence at discount stores at a faster rate this year than in 1992, but relatively few merchandise departments are responsible for that increase.

According to responses to this year's Top Brands Survey, 41% of store managers said they are carrying more nationally branded products this year, up from 38% who said brands increased last year. However, managers identified only seven categories in which name brand goods increased: housewares; food, candy & snacks; household cleaners and chemicals; consumer electronics; lawn & garden; home improvement; and over-the-counter drugs.

In contrast, brand growth declined in 10 categories and remained unchanged in three departments.

Housewares, household cleaners and chemicals and food, candy & snacks led in brand growth, driven by expanded programs at the nation's largest discount chains. For example, over the last year, the housewares department has been given near category killer presentations at a number of discount chains. At Kmart, the expansion of the floor care area has created a mini department by itself with the entire houseware category.

In food, candy & snacks, programs at Wal-Mart and Kmart have grown way beyond a short list of salty and sugary snacks to full-blown programs in carbonated drinks, juices, confectionery, cookies, crackers and assorted canned goods programs plus cereals and even route service for milk, bread and assorted bakery products. The selection of national brands has been spiced up by new private label programs by Wal-Mart, Kmart and Target that have driven the food program to center stage.

The household cleaners category has grown dramatically in the last year, drive mostly by manufacturers which have introduced a cadre of new items and packaging programs as a result of reformulated products. Equally compelling is the list of merchandise categories in which managers said brand growth has declined over the last year. The largest brand growth decreases were recorded in toys, automotives, hardware, small appliances, domestics, and stationery (areas where private label programs have expanded or where there has been a consolidation of vendors).

In toys, for example, vendor consolidation has trimmed the lists of branded products on the shelves to a select few. In hardware and automotives, private label programs are the cause of the shrinking number of national brands. Wal-Mart and Kmart, with their Popular Mechanics and Bench Top lines, respectively, have given greater shelf space to their private labels in the last year causing other, nationally branded merchandise to be pared.

While Kmart has limited the BenchTop line of products to hand tools, Wal-Mart seems to have made a commitment to extend the Popular Mechanics label into various hard lines departments. As a result, the Popular Mechanics label could show up next year as a top performing brand in the CE department, knocking out yet another name brand from the Top 10. Recently, the Popular Mechanics label was added to a selection of video and audio accessories including video cable connectors.

Overall, brand growth has stayed relatively stable over the past few years, never varying more than a few percentage points higher or lower. What has fluctuated is how each chain's managers view the performance of name brands.

This year, as in 1992, Kmart managers reported the greatest amount of brand growth in their stores, followed by Wal-Mart and then Target managers. Traditionally, Target managers report the least amount of brand growth. The same held true this year. Just 16% of Target managers said the number of national name brand goods rose, down from 20% last year. Forty-one percent of Wal-Mart managers said brands grew and 59% for Kmart. A year ago, 48% of Kmart managers said brands grew from the previous year compared to 38% of Wal-Mart managers.

When store managers were specifically asked for examples of a department in which the number of national name brand merchandise had increased in the past year, each chain provided a list of categories that speak volumes about their individual merchandising direction.

At Wal-Mart, the greatest growth in brands occurred in food, candy & snacks (named by one-fourth of the managers), followed by apparel (22%), household cleaners (21%), housewares (16%) and health & beauty care (15%).

Kmart managers reported the greatest brand growth in housewares (46%), H&BC (31%), and sporting goods (16$). Target managers said brands grew mostly in apparel (20%), H&BC (14%), and CE (14%).

Among conventional regional discounters--a list of 26 chains including Jamesway, Meijer, Pamida, ShopKo, Jack's, Harts, Rose's, and Swallen's--apparel topped the list with 37% of managers saying brands grew in that area of the store followed by H&BC (27%), and housewares (18%).

Apparel also topped the list of store managers at upscale regional discount chains (27%), followed by housewares (17%).

While national branded merchandise continues to be the heart of each discounter's merchandising program, particularly in departments in which the retailer is expanding its presentation, the widespread increase in private label products has kept brand growth at bay. As a result, the average number of top performing brands by department has slowed.