Stores increasingly going upscale with generics

Wal-Mart, which says sales of some private-label categories are up 40 percent this year, is rolling out new "All Natural" ice cream featuring such new flavors as blueberry pomegranate.

Kroger has new lines of steaks, bread and pizzas besides more organic items. Within the past five years, the company has nearly doubled to 14,000 the number of store-brand products it offers. It also gives free samples and runs blind taste tests against national brands in its stores, and has increased direct mailings to regular customers with coupons and recipe ideas for its brands.

Like other chains, Kroger now uses a tiered approach, offering a sharply discounted "Value" brand, its namesake store brands, and what it calls "premium" brands such as Private Selection. Kroger says it puts that label only on products that meet or exceed the leading national brand in quality; Private Selection sales are projected to hit $1 billion this year.

Burt P. Flickinger III, managing director of the consulting firm Strategic Research Group, said the big U.S. chains are catching up to the long tradition of strong private-brand grocery programs in other countries, such as those of London-based Tesco PLC and Canada's Loblaw Co. Ltd. — Loblaw 30 years ago introduced a brand called simply, "No Name."

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While companies with the top-selling brands will probably hold up better than runner-up brands against the store competition, he said, "the long-term implications are really cause for concern for every branded manufacturer."

Kroger's McMullen said he thinks there's plenty of room for both store and national brands to do well as people cut back on restaurant spending. Kraft Foods Inc., the nation's largest food and beverage maker, on Monday reported second-quarter growth, citing price increases and more consumers eating at home.

P&G, which has repeatedly raised prices to offset higher costs for energy and raw materials, has expressed confidence that product innovations and people's loyalty to its generations-old brands such as Pampers, Tide detergent and Gillette shavers will keep sales growing.

"It's all about value," Clayton Daley Jr., P&G's chief financial officer, recently told analysts. "It's not just price, it's all about product performance. ... It's about the trust that consumers have in your brands."

Frehner, for instance, recently loaded up on 48 boxes of Kroger macaroni and cheese that was on sale, 92 cents per box cheaper than their favorite brand.

But she and her husband miss their Kraft mac-and-cheese.

"Many times we can't tell the difference and we are glad there is a cheaper alternative," she said. "Other times, we notice a difference and just deal with it because of the money we save."

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