Summer 2018
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Justin King says there are limits to online grocery retailing

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Judith Kolenburg explains the success of private label wines

Store brands gain at Kroger
 Store brands are playing a pivotal role in Kroger’s new Restock Kroger strategy. Rodney McMullen, Chairman and CEO, told analysts that its store brands are an example of “how we are redefining the grocery customer experience. Kroger customers choose to put more of Our Brands in their baskets and pantries every day. Our Brands grew faster than the national brands in nearly every department and gained significant share overall.
 “In the first quarter, Our Brands made up 28.7% of unit sales and 26.7% of sales dollars,” he said. “In fact, Our Brands set the record for the highest ever retail dollar share in our history. Our Brands achieved a 5.1% sales growth at a 3.4% unit growth in the first quarter led by double-digit growth again in our popular Simple Truth and Simple Truth Organic lines.”
 The strong store brands performance came as Kroger reported revenue and same-store sales gains for the quarter, including a 66% increase in digital sales, fueled by its Clicklist store pickup program and home delivery in select markets. 

Walmart heads blockchain group
 Ten of the world’s biggest companies, including Walmart, Kroger and Nestlé are building a blockchain organization to remake how the industry tracks food worldwide. The Food Trust aims to improve recalls, quickly identifying the issue and shrinking the time consumers are at risk. Blockchain establishes authorship or ownership that experts say can’t be faked and eliminates costly middle layers because of its peer-to-peer structure. The encrypted data stays up-to-date on all participants’ systems. So far, the system stores data related to one million items in about 50 food categories, according to IBM.
 “You’re capturing real-time data at every point, on every single food product,” says Frank Yiannas, Vice President of Food Safety at Walmart, which leads the effort. “It’s the equivalent of FedEx tracking for food.”

More changes at Whole Foods
 Amazon keeps making changes at Whole Foods. There are published reports that Whole Foods is now charging vendors for the 10% discount that Amazon Prime members receive on select products.
 A Northeast distributor told its supplier customers that a 10% “scanback charge” would be applied to any Prime sale product purchased by shoppers. Whole Foods first implemented its Prime discounts, which offer an additional 10% discount on rotating sale items, in May and expanded to all stores just one month later.  Meanwhile The Wall Street Journal reports that some suppliers are unhappy with Whole Foods’ new fees and policy changes, with many refusing to sign new contracts with the grocer.
 Retail Dive reports that “it may very well be that all the charges and new policies are worth the trouble for suppliers. Data shows traffic is up significantly at Whole Foods stores, and that brands are seeing higher sales post-acquisition. Vendors and industry experts also see an opportunity for crossover success between the grocer and Amazon’s site.”

Amazon’s private label portfolio
 Not counting its Whole Foods brands, fast-moving consumer goods make up only a small portion of Amazon’s private label portfolio. A report by Coresight finds that “Amazon’s private label offering in grocery categories such as food and household care remains limited, and in beauty and personal care, Amazon offers just two private label products.”
 Two Amazon brands combined for 124 food and beverage products: Wickedly Prime (81 items) and Happy Belly (43 items), representing 1.8% of the retailer’s 6,825 private label offerings. Wickedly Prime includes such consumables as bars, chips and crisps, nuts, popcorn, puffed snacks, soup, seaweed snacks, sweet spreads, tea and trail mix. Happy Belly includes snack nuts and seeds, snack and trail mixes, and roasted bean and ground coffee.
 Health and household products, under the Amazon Essentials, Amazon Basics and Presto brands, accounted for the same percentage as food, totaling 126 items.

More CPG mergers, cutbacks
 The big CPG companies keep turning to mergers and cutbacks to compete effectively in the changing consumer marketplace. ConAgra Brands agreed to buy Pinnacle Foods for about $8.1 billion in cash and stock, to gain presence in the frozen food aisles. The buyout would create the second-largest manufacturer of frozen foods in the U.S.
 Meanwhile there is much speculation about a possible takeover of Campbell Soup, following the abrupt departure of its CEO. One of the possible suitors might be Kraft Heinz, according to published reports.
 After posting disappointing financial results, General Mills announced plans to eliminate up to 625 jobs by next spring as it strives to reduce costs and improve performance in its baking and yogurt products.

Lidl makes changes
 Lidl is switching its focus to smaller, more centrally located stores in the U.S., according to published reports. Under new U.S. management, the chain will focus on smaller stores, fewer products, and more central locations.
 Although it fell short of its goal to open 100 stores in the first year, it has only 53, the chain is encouraged by favorable market surveys that show it is finding acceptance, especially among younger consumers in the 18 to 24 age bracket.
 Instead of larger stores with 35,500 sq. ft., the company will open stores less than half that size. Reports say that Lidl will rent existing buildings in more central locations. It is also reducing the number of items sold, and changing them less often. The chain also will focus on the East Coast for its expansion, to make better use of its existing distribution centers.

