February 2010
	VIDEO INTERVIEWS PLMA Live! interviews Wall Street analyst Deborah Weinswig on store brand opportunities in 2010 and beyond. CLICK HERE TO PLAY VIDEO INTERVIEW
	MARKET RESEARCH Store brands are good for your health
	UPCOMING EVENTS Annual Meeting & Leadership Conference, Orlando, March 25-28

Wal-Mart cuts back on brands

  Wal-Mart is taking some big brands off its shelves, leading analysts to predict that the giant retailer is shifting toward a much narrower assortment strategy.
   “Wal-Mart is moving closer to the practices of club and dollar stores, which often carry only one national brand—sometimes on a rotating basis—plus private label,” Ad Age, the magazine for brand marketers, told its readers. “That gives ousted brands a chance to win their space back while ratcheting up pressure for price and sales performance on all brands year-round.”
   The publication says a change in the food storage category reflects this new strategy: “Wal-Mart has sent Glad and Hefty bags packing from its food-storage shelves. Similar decisions are likely to play out across other categories over the course of the year, as Wal-Mart steps up efforts to streamline brand assortments, often to the benefit of its fast-expanding Great Value brand and national brands that survive the vetting.”
   Meanwhile, The Wall Street Journal reports that the giant retailer is considering major shifts in the spice category where conducting a test by replacing the dominant national brand, McCormick, with private label in some stores. The publication reports that McCormick generates 11% of its revenue from sales to Wal-Mart.
   “McCormick’s sales at Wal-Mart may not be wiped out altogether if such a switch happened,” the article noted. “The company also produces private label spices that could replace some of its brand-name products on Wal-Mart’s shelves.”
   Wal-Mart executives told Wall Street analysts that its revamped Great Value program is performing well. Eduardo Castro-Wright, Vice Chairman said, “Our Great Value program is fully rolled out across the food and consumables area, and we are seeing solid mid-single digit sales increases, which compare very favorably to the overall grocery sales.”

National brands can’t force new items

   The era of national brands forcing new products on retailers is over, says Diane Dietz, Safeway’s Executive Vice President and Chief Marketing Officer. “The days of launching new products that don’t work and which retailers take the time to put on our shelves and market are gone. Packaged goods companies have to be very cognizant of their mix of brands, their pricing and staying relevant to the consumer,” she told a national marketing publication.
   The Safeway executive has special insight into the relationship between retailers and big packaged goods companies, since she spent nearly two decades with Procter & Gamble, involved in new product development and marketing.
   She also told marketers that, “Private label has changed dramatically. Safeway’s private labels are not just about low-cost versions of national brands. They go to things that we think are most important.”

Brands push deals, but private label still up at
Winn-Dixie

The big brands are stepping up their promotional efforts, but private label sales are still growing, Peter Lynch, Chairman/CEO of Winn-Dixie told financial analysts. “Last year we had a tremendous year on private label,” he noted, but “this year’s been a little bit more challenging because I think the major manufacturers have responded with better promotions on their products. Having said that, I think we’re up 10 basis points this quarter over last quarter this year. I think we’re just about flat or maybe slightly under same quarter year ago.
“We managed to maintain or be slightly ahead of last quarter. We’ve continued to see this as a very vibrant offering for us in our stores, particularly as people are challenged with the pocketbook at the end of the month. We’ll continue to press private label, but we don’t see the same increases this year that we saw last year,” Lynch said.

Merger may spur Walgreens’ food effort

   Walgreens’ efforts to expand its fresh food program could well accelerate as a result of its planned acquisition of Duane Reade, which operates 257 stores in the metropolitan New York area.
   Before the proposed deal was announced, Walgreens had disclosed plans to enlarge its fresh food program with a primary focus on urban-area stores, such as the Duane Reade units. Walgreens has been steadily building store brands in center store categories, and Duane Reade has been introducing fresh-to-go foods and snacks in its high-traffic stores.
   Walgreens has recruited grocery executives to bolster its fresh foods expansion. The chain hired a senior grocery and convenience store executive, Jim Jensen, as Divisional Merchandise Manager of Fresh Foods, to drive the development of the program.
   Jensen recently left Tesco’s Fresh & Easy Neighborhood Market chain, where he held a similar position to the one he’s taking at Walgreens. Before that, he worked at 7-Eleven as a category manager.

