June 2010
	VIDEO INTERVIEW PLMA Live! interviews Don McGeorge, former President of Kroger, on the future of supermarkets and store brands CLICK HERE TO PLAY VIDEO INTERVIEW
	MARKET RESEARCH Shoppers go online for grocery deals
	UPCOMING EVENTS Annual Washington Conference Washington, D.C., Oct. 4-5

Store brands taking bigger share of new products

  The latest data shows that retailers are becoming more aggressive when it comes to introducing new store brand products. A new study by the Mintel research and consulting company shows that private label’s share of all new products introduced in the U.S. has climbed from 17% in 2006 to 25% in 2009.
   Lynn Dornblaser, Director, CPG Trend Insight, Mintel International Group, suggests the trend may continue. “There’s less loyalty to brands, because benefit loyalty is replacing brand loyalty. Consumers want their needs met. If private label can respond, consumers are less likely to go back to brands.” She noted an increase in premium and personal care private label offerings, as well as more value items.
   Overall, Mintel found that the number of new product introductions across all retail channels fell 20% in 2009 after climbing 23% between 2006 and 2008. The 2009 decline was due by reductions in consumables.

SKU cuts help store brands at Supervalu

Craig Herkert, Chairman/CEO, believes Supervalu’s overall SKU cutbacks are contributing to the success of the retailer’s store brands. “We’re able to position our private brands much better than we were before,” Herkert told Wall Street analysts. “We have a great private brand program. We’ve got a team here that has delivered beautiful products, but we were hiding them, quite frankly, because we were over-assorted.” The retailer’s item reduction program has been productive, he said. “The 20% of the SKUs that we’ve taken out in some of these categories still allows us to be an assortment leader. There may have been a handful of items that we’ve had to respond to consumer requests for, but it’s been very, very small.”
The retailer is aiming to increase private label penetration by more than 200 basis points in the current fiscal year, to more than 20% of sales. Earlier this year, Supervalu discontinued using a private label broker, Daymon Worldwide, and put store brand personnel within product category teams to increase emphasis on those products.

Costco expanding Kirkland SKUs

Costco is planning for a significant expansion of its store brand program over the next few months. The emphasis will be on more food and packaged goods under its Kirkland Signature brand, Richard Galanti, Executive Vice President and Chief Financial Officer, told investment analysts.
He said the wholesale club will introduce store brands “in lots of supermarket consumables.” Costco’s goal is to get private label sales up to 37%, but that will take several years. Not all new products will succeed, Galanti said. “But most things do work, and not a whole lot is sacrosanct in terms of branded goods, ” adding that “We want to show our members the quality that we can offer and clearly if we can get them to be loyal to the Kirkland Signature brand that’s great long-term and we’re pretty much prepared to try everything.”
Galanti said grocery sales have been especially strong. “If there’s a silver lining to this horrible economy over the last year and a half,” it has been the success of fresh foods.

Aldi, Trader Joe’s move into new areas

Aldi is expanding both its namesake and Trader Joe’s chains into new territories. Trader Joe’s is expected to enter Nebraska and Iowa later this year, with Maine to follow soon after. Following the announcement to open its first Nebraska store in Omaha, the first Iowa store will be in West Des Moines. It also appears the chain will move into Portland, Maine, taking over a former Wild Oats store.
There also are published reports that the first Aldi store will appear in New York City. The retailer has reportedly been looking for several sites in the city and will open its first store in the borough of Queens next year.

Store brand sales strong at Whole Foods

   Whole Foods Market reports strong store brand sales as the retailer bounces back from the recession. “Customers are still seeking value, as demonstrated by continued strong sales growth in promotional and private label items,” John Mackey, Co-CEO, told investment analysts.
   Walter Robb, President and Co-CEO, added that the strength of store brands sales “suggests to me that through this thing customers have grown to like the brand even more and are continuing to put those in the basket.”
   Mackey believes that the improving economy may lead to more retail competition in the organic categories. “When the recession occurred, we saw the conventional operators move away from it a bit to focus more on value and price. So, in some ways, they are less aggressive than they were a couple of years ago.”

