Summer 2010
	VIDEO INTERVIEW Can store brand’s success in Europe translate to the U.S.? PLMA Live! interviews two experts. CLICK HERE TO PLAY VIDEO INTERVIEW
	MARKET RESEARCH Suppliers cutting ingredients in food products
	UPCOMING EVENTS Annual Washington Conference Washington, D.C., Oct. 4-5

New data shows shoppers switching to store brands

  A new Symphony IRI report documents that shoppers are indeed switching over to store brands in categories where they have traditionally been loyal to national brands. IRI data shows that store brands are gaining market share in 43 of the top 100 categories where national brands had greater-than-average penetration. Symphony IRI designates these as “up & coming” categories for private label.
   The report goes on to note, “Store brand penetration has reached nearly 100%, yet plenty of upward potential remains to be had in driving current buyers to buy more within existing categories and expand purchase behavior into new categories.”
   Meanwhile, the latest PLMA/GfK nationwide poll of main household grocery shoppers shows that many of them are now buying store brands in categories where they were once loyal to national brands.
   The data found that a solid majority (63%) of shoppers have changed their food buying habits as a result of economic conditions. Of these shoppers, two-thirds are purchasing private label products in categories where they used to buy only national brand items. Importantly, 80% say they will be buying more store brands in categories where they previously only purchased the national brand product once the economy returns to normal.

Kroger CEO: Store brands build loyalty

   David Dillon, Kroger’s Chairman/CEO, told Wall Street analysts about new data revealing the retailer’s store brands are creating loyal customers. He cited Nielsen Homescan Data which documents that “our strong corporate brands strengthen customers’ loyalty.”
   The Nielsen data “shows that Kroger’s overall market share continued to grow in the first quarter. We serve millions of loyal households. All but 5,000 of these households purchased at least one corporate brand item during the quarter.”
   Dillon believes “This is an outstanding indicator of the acceptance of our own brands and Kroger’s ability to build lifetime loyalty with customers with our exclusive and preferred brands. Corporate brands represented about 26% of our first quarter grocery department sales and approximately 34% of grocery sales units. We are pleased that we have maintained share at this level because we have expected some adjustments in customers’ purchasing behavior as the economy improves.”

Private label sales accelerate at Safeway

Steven Burd, Chairman/CEO of Safeway, reports that store brand sales began to accelerate in the most recent financial quarter. “It’s been strong and we’re now seeing some acceleration here in the third quarter,” he said to analysts. “It’s always been a good business for us. And we have some particularly strong brands, and so we think that we should see some acceleration in private brands as we move through the balance of the year.”
He anticipates that this acceleration will yield long-term gains: “I think that when you get into a long recession like this, you’re able to introduce people into private label that haven’t been using it. They see the quality of the product. I don’t think that the share that we pick up necessarily goes away.”

Store brand share climbing at Supervalu

Supervalu reports that private label’s market share is climbing at both its corporate and independent stores. Craig Herkert, CEO, told investors that private label unit share has now climbed over 20% for the most recent quarter for the retailer’s stores.
“Customers are shopping our private brands with increasing frequency. Our entry-level price point offering, Shoppers Value, is also gaining greater traction with the independent retailers we service through our Supply Chain business. Year-to-date, this brand is up 19% with our independent retailers,” he said.

Promotions hurt P&G profits

Introducing discount versions of best-selling brands and spending more on promotions apparently is not paying off on the bottom line for Procter & Gamble. The CPG giant reported a 12% profit decline for the latest quarter, prompting a Wall Street sell-off of its stock, which dropped nearly 13%. P&G’s volume growth was much greater than dollar sales, which the company attributed to the increased movement of lower-priced products.
The company’s current marketing strategy may be hard to sustain, warns Ad Age, the magazine for the big brands. “Just maintaining this year’s ad and promotion spending levels could be ambitious, given that P&G faces commodity-price increases rather than the reductions it saw last year,” the publication writes.

FDA may OK third party audits for imported foods

The FDA has signaled that it may allow the use of third party audits for imported foods in order to meet the inspection requirements laid out in any new food safety legislation that Congress passes this year, according to published reports. The third party auditors can do what the agency does not have the resources to do—monitor the safety of imported food before it is at the border.
A briefing on the prospects for upcoming food safety regulations will be featured at PLMA’s 2010 Washington Conference, to be held Oct. 4-5. For more information, contact Linda Morales, Director of Programs & Conferences at (212) 972-3131 or by e-mail at washconf@plma.com.

Walgreens aims for grocery growth

   Walgreens anticipates an increase in store brand grocery sales as a result of the chain’s recent acquisition of the Duane Reade drug chain. Greg Wasson, President/CEO, told analysts that the acquired chain has an expertise in grocery branding that can be used in all the Walgreens stores.
   “We do a terrific job as you might expect in the health and beauty private brand products,” he said. “Where we under-penetrate and have over the years is in consumables, and that’s where they over-excel, and in their DElicious snacks, their cookies, their food, their consumable items. So, we are going to continue to drive and enhance our OTC offering, which we’ve done well for years. But we think Duane Reade can really help us in the consumable space.”
   This month, an initial selection of Duane Reade’s DElish brand consumables will be offered across all Walgreens stores. “I think there is tremendous opportunity to grow our private brand offering,” Wasson said.