CVS adds more than 900 SKUs

CVS added 913 private label products last year and plans to keep up its aggressive product development and marketing program for its brands, Tom Ryan, Chairman and CEO of the drug store chain, told Wall Street analysts.
“Private label accounted for 17.6% of front store sales in the quarter. We introduced 108 private label items in the fourth quarter and added 913 items throughout 2009,” he said. In the Longs stores, private label increased to nearly 16% of front end sales, and “the introduction of private label products has been very successful and will help drive margin improvement at Longs,” Ryan told analysts.

FTC says new regulations on the way

A Federal Trade Commission official warned industry to expect new regulations, more oversight and stronger enforcement from FTC. The agency will look at advertising to kids, health claims for food and supplements and privacy issues, according to Leonard L. Gordon, Director of the Northeast Regional Office.
He told an industry meeting that changes are definitely on the way for testimonials and endorsements. “You will have to disclose much more prominently that, say, for weight loss claims, results are not typical,” adding that “More and more food products are making health claims, so you will see more enforcement there. They will have to have science or there will be problems.”

Family Dollar aims for more store brands

Family Dollar Stores is looking to increase store brand penetration in food and other consumables, officials said during an investor presentation. Kenneth Smith, Chief Financial Officer, believes consumable store brand sales could climb from the current sales level of 10% to 15-20%.
Overall, Family Dollar plans to increase private brand penetration from its current 19% level to 25%. Smith also said the chain would look to serve the small but growing group of shoppers it draws with annual incomes above $40,000.

Supervalu makes management shifts

Supervalu is restructuring its sales and marketing organization. Andrew Abraham has been named Group Vice President, Own Brands, as part of a series of senior management changes. Andrew will lead strategic business planning, assortment, pricing, placement, and product development efforts while working closely with the merchandising organization.
Supervalu also named Julie Dexter Berg as Executive Vice President-Chief Marketing Officer, beginning next month. She will lead all of the company’s marketing activities, including customer and brand strategy, advertising and research and analytics. The duties were handled by Duncan MacNaughton, who left the company last year, and Chief Marketing Officer-Own Brands, Steve Michaelson, who resigned last month.

Loblaw debuts discount brands

Loblaw in Canada has launched a line of discount brands in its No Frills discount stores. The range features category-specific brands such as Bijou (frozen juice), Terra (canned vegetables), Cercle (mayonnaise) and Du Matin (jam). The retailer has dedicated signage and store flyers to promote the line as “discount brands exclusive to No Frills” and “up to 20% cheaper than the big names.”

Store brands up, Tropicana down

Tropicana’s parent company, PepsiCo, attributed much of the brand’s declining market share last year to a surge in sales of private label juice. According to its figures for the first 10 months of 2009, Tropicana lost 2.3 volume share points. A company official blames the strong showing from private label, which had a 21% increase in unit sales and a 5% gain in dollar sales last year.

Retailer brands enjoy wine and spirits gains

While private label still represents a small piece of retail wine and spirits volume, its growth rates are considerably outpacing those of national brands, the latest Nielsen data shows.
Private label now has a volume share of 3.3% in table wine and 4.6% in spirits in food, drug, convenience and liquor stores. Sales volume for private label table wines and spirits grew 29% and 8%, respectively, during the 52 weeks ending Jan. 9. Meanwhile, the table wine and spirit categories as a whole saw volume growth of just 1.6% and 0.9%, respectively.

IN THE STORES

Fresh & Easy is offering a red gluten-free icon, to help customers identify gluten-free products throughout its stores. Each icon features the words ‘Gluten-Free’ and directs shoppers to ask a store employee for a complete list of gluten-free products.

