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CHICAGO -- The growing appeal of store brands, with their modest marketing and packaging, have been giving national players like Kraft a run for their money, reports Reuters.
Kraft Foods, Inc., the largest U.S. food maker, whose brands include its stalwart namesake, Oscar Mayer, and Altoids mints, stunned investors this week when it blamed a weak second quarter on an inability to keep prices in line with cheaper brands that lured away price-conscious shoppers. The company trimmed its 2003 earnings outlook in view of its plans to spend more on marketing and price promotions in hopes of spurring renewed consumer interest in its name-brand products.
Citing declining discretionary consumer spending, analysts quoted in the report said the progress of store brands will be one of the most closely watched near-term indicators for food companies, setting the baseline for retail prices and pushing manufacturers to stay ahead in product innovation, marketing, and promotions that can position their more costly foods ahead of the pack.
Store brands, including Albertson's President's Choice and Safeway Select, now represent one in five items sold by grocers, according the Private Label Manufacturers Association, which says its members' growth has outpaced branded competitors in four of the past five years, now accounting for about $50 billion in yearly retail sales.
Analysts said staple categories, including bread and cereal, would be the ones to watch as the battle over grocery shelf space in the tight economy continues.