Store Brands - July 2018 by ensembleiq

Authentic, Italian pizza as an own brand

2018 Beverage Report

Politics and private brands July 2018 | www.storebrands.com

ONWARD AND UPWARD Under Juan De Paoli, newly formed Ahold Delhaize USA aims to make its store brands â&#x20AC;&#x2DC;iconicâ&#x20AC;&#x2122;

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Volume 40 No. 7 July 2018

DEPARTMENTS 6

Editor’s Take

Viewpoint

Around the Industry

Getting Social

End Cap

CONTENTS

CATEGORY INTELLIGENCE 39

Sauces and marinades

Cough and cold

Trail mix and jerky

Oils and vinegar

Paper products

COVER STORY

Onward and upward Newly formed Ahold Delhaize USA aims to make its store brands ‘iconic’

FEATURES 20 SPECIAL REPORT The real deal Authentic Italian pizza is a premium product that can help retailers differentiate

23 TRENDING 2018 BEVERAGE REPORT A look at the trends in private brands for sports nutrition drinks, roast/ground coffee, ready-to-drink beverages, single-serve coffee and aloe drinks

34 TRENDING

Moving with the times

While fresh products and e-commerce pose additional opportunities for store brands, their transport comes with additional challenges

37 TOTAL STORE Politics and private brands As store brands become more about than just creating and selling tangible products, retailers are trying to improve their own brand images through non-tangible measures. But they might want to stay out of politics

Store Brands (ISSN-0190-9851; USPS # 0488-370) is published monthly by EnsembleIQ, 8550 W. Bryn Mawr, Suite 200, Chicago, IL 60631. Subscriptions: One year, $95; two years, $146. One year, Canada $112; two years, Canada $150, One year, foreign $175; two years, foreign $285. Payable in advance with a bank draft drawn on a US bank in US funds.Single copies $10, except foreign, where postage will be added. Reprints, permissions and licensing, please contact Wright’s Media at ensembleiq@wrightsmedia.com or(877) 652-5295. Canada Post: Canada returns to be sent to IDS, P.O. Box 456, Niagara Falls, ON, L2E6V2. Periodicals postage rates paid at Deerfield, IL and additional mailing offices. Printed in USA. POSTMASTER: send all address changes to Store Brands PO Box 1842 Lowell MA 01853. Copyright 2018 by EnsembleIQ. All rights reserved, including the rights to reproduce in whole or in part. All letters to the editors of this magazine will be treated as having been submitted for publication. The magazine reserves the right to edit and abridge them. The publication is available in microform from University Microfilms International, 300 North Zeeb Road, Ann Arbor, MI, 48106. The contents of this publication can not be reproduced in whole or in part without the consent of the publisher. The publisher is not responsible for claims and representations. 4

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On Sept. 11, 2013, Juan De Paoli became a U.S. citizen while living in San Antonio, Texas. Born in Italy, De Paoli wanted to be a U.S. citizen since he was a child. He was fascinated with the country and its ideals. “I just love this country,” says De Paoli, the current senior vice president of private brands for Retail Business Services, an Ahold Delhaize USA company. DePaoli’s citizenship is a win for America. He’s a humble, thoughtful and gracious person. And, these days, America can use all the humble, thoughtful and gracious people it can get. De Paoli adorns the cover of this issue of Store Brands. While he is the leader of Ahold Delhaize USA’s private brand team, he is more about the team than himself. So it should be duly noted that De Paoli wanted a photograph of himself with several members of his team on this month’s cover, not just himself. While that didn’t happen, De Paoli’s request tells a lot about his character. We elected to place De Paoli alone on the cover for a few different reasons. One, it’s important to take a simplistic approach when deciding on an image for a magazine cover. We have to respect our readers, who are busy with many things in their jobs and who have short attention spans (don’t we all?). With one person on the cover, our readers can quickly figure out who that person is by reading the accompanying copy. But when there are four or five people on the cover, we are asking our readers to identify several people, which they might not do. A cover can simply just get too “busy” with more than two people are on it. It’s also difficult to get several people on a cover because of its vertical format. Then the photographer has to take a photo from farther away, which can impact the drama or emotion that might come with just one person being photographed from a closer distance. Remember, photography is art. So, for those reasons, we decided to feature De Paoli alone. While I apologize for the quick lesson in cover photography 101, I just want to let you know our thinking behind cover shoots. This column is about De Paoli, but revealing the story behind the cover shoot had to be told as an anecdote to reveal what makes him operate. So back to De Paoli, who is a highly regarded leader of the private brands for one of the biggest grocers in America. De Paoli is downright passionate in his quest to make Ahold Delhaize USA’s private brands “world class” and “famous.” And De Paoli is also highly regarded by his team members and his peers for just being a genuinely good guy. After the photo shoot, De Paoli took me to his office to show me what he calls his “most valuable property.” It wasn’t a photograph of a car or a house — not even close. The “property” consisted of two folded-up flags in display cases placed on a shelf in his office — one a U.S. flag and the other a Texas flag, both awarded to him the day he became a U.S. citizen. “I’ve lived in multiple countries around the world, and this is the best country and the best place for anybody to be,” De Paoli said, beaming. Like I said, Juan De Paoli is America’s gain — for the good of the store brands industry and for the good of our country’s people.

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EVENTS • MARKETING • DIGITAL • RESEARCH • CIRCULATION CORPORATE OFFICERS Executive Chairman

Alan Glass

Chief Executive Officer

David Shanker

Chief Operating Officer & Chief Financial Officer

Richard Rivera

Chief Brand Officer

Korry Stagnito

President, Enterprise Solutions Chief Digital Officer

Terese Herbig Joel Hughes

Chief Human Resources Officer Senior Vice President, Innovation

Jennifer Turner Tanner Van Dusen

2015

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VIEWPOINT

By Ryne Misso

Ryne Misso is the director of marketing for Market Track, a global provider of advertising and promotional tracking, brand protection and e-commerce pricing solutions. He can be reached at rmisso@ markettrack.com.

Grabbing a piece of the seltzer pie In 30 years we may look back at the 2010s and label them as the decade in which food and drinks became trendy. There are hundreds of popular fad diets right now, from those that call for no sugar, to those that encourage eating like a Neanderthal. The words “farm to table” have never been painted on more restaurant windows. They’re even serving grasshoppers (chapulines) at Safeco Stadium, home of the Seattle Mariners. I consider myself a foodie, but some of these trends are just beyond me. Many of these trends aren’t for everyone. Even the most adventurous eaters might hesitate before ordering fried grasshoppers over a plate of garlic fries. But there is one trend in food and drinks that seemingly everyone is in on, and that’s drinking more sparkling water. You’d be hard-pressed to find a foodie out there whose fridge isn’t filled with La Croix or Bubly. Data from Mintel, reported by Inc., showed that soda sales hit a 30-year low in 2017, yet sparkling water sales have increased by 15 percent annually for the last three years. A study from Euromonitor found that sales of sparkling water in the U.S. more than doubled — to 770 million gallons — from 2008 to 2017. Retailers and manufacturers alike have jumped on this trend. According to Market Track data, sparkling water is accounting for a larger share of retail promotions for drinks in recent months, as retailers acknowledge it has become more of a trip driver. Some of the beverage category’s largest players are also lining up at the seltzer watering hole, hoping to quench their thirst for market share. In February, PepsiCo launched new sparkling water brand Bubly, giving La Croix some instant competition with

