The Sam's Generation?

Sam's American Choice. It may not have the cachet of "Coke" or the familiar ring of "Nabisco." But the fledgling brand boasts a formidable natural advantage: the marketing clout of Wal-Mart Stores Inc. and legendary founder Sam M. Walton. Sam's colas and fruit juices are already popping up in Wal-Marts across the country. And the experiment could produce a slew of Wal-Mart products developed to compete head-to-head with national brands.

The Bentonville (Ark.) retailer isn't backing away from its successful formula of offering name brands at low prices. It's simply responding to recession-weary consumers looking for value in nearly every product category. And without the hefty marketing costs incurred by name-brand manufacturers, Sam's brand should yield fatter profits. A recent Gallup Poll done for the Private Label Manufacturers Assn. found consumer acceptance of store brands at a record high, with nearly 90% of those surveyed having bought them. "Consumers are becoming more reserved and are looking for value. It is a real sociological change," says Fraser Latta, chief operating officer of Cott Corp. The largest private-label bottler in Canada, Cott is supplying Sam's colas from U. S. plants.

While the Wal-Mart name already ap- pears on such staples as paper towels and bathroom tissue, Sam's brand is decidedly higher quality and more prominently featured in the stores. The beverages are the first products with the new label, but retail analysts expect Sam's chocolate-chip cookies to come next, along with other foods. The new products sport attractive red, white, and blue packaging. The cola label boasts that Sam's products, made in the U. S. A., "offer better value than the leading national brands -- great taste at Wal-Mart's always low prices." In a store near Dallas, a six-pack of Sam's cola recently was selling for $1.18, or about 20% less per can than a 20-can case of Coke.

QUALITY PITCH. Wal-Mart apparently has learned from other retailers, which stumbled when they offered customers low-priced store brands of low quality. "The customer doesn't want a lesser-quality product," says Karen Cmar, a retail specialist at McKinsey & Co. Many retailers have also failed to devote the merchandising, product design, and other resources needed to execute a store-brand strategy. "If anybody can do it, Wal-Mart probably can," says Cmar.

Wal-Mart won't discuss details of its latest experiment -- or how far it might go. "We're very pleased with it at this early point," says a company spokesman. Retail analyst Walter Loeb figures Sam's brand could eventually top 10% of Wal-Mart's sales, which he sees hitting $44 billion this year and $56 billion next.

If that potential worries Wal-Mart's name-brand suppliers, they're not flinching. "Just about every retailer has private brands," says Lawrence D. Milligan, senior vice-president for sales at megamarketer Procter & Gamble Co. "When these store brands come out, they generally take their business from the tertiary brands, the Sunshines of the world," says Nabisco Foods spokesman Mark L. Gutsche. Sunshine Biscuits Inc., which says it's in the same league as Nabisco, begs to differ. Its ad director, Alexander Nichols, figures Sam's brand will hurt regional labels and generics.

No one expects store brands to explode at Wal-Mart. But a premium private label backed by Wal-Mart's clout will keep the big boys watching their own costs and quality. And where Wal-Mart treads, others are likely to follow.

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