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 Top 50 Retailers - March/April 2008  |
Which Way to Go?
Could be a cold wind coming, but retailers still hot on premium and organic lines. You don’t need a weatherman to know which way the wind blows, Bob Dylan famously said. But which way is the economic wind blowing these days, and how hard? Is it just a brief gust, or a cyclone, or something in between? Upscale retailing and upscale private label programs have been busting out all over during the last few years. But will that trend continue if too many consumers go bust, or just have to tighten their purse strings in what some economists see as a recession? Recent mergers are sure to impact store brand positioning and marketing. A&P, Montvale, NJ, has taken over Pathmark, Carteret, NJ, and there is talk of developing a two-tier strategy of full-range stores in affluent areas and no-frills stores in less affluent neighborhoods. “No Frills” was once Pathmark’s economy brand, later replaced by Smart Price. Maybe that label will find new life at no-frills stores, but Pathmark will have to get rid of at least one brand: Wild Oats, which it had franchised from the natural foods chain of the same name that was taken over by Whole Foods, Austin, TX, last year. Top Care, an HBC brand Pathmark began to carry after joining Topco Associates, Skokie, IL, might also have to go, if A&P decides to cancel the Topco membership. Price Chopper, Schenectady, NY, is already phasing out Wild Oats in favor of Topco’s Full Circle organic line, although it has a brand of its own – Price Chopper Naturals – in some of the same categories. Unified Grocers, Los Angeles, CA, expanded its wholesale base in the Pacific Northwest with the acquisition of Associated Grocers of Seattle. Meanwhile, smaller supermarket chains are increasingly getting out of self-distribution. One example last year was Minyard Foods, Coppell, TX, which became a member of Associated Wholesale Grocers, Kansas City, KS, and adopted AWG’s Best Choice and Always Save lines while keeping some of its own Carnival items. Tough Times Ahead? Always Save, AWG’s economy brand, has been licensed by Price Chopper, and brands like it may become a barometer for economic conditions as the year progresses – or regresses. Kroger, Cincinnati, OH, largest supermarket operator in the U.S., rolled out Kroger Value last year as an economy brand to replace FMV, and it must have had a reason. One straw in the wind: Dollar Zone sections of Food City outlets operated by K-VA-T, Abingdon, VA, are mass-displaying Valu Time boxed and bagged cereals at just a buck each. Valu Time is the economy brand of Topco, and it had already been getting greater exposure at stores of other member retailers in economically troubled regions like upstate New York. Besides the impact of the mortgage crisis and tightening credit, Americans are facing higher food prices brought on by several factors, including higher oil prices for fuel and fertilizer and subsidies for biofuels that are encouraging farmers to plant more corn for ethanol and cut back on grains for food. If the country does go into recession, that should help store brands generally – but not the pricier premium and organic store brands.
Wal-Mart, Bentonville, AR, reported Feb. 7 that its same-store sales (that is, sales at stores open at least a year) grew only 0.5% in January, excluding motor fuel. That was well below the forecast of two percent for the closely watched retail measure of economic health. The world’s largest retailer, also the largest grocer in North America, reported the same day that “gift card redemptions were below expectations, and customers appear to be holding gift cards longer and using them more often for food and consumables rather than discretionary purchases.” But Wal-Mart is also pursuing new initiatives in private label, including a Wal-Mart Deli line that began with pizza but has now been extended to deli meats – one an innovative combination of bologna and salami. The world’s largest chain may have been inspired by the Primo Taglio line at Safeway, Pleasanton, CA, which has also branded take-out food with the Signature Café line. Primo Taglio is used in service delis as well as packaged deli meats and cheeses, and that strategy has been adopted by Topco Associates, Skokie, IL, a buying cooperative for member chains. Under the World Classics Trading Co. premium brand, Topco supplies service delis with items like rotisserie turkey breast, Black Forest ham and mesquite turkey breast. Whole maple-cured hams under the same brand are new to the self-service meat section at Big Y, Springfield, MA. Safeway’s Signature Café includes fresh soups as well as fresh entrees and side dishes, a trend that is being picked up by other retailers. Store brand fresh produce, which began with bagged salads, has been extended to pre-cut vegetables, a category in which Wegmans, Rochester, NY, has been especially aggressive, with baby carrots, Brussels sprouts, green and wax beans and, most recently, cleaned and cut acorn squash. Wegmans has also gone Safeway and Wal-Mart one better with organic deli meats – roast beef, uncured ham, and oven roasted turkey breast, plain or basted with organic honey. Premium Brand Wagers This all comes at a time when other food retailers and wholesalers are betting on expanding their premium store brand lines and even creating new ones, despite the economic clouds. Winn-Dixie, Jacksonville, FL, for example, has rolled out Winn & Lovett; the new brand is aimed at bolstering its image following a bankruptcy that cost it half its stores. Replacing Prestige and harking back to a former name for the chain, Winn-Lovett, the new brand offers fare like coffee, olive oil, asparagus spears, milk chocolate toffee cookies and gelato ice cream. It is part of a three-tier strategy that also includes Winn Dixie as the first-line brand and a redesigned Thifty Maid as an economy brand. Thifty Maid had already been redesigned, and Winn Dixie introduced, before the 2005-6 bankruptcy. Publix, Lakeland, FL, which limited its Publix Premium brand to meat and ice cream until a year or so ago, is branching out into specialty items like Basil Tomato pasta sauce and Chocolate Covered Peanut Brittle, the latter a combination of milk chocolate and gourmet nuts that the retailer assures visitors to its website will be “the talk of the party” when they have company over. Here’s the rest of the pitch:
