Want a slice of gourmet apple pie that you won’t find anywhere else? Head on over to the local A&P.
That’s the only place—along with A&P’s sister stores Waldbaum’s and Super Fresh—where you can buy a Hartford Reserve Apple Pie. Baked fresh every day on-premise, it is made with five different apple varieties—using the best apples from season to season to create a balanced and consistent flavor, according to company officials.
Hartford Reserve Apple Pie is the cornerstone of the chain’s Hartford Reserve gourmet private label line, one of nine A&P house labels. The others are America’s Choice national brand equivalent, America’s Choice Baby baby care, Smart Price value tier, Via Roma Italian products, Green Way organic/natural items, Preferred Pet pet food and products, Live Better health care products and Market Spa beauty care.
“Our exclusive brands, including Hartford Reserve, Green Way and Via Roma are doing very well—well beyond our expectations,” Doug Palmer, vice president, Own Brands, for Montvale, N.J.-based A&P tells Grocery Headquarters.
So well that they’ve received notice beyond A&P shoppers. “We’ve received numerous unsolicited calls from other retailers, not just domestic, but international as well,” Palmer says. “We’re going to continue to focus our business here in the Northeast as a priority, of course, but we’re not closing the door of opportunity for outside sales down the road.”
A&P’s latest private label launches are Live Better for health care products such as mouthwash and bandages and Market Spa for beauty care items. Both are replacing the Health Pride line, which had a generic-looking red, white and blue label. Two distinct labels were created as consumers perceive a difference between a beauty item and something considered medicinal.
“The excitement is always waiting for what the consumer thinks about what we’re doing. That’s the final validation,” Palmer says. “And fortunately we are getting rave reviews from our customers. Even our store associates are complimenting how well the products are doing and how they look on the shelves.”
That’s because private label has evolved substantially from its days of cans of irregularly cut green beans. “Private label has become the new brands of the 21st century,” says Dr. Robert Passikoff, president of Brand Keys, a New York-based brand loyalty and engagement research firm. “Stores have invested a good deal of time, effort and money in developing the store brands. As a result, these private labels begin to take on the ‘brandness’ of the stores.”
As a result, even in the midst of the recession, consumers are looking at private label with a new set of eyes. “People have become wise shoppers,” Passikoff says, “meaning that they are not buying on price. They are buying on value.”
“Whether the recession has caused people to change their eating habits or fear of the recession has caused them to change their habits, they are still not working their way to the restaurants,” says Brian Sharoff, president of the New York-based Private Label Manufacturers Association (PLMA). “But they want restaurant-quality meals and they are looking to the supermarket for gourmet and premium takeaway, put-it-in-the-microwave, heat-and-serve meals.”
Private label continues to climb as the percentage of total store sales, reaching 23.5% as of Sept. 5, according to figures from New York-based The Nielsen Co., Sharoff says. “That’s definitely an increase of 1.5 to 2 points,” he says. “We believe the increase in store brands is permanent and that the end of the recession does not send consumers back to national brands.”
In 2008, store brands surged more than 10% to a record $83.3 billion, according to PLMA. In the supermarket channel, private label climbed 9.4%, far outpacing national brands, which added 1.4% in sales versus the prior year. Private label dollar market share increased to 18.2% (from 17.1%), setting a new record.
This particular recession offers a unique opportunity for private label, says Dave Rogers, executive vice president, at Daymon Worldwide, a Stamford, Conn.-based private label broker and marketing firm. “The consumer is looking for a great value on good, quality product and that is something private label/private brands can address,” he says. “The quality of the product is just as good—if not better—than the national brands. Retailers are understanding that, so we’re seeing our retailers promoting it more,” Rogers says. “We’ve seen our retailers addressing their private brands better than they ever have in the past. They are putting more resources in place and looking at organizations like Daymon that have the expertise in that area to help them promote it and find solutions that satisfy customers.”