Store Brands / July 2018 / www.storebrands.com

its creative branding and variety of flavors. With growing demand and increasing competition, the sparkling water category is quickly saturating the market. In addition to allocating more promotional support to the category overall, La Croix has seen a steady increase in promotional support from retailers over the past two years. PepsiCo has also made a significant trade investment for Bubly since its launch in February, that has vaulted it to the third-most promoted sparkling water brand behind private brands and La Croix. Wait one minute … did you just read that private brand is the top-promoted sparkling water brand? Despite all the notoriety around La Croix and Bubly? Yes, you read that right. Though La Croix and Bubly are winning share of media attention, retailers are still providing more promotional share to their store brand sparkling water. Over the past 24 months, private brands have accounted for 21 percent of all sparkling water promotions, compared to only 8.2 percent for La Croix. It is worth noting that La Croix and Bubly are both seeing their share of sparkling water promotions increase month to month, but they are not winning that share from private brands, for which ad share has held fairly flat over the past two years. Given the trajectory of the category, it is easy to see retailers doubling down on their private brand options in sparkling water. There is no distinct winner in product quality among the popular sparkling water brands, probably because sparkling water typically only has two ingredients: carbonated water and natural flavor. The battle in this category has been won on branding, with La Croix as the de facto pacesetter. Just as retailers have diversified their store brand options and modernized their branding and packaging in categories like snacks or household goods, it is safe to expect to see improved branding, packaging and shelf placement for private brand sparkling water in the coming months and years (if they’re not there already). Don’t be shocked to see drastic changes to private brand sparkling water across the board as grocers, drugstores and mass merchants aim to seize the growing opportunity in the category. SB

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Kroger’s private brands soar to new levels Private brand pundits have “In the first quarter, been saying for months Our Brands made up 28.7 that the store brands induspercent of unit sales and try is on the verge of taking 26.7 percent of sales doloff like a Boeing 747. If The lars,” Kroger Chairman and Kroger Co. is any indication, CEO Rodney McMullen said that may be happening now. in an earnings call transcript Last month, when Kroger offered by Seeking Alpha. “Our Gil Phipps announced its first-quarter Brands achieved a 5.1 percent leads Kroger’s earnings, the Cincinnati-based sales growth at a 3.4 percent unit Our Brands. grocery chain also announced growth in the first quarter led it had achieved the highest-ever by double-digit growth again in dollar share in the history of our popular Simple Truth and its Our Brands, its line of private brand Simple Truth Organic lines.” products. Gil Phipps, Kroger’s vice Last fall, Kroger announced its Restock president of Our Brands, and his team Kroger plan to “redefine the food and are the people behind the line’s success. grocery customer experience.” Restock

Kroger is fueled by capital investments, cost savings and free cash flow. The plan also calls for Kroger’s Our Brands to play a pivotal role in the strategy. “Our Brands is another example of how we are redefining the grocery customer experience,” McMullen said. “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].” For the first quarter ending May 26, Kroger announced net earnings of $2.0 billion, or $2.37 per diluted share. Kroger’s first-quarter adjusted net earnings were $626 million, or $0.73 per diluted share. Net earnings for the first quarter 2017 were $303 million, or $0.32 per diluted share, and adjusted net earnings for the first quarter 2017 were $546 million, or $0.58 per diluted share. Total sales, excluding fuel, increased 2.3 percent in the first quarter over the same period last year. SB

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AroundtheIndustry Boer will be remembered for his private brand passion By Lawrence Aylward

Goodbye and good luck to Dick Boer, who stepped down as CEO of Ahold Delhaize on July 1. Boer was named CEO of Ahold Delhaize in 2016 and has overseen the merger of Dutch grocer Ahold and its Belgium rival the Delhaize Group in the last two years. Prior to the merger between Ahold and Delhaize Group, Boer was CEO of Ahold for seven years. He was succeeded as CEO by Frans Muller. Boer, who turns 61 in August, said in his last meeting with shareholders that “there could be no better time to step down.” “We are in great shape. The integration of the company is largely complete,” he said. Boer will be remembered for his passion of private brands. Ahold Delhaize’s 18_0101_AD_H_Store Brands Mag.pdf

was not involved and did not know about. Ahold’s former CEO and chief financial officer were found guilty and fined. Boer was shocked and wondered if Ahold, labeled as “Europe’s Enron,” would survive. But Boer stuck with private brands are wellAhold, despite the retailer recognized and popular taking a hit to its reputaamong its 21 banners in tion. He made a name for 11 countries. himself for his operation“Dick has been a longal efficiencies, passion for standing champion for priprivate label and putting vate brands and the important the customer first. He was role private brand products play in named CEO of Ahold in 2010. Frans Muller (left) meeting the needs of customers “Dick embodies the customersucceeds Dick Boer. and creating better places to shop, first mindset, and that’s critical work and live,” said Juan De Paoli, when it comes to private brands,” senior vice president of Retail De Paoli said. “Private brands Business Services, an Ahold Delhaize have a unique ability to blend value and company in the U.S. quality to delight consumers, creating Boer joined Ahold in 1998 as CEO engagement and loyalty. Dick believed of Ahold Czech Republic. Five years this and created the support and space for after joining the company, Ahold private brands to grow and thrive within endured fraud the portfolio.” SB 1/10/18 a4:05 PM scandal, in which Boer

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GETTING SOCIAL

Q A with Greg Pohlmann Author of “Thinking Store Brands First” and a veteran of the private brand industry

How did you come into the world of private brands? The first store brand program I worked on was the Staff brand, which our Giant Food Stores sold in the late 1960s. I was in college then but later joined the Benner Tea Co. in 1975 (parent of Giant Food Stores) as director of advertising and marketing. Hence, I worked with the Staff store brand items in all our advertising and marketing efforts as both a retailer and wholesaler. Describe the private brands industry in one word. Differentiator. What do you like most about the industry? The win-win-win scenario store brands create for retailers, suppliers and customers. Everyone wins with sales, profits and savings.

Pohlmann is on course to advise the store brands industry for years to come.

What do you dislike most about the industry? That many consumers still believe purchasing store brands means they are trading down in product quality when compared to the national or regional brands. This is very far from the truth. What one great thing does the industry have going for it? When purchasing store brands, customers don’t have to pay the higher prices for national and regional brands and can use those savings for other things.

Greg Pohlmann’s new book.

