	MARCH 2006

	IN THE STORES Target is launching an exclusive brand of super-premium dog food called LIFELong
	MARKET RESEARCH Product introductions gain worldwide
	PLMA NEWS Registration opens for Executive Education Program
	EVENTS

Retailers ramp up natural and organic store brands

Natural and organic products are emerging as this year’s biggest retailing opportunity, and grocers are ramping up their store brand programs to stand out in an ever more crowded marketplace.

   The chain most responsible for creating the natural and organic trend, Whole Foods Markets, is turning more and more to private label. John Mackey, CEO, has told financial analysts that the chain will boost its store brand assortment as a way to set itself apart from the many new competitors. About 16% of Whole Foods’ non-perishables sales are in private label brands, Mackey said, and this is expected to grow to over 20% in the near future. He noted that Whole Foods will give less of a commitment to national brand products as they become more widespread in other stores
   Private label also promises to be a key strategy for a big new player in the natural and organics field—Supervalu. The company has just hired a top executive from one of the country’s most innovative store brand retailers, Trader Joe’s, to run Sunflower Market, its new natural and organics retail format. Glenn Backus II, formerly Vice President, Merchandising, Trader Joe’s, has been named General Manager of Sunflower, reporting to John Hooley, President of Supervalu's Retail Food Cos. Division.
   Initially, there will more than 120 products in the Nature’s Best line offered by Sunflower, but Jeff Noddle, Supervalu’s Chairman and CEO, indicated that this number would soon be expanded. Supervalu will not only offer the brand in Sunflower but also in other corporate and franchised stores.
   The nation’s biggest retailer doesn’t intend to miss out on the trend. Wal-Mart has just announced that it is doubling its assortment of organic SKUs in the first phase of a long-term plan to add more of these products. While the expansion will be significant, DeDe Priest, Senior Vice President, Dry Grocery, would not speculate on what percentage of Wal-Mart’s food assortments would eventually be organic.

Store brands making big gains in OTC

   Growing sales in the cough-cold-allergy-sinus, first-aid, and smoking cessation sectors are lifting the market for private label over-the-counter drugs, which is expected to reach $3.6 billion by 2010, according to a study from Kalorama.
   Store brands account for about 20% of the OTC market and sales reached $3.4 billion in 2005. The study credits the performance to the wide-reaching appeal of lower cost, better packaging and promotion, and innovative delivery systems. The bottom line: The market has shed its image of selling second-rate, me-too versions of national brands.
   “Private label OTCs have moved into their niche by providing high-visibility products that often go beyond name brand offerings,” said Kalorama. “There’s actually a new trend in the foot care sector where, for the first time, retailers are completely replacing national brands with their own in-store brands, as sales of the latter are far outpacing their national brand counterparts.”

Target’s electronics brand performs well

Store brands are playing an important role in Target’s rapidly growing consumer electronics business, reports Robert Ulrich, Chairman and CEO. “Electronics are very healthy,” he said, and “TruTech, which is our own private brand of electronic products, performed very well. We expect another very strong year in electronics with the continued advancement of digital technologies and the new gaming platforms that are coming out. Hardline penetration in direct imports continues to grow. Not at the same rates that we have enjoyed in the past, but we still have opportunities to increase our own brand penetration or direct import penetration in hardlines.”

Ahold to introduce home goods line

Ahold plans to introduce a line of home goods products through all its stores in the U.S. and Europe, according to Anders Moberg, CEO. The range will debut in the first half of next year and is a part of Ahold’s strategy to double its non-food sales in the near future. The new line will initially consist of kitchen items, but may expand to other categories. Analysts were not surprised at the retailer’s emphasis on home products, given Moberg’s experience at Ikea, where he was a top executive for several years. This line will be designed by Bart Karis, who has worked extensively with Ikea.

Store brands lead growth at JCPenney

Store brands sales have been leading the growth at JCPenney, as the retailer reinforces its strategy of “managing and marketing its brands as true brands instead of labels,” Mike Ullman, CEO, said to security analysts. “I think it’s been clear that our private brands have been growing at a faster rate than the overall store, so shoppers are telling us they like what we’re doing.” Penney will be adding new brands in selected categories but the “biggest opportunity for us is to do a better job with the brands we have,” he said.

House passes national food safety standards

The U.S. House of Representatives has voted in favor of the National Uniformity for Food Act, which would have the effect of creating national food safety laws that would supersede state laws. The bill now goes to the Senate for consideration. If the bill becomes law, it likely would supersede California’s Proposition 65, a 1986 law that requires consumer notification about contaminants known to cause cancer or birth defects and which has been the basis of numerous lawsuits in the state.

FTC wants data on marketing to children

The Federal Trade Commission has asked the public for comments regarding the food industry's marketing practices targeting children and adolescents. In a public notice, the agency also issued a warning to food and beverage companies that it is unlikely that sufficient information on their marketing practices is publicly available and that it would likely require data from the industry to complete its report. The FTC wants specific information on the types of foods being marketed, the types of media being used to market the products, the amount and time spent on each medium, and the age range being targeted.

Harris Teeter debuts ‘yourwellness’ program

Harris Teeter has introduced a new program called “yourwellness,” using new packaging and shelf signage to help shoppers identify healthful products. About two dozen wellness “keys” can now be found on store brand products, representing a variety of attributes including sugar free, fat free, vegan and heart-healthy. The keys can be found on select packages of Harris Teeter brand and HT Natural products. To make finding the products easier, the chain has placed wellness key shelf tags throughout all stores.