Wal-Mart Brazil is launching a range of sustainable products, involving both national brands and private label.

Supervalu is introducing nutrition iQ, a shelf tag information program that uses a color-coded system of tags to help consumers identify the nutritional value of food products.

Wegmans is offering a line of frozen mixed vegetables called Special Blends. The vegetables are flash-frozen with less than two hours between harvesting and processing. Each 1-pound bag costs $3.99.

Rite Aid is introducing two products to its Rx Suncare line, Rx Suncare Sport SPF 70 and Rx Suncare HairGuard.

Duane Reade, the New York drug store chain, has launched four premium packaged coffee blends under the DR Delish exclusive brand.

Giant Eagle is expanding its Valu King discount, private label-oriented store format to central Ohio. The retailer plans to open the store by June and add two more later this year.

OfficeMax is expanding desk and workspace selections under its Brenton Studio and Eastleight furniture brands.

Dollar General plans to open 600 stores over the next 12 months.

H-E-B announced plans to 19 stores this year, five of which will be in Mexico.

MARKET RESEARCH

Store brands are good for your health

Retailers are taking a healthy approach to their store brands. New Nielsen data shows that private label products comprise almost 40% of all items making health and wellness claims related to preservatives; one in four organic product sales; and nearly one in five items making natural and fat claims in food, drug and mass channels.
The research found that GMO-free claims are the fastest growing among store brands. Sales of these items increased 67% in 2009 to $60.2 million, followed in popularity by gluten free (62%), absence of specific fat (53%) and lowers cholesterol (45%).

Merchandising makes a comeback

   The large majority of grocery categories (88%) experienced increased merchandising activity in 2009, as marketers experimented with ways to provide value without lowering price, according to a new IRI study.
   Temporary price reductions were applied in 75% of categories with increased merchandising activities, compared with 53% in 2008; displays were in 72% of categories compared with 52%; and feature and displays by 66% up from 50%.
   Carbonated beverages were most frequently merchandised (73% of volume), followed by chocolate candy (65%), butter (61%), sports drinks (61%) and salty snacks (61%). “CPG marketers are leveraging merchandising to raise the profile of discretionary and other struggling categories in hopes of spurring sales in a tight economy,” IRI said.

PLMA NEWS

Leadership Conference looks at post-recession issues

   Store brand market share is reaching record levels as retailers try to attract value-conscious shoppers. But there is no guarantee these gains will continue, as the big brands counterattack and the economic outlook remains uncertain.
   This year’s Leadership Conference, held March 25-28 in Orlando, offers a strategic look at the issues facing private label in 2010. The Conference program, “Store Brands at Half-Time: What are we doing right? What are we doing wrong?,” features presentations from three different perspectives.
   On Friday, March 26, Don McGeorge, former President and Chief Operating Officer, The Kroger Co., offers the retailer’s viewpoint. David Skarie, President and Co-Chief Executive Officer, Ralcorp Holdings, gives the manufacturer’s perspective. The consumer’s point of view is covered in a presentation by Tod Marks, Senior Projects Editor, Consumer Reports. A look at financial issues facing retailing and private label will be presented by a leading analyst, Jonathan Feeney, Janney Montgomery Scott. John Failla, Publisher, Store Brands Decisions, will discuss key issues at the Retail Trends Breakfast on Saturday. He is followed by a presentation on “Inventing Business Opportunities No One Else Can Imagine,” by Art Turock, author and management consultant. The day concludes with the Private Label Hall of Fame reception and dinner.
   The host hotel is the Hyatt Regency Grand Cypress Hotel, and PLMA’s Annual Golf Tournament will be at the Grand Cypress Golf Club. For more information email annualmeeting@plma.com.

EVENTS

March 25-28

Annual Meeting & Leadership Conference
Orlando

May 18-19

“World of Private Label” Trade Show
Amsterdam, The Netherlands

June 14-17

Executive Education Program
Philadelphia

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