Store Brands / July 2018 / www.storebrands.com

What is the industry’s biggest challenge? Convincing retailers and wholesalers to not let branded trade dollars drive their business. Rather, they need to allow their

EBITA (earnings before interest, taxes, depreciation and amortization) operating profits determine how their stores and marketing plans are executed. If you could create one private brand product, what would it be? Meal kits for home delivery. Who is your hero and why? Jesus Christ, who gave me my parents, who then gave me life — the most special gift of all. What trait in yourself do you attribute most to your success? Driven to striving for perfection in every endeavor I encounter. What is the biggest obstacle you have ever overcome? Being an only child, having to suffer the loss of my parents when they passed away. What’s the best advice someone ever gave you? Listen much more and talk much less. What do you do for fun? While work was always fun, when not working I enjoy playing golf, jogging, playing the piano, serving in my church as elder and spending quality time with my wife, two sons, two daughters-in-law and our five grandchildren. You have a week off. Where do you go and why? I love both Colorado and Arizona to play golf and go trout fishing. If you were born 100 years ago, what would you do for a living? The same thing I did for 40 years before retiring — be the best store brand executive sales manager I could possibly be. SB

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PHOTOGRAPHY BY RICK HOVIS

t has been a challenging 18 months, but a time for which Juan De Paoli will always be grateful. “It has been the most rewarding experience of my career and one that I don’t know if I will ever experience again,” De Paoli says. De Paoli leads Ahold Delhaize USA’s private brands team. Ahold Delhaize USA, officially created on Jan. 1 from the merger of Ahold USA and Delhaize America, is the nation’s fourth-largest grocery retail group and the largest on the East Coast. Its supermarket chains include former Ahold USA chains Stop & Shop (based in Quincy, Mass.), Giant Food (Landover, Md.) and Giant/Martin’s (Carlisle, Pa.), and former Delhaize America chains Food Lion (Salisbury, N.C.), Hannaford (Scarborough, Maine) and Peapod (Chicago). Ahold Delhaize USA’s parent company is the Netherlands-based Ahold Delhaize, which also operates several supermarket chains throughout the Netherlands, Belgium, and central and southeastern Europe. De Paoli was named the senior vice president of private brands for Retail Business Services, a new services company created from the merger to drive synergies and provide services for the chains, including for private brands. Since his appointment, De Paoli, previously the senior vice president of brand management and own brands for Ahold USA, has assembled Retail Business Services’ private brands team to provide expertise and innovation to support the individual supermarket chains’ private brand portfolios. “I’m beyond excited about the team we have put together,” De Paoli says. “It’s an all-star team of private brand professionals.” The team includes Jac Ross, vice president of private brands innovation for Retail Business Services. De Paoli recruited Ross from London-based Sainsbury’s in early 2015. At Sainsbury’s, where private brands penetration exceeds 40 percent, Ross spearheaded store brand product development and technology in the grocery categories. She and her team there won several awards for their efforts. “Some of the products developed under Jac would rival any product in the world,” De Paoli says. Ahold Delhaize USA has co-headquarters in Quincy, Mass., and Salisbury, N.C. Its supermarket chains operate more than 2,000 stores across 21 states under a variety of store formats from hypermarkets to local supermarkets and convenience stores. De Paoli says he and the team want to grow private brands for the portfolio with products “that delight consumers and drive loyalty and growth.” And not just any private brands. De Paoli, a seasoned industry professional who was previously an executive with H-E-B and Topco Associates in addition to holding positions with consumer packaged goods giants such as Procter & Gamble Latin America and Oscar Mayer, wants the supermarket chains’ private brand lines to be “world class” and “famous.” “We have a saying, which is the motto of our department: We are here to perfect the expected and inspire with the unexpected,” De Paoli says candidly. “To perfect the expected means product quality needs to be not only what the retailer intends it to be, but what customers expect it to be.” Inspiring with the unexpected means developing products that are different, exclusive and pleasantly surprising to consumers, he adds.

ONWARD AND UPWARD Newly formed Ahold Delhaize USA aims to make its store brands ‘iconic’ BY LAWRENCE AYLWARD

AN ‘ALL-STAR’ TEAM Juan De Paoli (seated), the senior vice president of private brands for Ahold Delhaize USA’s Retail Business Services, says the 139-person private brands team is composed of “all-star private brand professionals.” Key members of the team include (from left)): Kasey Sheffer, director of private brands product management; Patrick Fraser, director of private brands label and design; Jim Seiple, director of private brands product excellence; Jeff Castonguay, director of private brands product management; Jac Ross, vice president of private brands innovation; Tesha Sigmon, director of private brands product management; Amy McClamrock, director of private brands business operations; and Mark Gilliand, director of private brands product management. www.storebrands.com / July 2018 / Store Brands

THE RIGHT BRANDS De Paoli and the team have spent the past 18 months analyzing the portfolio of store brands available to Ahold Delhaize USA’s supermarket chains. “We analyzed them thoroughly,” De Paoli says. “We asked consumers if we had the right private brand lines. To our satisfaction, (they told us) some of the brands were absolutely sensational.” One of those highly regarded store brands is Nature’s Promise, a line of USDA-certified organic and free-from products that Giant Food, Giant/Martin’s and Stop & Shop introduced in 2004. At that time, Nature’s Promise had 500 SKUs; it is now at 1,400 SKUs and still growing. Nature’s Promise will soon be available at all of Ahold Delhaize USA’s supermarket chains and will replace the Nature’s Place store brand in Hannaford and Food Lion early next year. “As the transition completes, the brand will exceed $1 billion in annual sales,” De Paoli says. Another highly regarded consumer store brand made available across stores is taste of Inspirations, developed by Delhaize America in 2003. The super-premium line, which features more than 350 SKUs including pastas, sauces, frozen appetizers, pizzas, desserts, marinades, dressings and more, will replace Simply Enjoy at Giant/Martin’s, Giant Food, Stop & Shop and Peapod. “From shaking up the regular dinner routine with our Grilled Pineapple BBQ Sauce, to treating dinner guests to our Chocolate Lava Cake, this line can be part of the everyday indulgences that bring something extra special to our customers,” says Tonya Herring, Giant Food’s senior vice president of merchandising. While at Ahold USA before the merger with Delhaize America, De Paoli admired taste of Inspirations. “It’s a phenomenal brand,” he says. “It’s a brand that I saw many times before and said to myself, ‘I wish that I had a brand that powerful and strong.’ ” Etos, a beauty line, is another premium store brand being made available to all stores. Etos, billed as “simple European beauty,” was created in the Netherlands in 1919. Ahold USA brought Etos to the U.S. in 2015 with 130 SKUs in the beauty, bath and hair accessories categories. Other specialty private brands include CareOne, a line of health and personal care products; Smart Living, a general merchandising line; Companion, a pet care line; and Always My Baby, a baby care line. These brands are billed as national brand equivalent or better. In the value category, the supermarket chains offer the Guaranteed Value and Cha-Ching private brands. Private brand lines also bear the names of each supermarket chain, and each line leverages the namesake products for consumer engagement. For example, Food Lion runs a twice yearly “Quarter Back” promotion during which customers get 25 cents back on each private brand product purchased in the Food Lion line up to $10. “It’s a very effective promotion for us each year,” said Food Lion Executive Vice President of Merchandising Geoff Waldau. “It invites our customers to experience the value and quality of our private brand products.” De Paoli says the goal is to drive loyalty and growth of private brands across all supermarket chains by creating “powerful and iconic” store brands. Through Ahold Delhaize USA’s brand-centric model, its supermarket chains can create the right strategies and select the right products for their customers. Working with the team in Retail Business Services, the chains can offer specific store brands for their regions. For instance, Hannaford, which operates stores throughout seafoodloving New England, offers Lobster and Shrimp Ravioli through taste of Inspirations. “We will work with the [supermarket chains] to create particular products with different flavor profiles because they are focused on serving their local communities and customers,” Ross says. A goal for parent company Ahold Delhaize is to have 50 percent of its private 16

