December 2013
de PLMALive!

Private label trends in Canada.
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Retailers really focusing on their brands
  PLMA’s biggest ever Chicago Trade Show is history, but the coming year is likely to bring even more success for store brands, speakers at the event predicted. “Private brand focus is unprecedented, and best-in-class retailers are investing in brand management activities like their branded peers,” Todd Hale, Senior Vice President, Nielsen, told a seminar session. Store brand sales reached $111.6 billion for the 52-week period ending August 31, a level that is 18.5% greater than for calendar 2009. National brand sales during that period were $529.4 billion, up only 8% since 2009, according to Nielsen sales data.
  At the Salute to Excellence Breakfast, Doug Rauch, former President of Trade Joe’s, recalled that the retailer found success by making sure every product it carries has a “story to tell.” When the retailer decided to commit to this strategy years ago the initial result in a sharp reduction in the number of SKUs that were carried. While the move was controversial at the time it has proved to be a driving force behind Trader Joe’s subsequent success.
  On the Trade Show floor, there were a record 1,230 exhibitors and 2,534 booths. The show’s international presence continues to grow. There were 340 exhibitors from 35 countries outside the U.S. represented on the exhibition floor. Nearly 10,000 visitors attended the event, an increase of more than 10% of the prior year.

Wal-Mart makes waves
  Wal-Mart is making waves with its store brands program. The big news is the retailer’s test of its Price First brand in several markets. The brand features simple packaging and is priced below the chain’s Great Value products. Wal-Mart’s move was quite unexpected and some observers are wondering if other major retailers will follow suit.
  Wal-Mart’s move may be a direct response to the opening price point challenge from dollar stores. For private label veterans, however, the introduction is reminiscent of the no-name generic products that enjoyed initial success but ultimately damaged the quality image of store brands.
  One retailer said the introduction wasn’t a surprise: “What really surprised me was that Wal-Mart waited so long to make the move, considering the competition from the dollar stores.” He added that initial product cuttings indicated the quality of the Price First items products was high.
  Price First is being introduced in the South with two-page flyers promoting the new brand. Individual stores have posted product images with the message “Our lowest-priced brand at Walmart.” Condiments, pasta and packaged baking mixes are among the first products under the Price First brand. There are also foam plates and bowls, paper napkins and bathroom tissue.
  Wal-Mart made a less controversial product launch with an extension of its Great Value brand. Great Value Naturals cleaning products are made from plant-based, all-natural cleaning technology and are 100% chemical-free and toxin-free, biodegradable, non-allergenic and packaged in recyclable materials.

Will Amazon deliver more store brands?
 Earlier this year Amazon made news with expansion of Amazon Fresh grocery delivery service into the Los Angeles area. Now the online giant is causing a stir with the revelation that it is considering a move into private label. Several publications report that Amazon has several job postings related to private label sourcing and management including a “senior consumables private label sourcing manager” and a “senior product manager, brand management, consumables,” both at its Seattle headquarters.
  Amazon’s consumables category includes personal care, beauty, health and wellness, baby and grocery products. The retailer currently sells private label home goods, including sheets and towels, and electronics accessories such as cables and batteries under the AmazonBasics store brand.

Whole Foods launches 365 loyalty program
  Whole Foods Market is testing a program designed to boost its 365 brand. The retailer is testing a loyalty program that gives customers a 10% discount on the 365 brand groceries that they purchase. Whole Foods has introduced a Hello 365 loyalty program in eight stores in Illinois, Indiana and Florida. “If it’s successful, we’ll look at rolling it out into some other markets,” the retailer said.
  In another move, Whole Foods is testing an online ordering system called click and collect at a store near Philadelphia. Under the pilot, groceries ordered online are collected in-store. Customers pay a $5 fee for any online order under $100. The fee is waived for orders over that amount. The test will be expanded to a second store near Los Angeles early next year.

Big brands are struggling
  Two iconic national brand companies, Campbell Soup and Kellogg, are really struggling. Campbell executives told Wall Street analysts that weakness in core business trends and increased advertising expenses spelled a slow start to the year. The company reported a 30% drop in net earnings during the first quarter. “I’m disappointed in Campbell’s first-quarter performance,” said Denise Morrison, President and CEO.
  Kellogg, the world’s largest maker of breakfast cereals, said it would cut about 7% of its workforce and slash capacity by 2017, after reporting another quarterly decline in sales in its cereals business. North American net sales fell 1.3% in the quarter, while the U.S. snacks business declined by 2.5% The company’s cost-cutting plan involves increasing growth in emerging markets.
  But Campbell and Kellogg aren’t the only big brand companies that are trying to turnaround their businesses. At Nestlé, the world’s largest food producer, Chief Executive Paul Bulcke recently told analysts that the company had identified a group of underperforming product lines it would like to sell.

