APRIL 2008
	VIDEO REPORT Do recessions really help private label sales? The answer may surprise you.
	MARKET RESEARCH Big increase in ‘green’ new products
	UPCOMING EVENTS “World of Private Label” Trade Show Amsterdam, May 27-28

Low-price strategy hurts store brands, even in hard times

  While some industry pundits are repeating the conventional wisdom that the country’s economic woes are likely to benefit private label, a much different message was delivered to executives attending PLMA’s Annual Meeting & Leadership Conference held last month in Tucson.
  In his Chairman’s Address, Bill Bond, Willert Home Products, warned that a preoccupation with low-price store brand strategies could backfire and benefit national brands. “Returning to their familiar playbook from the early nineties, the brands will no doubt rush to reassure Wall Street that private label’s success is merely the result of a down economy, and as soon as things improve, consumers will flock back and again be happy to pay a premium price for the national brands they love,” Bond said. He urged retailers to “set limits on the influence of national brands” and use their private label programs to build their own brands.
  The Leadership Conference program had an overall theme of “Best Practices: A Rising Tide Lifts All Ships,” but one of the most popular sessions was a panel discussion on “Worst Practices: What Not to Do and Why We Do It Anyway.” The panel’s worst practices included: An over-reliance on price, a focus on “national brand equivalency” that leads to “me-too” private label, and a subordination of private label to the promotional strategies of the national brands.
  At the event’s final dinner, four executives were inducted into the Private Label Hall of Fame, after being selected by a committee of retailers, wholesalers, manufacturers, brokers, and trade suppliers. This year’s inductees are: Sir Terry Leahy, Tesco; Don Watt, DW + Partners; Peter Schwartz, Daymon Worldwide, and Marvin Benjoya, Perrigo.

Supervalu ‘making progress’ on boosting store brand share

   Supervalu is “making steady progress” on increasing its store brands from 15% to 17% of total sales. Duncan MacNaughton, Executive Vice President, Marketing and Merchandising, told analysts that the goal will be achieved by “building a strong value message around our own brand” and the rollout of “mega brands” across all retail banners.
   One such rollout has just started with the introduction of 150 organic items under the Wild Harvest brand. The brand, which may be eventually expanded to 300 items, will be fully integrated across many product categories and is being supported by a comprehensive marketing campaign.
   “Our own brands momentum will continue throughout the year with more mega brand rollouts including Baby Basics and Home Life product lines and later this year, we will launch our new premium own brand line that will feature exciting prepared entrees and side dishes as well as premium grocery, bakery, deli and frozen food selections,” the Supervalu executive said.
   The retailer is also beefing up its staff dedicated to creating innovative new products and programs. Supervalu has begun staffing 400 positions in its Minneapolis “innovation center” and is ahead of the planned schedule in building the organization.

Tesco says Fresh & Easy stores are doing well

Tesco says most of its Fresh & Easy stores are “performing ahead of budget” with private label and fresh food sales leading the way. While the retailer has put a moratorium on adding new stores for a few months, it plans to open its Northern California distribution center ahead of schedule.
The British retailer believes that criticism about the format’s performance by financial analysts and the business press is off base. Sir Terry Leahy, Chief Executive Officer, said the retailer is “getting the best feedback we have ever had from any format we’ve opened anywhere” and “growth is progressing well week on week.”

Publix issues a promotional challenge

   Publix launched another store brand challenge, repeating a controversial chain-wide promotion it ran last year. As part of the promotion, shoppers who purchased one of three featured national brand products received the Publix brand equivalent free. Some of the national brand products involved were: Kellogg’s Nutri-grain Strawberry Cereal Bars, Kellogg’s Special K Red Berries Cereal, and Betty Crocker Shark Bites.
   “In one corner, you have the national brand. In the other, the Publix brand. So which comes out on top? That’s for you to decide,” the retailer’s ad copy read. “We’re confident that you’ll enjoy Publix brand products just as much, if not more than the national brand counterparts.”
   During last year’s promotion, Welch’s Grape Juice, Kellogg's Raisin Bran Crunch and Thomas’ English muffins were among the national brand products featured. The challenge is “not meant to alienate our relationships with suppliers and vendors,” a Publix official said.

Private label gains at Rite Aid

Rite Aid’s focus on building store brand sales at the front end is paying off, Mary Sammons, Chairman/CEO, told Wall Street analysts. “We saw good private brand sales growth in the quarter, with core Rite Aid private brand penetration reaching 12.9% for the year and a significant increase” in the Eckerd stores it acquired, she said.
“Increasing private brand penetration in all of our stores is an important goal again this year and we expect the new exclusive skin care, men’s grooming lines, and pure spring bath and body products we introduced to help us achieve our goal, Sammons added. “Replacing all the front-end merchandise with Rite Aid assortments and Rite Aid private brand has had the most positive impact on sales in the acquired stores. Private brand penetration, for example, has already increased more than 200 basis points since June.”

Office Depot debuts ‘green’ line

Office Depot has launched an environmentally-friendly line of office supplies called Office Depot Green. The range is likely to grow to encompass a wide assortment of products including core supplies, such as recycled paper, notebooks and file folders, as well as remanufactured ink and toner cartridges, non-toxic cleaners and compact fluorescent light bulbs.
The brand will include products with a variety of environmental benefits including 30% or more recycled content, remanufactured, Energy Star qualified and Green Seal certified. Office Depot carries more than 4,000 products containing recycled content. Office Depot Green is available at the company’s stores and online at www.officedepot.com/buygreen.