Store Brands / July 2018 / www.storebrands.com

STORE BRANDS FOR MANY OCCASIONS Ahold Delhaize USA offers an array of private brands Namesake brands including Food Lion, Giant Food, Giant/Martins’s, Hannaford and Stop & Shop products. Nature’s Promise, a line of USDAcertified organic and free-from products that is at 1,400 SKUs and growing. taste of Inspirations, a super-premium line featuring more than 350 SKUs including pastas, sauces, frozen appetizers, pizzas, desserts, marinades, dressings and more. Etos, a premium beauty line featuring 130 SKUs in the beauty, bath and hair accessories categories. Care One, a national brand equivalent or better line of health and beauty care products. Smart Living, a national brand equivalent or better line of general merchandising products. Always My Baby, a national brand equivalent or better line of baby care products. Companion, a national brand equivalent or better line of pet care products. Guaranteed Value, value line. Cha-Ching, value line.

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brand sales coming from nutritious products by 2020. In 2017, the company reached 46 percent. This requires creating and renovating private brands with fewer undesirable ingredients but without sacrificing taste, Ross says. For instance, Ross oversaw a 50 percent reduction of sugar in private brand organic fruit punch and lemonade beverages, which are part of its Nature’s Promise line. The beverages were tested by a blind consumer panel, whose members couldn’t tell the difference between the regular products and the sugar-reduced products. In the store brand commercial bakery line, sugar was reduced by 80 percent in English muffins, and salt was reduced by up to 35 percent in items like hoagie buns and potato rolls. In addition, high fructose corn syrup was reduced by more than 80 percent in more than 70 bakery items. Again, consumers testing the products did not notice the changes. taste of Inspirations is a super-premium line that offers more than 350 SKUs.

“It’s key for us to renovate and continue to renovate,” Ross says. De Paoli says healthy products are a pillar for the company’s private brands. Reformulating products to be healthier and creating new healthier products is challenging but one that Retail Business Services embraces for its private brands. “We are doing it because we believe in it,” De Paoli says. “It’s about challenging yourself and committing to be an advocate for the consumer.” But De Paoli and Ross emphasize that the healthier products must taste great — not good, great. “Good is not enough,” Ross says. “Good is the enemy of great. Because if somebody settles on [a product] being just good enough, that suggests there is something after that.” Giant Food, Giant/Martin’s and Stop & Shop gained a following for their Limited Time Originals Program — a program consisting of rotating flavor-based assortments of distinct private brand SKUs. Limited Time Originals is also now being offered by Food Lion and Hannaford. The program emphasizes a different flavor (or sometimes two flavors) every six weeks throughout the year and features 30 to 60 unique store brand items in that flavor profile at a time. Highlighted flavors have included Limoncello, Salted Caramel, Toasted Coconut, Twisted Chocolate and Hot, to name a few. The Limited Time Originals Program is about differentiating 18

Store Brands / July 2018 / www.storebrands.com

from the competition, bringing innovation to consumers and inspiring customers with uniquely flavored items, De Paoli says. “In order to innovate and develop distinctive products, you have to push the envelope,” De Paoli notes. “If you don’t push the envelope and take some risks, the innovation won’t happen.” Retail Business Services is also working closely on private brands for Peapod, Ahold Delhaize USA’s grocery delivery brand in Chicago and on the East Coast. “What we hear from Peapod is that private brands play a tremendous role in its strategy,” De Paoli says. “We continue to develop products in partnership with Peapod, some exclusive to its customers. We see brands like Nature’s Promise performing well with Peapod customers. Peapod is a larger window to the world.” Giant Food, Giant/Martin’s and Stop & Shop also recently announced the launch of Guiding Stars in their stores for thousands of private brand products. Guiding Stars is an easy-to-use nutrition system that utilizes star symbols to educate consumers about nutrition content. The stars — one star means an item has “good” nutritional value, two mean an item has “better” nutritional value and three mean an item has “the best” nutritional value — are placed as tags on store shelves. Guiding Stars was developed by Hannaford in 2006 and has been licensed to other retailers since then. Food Lion implemented Guiding Stars in 2007. Lisa Coleman, lead nutritionist for Giant Food, says more of the retailers’ customers are prioritizing nutrition, and research reveals that more than half of Americans cook at home because the meals are healthier. “[With Guiding Stars], customers can find the products they’re looking for faster and feel confident that they’re selecting the foods that are best for their families,” Coleman notes. Ross says Guiding Stars allows Retail Business Services to measure exactly how many healthy own brand products it has available to consumers. The goal is to increase that count. “We want to ensure wherever possible that a product has one star or more,” Ross adds. “If products are close to two stars, we will work with suppliers to tweak recipe formats and ingredients [to get them to two stars].” But, again, Ross stresses that the products must taste great. “There’s no point in having a healthy product if it doesn’t taste great because consumers won’t come back and buy it,” she adds. INNOVATION ABOUNDS Like many industry people, De Paoli believes there’s a boom on the horizon for private brands. More retailers are stepping up their private brand programs by differentiating their store brand assortments with exclusive and premium products. “It’s one of the most dynamic and exciting times I have ever experienced in the industry,” says De Paoli, who has been in the industry for 18 years. “There is no question the marketplace is changing and the quality of private brands in the U.S. is improving significantly. The amount of innovation is becoming more prevalent.” De Paoli says Retail Business Services aims to stay in the forefront of what some call a renaissance in private brands. “We are on the journey to become famous for private brands … to help the [supermarket chains] of Ahold Delhaize USA become even more relevant and give them a very powerful reason to have customers shop in their stores,” he says. SB

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SPECIAL REPORT

THE

REAL DEAL Authentic Italian pizza is a premium product that can help retailers differentiate BY LAWRENCE AYLWARD

n America we love to load our pizzas with pepperoni, Italian sausage, bacon, meatballs, mushrooms, onions, pineapple, extra cheese … and the kitchen sink if there’s room. The toppings are sometimes so heavy — and can create so much grease — that the crust droops like a tree branch during an ice storm. Italian pizza makers, however, are much more discreet when it comes to what and how many toppings they put on a pizza. They take a minimalistic approach. A sagging crust caused by too many toppings is considered a travesty. Italians also take great care in prepping ingredients for pizza. They aren’t in a rush. For instance, Italian pizza makers will let dough sit and ferment for what may seem like an eternity to American pizza makers. In May, at the 19th CIBUS International Food Exhibition in Parma, Italy, I spoke with several representatives from Italian pizza ingredient manufacturers to get their views on American pizza, especially regarding all the twists we’ve added to the

Italian tradition over the years. For sure, the Italians were very diplomatic and welcomed our diverse pizza versions, even when we tried to turn a pizza into a cheeseburger by adding ground beef, American cheese and pickles. That said, Italians are also firm — if not unyielding — in adhering to what constitutes an authentic Italian pizza, which means many things, including a philosophy that accentuates the relevance and influence of all ingredients. So their doctrine toward pizza making made me wonder if authentic Italian pizza would work as a private brand throughout the U.S., whether it’s sold as a frozen food or as a chilled or cooked item in the fresh-prepared section. But after considering the food revolution America is experiencing — many people want more authentic food products that are healthy and free from preservatives and other undesirable ingredients — it’s apparent to me that authentic Italian pizza could succeed as a private brand. And this comes from someone who is apt to turn down a slice of stuffed-crust, triple-meat pizza about as much as he would a $1 million bill (if there was one).

