Summer 2017
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Amazon’s new private label
 It looks like Amazon is about to become a serious private label grocery retailer. That’s the judgment of two Wall Street analysts evaluating the online giant’s bid to acquire Whole Foods Market for $13.7 billion.
 “The possibility that Amazon will begin to use the well-known 365 private label brand from the Whole Foods Market as a lynchpin of its food grocery offering is important,” write Alexia Howard and Matt Romariz of Bernstein.
 “Clearly many of us had thought that any ‘Amazon’ branded foods would be shunned by consumers. But by acquiring Whole Foods, the 365 brand becomes instantly available as part of Amazon’s online offering. This brand is highly credible with consumers–indeed we had previously asked Whole Foods if they might consider selling the brand more broadly into other retail channels.
 “The idea that a juggernaut company in the online retail space is clearly staking its turf in the private label world is game-changing,” the analysts concluded.

Albertsons invests in online
 Albertsons is stepping up its online investments, The retailer plans to overhaul the e-commerce systems of its 2,300 supermarkets and stores in fiscal 2018. It expects to migrate, and in some cases rewrite, e-commerce systems built five to 15 years ago so that they can run on modern public and private cloud platforms.
 Albertsons currently is updating features on its mobile app and websites to be “cleaner and simpler” for shoppers, such as shortening the process of signing up for an account and streamlining online payments, CIO and Executive Vice President Anuj Dhanda told journalists.
 Albertsons recently hired top technology executives come from outside the grocery business, from sectors that have already dealt with the technological and cultural transformation necessary to become a digital business. About half of Albertsons’ customers in its 35-state territory can shop online. The other half will get the capability as the IT group migrates stores to corporate systems over time.

Big brands are struggling
 “So Long, Hamburger Helper: America’s Venerable Food Brands Are Struggling.” That was the headline in a major feature article in The Wall Street Journal. It reported that “firms including General Mills and ConAgra were slow to address the twin threats of fresher, more modern fare and inexpensive store brands.”
 The publication noted that “store brands gained popularity around the financial crisis, and analysts expect their market share to rise as they add natural brands of their own and as discount chains, which mostly sell store brands, expand.”
 The article went on, “Private label product shelf space has expanded 3.5% a year since 2012, estimated Credit Suisse analyst Robert Moskow in a recent report. Big brands face escalating price pressure from the incursion of store brands and from retailers demanding lower prices, he wrote.”
 It noted that “the plight of the packaged-goods companies is a classic business tale. An industry creates winning products, carves out strong market positions and enjoys reliable, sustained revenue—only to be too slow to adapt to changes that threaten those cash cows.”

Store brands add trips
 Nielsen says store brands are helping deep discounters, such as Aldi and Lidl, grab additional shopping trips. “For many retailers, but particularly deep discount retailers, store brands play a strategic role for winning over shoppers from other channels,” Nielsen noted. “Compared with other major retail channels, deep discounters have more than twice the store brand share of dollars.”
 For the first time in more than a decade, shoppers actually made more trips to stores, taking an average of 109 trips per household in 2016. However, despite this increase in trips, overall spending was flat, as 85% of those additional trips had smaller basket sizes (fewer than 15 items per trip) compared with the year prior.
 While consumers are taking more trips across most retail channels, deep discount grocery is seeing some of the largest increases in shopper activity. In fact, while trips across all channels are up 0.5%, shoppers took 2.8% more trips to deep discounters in the last year. However, only about 40% of households shop at deep discounters, which is much lower compared with more established channels like supermarkets and mass merchandisers. For deep discounters, there are still significant opportunities for growth ahead, unlike the already saturated conventional grocery channel.

Kroger hits the 30,000 mark
 Kroger now has more than 30,000 products in its store brands program and has introduced 1,000 food and household items in the past 18 months. “Our brands sold a record-setting 8.2 billion units in 2016, which equates to customers choosing to add 1.25 million of our exclusive products to their shopping carts every hour that our stores are open,” said Gil Phipps, a Kroger Vice President. “Through innovation, we are committed to introducing new items monthly that give our customers a wide selection of choices and price points, and always guaranteed quality.” 
 For the latest quarter, Kroger’s store brands penetration came in at 28% of total units sold and 25.6% of sales dollars, excluding fuel and pharmacy.

Aldi aims to be number three
  Aldi announced a $3.4 billion capital investment plan that would expand the small discounter to 2,500 locations by the end of 2022. The expansion might make it the third largest U.S. grocery chain by store count. Aldi is nearing the end of a $3 billion investment announced in 2013 to expand to expand to 2,000 stores by the end of 2018. Earlier this year, Aldi announced a separate initiative to invest $1.6 billion in 1,300 store renovations, indicating the company is unleashing $5 billion toward growth in the next five years.

No changes for Nutrition Facts
 The new Food & Drug Administration head told Congress that although the Nutrition Facts label rule deadline is being delayed, the agency has no plans to reopen the rule. Commissioner Scott Gottlieb assured the Senate appropriations subcommittee that the delay was simply a means to provide “additional guidance to sponsors on how to interpret aspects of the new Nutrition Facts label.”
 Gottlieb said, “This is a time-limited delay. This is not a suspension of the regulation. We are not reopening the regulation.” The agency did not indicate how long the extension would last, saying only that it would provide details of the extension through a Federal Register Notice at a later time. 
 Many food industry executives have urged the administration to align the compliance dates for changes to the Nutrition Facts Label and U.S. Agriculture Department’s GMO labeling disclosure requirements. The U.S.D.A. is required by law to publish a final rule by July 2018 but the compliance date for GMO labeling disclosure requirements will likely be well beyond July 2018.
 One scenario has the Nutrition Facts compliance date being pushed back to 2021 and being implemented at the same time as the mandatory bioengineered food disclosure label. During his confirmation hearing Gottlieb appeared to support the idea.

