JANUARY 2008
	VIDEO REPORT Who is Aldi and what does it really want?
	MARKET RESEARCH ‘Good value’ is top priority in picking stores
	UPCOMING EVENTS Leadership Conference Tucson, March 27-30

Aldi steps up expansion across the country

   After three decades of pursuing a conservative growth strategy, Aldi is accelerating its expansion plans and entering some of the nation’s most populous states. Overall, the German-owned retailer plans to increase its store base by more than 10% this year, adding about 100 new stores.
   The first major expansion will occur in Florida, where Aldi has begun construction of a $40 million, 500,000 sq. ft. distribution center. David Behm, Vice President, said, “We really have the Florida market surrounded so it was a good time for us to come down and expand.”
   Aldi also is moving into Texas and is eying sites for another large distribution center there to support expansion in the state. Aldi expects to open 25 to 35 stores in the Dallas/Fort Worth area by fall 2009.
   In the Northeast, Aldi is building a 500,000 sq. ft. warehouse in Connecticut, capable of supplying 70 stores in Connecticut, Massachusetts and Rhode Island.
   The German-owned chain now has 900 stores in 26 states. The retailer is owned by the Albrecht family, which also owns Trader Joe’s, a chain with nearly 300 stores in 23 states. Aldi is the dominant food retailer in Germany and operates more than 8,000 stores in Europe, Australia and the U.S.

Supervalu rolls out three-tier program

   Supervalu expects the majority of the products in its new three-tier store brand program will be distributed to all its stores by early next year, according to Jeff Noddle, Chairman/CEO. The goal, he said, is to “drive increasing penetration” for store brands.
   “Following a comprehensive review of our brand portfolio that included SKU rationalization, we are now launching our own brand strategy to our customers and have begun an early phase out of existing labels,” he told Wall Street analysts.
   The program’s three tiers—premium, mega brands (national brand equivalent) and value—will “contain strategically important products that deliver higher margins, differentiation and consumer loyalty.” The mega brands include Wild Harvest for natural and organic products, Baby Basics for diapers and related items, and Home Life in nonfoods. There will be about 200 items in the value-oriented line.

Store brands account for 75% of Fresh & Easy sales

Store brands are accounting for three quarters of sales at Tesco’s new Fresh & Easy stores, even though they only represent less than half of the SKUs offered. Tim Mason, Fresh & Easy’s top executive, described the initial store brand sales results as “fantastic.” The average 10,000 sq. ft. store carries about 3,500 items, of which 45% are private label. “There are no private label products outside of food right now,” according to Simon Uwins, Chief Marketing Officer, “but that’s not to say that won’t change.”
Store brands play an important role in the retailer’s substantial wine assortment. Of the 167 different wine labels carried, about one-third of them are private label. The store brands are labelled as Fresh & Easy exclusives and feature information on the back describing the taste, origin of the grapes, and foods with which the wine should be paired.

Safeway selling its organics line to Sysco, Carrefour

   Safeway is looking for new markets outside of its stores to sell its O Organics line of foods. So far, the retailer has found two major customers—Sysco, the country’s largest foodservice supplier, and Carrefour, the world’s second largest retailer. Sysco is carrying the products in northern California. The distributor is marketing 25 SKUs, including ready-to-drink teas, juices, Italian sodas and other beverages. Sysco customers include high schools, colleges, hospitals, restaurants and military facilities.
   Sysco says it added the brand because “there’s a growing demand for organics in California and O Organics is a recognized brand.” The foodservice versions of O Organics are the same as those sold in Safeway’s stores.
   Carrefour is selling Safeway’s organic range in Taiwan. Carrefour declined to comment on whether it had an agreement with Safeway that extended beyond its Taiwan stores. Safeway is also looking to sell the organic line in South America. “We’re in the process of monetizing the brand,” according to Steve Burd, Chairman/CEO. The O Organics line has grown to 300 items since its 2006 launch. Safeway expects the line to reach $300 million in sales for 2007, up from $164 million last year.

Wakefern wholesales ShopRite products to Gristedes

Wakefern Food Corp., the New Jersey-based retailer-owned cooperative, has entered into a wholesale agreement to make available 7,000 ShopRite SKUs to 40 Gristedes grocery stores in the metropolitan New York area. The ShopRite line includes organics and specialty grocery items. Wakefern wholesales its store brands to a few other wholesale customers, including Heinen’s, a 17-store chain based in Cleveland.

A&P readies ‘combined’ brand introduction

Following its takeover of Pathmark stores, A&P plans to launch a new unified private label in the first part of this year. Eric Claus, President/CEO, reported: “We are very quick in putting our new merchandising teams together and are already in the process of strengthening our programs for the next few months. We also intend on being very quick to launch our new combined private label programs and plan to have that integrated in the first part of fiscal 2008.”
“Private label penetration continues to grow at an aggressive rate,” he noted. These gains come as the chain’s new merchandising strategy is resulting in increased basket sizes, more customers, and market share.

Private label gains at former Eckerd stores

Private label penetration continues to increase at Rite Aid, the country’s third largest drugstore chain. Mary Sammons, President/CEO, told Wall Street analysts that the retailer “has solid private brand sales with year-to-date penetration running at 13%. Private brand penetration at the former Brooks/Eckerd stores, which was less than 9% when we acquired them, also improved, helping their front-end margin beat plan. We expect it to continue to increase now that those stores carry our full private brand assortments which are heavily promoted in our weekly circulars.”