Editor’s note: Store Brands’ Lawrence Aylward attended the CIBUS International Food Exhibition in Parma, Italy, in May on behalf of the Italian Trade Agency. CIBUS featured about 3,100 Italian food exhibitors, including hundreds of exhibitors that introduced new products. CIBUS also featured many suppliers that manufacture ingredients for an Italian tradition: pizza. In this story, Aylward reports on how U.S. retailers can use authentic Italian pizza as a private brand. 20

Store Brands /July 2018 / www.storebrands.com

SPECIAL REPORT

The best pizza crust is so airy that you can see right through it, says Massimiliano Saieva, who operates the Roman Pizza Academy. Saieva posted this photo on his company’s website, www.romanpizzaacademy.com.

Why do I believe authentic Italian pizza could be a success as a private brand? First, many of today’s food shoppers want to be told a story behind a product. Three words — “Made in Italy” — tells a story. And to expand on where the pizza originated in Italy in 50 words or less through packaging or merchandising only makes the story more romantic and enjoyable. Second, there’s Americans’ overall affinity for Italian food, even if it’s Americanized. But if it’s the real deal, it’s “meraviglioso,” the Italian word for wonderful. Eating real Italian food is an experience, something else more American consumers want. Third, although many American pizzerias and manufacturers have turned pizza into junk food — remember Pizza Hut’s hot dog stuffed-crust pizza? — pizza can be healthy. Consider the margherita (or margarita) pizza, the most popular pizza in Italy, which consists of tomato, olive oil, mozzarella and basil. It’s a simple offering with healthy ingredients, yet retains its indulgence. As part of America’s food revolution, this type of pizza is just what more Americans are seeking. At the CIBUS show, I spoke with Stefano Laudadio, business development executive for PizzaSi, which manufactures “premium pizza bases” at its facility in Italy, that are handmade with natural yeast, extra virgin olive oil and semolina durum wheat flour. Laudadio told me that Italians like the “full experience” of pizza, meaning they like to taste the dough, the sauce, the cheese and whatever toppings are placed meticulously on the pizza in every bite. It is why all of the ingredients are viewed as equal, none more important than the other. “The dough is not just a support that holds the toppings,” Laudadio says. “We stress the fact that it’s not about the quantities, it’s about the quality. Less is best. Pizza doesn’t have to be junk food.” Pizza chef Massimiliano Saieva, who operates the Roman Pizza Academy in Miami, was busy making pizza for show attendees as a celebrity guest at the Molino Polselli booth during the show. Based in Arce, Italy, Molino Polselli manufactures flour for pizza crust. Saieva stresses the key to making an excellent Italian pizza is chemistry, including allowing the proper time for dough to ferment. The Sicilianborn Saieva, whose academy teaches people everything they need to know to make a Roman-style pizza (Pizza al Taglio), a rectangular pie with a thin and airy crust, doesn’t let a pizza in the oven unless the dough has been fermented in a refrigerator for at least 48 hours (he prefers 72 to 96 hours). The extended time and refrigeration www.storebrands.com /July 2018 / Store Brands

SPECIAL REPORT slows the yeast fermentation, allowing carbon dioxide and gluten more time to develop, which leads to an airier and more flavorful crust. “There’s a huge difference [in the crust],” Saieva says, when the dough is allowed to ferment longer. The crust is so light and airy, he says, that you can see right through it. I tell Saieva that the phrase “time is money” is adhered to by many businesses in America, and a retailer might not be able to allow dough to ferment for so long because that would be classified as “labor intensive.” “Time is not money,” Saieva responded. “Quality is money.” Saieva is not critical of American pizza and credits Americans for trying new things with pizza. He says several students at his school “tell me they hate Hawaiian pizza.” But Saieva tells them, “you can’t hate a product if your customers want it. If you do it right, why not?” That’s Saieva’s point: Doing it right. But his “right” requires perfection, nothing less. Giulia Miatto, a technician for Padua, Italy-based Molino Quaglia, which manufactures wheat flour for pizza crusts, is also all about perfection. She says using the right flour and using it correctly are crucial elements in creating the perfect pizza. Molino Quaglia is a fourth-generation familyowned business, which has its roots in stone grinding, which gives flour flavor and retains all the vitamins, enzymes, amino acids and fiber contained in the grain. On its website (www.molinoquaglia.org/ en.php), Molino Quaglia says the task of the wheat miller is to protect the vitality of the grain, using the best technology available to provide clean, healthy and reliable flour. Molino Quaglia utilizes augmented stone milling, a patented modern stone-grinding process “that combines the nutritional qualities and the taste of stone grinding with the cleanliness and stability of the most advanced cylindrical grinding process in Italy.” Like Saieva, Miatto has no problem with Americans putting their own spin on pizza. When I tell her that a U.S. pizza chain in the Midwest offers a peanut butter and jelly pizza, Miatto makes a funny face but she doesn’t dismiss such a creation. “That’s strange,” she says, “but you are creating something new.” But Miatto qualified her statement, stressing perfection again. No matter what the pizza style, she says it must contain the best and freshest ingredients. At the Italpizza booth, the topic of perfection was again the subject of discussion. Massimo Sereni, the sales manager for Modena, Italy.-based Italpizza, emphasizes the important roles of “dough 22

Store Brands /July 2018 / www.storebrands.com

maturation” and “chemical composition” in authentic Italian pizza. He says Italpizza’s crust consists only of water, oil, wheat, salt, yeast and a small amount of sugar to activate the yeast. Sereni says he has seen plenty of American pizza where the dough is very heavy because of all the sugar and preservatives in it. Sereni, whose company offers frozen and fresh Italian pizza in the U.S. as private brands, says more Americans are experiencing and embracing the simplicity of authentic Italian pizza, as evidenced by Italpizza’s pizza, sold as a store brand at Trader Joe’s, the Monrovia, Calif-based chain that has attracted a huge following for its own brands. On its packaging, Trader Joe’s proudly touts that the pizza is “Imported from Italy.” “Seven years ago it was impossible to sell a margherita pizza from Italy in the U.S.,” Sereni says. “Now they are becoming very popular. Our margherita pizza is the No. 1-selling pizza at Trader Joe’s.” Private brands are entering a new era that emphasizes authenticity, premiumization and differentiation. Real Italian pizza—and all of its simplicity—fits all three requirements. Retailers might be wise to get in on a slice of the action (pun intended). SB Aylward, editor-in-chief of Store Brands, can be reached at laylward@ensembleiq.com.

The margherita, the most popular pizza in Italy, is gaining popularity in the U.S.