Where does Publix Premium Chocolate Covered Peanut Brittle get its rich flavor? It starts with the finest ingredients: real milk chocolate, pure butter and Grade-A peanuts. The butter and peanuts are slow roasted together and pumped onto a cooling belt where the hot brittle is spread and cooled. Then comes the finishing touch. The brittle is topped with a waterfall of milk chocolate. And yes. It tastes just as good as it sounds. Publix has also come out with a slew of other innovative products under its first-line Publix brand. Among them are frozen-at-sea bay scallops, a breakfast bread made with fruits and nuts, chef-developed deli sub spreads (Peppered Bleu Cheese, Honey Chipotle, Basil Pesto and Sundried Tomato), and deli chicken sauces (including Buffalo, Oriental Glaze, Orange, Honey BBQ and something called Mojo.) Tales of Inspiration Winn-Dixie and Publix may soon find their premium brands competing with one that originated in the Northeast. Inspirations was created by and for Hannaford, Scarborough, ME, but has since been adopted by its parent, Delhaize America, Salisbury, NC. Renamed Taste of Inspirations, the brand is now beginning to appear at on deli meats and cheeses – but not yet on shelf-stable products as at Hannaford – at Food Lion and Bloom outlets in the Middle Atlantic and Piedmont states and at Sweetbay (formerly Kash n’ Karry) in Florida. Tampa-based Sweetbay has also adopted the Hannaford brand as its first-line private label, and Nature’s Place – which also originated at Hannaford – as its organic line. But Nature’s Place, also carried at Food Lion and Bloom, no longer carries the Hannaford logo or distribution clause, and the Hannaford logo is also gone from Taste of Inspirations. On the Go Bistro, a line of upscale frozen foods at Hannaford, now has a fresh foods namesake at Food Lion and Bloom. At one Bloom outlet in Warrenton, VA, On the Go Bistro take-out items include Baked Beans, Creamed Spinach, Macaroni & Cheese, Chicken Alfredo, Cheddar Mashed Potato, Seasoned Green Beans, Vegetable Medley, Spaghetti & Meatballs and Brown Gravy. Bloom already had a take-out line called Tabletop, named for a section of the upscale store format, with items like cheese-stuffed jalapenos, butter mushrooms and Charleston She-Crab soup. The Tabletop logo appears in a Bloom ad circular announcing On the Go Bistro; perhaps the Tabletop brand will be folded into On the Go Bistro, but there is no indication of that in a flyer for the new line:
Love to cook but don’t have the time? Tired of paying for restaurant takeout? Hungry for something new? Then you’ll love our inspired menu of delicious, freshly prepared family-sized meals, sides and entrées. Our chefs prepare each ON THE GO Bistro meal from the same wholesome ingredients you use in your kitchen. And unlike typical restaurant takeout, our ON THE GO cuisine is lower in fat, artificial ingredients, additives and preservatives. Just why Delhaize is going with a fresh rather than a frozen line like Hannaford’s isn’t certain, but it might have to do with the fact that rival Harris Teeter, Charlotte, NC, is taking a high profile in take-out food with its Fresh Foods Market brand. Harris Teeter offers fresh soups and pasta as well as entrees. It has also been branding other fresh foods departments – produce with Farmer’s Market and seafood with Fisherman’s Market. The latter offers side items like Chef’s Butter as a “finish” for seafood dishes. At Hannaford, new frozen On the Go Bistro items include Crispy Walnut Shrimp, Buffalo Chicken Wings and Cajun-style Shrimp. Upscale frozen foods are catching on at other retailers in the Northeast, as witness items like Cashew Chicken under the Simply Enjoy brand at Stop & Shop, Boston, MA; and Braised Cabbage & Bacon under the Central Market Classics Solutions banner at Price Chopper. Eat Well, Live Well Wegmans has gone further than any other retailer with its frozen specialty entrees like Travels of Asia Shrimp & Vegetable Egg Rolls and Travels of India Chicken Curry. For the Holiday seasons, up to and including Easter, the chain was offering 10-pound packages of Red King crab legs at $99.90 – no doubt the priciest store brand frozen item ever. It has followed up with Mexican lobster tails. With new health and nutrition labeling requirements in place, Wegmans is trying to outdo Hannaford in terms of in-store healthy foods promotion. Hannaford has its Guiding Stars shelf talkers that direct shoppers to especially beneficial items – branded or private label. But Wegmans offers a four-point Eat Well, Live Well program that – thus far, at least – seems to be focused on its PLs. Those four Principles are:
Principles two and four have to do with exercise and monitoring weight and physical activity, but the others tie in with in-store promotions. At the entrance to one store near Allentown, PA, for example, a mass display of Fruit Flats snacks was accompanied by a Principle One shelf talker heralding that one fruit bar is equivalent to half a cup of fruit. A store brand oatmeal display was similarly promoted with a Principle Three shelf-talker about each packet having just 120 calories – and rating high in whole grains to boot. “Four Wegmans employees changed their lives and you can too!” headlined a feature about the program in the chain’s Winter 2008 Menu magazine, giving case histories of the employees. The issue also featured dozens of recipes using private label ingredients and publicized such innovative store brand products as organic deli meats, fruit spreads, fresh chicken and “super yogurt.”