Because so many consumers are hurting, Rogers sees a resurgence of the value tier, formerly called generics. “Consumers who have lost their jobs are looking for value,” he says. “Some of our retailers who really haven’t gone down that path before are actually reconsidering and saying that maybe they should have a tier that satisfies that request in commodity products like sugar and mac-and-cheese.”
Dan Mazur, senior vice president, center store program management, at Topco Associates, based in Skokie, Ill., says his firm has seen double-digit growth in all three of its private brand tiers—premium, national brand equivalent and economy—during the current recession. “Many consumers turn to private brands for their lower prices but quickly discover the value of private brands when they experience the quality of the products,” he says. “The consumer acceptance of private brands is a result of many years of product quality and marketing improvements by Topco and its members.”
Mazur says joining a private-label cooperative, like Topco, provides a turn-key alternative. “By aggregating the volume of its member companies, Topco is able to source products and services at prices that provide members with a significant competitive advantage,” Mazur says. “In addition, Topco provides its members resources that include package design, quality assurance, distribution services and a complete assortment of existing brands across three quality tiers.”
Mazur says Topco continually receives interest from retailers looking to join its organization. “Retailers typically contact Topco directly or through one of our existing member networks,” he says. “We then initiate a dialogue with the retailer to learn more about their business and private brand objectives to determine if there’s a fit. If there is, we then go through a discovery and approval process that involves Topco’s Board and membership.”
FOLLOW THE LEADERS
While many retailers are expanding their private label programs to include gourmet, signature and unique items, the vast majority of private label still copies the national brands offerings.
“The majority of manufacturers that are out there do emulations of national brands, us included,” says John Sterling, vice president, marketing and category management, Ralston Foods, a St. Louis-based manufacturer of ready-to-eat cereals, hot cereals, snack mixes and other products. “When major manufacturers come out with a new product we’ll typically develop an emulation of it—if we think it is going to be a winner. We typically let it come out and see what the response is like.”
That strategy allows retailers to ride brand name manufacturers’ coattails. “You wait for them to build a market and create the awareness,” Sterling says. At this year’s PLMA Show, Ralston will be showcasing its version of Life cereal. “Life is a big cereal and until now there was no store brand emulation of it because it requires a different technology. We made an investment in that technology and now we can offer a version of it.”
Not all Ralston products are copies of national brands. The company will work with large retailers on formulating exclusive products.
“The traditional retailer is starting to see the opportunity to be a partner with their customers through their private label, both in terms of making sure it is good quality and a good value in terms of low prices,” Sterling says. “Retailers recognize that their private label is another way to partner with the consumer.”
“Being a national brand equivalent is still the initial bar for store brands,” says Steve Fay, vice president, Berner Food and Beverage, a Roscoe, Ill.-based manufacturer of private label snack condiments, cheese spreads, cheese sauces, ready-to-drink iced lattes, high protein drinks and nutrition drinks emulating Slim Fast and Ensure.
“In many instances we see retailers looking to move the bar up and differentiate their store brand from the national brand with a higher quality product. We have invested a great deal in having a robust research and development component to our business to be responsive to that trend,” he says.
When it comes to sourcing a private label supplier, retailers are not looking simply for a manufacturer, but rather someone that listens to them and understands their goals and objectives, Fay says. “They want intelligent partners who understand the category of products they supply and understand the environment that those products are sold in,” he says. “They want partners who can offer up intelligent insights, especially in smaller categories where their expertise might not be as well honed.”
With the push towards better health and growing legislation against “harmful” ingredients, retailers are also seeking private label manufacturers with an eye towards nutrition.
Gilroy Foods & Flavors, a Gilroy, Calif.-based subsidiary of ConAgra specializing in 100% California grown private label dehydrated garlic and onion products, has seen a spike in its business in recent months.
“Our dehydrated garlic and onion seasoning are grown and processed in the U.S., an attribute that consumers care increasingly more about as food safety headlines around the world make waves,” says Dana Southard, integrated marketing manager. “In a recent study, a staggering 82% of consumers indicated they are willing to pay more for a garlic seasoning product grown and processed in the U.S. The average upcharge they would be willing to pay is 52-cents. That’s a powerful message for retailers to consider.”