BEVERAGE REPORT 2018

The following pages comprise our annual Beverage Report with stories on the following categories: Sports Nutrition Drinks Roast/Ground Coffee Ready-to-Drink Beverages Single-Serve Coffee Aloe Drinks

www.storebrands.com / November 2017 / Store Brands

BEVERAGE

REPORT 2018

SPORTS NUTRITION DRINKS

IT’S NO SWEAT BOASTING EXPANDED NUTRITION AND OTHER HEALTH BENEFITS, SPORTS NUTRITION DRINKS ARE FITTING IN EASILY WITHIN PRIVATE BRAND PORTFOLIOS ●

BY N EV EN K A J EV T I C

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first glance, and any relevant information regarding Healthy living is a lot of work. Nothing can really take the certifications, nutritionals, sustainability efforts and place of an active lifestyle and good nutritional choices. flavor should pop off the package,” says Corrie Drellack, Today’s health-conscious — but time-starved — consumers Agropur’s director of marketing and communications. are increasingly looking to health and wellness products for Other questions a retailer will want to address revolve some support to make it a little easier. Take sports nutrition around what happens when the customer takes the product drinks. These beverages have been the perfect go-to to home. Is it easy to use? Can it be stored without hassle? Does help our bodies recover post workout. Now the category is it take up a lot of cabinet space? Can it be resonating with consumers looking to improve thrown into your bag to work or the gym? or boost their overall nutrition throughout the “Making sure you think out those day. It is a great time for private brands to take details is a major component of [the] advantage of the expanded opportunities. packaging decision process,” Drellack says. Store brand sports nutrition drinks is a “Also, it’s OK to go with cost optimization, hot category, according to Jeff Reget, sales but make sure your packaging isn’t manager for private label and sports nutrition so cheap that it creates issues with for La Crosse, Wis.-based Agropur Ingredients. functionality.” Frustration with packaging Agropur Ingredients is a global supplier of could easily send consumers back to their ingredients and services for the food, beverage previous brand, or put them on the search and nutritional industries. for a new replacement. “As consumers have increased their When it comes to flavors, a few like purchasing and consumption of health and berry flavors continue to perform well. wellness products, private brands have taken And you can’t go wrong with the classics note and have launched or initiated product JEFF REGET, SALES MANAGER, PRIVATE LABEL like chocolate and vanilla, regardless if development to help them compete in these AND SPORTS NUTRITION, the protein is dairy or vegan. But retailers categories with their own brands,” Reget says. should not be afraid to have a little fun “These products include dairy-based and plant- AGROPUR INGREDIENTS with flavor names and profiles. based powders, ready-to-drink beverages and “Companies have done a great job with developing on-the-go healthier snack options.” appealing names for them, such as chocolate fudge According to a March 2018 report from market researcher brownie or Tahiti vanilla to communicate what the Mintel on nutrition and performance drinks in the U.S., the consumer should expect to taste and to help make the overall category will need to address certain issues such as name and flavor more appealing,” Reget says. rebooting formulations to feature reduced-sugar totals and But merchandising in general could use some work, he cleaner formulations. Clean label has had a big influence in adds. It seems that the private brand is promoted alongside product development over the past few years, but the adaptthe national brand equivalent to show added value on a ability and flexibility of private brands in this category will similar product with similar claims at a lower price point. continue to serve retailers well. This practice includes adding product certifications or “Private label formulas can be developed to make improving the organoleptic characteristics of the product improvements over national retail brands on items such and packaging, Reget explains. as mouth feel, flavor, dissolution, price and packaging Retailers should not forget that they are in a key position design,” Reget says. “These attributes could help the store to model their store and communications in a way that brand have a more premium feel. But it really goes back highlights their products appropriately. to how the retailer identifies itself, and how that can be “An important aspect for retailers to pay attention to is communicated in [its] private label portfolio.” to make sure customers are seeing that private brand name Packaging is an important communication tool between all over the store,” says Candyce Lefeber, account manager retailer and shopper. Often, packaging is the first impression for Agropur. “It takes six to seven interactions with a the product has with the consumer. brand before a customer will purchase it.” SB “Whatever your brand story is should be clear upon

“STORE BRAND SPORTS NUTRITION DRINKS IS A HOT CATEGORY”

Store Brands / July 2018 / www.storebrands.com

BEVERAGE

REPORT 2018

ROAST/GROUND COFFEE

QUALITY IN THE CUP STRONG DOUBLE-DIGIT GROWTH FLOURISHES IN PRIVATE BRANDS, AS PREMIUMIZATION, INNOVATIVE FLAVORS AND VARIETY IMPRESS CONSUMERS ●

BY L A U REN H A RT MA N

While overall roast and ground coffee sales have been nearly flat in the U.S., coffee sales among private brands are as hot as … well, a steaming hot cup of coffee. According to the latest category research from market research firm IRI, dollar sales of store brand coffee were $1.38 billion for the 52 weeks through Feb. 25. That’s a 15.8 percent gain in sales over a year ago, and represents a dollar share of 14.9 percent, IRI says. “Private brands had a very strong year in 2017, as more retailers implemented premium and authentic private brands,” observes Clay Dockery, division vice president of corporate brands for Suffolk, Va.-based Massimo Zanetti Beverage USA, which manufactures coffee products for private brands. “The coffee category is very dynamic, and the pace of change is dramatic. Retailers that are focused on emerging trends are winning in the marketplace. Retailers are [also] desirous of understanding the economics of the green coffee purchase.” Premiumization has positively impacted the category, says Dockery, who anticipates this is to be a long-term trend. “Whether an organic or conventional portfolio, it all starts with quality in the cup. A great cup of coffee found in a private brand is the path to long-term success.” Dockery expects that momentum to continue in private brands. “We anticipate the momentum to continue in 2018,” he says. “In a flat category, private brands enjoyed double-digit growth. Year to date, we continue to see that strong growth continuing. As quality and variety continue to be the hallmarks of private brand portfolios, we are seeing strong consumer acceptance.” For a premium program to be successful, the packaging must clearly articulate the points of difference the brand segment possess, Dockery says. “We have not seen much differentiation in packaging, but there is increased consumer awareness of packaging’s afterlife,” he adds. “As consumers are looking for sustainable products, they are also keenly aware of the impact of packaging on the environment. Retailers that have sustainable coffee programs with sustainable packaging alternatives have seen great growth.” OTHER TRENDS GAINING GROUND Massimo Zanetti is also currently watching trends primarily driven by how consumers prepare roast and ground coffee at home. Roasting develops coffee’s flavor and fragrance; the higher the roast, the more flavor is 26

Store Brands / July 2018 / www.storebrands.com

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developed, says the New York-based International Trade Centre’s Coffee Guide. Bean-to-cup brewers, pour-over and French presses are increasing in popularity, while consumers still favor traditional automatic-drip and single-serve coffee makers, Dockery adds.