Organic foods may be the fastest-growing segment in private label, as witness Private Selections Organic at Kroger, O Organics at Safeway, Nature’s Promise at Ahold USA, Boston, MA; and Nature’s Basket at Giant Eagle, Pittsburgh, PA, as well as Nature’s Place at Delhaize. But the fact that organic products are nearly always priced higher than standard counterparts could be a stumbling block in a recession. Nature’s Place 17 oz raisin bran, for example, runs $2.79 at Hannaford, where 20 oz Hannaford brand can be had at two for $4. But Unified Grocers isn’t counting out natural and organic foods. Indeed, its Market Centre specialty foods division has just rolled out a line of natural and organic products called Natural Directions, which the wholesale grocery cooperative, has begun distributing to more than 2,000 independent retailers in Arizona, California, Oregon and Washington. “Our retailers were having a hard time competing with other private label natural and organic grocery brands,” said Market Centre. “The idea behind the new line was to give our membership something to compete with.” About 180 natural and organic SKUs are offered in the new line, which will be expanded over time to include more than 1,200 items. Most of the products are certified organic and those that cannot be certified are all natural. Products include juice, applesauce, milk, cheese, dressings, frozen foods and tea. One budding trend in store brands is hormone-free milk. Kroger got the ball rolling last year, and was recently joined by Big Y, Giant Eagle and Meijer, Grand Rapids, MI. “Our customers have asked for a different choice in their milk, as many prefer it from cows that have not been treated with artificial growth hormones,” said Ralph Fischer, group vice president of Meijer. “We’ve researched the topic and have listened to our customers. If it’s important to them, it’s important to us.” Wegmans has long had a sub-brand, Food You Feel Good About, for healthier fare. Now Safeway has spun off Eating Right, originally a sub-brand for Safeway Select frozen entrees, as a store brand for healthy eating generally. “We’re dedicated to making every Eating Right product great tasting and better for you,” declares package copy. “Created with your nutritional needs in mind, Eating Right is a line of flavorful foods that address a variety of dietary benefits.” Specific benefits appear in color-coded dots on each package. Mickey and Winnie and… Diane? The Walt Disney alliance with Kroger, with its hundreds of Disney Magic Selections sold exclusively in Kroger’s U.S. stores (One example: Mickey Mouse-shaped burgers!), has its counterpart in Canada at Sobey’s, Stellarton, NS, which is marketing a Compliments Junior line with the Disney logo and Disney characters – as with chocolate graham crackers shaped like Winnie the Pooh. Everybody knows who Mickey and Minnie… er, Winnie… are. But Diane Weber? Since 1996, she’s been a “valued Save-A-Lot employee,” Save-A-Lot being the box store operation of Supervalu, Eden Prairie, MN. Now she’s got a brand named for her, Diane’s Garden, featuring (thus far, at least) tomato juice and sliced stewed tomatoes with onions, celery and bell peppers. “We salute her good judgment,” the company says, which may or may not mean that Weber is a designer chef as well as a critic. “My stewed tomatoes are slowly stewed in their natural juices and ready to heat and serve,” she herself is quoted. “I recommend either using them ‘as is’ over pasta, rice and meat dishes, or as a special ingredient when creating your own family recipes. Enjoy.” Save-A-Lot, along with Aldi, Batavia, IL, is one of the leading limited assortment retailers in the U.S., and both are trying to create an image that goes beyond piling stuff high and selling it cheap–Aldi even has its own premium brand, Grandessa. Supervalu, Save-A-Lot’s parent, used to be primarily a wholesaler, but since it took over most of Albertson’s, retail sales have accounted for more than three quarters of its volume. C&S Wholesale, Keene, NH, is the only nationwide U.S. wholesaler to have steered clear of retail operations (apart from a handful of Grand Union stores it picked up from the collapse of that chain. Unified put West is the largest regional wholesaler to keep the faith pure. Others, like Spartan Stores, Grand Rapids, MI; and Roundy’s, Milwaukee, WI, have – like Canada’s leading wholesalers – work with both strategies, with varying degrees of success. Canadian wholesalers, too, have had varying degrees of success, but not as obviously as their American counterparts. Sales at Sobey’s for the 52 weeks ended 11/3/2007 were $13.303 billion, up a modest 2.5% in Canadian terms, but 18% in apparent terms because the Canadian dollar has gained against the U.S. dollar – they were about equal at the end of the year. That changes Private Label’s rankings of other Canadian food retailers and wholesalers as well, even if their turnover increases didn’t burn up the track.
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