Retailers have come a long way from the no frills aisle.

Rather than marketing store brands as some lesser, cheaper alternative to brand name products, Wal-Mart, Walgreens, CVS and others are increasingly creating and promoting their own "captive brands."

For example, the bioInfusion line of haircare products, available only at Walgreens, sits on the shelf alongside Procter & Gamble's Pantene. At CVS, Pantene has to contend with the Cristophe line. At Wal-Mart, it is up against Equate.

Carrying no evidence of the store's affiliation, these brands, manufactured by a third party and sold exclusively at the chains (hence "captive"), let the retailer command a price similar to brands produced by consumer packaged goods companies like P&G. They also let the retailers gain ground in a category—beauty—for which consumers generally take a dim view of traditional private label brands.

"The big reason why it's a winner is because, if I'm a retailer and I promote my own brand, the opportunity for me to get a much richer margin is greater than if I am dealing with a branded company," said Paul Kurnit, marketing professor at Pace University, New York. "There is no middleman. And the consumer wins in terms of a better price."

P&G has taken notice. "We treat them just like we do any other competition," said P&G rep Dave McCracken. "We try to out-innovate anyone, whether it's a captive or retailer brand or other competition."

BioInfusion, which was created by Walgreens three years ago, has grown to become one of the top brands in the entire haircare category, per the drug chain.

Walgreens reported that sales for its private label brands (which include captive brands like bioInfusion) jumped 15% from 2007 to its most recent 2008 quarter. Organic and olive oil-based line extensions were introduced last year.

CVS has grown its popular line of Cristophe salon-style products over the last six years. The collection now numbers 32 SKUs, with products ranging from a 2-oz. bottle of extra strength hair serum ($9.99) to a 10-oz. container of curl-defining shampoo ($7.99).

CVS has even dedicated print ads to its house brands. This month, for example, an ad for its apothecary line, Vickery & Clark, appeared in Vogue. While captive brands traditionally rely on in-store support via circulars and customer loyalty programs, CVS rep Erin Pensa said the company is turning to national marketing to convey its overall store message of "reinventing beauty."



"The whole purpose of the ad is to highlight what the shopper can find at CVS that they can't find anywhere else," said Pensa.

Competition among retailers is driving the captive brand movement, said Walgreens rep Tiffani Bruce. "It's a way of differentiating. If there's something we have that other retailers don't have, it's an opportunity for us to build loyalty."

Walgreens created an internal "brand police" to regularly evaluate its product portfolio. "They protect the standard and quality for our brands so we know that we are competing side-by-side with national brands," Bruce said. "We have limited shelf space so we try our best to pinpoint which brands are resonating well with customers and what needs are being met."

One reason why the shift has affected beauty care more than other industries is because the category itself is "over-SKU-ed," said Mike Moriarty, partner at A.T. Kearney's consumer and retail practice division in Chicago. "If you look at the haircare aisle, it has way too much product in it anyway."

The influx makes it particularly tempting for retailers to introduce their own offerings because they can identify certain niches not yet met by their consumer packaged partners, Moriarty said.

Since the retailer ultimately controls the display units, the result is a shelf space war. That's a circumstance in which captive brands have a distinct advantage, said Allen Adamson, managing director at Landor Associates, New York. "You own the playing field, and so, you can stack the cards to your advantage."

This, however, does not mean that captive beauty brands will eventually displace their branded rivals, CVS' Pensa said, adding, "Our goal is to have something for everyone. We have great relationships with our national partners."

Moriarty is more skeptical. "If I wasn't the No. 1, 2 or 3 brand in the haircare aisle, I would start to figure out how to secure real estate for my children," he said.

Because they are pushing their own products, Moriarty said, "There are brands that are slipping off the shelves because retailers don't want them anymore."