“PRIVATE BRANDS HAD A VERY STRONG YEAR IN 2017, AS MORE RETAILERS IMPLEMENTED PREMIUM AND AUTHENTIC PRIVATE BRANDS” CLAY DOCKERY, VICE PRESIDENT OF CORPORATE BRANDS, MASSIMO ZANETTI BEVERAGE USA

“And we continue to see more use of single-origin coffee” he notes. “Different origins have vastly different flavor profiles, and consumers, particularly millennials, are adventurists when it comes to coffee. For flavored coffee, we are seeing best-in-class retailers offering not only a core flavor portfolio, but also a seasonal in-and-out program to drive sales.” Dockery suggests retailers can continue to drive the mainstream coffee segment by ensuring the right merchandising frequency and having a thoughtful priceshielding approach when promoting national brands. “For the premium bag category, variety is a primary driver,” he notes. “In single-serve, a mix of different sizes drives incremental volume to a private brand. For all segments, committing to sustainable sources is a core driver of purchase intent.” SB

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BEVERAGE

REPORT 2018

READY-TO-DRINK BEVERAGES

INNOVATION EQUALS OPPORTUNITY PREMIUM PRODUCTS CAN DRIVE SUCCESS FOR PRIVATE BRANDS ●

BY L A W REN CE A YL W A RD

The ready-to-drink (RTD) beverage category is rife with opportunity, including for RTD coffee. But a lot of that opportunity comes down to retailers’ willingness and ability to work with suppliers to innovate on premium products. Statistics provide a good reason for retailers to do just that. RTD coffee is the fastest-growing segment of the $13.6 billion retail coffee market, according to market researcher Mintel, and is forecasted to grow 67 percent through 2022. Cold-brew coffee sales at retail continue to be anything but cold. U.S. retail sales of refrigerated cold-brew coffee grew 460 percent from 2015-17 to reach an estimated $38.1 million, according to Mintel. And they continue to grow. About 10 percent of coffee drinkers reported having cold brew daily in 2017, according to the National Coffee Association, up from only 1 percent in 2015. John Castellon Lopez, CEO of Matagalpa, Nicaragua-based Castellon Coffee, expects premium beverages to continue to drive sales in the RTD beverage category through attributes that command consumers’ attention, from healthy to functional, to sustainably produced to single origin. It’s one reason why Castellon Coffee, a family business that has been in operation for decades, recently introduced RTD cold-brew coffee for private brands. “As part of our DNA, we are always studying and exploring new trends and tastes as well as the needs of diverse consumers in order to develop innovative products that [offer] an experience,” Lopez says. The company offers versatile cold-brew combinations for private brands, including drinks flavored with spices like ginger and cinnamon, he adds. Lopez says the company’s latest creation, cáscara coffee, which combines dried coffee pulp with the traditional cold-brew process, is an innovation that proves every part of the coffee plant can be used, even to produce an innovative drink. 28

Store Brands / July 2018 / www.storebrands.com

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“It does not taste like coffee, but rather expresses more floral, citrus and roasted fruit notes that become a very nice combination between coffee and tea,” Lopez says. Lopez believes more retailers are looking to implement premium and authentic private brands in the RTD category, especially because the category presents itself well to offer specialty products. Retailers also want to work with suppliers that offer authentic products and have a history in producing them, he adds. “In private label, we know firsthand of the efforts that retailers put in developing premium brands, especially in the coffee industry where there is so much competition,” Lopez says. “We develop the ideal product for each of our customers.” Lopez stresses that Castellon Coffee offers convenient and recyclable packaging with a longer shelf life for its private branded coldbrew coffee. Packaging should not only reflect a creative design, but the size of the package should fit easily on store shelves to achieve to total optimization, he says. That said, Lopez realizes that consumers are not buying the package — they are buying the product “and everything it represents,” including a company’s history in making the products it sells. “I think this will continue to gain importance in the RTD industry because consumers want to connect with a product’s origin, its creation and the production process,” he adds. Lopez is also aware of the importance of providing personalization in private brands. “We have consumers that want products to be created for themselves, which they can connect with and feel some sort of belonging,” he adds. “That is exactly what we offer. Our team does not sacrifice taste and quality over convenience and price.” Lopez says retailers can drive success in the RTD beverage category more by simply giving their store brands more exposure. “Retailers need to strategically locate and differentiate all product types according to demand,” he adds. “Having a well-organized retail store is a very crucial point.” SB

single serveCOFFE

BEVERAGE

REPORT 2018

SINGLE-SERVE COFFEE

BETTER COFFEE, SAME PRICE POINT

PREMIUM AND UNIQUE OFFERINGS ‘HAVE TURNED THE CATEGORY AROUND,’ SUPPLIER SAYS ●

BY L A W REN CE A YL W A RD

More retailers have discovered that the path to differentiation is through premium private brands that offer value. The single-serve coffee category is no exception. Private brand sales are steadily growing in single-serve coffee with retailers shifting their focus to sourcing new and innovative store brand products, says Tim Greulich, director of sales and marketing for North Little Rock, Ark.-based Westrock Coffee Co. “The shift from cheap alternative private label products to premium and unique offerings has turned the category around,” Greulich adds. According to the National Coffee Association’s recent “2018 National Coffee Drinking Trends” report, 64 percent of U.S. consumers drink coffee daily, with 79 percent of them preparing coffee daily at home. The report says the popularity of single-serve coffee machine ownership continues to grow steadily, up 14 percent from the previous year, which bodes well for private brands. While demand for soda continues to decline, coffee, bottled water and tea continue to be major growth areas in recent years, according to the NCA. But while premium products are growing in the singleserve segment, Greulich stresses that consumers want “better coffee at the same price point” they were paying for lesser-quality products. Hence, to drive the category,

64% OF U.S. CONSUMERS DRINK COFFEE DAILY WITH

79% OF THEM PREPARING COFFEE DAILY AT HOME.

NATIONAL COFFEE ASSOCIATION,”2018 NATIONAL COFFEE TRENDS REPORT.”

Store Brands / July 2018 / www.storebrands.com

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retailers need to find suppliers that can provide them high-quality coffee, which can be prepared in all singleserve coffee machines, without raising prices. Greulich also defines higher quality as single-origin coffee, traceable coffee and coffee with a story behind it, aspects that also equal differentiation. While the potential for differentiation in the category remains high, Greulich doesn’t see new flavors playing a huge role in distinction. “We are seeing flavored coffees still in seasonal rotations for the most part,” he adds. “We believe single origin and unique roasts are of greater appeal. Once you find a few blends that cover most of your customer preferences, push them with promotions, advertising and sampling. Trial is the most important piece to growing coffee sales.” Retailers shifting to more premium and authentic private brands in single-serve coffee has been great for the category’s growth, Greulich says. He says Westrock Coffee’s focus on sourcing directly from farmer partners at origin has contributed to the premium factor. “As retailers’ demand higher-quality coffees, farmers are asked to focus more on quality to meet the demand,” he adds. “In the end, they make more money, per coffee tree, because they are selling a product that stands apart from other coffees going to market.” In terms of packaging for single-serve coffee, Greulich believes “colorful and playful” artwork can help a product stand out. But he stresses to keep packaging simple and clean. “The clean packaging look is still very popular and is used to set product apart from all of the busy-looking artworks,” he adds. Global research company Technavio reports that the global coffee pod market is expected to grow at a compound annual growth rate of more 7 percent through 2021 because of the growth in single-serve coffee. “The overall demand for single-serve coffee pods has increased for both at-home and out-of-home purposes,” according to Technavio. “Workplaces have coffee pod machines to reduce labor costs. Improvements in capsule technology such as increased shelf life will further enhance the sales of coffee pods.” SB