New package design for Wegmans’ brands

Wegmans is changing the look of its store brand products. The signature of Danny Wegman, Chairman, has been replaced with “The Wegmans Family” signature to acknowledge two daughters now working in the company. Contact information has been added to the package and the label design has been updated on products where there is a similar national brand.

Kroger switches buying responsibilities

Kroger is changing responsibilities for buying and sales planning in several categories. Beginning next year, the company will transfer company-wide responsibilities for buying and sales planning in the housewares, seasonal and stationery categories to its Fred Meyer division. Other general merchandise categories are scheduled to follow in 2008. Meanwhile, Fred Meyer will shift buying responsibilities for its grocery category this year and its candy and health and beauty care categories next year to Kroger's facility in Blue Ash, Ohio, a suburb of Cincinnati. Grocery buying and sales planning functions at its California division and its QFC division in the Seattle area will be changed later this year.

Luxury appliances go store brands

BrandSource, a national network of more than 3,000 major appliance retailers, is gearing up for the launch of a private label luxury appliances line. To be launched in a few months, the line will include built-in refrigerators, dishwashers and cooking products. “Targeted towards their premium consumers, this private label brand will be highly profitable to BrandSource members as it gives them the option to purchase luxury products” at affordable pricing, the buying group said.

IN THE STORES

Target is launching an exclusive brand of super-premium dog food called LIFELong designed to deliver complete nutrition. There are five varieties, including Lamb & Rice and Chicken & Rice formulas. Retail price varies with package size, but a 40 lb. bag of Lamb & Rice Adult Dog Food retails for $29.99.

Esso, in Canada, is offering 300 President’s Choice products in five of its gas station/convenience stores in the Toronto area. After six months, Esso will decide whether the program will be expanded. Products include soft drinks, snacks, pasta sauces, bakery items, and desserts.

Raley’s now offers its line of refrigerated gourmet soups under the Nob Hill Trading Co. brand. The soups contain California-grown ingredients and have been developed exclusively for the California supermarket chain.

Trader Joe’s has introduced two products marketed as containing Omega-3, known for reducing the risk of coronary heart disease. The items are Soy & Flax Clusters Cereal and Omega Cranberries. A 5-oz. bag of the latter costs $1.89.

Wal-Mart is selling a store brand version of the low-calorie sweetener Splenda in its supercenters around the country; Altern is the brand of the sucralose product.

Dierbergs Markets has introduced all-natural turkey under a new brand, Dierbergs Just Perfect.

Loblaws is launching an apparel line called Joe Flash, reportedly named for its designer Joe Mimran. He also designed Loblaws’ general merchandise line under the President’s Choice brand.

MARKET RESEARCH

Product introductions gain worldwide

The number of new products is increasing around the world, with the beverage category leading the way, according to Mintel. More than 156,000 new products appeared on store shelves in 2005, with about 16,000 of them launched in the U.S. Beverages—the most active category in food and drink—accounted for nearly a fifth of the introductions. Bakery was second with 12%, followed by confectionery with 11%. Food posted nearly a 10% increase in launches from 2004.
Some areas of focus are catering to aging consumers with new foods that are easier to chew and those formulated for the dietary needs of seniors. Portion control new products are expected to increase. Mintel also predicts that food makers will be introducing more “wisdom producing” products containing Omega-3, a fatty acid said to enhance brain function.

Carbonated soft drink sales fizz

Americans bought fewer carbonated soft drinks in 2005 than the prior year, the first decline in the past 20 years, according to Beverage Digest magazine. Sales volume of soft drinks fell 0.2% in the U.S. last year. More concerned about their health, people are gravitating toward water, tea and sports drinks like Gatorade. Per capita consumption also declined in 2005. The average American drank 828 eight-ounce servings of carbonated soft drinks last year, down from 837 in 2004. Some industry experts are doubtful this year’s downturn can be reversed. For example, Morgan Stanley analyst Bill Pecoriello expects U.S. soft drink volume to decline at a rate of about 1% for the next several years.

PLMA NEWS

Registration opens for Executive Education Program

   Registration is open for PLMA’s annual Executive Education Program at St. Joseph’s University, Philadelphia, to be held June 12 to 15. Now in its sixth year, the program has provided graduate level business instruction to more than 300 private label executives—manufacturers, retailers, wholesalers and brokers—in three courses of study—Core, Advanced and Retail Colloquy.
   In 2005 alone, the program matriculated some 100 executives in sessions at the private label trade show in November in Chicago and at St. Joseph’s in June. Retailer and wholesaler enrollment has also increased sharply in the past two years, with more than 50 executives from major operators such as Safeway, Wal-Mart, Sam’s Club, Ahold USA, Winn-Dixie, Raley’s, Walgreens, Pharmasave, Nash Finch and Topco signing on; nearly a dozen more have already enrolled for this June’s program. PLMA also conducts executive education programs in The Netherlands, France and Italy.
   The Core curriculum stresses basic knowledge, from private label history to the fundamentals of private label marketing, packaging and promotion; the Advanced curriculum emphasizes leadership and strategy for individual decision-making with an examination of how model store brand programs achieve success; and the Retail Colloquy offers manufacturers and retailers the chance to work together to develop problem-solving techniques that deal with current and future industry challenges. Classes are cross channel and applicable to all retail formats.
   For more information, contact Sylvia Stein, executive education coordinator, at (212) 972-3131.

EVENTS

May 30-31	“World of Private Label” Trade Show Amsterdam

June 12-15	Executive Education Program Philadelphia

September 25-26	Annual Washington Conference Washington, D.C.

November 12-14	PLMA’s Annual Trade Show Chicago

Return To: Previous Screen