CVS and Costco Give Two Major Brands the Boot

SHARE:

Email

Print

LinkedIn

Facebook

Twitter

December 2, 2009

In two high-profile CPG pricing disputes, Costco recently decided to remove Coca-Cola products from its store shelves, while CVS threatened to remove Energizer alkaline batteries by early next year.

The firm retailer stance in these two cases is a sign of the growing power of store brands and retailers’ commitment to lower prices and improve margins, according to several published reports.

Other challenges to consumer packaged goods companies in this economic environment is deflation as commodity prices continue to decline, rising retail margin pressure and lower unit volumes.

An Ad Age report also cited Wal-Mart’s “stepped up efforts to pare brands from its shelves this year,” which manufacturers and analysts expect will accelerate further next year.

"We found we can better serve our customers with a simplified assortment," CVS said in an e-mail statement to Ad Age. The retailer said it found customers responded best to a single national brand in alkaline, plus Energizer lithium and private label.

CVS store brand batteries have the largest category penetration with a near 50 percent share, according to Ad Age, with Duracell and Energizing splitting the balance.

The Ad Age report went on to say “analysts and marketers believe increasing leverage and margin at the expense of brands is another goal of retailers.”

According to the report, CVS has been sending manufacturers statements demonstrating the difference in profit and price between their own store brands and national brands.

But playing hardball with large national brands is not new to Costco. Four years ago the chain removed Procter & Gamble's Pampers in lieu of Kimberly Clark’s Huggies and its own store brand, a decision that still stands today, according to Ad Age.

“Other classes of trade are seeing that club stores have conditioned consumers not to expect every leading brand in every store,” Brendan Langan, director-retail insight for the drug and club channels at WPP consulting firm Management Ventures, told Ad Age. “Removing Coke is perhaps an extreme test of how far Costco can take that strategy. Members are going to decide what happens there."

Langan added that loyalty program data reveal to retailers such as Costco and CVS what brands are most important to its most-profitable customers “and what brands they can do without.”

Read These Related Articles:

• Walgreens and CVS Clean Up in Paper Towel Tests
• Costco Kirkland Brand to Explode Over the Next Two Years
• Kroger and Loblaw Roll Out Retail-Ready Packaging for Store Brands (Part 1 of 2)
• Costco Parades Kirkland's Value Versus National Brands
• To Combat Store Brands CPGs Fire Up Marketing Spends

Most Read

Guest Columns

How to Develop a Private Label Expression Aligned with Retail Brand Strategy

By creating private label as a marketing tool rather than just a price alternative, retailers gain the opportunity to tell a complete brand story while simultaneously boosting customer loyalty.

Source: CBX

Using the Store Banner to Endorse Private Label Architecture

Although the economic downturn accelerated private label growth in Europe, there was another key driver -- retailers started to brand their stores.

Source: IPLC

Linking Your Empowered Customer into Your Store Brand Management Process

The formula for success is for retailers to take a holistic store brands management approach by collaborating with customers to maximize store brands potential.

Source: Austin Clark Group

See All Guest Columns »

Press Releases