Retailers Get Push-Back as Brands Disappear

"The whole idea of efficient assortment and giving more shelf space to the brands shoppers are looking for the most tends to improve visibility of existing and new items," says Jennifer Chelune, a Procter & Gamble spokeswoman. "It favors companies that innovate."

Meanwhile, Kimberly-Clark(KMB) and its Kleenex tissues, Huggies diapers and Scott and Viva paper towels saw sales rise 8.5% in the quarter, but the company reduced its 2010 earnings forecast as sales of core paper products fell 6% when consumers sought cheaper alternatives. Its stock price followed that downward trend. If that's the pressure being felt by the maker of the tissue that the NRF's 2009-2010 BIGResearch Consumer Intentions and Actions Surveys say is their favorite brand by an 18% margin, the burden on manufacturers that are lower on the food chain is even heavier.

"Unless you have come up with a product that's such a standout and so different from the market, you're not going to make it if you're just another iteration of ketchup," STORES Magazine's Reda says. "If you're number three or number four in that space, what's going to set you apart from those other two?"

That fight gets tougher when store brands join in. According to the NPD Group, sales of private-label items increased 8.8% from 2008 to 2009 and nearly 18% during the past decade. Nielsen found that store brands brought in $86 billion in U.S. sales last year, up $14 billion since 2007. With Consumer Reports finding that store brands, on average, cost 27% less than their big-brand counterparts, such a surge can eat away at sales volume for companies like Del Monte(DLM) and Unilever(UN), with the NRF survey reporting that the No. 2 brands of vegetables and ice cream are store/generic products.

However, many retailers still depend on manufacturers to pay for displays at the end of aisles and other prime shelf space, making private-label products a limited option for retailers not named Trader Joe's. While manufacturers tend to use this knowledge to their advantage and flood the floor with billboard-sized displays of their merchandise, a slimmed-down store selection can be easily expanded through E-commerce. Procter & Gamble, for instance, is using its eStore commerce site as an "online learning lab" to test consumers' habits and relay that information to online retailers like Wal-Mart and Amazon(AMZN).

"We are a house of brands," Wal-Mart's Simon said at the conference. "We prefer to sell national brands because that's how we can differentiate ourselves in price better."

-- Reported by Jason Notte in Boston.

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