Wal-Mart Cuts Big Brand Names
February 10, 2010 - A recent article from Adage.com reported that Wal-Mart has wiped Glad and Hefty bags packing from its food storage shelves after a series of store tests starting late last year. In their place, Wal-Mart consolidated nationally with one food bag brand, SC Johnson's Ziploc, and its own private label, Great Value.
In trash bags, however, it was reported that Glad and Hefty retained their places on the shelf, and that Pactiv Corp., the Hefty brand owner, has agreed to take over all private label manufacturing for Wal-Mart's Great Value trash and food bags. It is unclear if the disposable food storage container segment will be affected.
For Wal-Mart, the decision may aim to accommodate a growing consumer need for less expensive options in a troubled economy. Private label sales likely reached a new high of 17.5 percent of a basket of U.S. groceries in 2009, fueled by tougher times, says Robert Moskow of Credit Suisse.
Faced with the threat of mass de-listings, the bag brands increased ad spending 78 percent from the year-ago period in 2009, according to Kantar Media. Adage.com reports that Hefty had the biggest increase, hiking spending more than sevenfold to $23 million. Glad increased spending 58 percent to $57.9 million and Ziploc 37 percent to $31.5 million through November compared to the year-ago period.
Similar moves are likely to occur in other categories as Wal-Mart streamlines brand assortments, often in favor its Great Value brand. An article in the Wall Street Journal reports that Wal-Mart has considered switching to private label spices, also testing the idea by replacing McCormick & Company products with generic version in some stores. Like Pactiv Corp., McCormick's sales at Wal-Mart may not be wiped out altogether if such a switch occurred. The company also produces private label spices that could replace some of its brand name products on Wal-Mart's shelves.
Still, the lack of a brand presence on shelf and sales of less expensive private label products will undoubtedly have a big impact on margins at Pactiv Corp. and McCormick. Whether or not Americans will stick with store brands if the economy improves is a key question and consumer trends will most likely prompt Wal-Mart to reevaluate assortment decisions in the future.
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