Private Label store brands versus Branded Products

privatevsbrandedMy first real job out of college (that actually paid something) was being a cost accountant for a huge Baby-food, canned milk, and chili company. I was responsible for various things, including entering product masters into the ERP system. These product masters are basically the recipes used to assign costs to products. When the production line would run a job, they would enter which product they were making and how much of it, and the system would calculate how much cost should be assigned so they could calculate yields and variances. Now, that’s a bit technical, for the purpose of this post I wanted to lend credence to the fact that I’ve personally seen the recipes for both private label (think store brand foods) and your national or branded products (think Kraft Cheese, or Kellogg’s Rice Krispies or similar). You would be amazed to know that most products only differed in packaging, yep – the contents were the exact same!
Now, there are some instances where the store brands and the branded products have slightly different recipes, but more often than not – the difference was marginal at best.

Don’t let the marketing trick you, because they’re good at what they do. A recent court case proved this is happening, even in Baby food products:

PBM Products, LLC, a leading infant formula company that supplies store brand infant formulas to Walmart, Sam’s Club, Target, Kroger, Walgreens, and other retailers, has received a favorable jury verdict and a $13.5 million damages award in its false advertising lawsuit against Mead Johnson & Co., the operating subsidiary of Mead Johnson Nutrition Company (NYSE: MJN) (Mead Johnson), the makers of the national-brand Enfamil Lipil Infant Formula. Mead Johnson is 83 percent-owned by Bristol-Myers Squibb.

PBM’s lawsuit claimed that Mead Johnson engaged in false and misleading campaigns against PBM’s competing store-brand of infant formulas, suggesting they do not provide the same nutrition as Mead Johnson’s brands. PBM’s store-brand infant formulas cost up to 50 percent less than Enfamil LIPIL.

The $13.5 million in damages awarded by the jury in the United States District Court for the Eastern District of Virginia is one of the largest damages awards ever for a false advertising case.

”This decision by a jury of the people confirms that Mead Johnson’s ads have been false in suggesting that there is a nutritional difference between our store-brand formula products and their products, when in fact the only major difference is price,” said PBM CEO Paul B. Manning. “Despite Mead Johnson’s scare tactics, parents are assured that PBM’s formula products are as high quality and nutritious as Mead Johnson’s.”

U.S. District Court Judge James R. Spencer issued his written rulings yesterday following the November 10th jury verdict. Judge Spencer’s written rulings permanently enjoined Mead Johnson from making any false statements concerning PBM’s infant formula, including the claims Mead Johnson previously made in Enfamil advertising that “It may be tempting to try a less expensive store brand, but only Enfamil Lipil is clinically proven to improve brain and eye development,” and “there are plenty of other ways to save on baby expenses without cutting back on nutrition.” The Court also ordered Mead Johnson to retrieve from the public domain all advertising or promotional materials containing these or any other false claims about PBM’s store brand infant formula.

It sometimes takes knowledge to know best how to be frugal, and learning marketing tricks of giant companies is a start. Be mindful of tactics to trick you into buying branded products that aren’t really any better than their private label counterparts.

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