Lidl hit with lawsuit
 Welcome to U.S., Lidl. The German-based retailer’s first stores here were barely two weeks old before Kroger greeted it with a lawsuit alleging Lidl’s “Preferred Selection” line of private label goods copied Kroger’s “Private Selection” brand.
 The suit, filed in U.S. District Court in Virginia, alleges that Lidl purposefully selected a name and logo for those items meant to confuse consumers and infringe upon and interfere with consumer understanding of Kroger’s brand, which it said accounted for nearly $2 billion in sales in 2016.
 Lidl is fighting back. The German retailer filed court papers in which it said that Kroger has “offered a striking absence of evidence in support of its claims.” Lidl won the first round of the legal battle. A federal judge denied Kroger’s request to prohibit Lidl from selling its “Private Selection” brand.

Target gets sustainable
 Target is making its store brands healthier and more sustainable. The retailer reports that it is two thirds of the way toward completion of its goal to remove artificial flavors, preservatives, sweeteners and colors from all its children’s items by the end of 2018.
 By the end of last year, 162 packaging design changes had been made to store brands products to promote sustainability. The changes included using less packaging and more recycled content in packaging. The retailer plans to source all private label paper-based packaging from sustainably managed forests by 2022 and to eliminate expanded polystyrene from store brands packaging by 2022.

IN THE STORES

Walgreens is introducing its Sleek MakeUP brand of cosmetics online and at more than 150 stores. The retailer acquired the British brand in 2015.

Whole Foods Market is delaying the opening of anymore of its small format stores under the 365 banner.

Lidl will establish a regional headquarters and distribution center in Cartersville, Georgia with the construction of a $100 million facility.

Target's smaller format urban stores may have one-third of the store space dedicated to groceries, which are expected to bring in half of all sales.

Amazon has begun offering its new meal kits to customers in select markets.

Sam's Club is testing a business online delivery program in Dallas.

Wal-Mart is expanding its certified Angus program across the U.S.

Walgreens called off its two-year pursuit to acquire Rite Aid and will buy over 2,000 of its stores.

Associated Wholesale Grocers will combine operations of its Fort Worth, Texas division with its Oklahoma City division and sell the Fort Worth warehouse.

Vitacost.com, Kroger’s online retailer of health and wellness products subsidiary, is introducing new branding and packaging for its dietary supplements.

Publix plans to launch same-day grocery delivery via Instacart across all stores by 2020, according to published reports.

Loblaws is expanding its no name Naturally Imperfect line to include frozen blueberries, strawberries, mixed berries, mixed fruit and mangos.

Fresh Encounter, an Ohio-based retailer, is acquiring 15 Marsh Supermarkets stores.

 

MARKET RESEARCH

Natural products sales keep climbing
  Natural products industry sales grew 7.4% across all retail channels in 2016, reaching $141 billion in sales, according to a Natural Foods Merchandiser’s report. It found that 69% of natural products stores saw their sales increase last year. Competition also was held at bay with 72% of the stores surveyed saying they didn’t have new competitors open their doors nearby in the past year. Conventional grocers are the biggest sellers for natural products, capturing 44% share of all natural products sold last year, compared with 39% sold through natural products stores.

What’s a clean label?
  More than half of consumers say they’re familiar with the term “clean label,” but just 38% indicated a strong understanding of it exactly means. A Kerry research report shows that consumers have different interpretations of the commonly used industry term. Some thought it meant products were “all natural,” “non-G.M.O.” or had “no additives or preservatives”. Others thought the term included product attributes such as “farm grown,” “sustainably produced,” “minimally processed” and “made with real ingredients.”

PLMA NEWS

Washington Conference to be held October 2-3
  There are plenty of big changes taking place in Washington, whether its regulatory action on Nutrition Facts and GMO product labeling or proposals for a major overhaul of the country’s tax code. These topics and many others will be on the agenda at PLMA’s 2017 Washington Conference, to be held October 2-3.
  At the Conference’s opening dinner on Monday, October 2, Frank Luntz, Contributing Editor for Fox Broadcasting, will give an insider’s perspective on what’s happening. The next day will begin with an analysis of the international scene by David Ignatius, foreign affairs columnist for the Washington Post. After the breakfast session, attendees will go to Capitol Hill to be briefed on the latest legislative developments. The session will be moderated by Erik Winborn, PLMA’s representative in Washington.
  The Conference wraps up Tuesday night with one of its most popular features, the “Dinner With…” interview. This year the guest is John W. Dean, former White House Counsel, who was a key witness in the Watergate investigation.
  The host hotel for the Washington Conference will be the Grand Hyatt Washington, which is centrally located between the White House and the Capitol. For more information or to register for the conference, email conferences@plma.com.



EVENTS

 

October 2-3 PLMA's Annual Washington Conference
 

Washington, D.C.

 
November 12-14 Private Label Trade Show
  Chicago

 

 

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