CVS posts double-digit gains in store brands

CVS President and COO Larry Merlo told Wall Street analysts: “We continue to see double-digit growth in our store brand sales and we continue to leverage extra care to help deliver that value and drive profitable sales.” The performance of private label is especially important at a time when shoppers are reluctant to spend. “We still see the consumer being very cautious and looking for value and buying more on promotion and trying store brands,” Merlo said.

Big suppliers expand with acquisitions

   Two of the biggest private label suppliers are getting even larger. Ralcorp Holdings has completed its $1.2 billion acquisition of American Italian Pasta Co., which now makes the Kansas City-based pasta company a wholly-owned subsidiary.
   Cott Corp., the largest store brand beverage supplier, has gotten approval from the Federal Trade Commission for its planned acquisition of Cliffstar, a leading maker of juice products. Under the deal, Cott will acquire substantially all of the assets and liabilities of Cliffstar and its affiliated companies. The purchase price is $500 million in cash, payable at closing, subject to adjustments for working capital, indebtedness and certain expenses. The transaction is expected to close in the third quarter of 2010.
   Meanwhile another major store brand supplier, American Safety Razor, plans to be sold to creditors after filing for bankruptcy.

Tesco takes over Fresh & Easy suppliers

   Tesco is taking over the U.S. operations of two British-based suppliers to its Fresh & Easy chain. The suppliers, Wild Rocket Foods and 2 Sisters Foods, agreed to follow Tesco to the U.S. five years ago.
   The Financial Times reports that the takeover comes “after slower-than-expected expansion” of Fresh & Easy hurt the suppliers’ economic performance. Tesco told the Financial Times that the purchase was a sign of its commitment to the U.S. business.
   The companies provide fresh produce and meats from two facilities they built adjacent to Fresh & Easy’s distribution center near Los Angeles.

Harris Teeter CEO: Store brand sales stay strong

Private label played an important role in Harris Teeter’s sales gains in the most recent quarter, according to Thomas Dickson, the retailer’s President/CEO. Store brand penetration “remained strong at 24.52% for the quarter,” he said. “We continued to drive customer shopping visits and loyalty through the investments we have made in our in-store promotional activity and lower everyday prices. This has resulted in an increased number of customers, increased number of items sold and greater number of customer shopping visits.”

Private label wines score high

Private label wines are drawing kudos from Consumer Reports. The magazine gave high scores to wines from Whole Foods, Trader Joe’s, Wal-Mart and 7-Eleven. The convenience store’s wine ranked as one of the top four Chardonnays priced under $10. According to the magazine, “You can buy a very good Chardonnay for $5 to $9,” and it can be a store brand.

IN THE STORES

Whole Foods reports that its store brands are posting “continued strong sales growth.”

OfficeMax has launched a back-to-school brand called “Schoolio.” The line includes folders, binders, desk accessories, backpacks and lunch totes.

Safeway has extended its Refreshe brand beyond bottled water into carbonated soft drinks.

Wal-Mart has introduced limited online grocery shopping. The categories currently available include baking mixes, selected breakfast cereals, cereal bars, cleaners and detergents and paper & plastic products.

Kroger offered free boxes of store brand cereal with purchase of Walt Disney’s Alice in Wonderland home video.

BJ’s Wholesale Club has debuted Wellsley Farms brand imported pastries, European-inspired artisan breads and signature muffins.

Wegmans Food Markets has created “eat well, live well stations” that display a selection of fresh foods near the pharmacy department.

PetSmart is offering an exclusive line of pet products under the Martha Stewart brand.

MARKET RESEARCH

Suppliers cutting ingredients in food products

Mintel reports that major food and beverage marketers are simplifying their products. More than half (56%) of food/beverage product categories in the U.S. showed decreases in the average number of ingredients per product between 2008 and 2009, with an average ingredients decrease across categories of 2.4%. The researcher says this trend is a response to consumers increasingly shifting their nutritional health/wellness focus toward “natural,” “real” and additive-free foods. While most “simple” offerings are still coming from smaller companies, large companies are also participating, sometimes by introducing “simple” extensions of well-established brands.

PLMA NEWS

Washington Conference to be held Oct. 4 - 5

   Two of the country’s leading legislators—Sen. Byron Dorgan (D-North Dakota) and Rep. Ron Kind (D-Wisconsin)—are featured speakers at PLMA’s 2010 Washington Conference, told be held Oct. 4 - 5. They will be looking at what’s ahead in the government’s high-profile effort to promote nutrition and stem obesity.
   The formal program begins on Oct. 5 with Bill Schneider of CNN discussing “The Fight for Congress.” This is followed by separate briefings on the Healthy Choices Act, Food Safety and Drug Safety, and Obesity. In the afternoon, there will be a workshop on “Packaging and Labels: Speeding Up the Compliance Process.”
   A highlight of the Conference will be the appearance of former CIA Director George Tenet, who will be interviewed as part of the popular “Dinner With…” series. For more information, contact Linda Morales, Director of Programs & Conferences at (212) 972-3131 or by e-mail at washconf@plma.com.

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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