Sales up for Target brands

Target reports that last year’s introduction of its Up and Up brand of household products has been “highly successful” and the chain plans to add another 100 items. The retailer says that has been “similar success” with the relaunch of Circo brand, with sales in the infant toddler category up double-digits over last year.
In home department, the relaunch of its Room Essentials and Home brand have created a sales lift. “Results have been outstanding with the two brands combining for a mid single-digit comparable store sales increase in the first quarter,” the retailer said.

FDA needs tougher food standards, panel says

The FDA needs to use the same strict standards for assessing health claims of food and supplements as it does for drugs, said a panel appointed by the Institute of Medicine, which advises the federal government. The committee recommended a new framework the FDA could use for judging studies that companies provide to support health and safety claims for their products.
The group said the FDA is stuck using crude tools to measure the benefits of food, drugs and supplements and needs a whole new set of standards. Relying on biomarkers is confusing the entire process of drug development. Common biomarkers include levels of cholesterol and blood sugar.

Value brands may hurt CPG companies

   The strategy of big CPG suppliers to introduce value brands to combat the rise of private label may ultimately be counterproductive. That’s the conclusion of a new study by Planet Retail, the international consulting firm.
   “In the recession, many brand manufacturers responded to the private label threat by launching their own value sub-brands,” said co-author and Planet Retail’s research director, Matthias Queck. “While these brands may have helped to retain shoppers from defecting to private label, they could do damage to the brand in the long-run.”
   Because private label threatens national brands’ profits, Planet Retail advises brand manufacturers to collaborate with retailers for long-term growth.

Big brands pay off bloggers

The big brands are trying a new way to battle the growth of private label—paying bloggers to tout their products. Ad Age reports on a study showing that “more brands will compensate bloggers and social media users in an attempt to generate chatter about their products.”
The trend has caught the eye of the Federal Trade Commission, which has issued guidelines that require content creators to disclose any “material connection” they have with advertisers. The magazine reports that the FTC apparently hasn’t slowed down the practice. Consumer package goods companies are most active in the area, accounting for a quarter of spending, according to one researcher.

Wal-Mart wants transportation shift

Wal-Mart wants to take over transportation services from suppliers. The retailer is contacting all manufacturers that provide products to its more than 4,000 U.S. stores and Sam’s Club membership warehouse clubs. The goal is to take over deliveries in instances where Wal-Mart can do the same job for less and use those savings to reduce prices in stores.
Under the program, Wal-Mart is increasing the use of contractors, as well as its own private fleet of trucks, to pick up products directly from manufacturers and transport the goods to its distribution centers and stores. The retailer currently moves most goods only from its distribution centers to stores.

Safeway cuts prices

Safeway has altered its pricing strategy so that it is no longer 2% higher than conventional competitors. Steve Burd, Chairman/CEO told analysts that Safeway’s pricing is now “slightly lower than the chief conventional competitor in each market,” and from 2 to 4% lower than the largest secondary competitor in each market.

Sobeys debuts discount chain

Sobeys, the Canadian supermarket retailer, has opened a new chain of discount food stores in the Toronto area. The chain, called FreshCo, features fresh produce and meat as well as specialty ethnic products. The first eight stores are located in the Brampton and Mississauga communities west of Toronto.
The move comes as Loblaws, the country’s largest supermarket chain, opened a number of its discount No-Frills stores over the past few years and Wal-Mart Canada continues to cut prices on staple products.

Save-A-Lot focuses on urban growth

Supervalu will expand its Save-A-Lot limited assortment stores in urban areas. About half of Save-A-Lot’s stores will eventually be in metropolitan areas, said Bill Shaner, President/ CEO of Save-A-Lot. Supervalu has said it plans to double the 1,200-store Save-A-Lot chain over five years. The retailer has owned 20% of Save-A-Lot stores, with 80% run by licensees. The percentage of corporate-owned stores is likely to increase.