Coalition for labelling legislation
 More than 60 organizations are creating the Coalition for Accurate Product Labels, representing farmers, manufacturers, small businesses and retailers. The coalition will support the Accurate Labels Act introduced in both the House of Representatives and the Senate.
 The Accurate Labels Act seeks to establish science-based criteria for all additional state and local labeling requirements; allow state-mandated product information to be provided through smartphone-enabled “smart labels” and on web sites; and ensure that covered product information is risk-based.
 The coalition said that so far in 2017 and 2018 there have been 30 proposals in 11 different states that would require warning labels or ingredient listings that go beyond national standards. The coalition pointed to New York, San Francisco and Baltimore proposing warning labels on sweetened beverages.

California bans local grocery taxes
 California lawmakers banned all local taxes on groceries for 12 years, a major victory for the soda industry. Lawmakers said they had no choice but to pass the tax ban as they were faced with the threat of a sweeping ballot initiative backed by the soda industry that would have made it more difficult to raise all local taxes. Health groups and supporters of soda taxes reacted angrily to the vote, calling it the result of a backroom deal cut by lawmakers and the beverage industry.
 The beverage industry has fought soda taxes, which have also been passed in Philadelphia and Seattle, with multimillion-dollar campaigns and by marshaling local business interests.
 In California, the beverage industry prevailed using the relatively new tactic of getting a state legislature to block local measures taxing soda and other groceries. Similar pre-emption laws have passed in Arizona and Michigan. Business groups in Oregon and Washington state are supporting ballot measures that would pre-empt local grocery taxes in those states.

Double digit growth for specialty foods
 Specialty food sales rose 11% between 2015 and 2017, according to a report by the Specialty Food Association. Specialty foods posted a record $140 billion in sales last year. This category is growing faster than all food sold at retail, climbing 13%.
 The specialty food categories with the highest dollar growth between 2015 and 2017 were water (+76%), rice cakes (+64%), refrigerated RTD coffee and tea (+63%) and jerky and meat snacks (+62%). The report also found that interest in specialty foods spans generations, with 79% of Gen Z shoppers, 67% of millennials, 65% of Gen Xers and 60% of baby boomers buying these premium products.



Walmart has introduced a range of wines under the Winemakers Selection brand.

Target has introduced the Made By Design brand, featuring 750 non-food items such as towels, cooking utensils, glassware, plates, pots and closet organizers.

Kroger plans to pilot unmanned road vehicles for grocery delivery under a partnership with a robotics and artificial intelligence specialist. 

Walmart has opened a 250,000 sq. ft. milk processing facility in Indiana.

SpartanNash has introduced a range of meal kits under the Good to Go! brand.

7-Eleven has added Voyager Point varietals to its store brands wines.

H-E-B plans to build a 46,000 sq. ft. snack manufacturing plant in Houston to produce plain and flavored tortilla chips.

The Fresh Market plans to close 15 stores in nine states as part of its turnaround plan. is opening a fulfillment center in The Bronx to build delivery service to New York.

Weis Markets in Pennsylvania has launched Plant Powered, a program that highlights plant-based food and beverage products in its private label and national brand assortment.




Independents are struggling
  Independent grocery stores posted lackluster financial results, according to a report from the National Grocers Association. Same-store sales for independents dipped 0.6% in fiscal 2017.The slight decrease, however, marked an improvement from fiscal 2016, when comparable-store sales fell 1.62% year over year. In 2017, sales were down for half of independent grocers.
  With decreased dollar sales, flat margins and higher expenses, the independent grocery sector saw net profit before taxes decline to 0.09% in 2017 from 0.98% the year before. EBITDA (earnings before interest, taxes, depreciation and amortization) also fell to 1.4% from 1.85%.
  NGA reported “profit leaders, the top 25th percentile in net profits, saw greater sales contributions by fresh departments — including produce, meat and deli — at higher-than-average margins.”

Natural foods retailers slowdown
  Nearly 60% of natural foods retailers saw sales growth in 2017, according the Natural Foods Merchandiser Market Overview. It reported that 30% saw sales decline and 13% reported no change. That’s a slowdown from the previous year, when 69% reported sales growth in 2016, 19% indicated they had sales drops that year and 12% reported flat sales. 
  Conventional grocery stores continue to be the biggest sellers of natural products, claiming 44% of 2017 sales. Thirty-eight percent of sales were made by natural stores and 18% by other retailers, including mail order, practitioners, the internet and multi-level marketing outfits.


Newt Gingrich speaks at Washington Conference, October 1-2
  Former Speaker of the U.S. House of Representatives Newt Gingrich will be a featured speaker at PLMA’s Annual Washington Conference, to be held October 1-2.
  Gingrich will make a presentation at the breakfast session on Tuesday, Oct. 2. After the presentation, attendees will go to Capitol Hill for a series of briefings on trade issues, legislative developments and changes at the U.S. Supreme Court. That evening the popular “Dinner With…” session will feature an interview with former Secretary of Defense William Cohen.
  At the Conference’s opening Monday night dinner, Amy Walter, National Editor for The Cook Political, will give an insider’s perspective on the midterm elections.
  The host hotel for the Washington Conference will be the Grand Hyatt at Capitol Hill. For more information or to register for the conference, email



October 1-2 Annual Washington Conference

Washington, D.C.

November 11-13 PLMA’s Private Label Trade Show




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