FEBRUARY 2008
	VIDEO REPORT What does the court ruling mean for private label?
	MARKET RESEARCH Sustainability goes mainstream
	UPCOMING EVENTS Leadership Conference Tucson, March 27-30

Store brands win trade dress victory in Federal court

   Store brands won a sweet victory in Federal Appeals Court, where a recent decision gives retailers significant latitude to use colors in their packaging that resemble those of competing national brand products. The Court rejected the argument by McNeil Nutritionals, maker of Splenda artificial sweetener, that consumers are likely to be confused because store brand sweeteners use the same yellow packaging as Splenda.
   The Third Circuit Court of Appeals found that color is just one of several factors that must be considered in deciding if consumers are likely to be confused in making their purchasing decision, which is the most important factor in determining trade dress infringement. The Court ruled that even if the color of the packaging was similar such confusion was not likely when the store name and logo were prominently displayed on private label products.
   The Appeals Court suggested that store brands with similar packaging would not be actionable when they display prominently a well-known label, such as a store-specific signature on their packages. However private label versions “cannot copy the national brands to such a degree of similarity then merely affix a tiny differentiating label, as to become entirely immune to infringement action,” the court ruled.

Private label poised for gains as big brands struggle

   The new year has not started out well for the national brands, and one major Wall Street analyst believes that private label is well positioned to capitalize on their woes. The nation’s biggest brand marketers—Procter & Gamble, Kraft, Kellogg’s and Hershey—all announced cutbacks or flagging financial performance in recent weeks. Procter & Gamble took another step out of the food business when it disclosed plans to spin off its Folgers coffee business; Kraft posted a quarterly loss on weak performance by its cheese and grocery divisions; Kellogg’s reported lower quarterly profits resulting from rising commodity costs and ad spending, and Hershey said earnings are likely to drop this year.
   There are clear signs of more troubles ahead. Analysts think two other billon-dollar P&G brands, Pringles and Duracell, are on the block. Kraft said it would increase cheese prices further, which may hurt demand. Kraft’s performance worries Wall Street analysts. Citigroup wrote, “We remain concerned about a number of risk factors, including recent market share losses in key U.S. categories such as biscuits (cookies and crackers), coffee, cereal and sliced lunchmeat.”
   Another firm, Sanford C. Bernstein, believes that private label is well-positioned to capitalize on the woes of the big brands. Bernstein reports that store brand market shares in the 10 U.S. household and personal care categories with the highest private label penetration grew half a percentage point on average to 27.5% in the second half of 2007. The rise in private label shares came before the price hikes anticipated for this year. Even if private label brands follow those hikes, Bernstein said, higher prices and a weakening economy still could benefit store brands.

Brands cut back on food coupons

The big brands cut back on coupons in food categories last year, while activity was up for non-food products. Within the consumer products goods industry, coupon circulation dropped 1.8% for food items, according to the 2007 FSI Distribution Trends Report, released by Marx Promotion Intelligence. The report found that the non-food segment had a 3.9% increase in coupon circulation.
Record levels were set for average face value within both the non-food and food segments, with a 5.8% increase to $1.54 for non-food and a 5.1% increase to $0.87 for the food. FSI coupon support was included as part of 441 new product introductions across the CPG industry. Food categories contributed 312 of these new items led by cereals, beverages, and snacks. Non-food categories had 129 new items, led by household cleaning products and home paper/plastic.

Wal-Mart promotes ethical sourcing

Wal-Mart will favor suppliers that provide ethically-sourced products as part of its effort to improve social, ethical and environmental standards in the factories of its suppliers. The retailer says it will even pay more for suppliers that meet its standards and share a commitment to quality and sustainability. “Paying more in the short term for quality will mean paying less in the long term as a company. Higher quality products will mean better value, fewer problems, fewer returns and greater trust with our customers,” said Lee Scott, CEO.
Wal-Mart has also begun using its packaging scorecard to rate suppliers on their progress toward developing sustainable packaging, as well as their ability to help Wal-Mart reach its company-wide sustainability goals to reduce waste, use renewable energy and sell sustainable products. Wal-Mart buyers will now be able to use the scorecard as a tool when making purchasing decisions.

Natural line debuts for independent stores

Market Centre, Unified Grocers’ specialty food division, has introduced a line of natural and organic products. The wholesale grocery cooperative, based in California, will soon begin distributing the Natural Directions line 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 Natural Directions 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.

Target expands natural personal care

Target is expanding its range of natural personal care products, eventually stocking up to 8 feet of natural items in all 1,591 of its stores. The section is expected to include natural and organic body lotions, face creams and shampoos. The sets will be merchandised with a backdrop touting “Natural Beauty Care” accented by photos of green trees and nature elements.
Target said it is launching two cosmetic bags made of recycled fabric to coincide with the natural care set. One is a small tote with two shoulder handles and pink lining selling for $14.99, the other is a medium-sized, top-zip case with an embedded mirror and green lining, for $16.99.

Costco introduces craft beers

Costco will introduce its first line of beers. The retailer has filed label applications with the federal Tax and Trade Bureau for a Kirkland Signature Hefeweizen, amber ale and pale ale. The beers will be brewed by San Francisco-area craft brewer Gordon Biersch, which also brews beers for Trader Joe’s.