Wegmans put supplier name on store brand

Wegmans is disclosing the product manufacturer on one of its store brand packages. The supermarket chain decided to add the name of family-owned Gottlieber Spezialitäten AG to the label of its new Wegmans Brand Swiss Crepes. The supplier has a strong reputation for quality and is a gold medal winner with the Exposition of Swiss Tourism in International Culinary Art.

Dollar General creates DG Home brand

Dollar General has renamed its DG Everyday line of household cleaning items, paper products and kitchen essentials as DG Home. The rebranded line joins the recently launched DG Baby range of baby care items and the redesigned Clover Value grocery assortment. Dollar General, with more than 8,800 stores in 35 states, plans to add 600 stores this year.

IN THE STORES

Rite Aid is offering its new Tugaboo diapers in stores and supporting them with a video promotion. Parents and caretakers who watch brief informational videos about Tugaboos diapers and training pants can earn $1 off coupons.

Fresh & Easy wines have been recognized by Wine & Spirits Magazine, which named the retailer’s 1997 chardonnay one of its “100 Top Values of the Year.”

Hannaford Supermarkets is promoting its new line of spice rubs by applying them to any meat order free of charge. The rubs are marketed under the retailer’s Taste of Inspirations specialty line.

Winn-Dixie has introduced an organic active yogurt line with added probiotics and prebiotics to aid digestion.

Sobeys in Canada has launched Signal, a value brand in food, household and cleaning categories.

Harris Teeter has introduced Smooth & Creamy churned ice cream and frozen yogurt. There are 12 flavors of Smooth & Creamy and six flavors of frozen yogurt.

PetSmart and GNC are launching a line of dietary supplements designed for dogs and cats. The products will be in stores by this fall.

Target will add grocery sections to more than 240 stores this year.

Bloom, a Food Lion banner, promoted its beef brand with a billboard attached to a fan pumping out charcoal-scented air. The billboard was designed to look like a giant fork spearing a piece of meat.

Office Depot is introducing three office furniture lines, The Christopher Lowell Office Collections, that offer an assortment of desks and storage options.

H-E-B in Texas featured store brand products in its H-E-B Showcase, offering product samples and demonstrations.

King Kullen, the New York supermarket chain, celebrated its introduction of Topco Associates’ Food Club brand with a 10% savings on all products.

MARKET RESEARCH

Shoppers go online for grocery deals

Shoppers looking for deals on food purchases are turning to online tools for help, a new Deloitte consumer survey found. Deloitte reports that one-third of the 1,102 respondents polled subscribe to receive e-mails, recipes and coupons directly from food manufacturers, up six percentage points from two years ago. A total of 23% of consumers visit a food company’s web site to learn more about their products and will make a food purchase as a result.
Additionally, shoppers tend to become more bargain-hungry and will seek to compare prices, especially if they use a mobile device while shopping or when making shopping decisions. Men were more aggressive when it came to bargain hunting than women.

PLMA NEWS

PLMALive! video looks at secrets of success

PLMA will broadcast its second PLMALive! video series, “The Secrets of Store Brands Success,” on June 22-23. The video looks at best in class practices and analyzes what retailers and manufacturers will need to do in the years ahead. The first program, to be broadcast on June 22, focuses on retailers. The next day’s program looks at private label suppliers. Both parts, along with other video reports, can be seen on www.plmalive.com
“The Secrets of Store Brands Success” program follows the first PLMA Live! video series on “Recession & Recovery: What’s Ahead for Store Brands.” That three-part series appeared March 23-25 and was viewed by more than 1,000 people across the U.S. and abroad.

EVENTS

Oct. 4-5

Annual Washington Conference
Washington, D.C.

Nov. 14-16

Private Label Trade Show
Chicago

Dec. 8-10

Shanghai Private Label Fair
Shanghai

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