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Private Label Takes on Skin Care

By: Jeff Falk
Posted: January 10, 2006, from the January 2006 issue of GCI Magazine.

At the recent Private Label Manufacturers Association (PLMA) trade show in a Chicago suburb, somewhere between the booths of store brand olives and gigantic bags of dog chow, private label personal care and cosmetics companies continued to spread their message: We’re producing strong products, we’re competing successfully and we’re growing. As outlined in Private Label Still Generic? in the October issue of GCI, private label is standing tall next to leading brand names on store shelves worldwide—competing in formulation, packaging and labeling at a lesser cost. Private label sales are approximately US$75 billion annually (US$89.4 billion), according to a report by Citigroup Smith Barney, and are effectively mirroring branded formulas by utilizing a brand equivalency strategy.

In addition, according to PLMA, store brands continue to be an important growth factor for U.S supermarkets and drugstore chains, with private label achieving a record 13.1% market share in terms of units. Private label dollar sales were up approximately 3.5% in drugstore chains (a strong and appropriate outlet for personal care products) compared to 0.4% for national brands. McKenna Labs, Inc., a private label manufacturer, has had an average sales increase of more than 200% over the past four years, allowing it to expand its skin care capabilities.

Once limited to commodity products and simple formulas, private label is competing with the sophisticated skin care formulas of high-priced brands and spa products.

Entering the Skin Care Arena

Perception still can be a barrier into the market for private label manufacturers, and overcoming perception is complicated when stores settle for the lowest contract bidder even if that bidder has no actual manufacturing capability, which sacrifices quality and perpetuates negative perceptions.

“The key to changing the perception is quality, packaging, marketing and today’s technology,” says Sheryl Singer, national sales manager, McKenna Labs, Inc. “Advanced raw materials allow high quality products to be created for almost every purpose. Consumer awareness is higher than ever. They know what to look for when comparing products. You won’t often see the ‘generic’ brand on today’s shelves.”