So is organic and natural. Chino Valley Ranchers, an Arcadia, Calif.-based grower of cage-free eggs derives a little more than 50% of its business from private label, according to David Will, general manager. “You are hard pressed to find a retailer that doesn’t offer a cage free or an organic selection,” he says. “The day of just having one type of egg in the store is over. You now have a combination of white and brown, cage free, organic and nutrient enhanced.”
One profitable area of private label often overlooked by retailers is the bulk business. Buy The Pound, a Chelmsford, Mass.-based manufacturer of automated bulk dispensing machines is currently testing Green Mountain coffee with two new England chains and is working with PetSmart on a private label cat food program.
“Coffee is exceptional. It looks great in the machine and people get it,” says Greg Mazur, president. “Standard bulk bins are dirty and portray a low quality. Our machines can be customized to the store décor and are oxygen free to keep items like coffee fresh.”
Have a Holly jolly chicken
After being absent from the retail scene for more than a decade, Holly Farms chicken is back, born again as an exclusive brand for Food Lion LLC.
As part of its arrangement with Springdale, Ark.-based Tyson, Food Lion is replacing all store-brand fresh chicken with Holly Farms premium brand chicken at its more than 1,200 Food Lion, Bloom and Bottom Dollar banner stores.
The Holly Farms poultry company was founded in Wilkesboro, N.C. in 1958 and built a reputation for high-quality, fresh, tray-packed chicken over the years. The company and its operations were bought by Tyson Foods in 1989. In the late 1990s, Holly Farms was phased out as a national brand.
“Food Lion has a unique opportunity to reintroduce one of the most well-respected brands of fresh chicken at out stores,” says Hans Lefebvre, vice president of meat and seafood merchandising at Salisbury, N.C.-based Food Lion. “In an economy where consumers are always searching for premium products at great prices, we are able to provide both to our customers through this arrangement.
“This is a fantastic opportunity to provide a unique product offering exclusive to our customers, while delivering on our commitment of quality products at great prices,” Lefebvre says. “The Holly Farms brand has a strong heritage in many markets in which we operate as a provider of quality, premium fresh chicken at a great price. The reintroduction of this brand enables us to provide a differentiated product at or below current store brand fresh chicken prices.”
“We’re excited about working with Food Lion to offer Holly Farms-branded chicken to consumers again,” says Tim Price, vice president of business development for Tyson Foods’ retail fresh poultry business.
Hall of innovation
Remember the upper level mezzanine at the PLMA Show, where fresh, frozen, refrigerated and gourmet foods were displayed? This year they are moving down to the main floor and being replaced by PLMA’s Innovation Hall, an historic initiative that’s designed to bring together research, branding, design, packaging development, training and certification companies in one easy-to-shop show floor.
Open to all PLMA attendees, Innovation Hall will have different hours than the main convention, opening on Nov. 15, from 3 p.m. to 7 pm; Nov. 16, from 9 a.m. to 6 p.m.; and Nov. 17, from 9 a.m. to noon. Booths will be arranged in an island fashion and there will be an extensive speaking program. Approximately 45 companies are participating in the Innovation Hall and speaker programs, including GfK Roper Research, Nielsen, Interbrand, Wallace Church, Willard Bishop, McMillan Doolittle, Mead Westvaco, Intel and A.T. Kearney.
“This is really, really different and not something seen at PLMA before,” says Dane Twining, director of public relations.
“Innovation means that private label store brands growth is no longer contingent on product concept and restaurant-quality food,” says PLMA president Brian Sharoff. “That’s still very important, but major retailers are now looking for innovations in logistics, shelf management, packaging, profitability—anything that makes the entire store brand program more productive and efficient. Now more than ever, retailers are changing the way they bring private label products to market.”