Wal-Mart introduces eco-friendly coffees

Wal-Mart Stores has introduced six eco-friendly coffees under its Sam’s Choice brand. Each 10-12-oz. bag sells for $5.88. The coffees are part of the company’s “Earth Month” expansion of eco-friendly products. The initial Sam’s Choice gourmet coffees include Fair Trade Certified, House Blend, Espresso Roast and French Roast; Rainforest Alliance Certified Breakfast Blend whole bean and ground coffee; and USDA Organic, Swiss Water Process Decaffeinated. All Sam’s Choice coffees are 100% Arabica beans.

Family Dollar adds food, store brands

Food and store brands are two key strategies pursued by Family Dollar, one of the country’s largest dollar store chains. Howard R. Levine, Chairman/CEO, told analysts that the retailer is continuing to “expand and refine our food assortment.”
As part of the plan, Family Dollar has “strengthened our everyday assortment of quick prep and ready-to-serve products in all stores, introducing larger family sizes and emphasizing private label and value brands. Clearly our customers appreciate the changes we have made in our assortment as food continues to be the biggest driver of sales.” In addition to strengthening the assortment of food, the retailer also has made investments in other areas, including household paper and home cleaning products.

Kroger Co. names head of manufacturing

Kroger Co. has named Calvin Kaufman as Group Vice President and President of Kroger Manufacturing. In his new position, Kaufman is responsible for overseeing the retailer’s 42 food processing plants. Kaufman succeeds William T. Boehm, who is retiring after 27 years. Kaufman currently is Senior Director of Logistics for Kroger. He joined the organization as part of Fred Meyer logistics group in 1994.

Delhaize set to create ‘Guiding Stars’ company

Delhaize is set to spin off its “Guiding Stars” nutritional rating system as a wholly-owned subsidiary. The new company would license the system and related promotional material to other supermarket operators, foodservice companies, manufacturers, and government agencies. Guiding Stars is currently being used in Delhaize’s retail groups: Hannaford, Food Lion and Sweetbay.

Target creates new packaging for Archer Farms cereals

Target has created packaging designed to prolong freshness and require less storage space for its Archer Farms cereals. The canister package, which is partially constructed from recycled paperboard, is 10 inches tall by two and one and a half inches deep, requiring minimal kitchen cabinet space. The cereals are available in 18 flavor combinations.

IN THE STORES

Loblaw is rolling out a new format under the Loblaw Great Foods banner. The store features a greater range of convenience foods as well as artisan breads and more than 350 varieties of local and international cheeses.

7-Eleven is adding more fresh offerings this summer, including gourmet sandwiches and wraps, focaccia sandwiches and a new variety of New Zealand apples.

JCPenney will launch a brand of home furnishings and accessories called Linden Street. The products will be in stores by July and the range will be the largest home goods launch ever for the retailer.

Meijer will carry pet health insurance in 100 of its stores. The insurance will be via cards displayed on freestanding kiosks the retailer’s pet departments.

Schnucks Markets is introducing a “green” cleaning section in its stores, featuring its Full Circle products as well as national brands.

Whole Foods Market will do some meat and cheese processing in its new 111,000 sq. ft. distribution center in Braselton, Ga. The retailer also announced plans to close its bakery plant in Austin, Texas.

Raley’s, the California superemarket chain, has introduced Raley’s 100% Black Angus Beef brand.

Cost Plus World Markets is offering a range of wines under the Foodies brand. Each Foodies label graphically illustrates the kind of food that it is best served besides.

MARKET RESEARCH

Big increase in ‘green’ new products

There is a large increase in the number of new products making environmentally-friendly claims, according to research by Mintel Global New Products Database. In 2002, the database recorded only five environmentally-friendly product launches across all sectors of industry. In 2007, 328 new products carried this claim, representing a 200% increase compared with 2006.
Consumers particularly look for eco-friendliness in certain sectors, including household paper products (66%) and energy efficient appliances (48%). Mintel found that 57% of consumers look for eco-friendliness when shopping for food, which has forced the sector to focus on the development of environmentally-friendly products. Consumers are increasingly looking for products that are not necessarily ‘organic’ or ‘natural’ but address other environmental concerns.

Shoppers like small formats

Consumers are ready and willing to shop at small-store food formats that emphasize convenience and fresh, prepared foods, according to a study by TNS Retail Forward. The report found that 64% of shoppers surveyed said they would definitely or probably shop a small-format store. “The combination of small size and a fresh, prepared-food emphasis is a compelling offer for the time-pressed shopper,” TNS said.

PLMA NEWS

Executive Education program to be held June 16-19

   Registration is underway for PLMA’s 2008 Executive Education Program, to be held June 16-19 at St. Joseph’s University in Philadelphia. More than 40 manufacturers, retailers, distributors and brokers from around the country have already have signed up to participate.
   This year’s program features a new curriculum that focuses on Best Practices in Private Label, and several new classes. There are three curricula: Core, Advanced and Retail Colloquy. Each curriculum is based on a four-day schedule of instruction. Classes are cross-channel and applicable to all retail formats. The three-tier program is designed to be taken in sequence, with Core leading to Advanced and then Retail Colloquy.
   For more information, contact, Sylvia Stein, Manager of Executive Education Programs at (212) 972-3131 or email info@plma.com.

EVENTS

May 27-28	“World of Private Label” Trade Show Amsterdam, The Netherlands
June 16-19	Executive Education Program St. Joseph’s University, Philadelphia
Oct. 6-7	Washington Conference Washington
Nov. 16-18	PLMA Trade Show Chicago

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