FDA to ban trans fats
  The Food and Drug Administration has proposed measures that would all but eliminate artificial trans fats from the food supply. Under the proposal, which is open for public comment for 60 days, the agency would declare that partially hydrogenated oils, the source of trans fats, were no longer “generally recognized as safe.” That means companies would have to prove scientifically that partially hydrogenated oils are safe to eat.
  The move concludes three decades of battles by public health advocates against artificial trans fats, which occur when liquid oil is treated with hydrogen gas and made solid. Some trans fats occur naturally, but the FDA proposal only applies to those that are added to foods.

A push for voluntary GMO labeling
  Food industry groups are pressing for legislation that would institute a national voluntary labeling system for products that contain genetically engineered products. The effort follows expensive battles in California and Washington over state ballot initiatives seeking to impose mandatory labeling regulations.
  A coalition led by the Grocery Manufacturers Association is said to be behind the effort. The industry proposal calls for mandatory labels for any products derived from genetically engineered plants, but only if they are found to present any risks to health or safety. To date, no GMO ingredients have been deemed unsafe.
  In the absence of any such designation, the proposed legislation would direct the FDA to develop a new voluntary labeling system under which products could be labeled as “GMO-free.” The labeling system would also apply to any companies that wish to label products as containing GMOs.

Target rates sustainability
  Target plans to rate the sustainability of the products it offers. The retailer says the move will also influence its merchandising and product placement decisions, adding that products found to be highly sustainable will be rewarded with incentives. Target is rating the sustainability of 7,500 personal care, beauty, household cleaning and baby care products this month. Each product will receive a score from 0 to 100, with 100 being the most desirable score, based on its ingredients, the transparency of its ingredient list and environmental impact. Target noted: “We plan to use this first phase to learn with our vendors how to improve our entire selection of products.”

Yucaipa resets Fresh & Easy
  Get ready for Fresh & Easy 2.0. Yucaipa Cos., the new owner of Fresh & Easy Neighborhood Market, says it is planning big changes in the stores, turning the chain into “a healthy, convenient food experience.” Yucaipa, which acquired the stores from Tesco, aims to improve convenience, hours and customer service, along with greater value, better prices and stores that are easier to shop. James Keyes, former chief executive of 7-Eleven, has been named to run Fresh & Easy.

CVS promotes its brands with social media
  CVS is using social media campaigns to promote its store brands. The drug chain ran the “Essence of Beauty Fragrance Finder Instant Win Game,” on Facebook that gave shoppers a chance to win one of more than 100 prize packages by pairing personal tastes with its Essence of Beauty brand fragrance and body care products.
  The retailer is also featuring social media with celebrity images to promote its new myWeekly Ad program, which tailors deals and promotions based on individual shopper needs based on Extra Care loyalty program members’ activity. Shoppers are encouraged to “Like” an image and stock up on store brand items such as Gold Emblem nuts, pretzels and chips.

Online retailer adds store brands
  FreshDirect, the online grocery retailer, is launching its “Just Fresh Direct” and “Cloud Nine” brands. Just Fresh Direct features 20 shelf stable, dairy and frozen products with butter, unbleached flower, milk and olive oil among the first items. By the end of next year, the brand is expected to grow to 150 items. Cloud 9 consists of 14 household items, including bathroom tissue and garbage bags. Plans call for the line will grow to 20 items next year. Local sourcing is a key element of the food products. Area farmers and producers are clearly identified on packaging, even down to the name of the farm (Alderfer Farms in Pennsylvania) that supplies the eggs.

Aldi airs TV spots
  Aldi is bringing some of its most successful international advertising to its U.S. stores. The limited assortment chain has aired a TV spot based on its award-winning ‘Like brands’ in Britain. The spot commercial focuses on Aldi private label peanut butter alongside its Jif branded counterpart. Both products’ prices are compared to demonstrate Aldi’s price advantage.

Safeway sells snack plant
  Safeway is selling its snack manufacturing plant in Joplin, Mo., to Annie’s Inc., Berkeley, Calif., for $6 million and the cost of inventory and supplies. The plant, which manufactures cookies and crackers, has been the primary supplier of those products for Annie’s for the past decade, according to trade reports.

More mergers for store brand suppliers
  Mergers keep coming among store brand suppliers. The two most recent deals were made for non-food manufacturers. PL Developments, an over-the-counter pharmaceutical and nutritional supplement supplier has signed a definitive agreement to acquire Aaron Industries, a maker of liquid dose pharmaceutical and health care products. Terms of the acquisition are not being released as both companies are privately-held. Aaron Industries’ operations will be integrated into PL Developments with combined company headquarters in Westbury, N.Y. Aaron’s manufacturing and distribution facilities will remain in Clinton, S.C. and Los Angeles.
  In the other deal, Reynolds Consumer Products is acquiring the domestic operations of Trans Western Polymers, which will be combined with Reynolds’ Presto Products subsidiary to bring together private label trash bag operations. Trans Western, founded in northern California, makes plastic trash and food storage bags. Presto Products is a supplier of food and disposer bags, packaging closures, soil stabilization materials and specialty stretch films.