Walgreens: Store brands push up profits

Walgreens credits increased sales of private label as a reason for the drug chain’s higher profits in the most recent financial quarter. Gregory Wasson, President, said Walgreens is experiencing “especially strong sales among our private brand products” as “consumers search for more value.”

Private label SKU count up 13% at Whole Food

Whole Food Markets increased its store brand SKU count by 13% in the past year and plans call for even further expansion, according to John Mackey, President/CEO. “We are actively continuing to further differentiate our product offerings in ways that speak to our authenticity and leadership role within natural and organic products. These initiatives include the continued expansion of our private label products,” he said. Store brands currently account for 19% of total grocery and non-food sales.

Family Dollar aims for store brand growth

Family Dollar, the second largest dollar store chain, is planning a significant increase in its private label sales, R. James Kelly, President, told security analysts. “We’ve worked hard this year in improving the quality of those products and I think that provides a foundation for us to expand the assortment and the sales of those items,” he said. The increase in store brands comes at a time when Family Dollar is stepping up its emphasis on food products. More selling space is devoted to foods, including coolers for perishables items.

High-end line successful at Staples

Staples, the home office retailer, reports success with its high-end line of office supplies and accessories under the M by Staples brand. “We’ve gotten a very positive reaction from our customers, further verifying this line’s appeal, and we look forward to expanding the offering this spring,” according to Ron Sargent, Chairman/CEO.
The premium line is part of a broader expansion of store brands, which now account for about 20% of sales. “I think the opportunity’s probably to be 30% of our sales at some point,” Sargent said. “For an industry that does not have a tremendous number of brands, we think the Staples brand is really the right alternative for our customers and the fact that we’re continuing to grow it would indicate that the customers agree.”

Best Buy pushes store brands in Canada, Japan

Best Buy, the country’s largest consumer electronics chain, is aggressively expanding its store brands sales outside the U.S. In Canada, private label has become a “quickly growing” business, Robert Willett, CEO of the international division, told analysts. In Japan, Best Buy products are now being sold by a K’s Holdings, a leading retailer. K’s Holdings plans to sell more than 100 items under Best Buy’s Rocketfish brand at all its 292 stores.

IN THE STORES

A successful Japanese private label retailer, Muji, is entering the U.S. with two stores in Manhattan. The retailer’s name means “no-brand quality goods.” Muji has about 320 stores in Japan and 70 stores in Asia and Europe.

Kohl’s will introduce a range of products by The Food Network and celebrity chef Bobby Flay. The brand will include cookware, dinnerware, utensils, cutlery, barbecue tools and kitchen gadgets, textiles and electrics.

Safeway has established a website for its Eating Right brand. The site, http://eatingright.safeway.com, offers product information and a coupon for $1 off any Eating Right product.

Wegmans has polled consumer members of the Wegmans Opinion Panel about 98 store brand items. “We’re hoping to pinpoint which products are the most important to you,” reads an e-mail to consumers.

Meijer is encouraging shoppers to post homemade video commercials for Meijer brand products on the company’s website. The postings are part a contest in which customers can receive up to $2,500 for using Meijer brand products.

Raley’s in California is rolling out a food nutrition scoring system developed by Topco Associates. The program enables comparisons using a scale of 1 to 100, with healthier foods getting higher scores.

Hannaford Bros. is planning to license its Guiding Stars nutritional shelf-labelling system to other retailers.

Kroger has launched a credit card rewards program that offers holders of its 1-2-3 Rewards MasterCard extra points for purchases made at more than 300 retail partners.

In Canada, Shoppers Drug Mart, has introduced a line of imported Belgian chocolate under the Le Chocolat brand.

Ukrop’s in Virginia has added peanuts, flavored syrups and dessert sauces to its “Joe’s Market by Ukrop’s” gourmet line.

MARKET RESEARCH

‘Good value’ is top priority in picking stores

“Good value” is the most important factor in determining where consumers spend their grocery dollars, according to a study by Nielsen. Nearly two-thirds (60%) of U.S. consumers rank “good value for money” as the most important consideration when choosing a grocery store. The next most important factor is broad product assortment, with more than one of every four shoppers (28%) saying they choose grocery stores based on the selection of high quality brands and products. Location was slightly less important, with 23% choosing the grocery store that is closest.
For consumers citing “good value” as their most important consideration, Nielsen finds that price, promotions and perceptions are most influential in helping consumers define value. Four of every five U.S. shoppers consider it very important or somewhat important for supermarkets to feature frequent promotions and price discounts, while 72% believe a store’s reputation for delivering low prices is very or somewhat important.

Shoppers spend more time reading labels

Concerns about health and wellness are leading shoppers to spend more time checking out labels, The Hartman Group reports in a new study. This report reveals that 28% of Americans are reading labels much more frequently today than a year ago. Another 31% of consumers are reading labels slightly more often. Hartman says, “Consumers are adding ‘label reading’ as part of health and wellness lifestyles and their attempt to try and comprehend ‘what’s in the box.’ In the area of food and beverages, across consumer segments, label reading appears to be a strong habit that is increasing in intensity.”

EVENTS

March 27-30

Annual Leadership Conference
Tucson

June 16-19

Executive Education Program
St. Joseph’s University
Philadelphia

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