Store brand share hits all-time high at Shoppers Drug Mart

Shoppers Drug Mart reported that private label and exclusive brand penetration reached an all-time high, 16.1%, for the fourth quarter. Store brand increases were led by strong gains in seasonal products. The Canadian retailer said that increased private label penetration remains one of the company’s key strategies to boost margins and profitability.

CVS promotes its brands

CVS offered a buy-one-get-one deal on all its brands. Its loyalty cardholders who bought one private label item received 50% off another. The offer applied to the chain’s entire line-up of exclusive labels and store brands, which total more than 3,000 SKUs. CVS also offered online shoppers 30% off all store brand items, encompassing the OTC, personal care and baby care categories.

Loblaw may add carbon dating

Loblaw is considering adding carbon labels to its private label products. The labels would detail the environmental impact emitted during the production process. Only a few companies have adopted the idea and no universal standards exist for measuring the carbon footprint of a product. Loblaw said it was too early in the process to provide further details of its plan to add carbon labels.

Roundy’s launches ad campaign for store brands

Roundy’s has launched an advertising campaign featuring its CEO, Robert Mariano, to promote its store brands. The ads feature ‘Chairman Bob’ who conducts a series of food inspections with help from his ‘Bobtourage’. The campaign includes TV commercials, radio and print. A website—www.meetchairmanbob.com—has also been launched for shoppers to learn more about Roundy’s 2,500 private label products.
“I personally guarantee the freshness and quality of every Roundy’s product through my signature on our labels,” said Mariano. “But my signature is only symbolic of the commitment that all the 22,000 employees at our stores have to providing our customers with the highest quality products. This new ad campaign is our way of showing that we take the quality of our products seriously.” The campaign is across all banners in all markets.

Price Chopper goes Full Circle

Price Chopper, the New York-based supermarket chain, is now carrying Full Circle organic and natural products. Previously, Price Chopper carried Wild Oats products, which have been discontinued. Full Circle is distributed by Topco Associates and includes about 700 organic and natural products.

IN THE STORES

Target is eliminating trans fats from its Archer Farms grocery line, which includes more than 2,000 items.

Raley’s, the California supermarket chain, is carrying the Full Circle brand of organic and natural goods from Topco. The line includes about 120 items.

Supervalu is closing all five of its Sunflower Markets, which specialized in organic foods.

Hannaford Supermarkets will debut a kiosk from restaurant operator O’Naturals in its headquarters. There are no plans at present to roll out O’Naturals kiosks in Hannaford stores.

7-Eleven is adding healthier snacks in its stores, including its own MEGA protein bars.

Office Depot has launched its Foray product line in Europe. The line includes a wide range of basic office supplies such as pens, highlighters and writing pads.

MARKET RESEARCH

Sustainability goes mainstream

   About half all consumers consider sustainability in selecting consumer packaged goods items and choosing where to shop for those products, according to IRI research. “Sustainability has evolved from a niche segment concern to a major factor influencing purchasing and shopping behavior across a sizable consumer base,” says IRI. “Our survey indicates that consumers are focused more and more on the social and environmental impact of their CPG purchases, creating a viable and growing U.S. market for sustainable products and packaging with the potential to mirror well-developed markets in Europe and Japan.”
   IRI found that about one-third of shoppers look for eco-friendly products and packaging in their brand selection. Up to one-quarter of those surveyed consider fair trade practices along with eco-friendly or organic designations in selecting a shopping destination Nearly 40% of consumers search specifically for organic products.
   IRI data shows that older consumers are actually the more likely audience to weigh multiple sustainability factors in their purchases. “Consumers aged 55 and older are the real driving force behind this expansion,” says IRI. “Generally, with the time to seek out specialty items and the resources to afford premium priced products, aging consumers are a critical target market today.”

PLMA NEWS

Leadership Conference, March 27-30, focuses on best practices

   PLMA’s 2008 Annual Meeting & Leadership Conference will focus on an issue that affects everyone in private label—how an industry-wide adoption of best practices could lead to a much bigger and better store brand business.
   The theme of this year’s event, to be held March 27-30 in Tucson, Arizona, is “Best Practices: A Rising Tide Lifts All Ships.” Several presentations identify the best practices that must be adopted by both manufacturers and retailers to improve the performance of store brands across product categories and retail channels.
   “Best Practices: Meeting the Challenges of the Private Label Partnership,” will be discussed by a retailing expert, John Rand, Director of Retail Insight, Management Ventures. A panel of industry executives will focus on “Worst Practices: What Not to Do and Why We Do It Anyway.”
   Michael Sansolo, former Senior Vice President, Food Marketing Institute, and now a commentator on morningnewsbeat.com, will offer his perspectives on the changing retail landscape and what might happen in the year ahead. Brenda Hambleton, a senior executive with C&S Wholesale Grocers, will talk about new developments in supply chain management
   The annual Private Label Hall of Fame Dinner will be held at the Conference, as well as PLMA Board of Directors and Task Force meetings. Host hotel for the event is the Loews Ventana Canyon. For details on registering, contact PLMA at (212) 972-3131 or email info@plma.com.

EVENTS

March 27-30

Annual Leadership Conference
Tucson

May 27-28

“World of Private Label” Trade Show
Amsterdam

June 16-19

Executive Education Program
St. Joseph’s University
Philadelphia

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