TreeHouse sees more growth ahead
  TreeHouse Foods sees steady growth for store brands in a difficult retail environment. Dennis Riordan, Chief Financial Officer told Wall Street analysts: “Across the food industry, sales volume has been difficult to come by. Consumers continue to buy less, shop for values and migrate towards better-for-you foods and beverages.
  “While these issues are generally headwinds for most food companies, we see the shifting dynamics as further opportunity in our private label world.” He predicted that “private label in aggregate will continue its slow and steady advance as customer brands gain new ground in traditionally branded enclaves such as coffee, hot beverages, snacks and better-for-you products.”
  He believes the grocery industry will become “increasingly bifurcated as retailers choose between the strategic segmentation and differentiation of their house brands versus the transactional advantage of national brand discounting.”

IN THE STORES

Kroger says its Simple Truth brand will soon hit $1 billion in annual sales.

Publix has introduced six limited-edition ice cream flavors, including pumpkin pie, deep dish apple pie and Santa’s White Christmas, for the holidays.

H-E-B has introduced a range of baby food pouches. The food is made with fruits and vegetables and contains no artificial flavors or colors.

Food Lion conducted a “Just Desserts” Holiday Bake-Off Competition asking shoppers to submit original holiday recipes using at least one Food Lion store brand product. The winner gets a $500 gift card.

Price Chopper Supermarkets, based in New York, has introduced Create, Take & Bake Seafood Dinners, customizable fresh meals that are prepared by in-store and can be steamed at home.

Safeway plans to close all unsold Dominick’s stores and withdraw from the Chicago market by the end of this year.

Target expects U.S. expansion to slow to less than the 5% annual growth the company had been projecting.

Piggly Wiggly Carolina is outscouring its entire distribution to C&S Wholesale Grocers.

Ace Hardware has redesigned the packaging for store brands, affecting about 1,400 SKUs.

OfficeMax has launched the WorkPro brand, offering a commercial-grade, limited lifetime warranty seating line.

Dollar General topped Kantar Retail’s opening price point survey.

99 Cents Only Stores plans to add store brands products sourced from overseas to improve gross margins.

Roche Bros., the Massachusetts-based supermarket chain, is planning a new banner, Brothers Marketplace, offering artisanal products, prepared foods and catering.

Metro, the Montreal-based retailer, will use labels to identify organic, made-in-Quebec products.

Spartan Stores and Nash Finch have completed their merger and will operate under the corporate name of SpartanNash.


MARKET RESEARCH

Men’s grooming market looks good

The men’s grooming business is looking good. Mintel reports that last year the U.S. men’s grooming market reached $3 billion, up from $2.5 billion in 2007. The researcher also projects a positive future market outlook, with sales expected to rise 16% by 2017. Globally, beauty and personal care launches targeted to men have increased 70%. Mintel says that to keep up with demand, the market is becoming more segmented and expanding into new categories. For instance, typical feminine formats such as serum and eye cream have moved into the male category.

 

PLMA NEWS

Walgreens, Family Dollar execs at Leadership Conference, March 27-30

Senior executives from two of the country’s biggest and most important retailers will be featured speakers at PLMA’s 2014 Annual Meeting and Leadership Conference, to be held March 27-30.
  Representing the nation’s largest drug chain will be Moe Alkemade, Group Vice President, Global Sourcing and GMM Merchandising at Walgreens. He led the restructuring of the retailer’s private label portfolio and established the foundation of its global sourcing program.
  Focusing on the fast-growing dollar store channel will be Michael Bloom, President and Chief Operating Officer of Family Dollar. He is responsible for major operational functions, including store operations, merchandising, marketing, global sourcing, and supply chain.
  The 2014 Annual Meeting and Leadership Conference will be held at the Hyatt Grand Cypress in Orlando, Fl. For more information, telephone (212) 972-3131 or email conference@plma.com. Click here for early registration.


EVENTS

 

March 27-30 PLMA’s Annual Meeting and Leadership Conference
  Orlando, Fl.

  

May 20-21 “World of Private Label” Trade Show
  Amsterdam, The Netherlands

 

e-Scanner is a monthly publication of the Private Label Manufacturers Association, 630 Third Avenue, New York, NY 10017, Telephone (212) 972-3131. Copyright 2013 by PLMA.

 

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