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BEVERAGE

REPORT 2018

ALOE BEVERAGES

DRINK THE PLANT POWER THE TIME IS RIPE FOR PRIVATE BRAND RETAILERS TO REALIZE THE POTENTIAL OF BEVERAGES IN THIS UP-AND-COMING CATEGORY ●

BY N EV EN K A J EV T I C

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According to Avihu Schumacher, CEO of MiamiOf all the current health and wellness trends, natural and based Casa Moller USA Inc., aloe-based beverages are simple foods and beverages appear to be the most enduring. a growing category that is fast becoming a regular part It seems like new products pop up every day just to meet of a retailer’s planograms. Multiple flavors and sizes are the demand. While key ingredients like aloe vera have popping up throughout the store — from been around for centuries, plant-based the refrigerated case near the checkout to formulations like aloe drinks have only “ALOE-BASED the shelf space beside all other juices. recently made major headway, relatively Casa Moller USA’s OKA Aloe line of speaking. Private brands have some BEVERAGES ARE products includes aloe juices with coconut, catching up to do, but the investment in A GROWING pineapple, mango, strawberry, apple and aloe beverages could pay off and expand cranberry. The products are “all natural,” a retailer’s healthy beverage offerings. CATEGORY THAT vegan and contain no added sugar, Consumer interest in healthy and IS FAST BECOMING preservatives or colorants. convenient food and drink is at an allBut even more new flavors and time high, but so is the desire for trustA REGULAR PART combinations are just making shore in the worthy and recognizable ingredients. In OF A RETAILER’S U.S. Examples include aloe beverages with other words, consumers crave and trust added ingredients like chia seeds, basil the familiar. PLANOGRAMS.” seeds, maca powder and moringa powder. “Across the world, manufacturers and “Another novelty we are doing is retailers have opportunities to provide AVIHU SCHUMACHER, sparkling aloe vera [beverages] with very more people with food and drink that CEO, CASA MOLLER USA INC. low calories,” Schumacher says. “We [offer is recognizable, saves time and contains these beverages] for kids too in six packs.” servings of beneficial fruits, vegetables The OKA Aloe line could also be and other plants,” says Jenny Zegler, offered in various packaging forms like 12 packs, 24 packs, global food and drink analyst at market researcher Mintel. slim cans, regular cans and PET bottles. Long recognized for its medicinal In order to drive the category further, retailers will need benefits, aloe vera products are to make sure their customers are aware of their store brand made by crushing or grinding aloe beverage offerings. Schumacher recommends creating the entire aloe vera leaf and opportunities for sampling within the store because he then filtering its liquid. Its mild feels that without trying the product, consumers will not flavor and juices make it an understand it. ideal food supplement and the “But when [they] do, I can assure you they will not list of health benefits includes leave it again,” he says. vitamins, amino acids and folic Sampling creates an excellent opportunity to not acid. In addition to strengthonly promote a retailer’s private brand products but ening the immune system, aloe also to educate the consumer on the benefits as well. vera drinks increase the water With more retailers looking to implement premium content in intestines to help and authentic private brands, aloe beverages would fit detoxify the body. Simply in perfectly, and could have a positive impact on store put, another beverage brand portfolios. that offers so many That said, Casa Moller USA is increasing its business in health benefits private brands among various retailers, Schumacher says, a would be hard to positive sign for the category’s growth. SB come by. 32

Store Brands / July 2018 / www.storebrands.com

TRENDING

MOVING WITH THE

TIMES

Retailers are finding the fresh section a fine opportunity for store brand growth, especially as the center store continues to shrink. That’s all good, but it poses severe chal-

lenges when it comes to the transportation and logistics of fresh products. “Supermarkets that have expanded their fresh produce sections have created an increase in the number of overall shipments in the industry, which coupled with the increasing driver shortage, has pushed the market pressure to levels that were unthinkable in the past,” says Derek Beelen, an account executive for Choptank Transport, a Preston, Md.-based logistics company. Fresh store brand products are usually outsourced to keep costs of production down for retailers, Beelen adds. But these products still require transportation on the production side with the need for raw materials or on the distribution side with finished goods. “A lot of companies are switching to just-in-time inventory management, which creates a lot more time sensitivity and puts more pressure on the transportation market,” Beelen says. “Add in the implementation of electronic logging devices (ELDs), and we see an increase in the request for team drivers to ensure that the supply chain is not interrupted.” With the shrinking of the grocery store’s center store, which equates to fewer dry goods and more retailers expanding their fresh sections with store brand products, there is also an increase in the amount of temperaturecontrolled freight hauled on refrigerated trailers, says Jennifer Vander Zanden, vice president of fuel recovery at Breakthrough Fuel, a global transportation energy

Store Brands /July 2018 / www.storebrands.com

BY LAWRENCE AYLWARD

While fresh products and e-commerce pose additional opportunities for store brands, their transport comes with additional challenges

management and advisory company. “This shifts the demographic of service requirements from a carrier and adds an incremental cost of fuel used to maintain the temperature of the trailer,” Vander Zanden adds. “In addition, fresh sections of the store have a shorter shelf life than the center store, which places the focus on how to decrease transit time to customers in an effort to maximize consumption and reduce food waste.” The combination of refrigerated equipment requirements and decreased transit time can pose challenges for the use of intermodal shipping for mid-to-long length of haul, due to equipment availability and increased transit on some lanes for intermodal schedules, Vander Zanden points out. Beelen notes a truck that has a breakdown or misses an appointment can cause a critical shortage in the supply chain, and the customer will not have excess inventory to pull from to stock the shelves until the next truck arrives. GETTING SQUEEZED With the increase of retailers selling their private brands online, those in logistics and transportation are getting squeezed from all sides, says Kerry Byrne, president of Total Quality Logistics (TQL), a Cincinnati-based freight brokerage firm. “From the carrier side of the equation, we are in one of the tightest capacity markets we’ve ever experienced,” Byrne says. “On the shipper’s side, customer expectations for fast deliveries has put enormous pressure on retailers and distributors to be able to deliver mer-

TRENDING

HOW CAN THEY HELP? We asked representatives of Total Quality Logistics, Choptank Transport and Breakthrough Fuel how they can help retailers with their private brands in terms of logistics and transportation. Here are their responses: “We arrange the pickup and delivery of freight at almost every large national retailer daily. We know the retailers’ expectations, which means we can help our customers anticipate those needs. Technology is helping us provide solutions by analyzing our historical shipping data and intelligently sourcing carriers for new loads.” KERRY BYRNE, PRESIDENT OF TOTAL QUALITY LOGISTICS

“Fuel represents the second-largest and most volatile cost in U.S. shippers’ transportation spend. With increasing pressures in the transportation industry, it is important for shippers to take control of this cost. Breakthrough Fuel brings shippers a competitive advantage by enabling them to manage fuel costs, reduce consumption and remove emissions from their supply chains.” JENNIFER VANDER ZANDEN, VICE PRESIDENT OF FUEL RECOVERY FOR BREAKTHROUGH FUEL

“Choptank offers value to its customers by sharing its knowledge of current market conditions, utilizing the best and latest technologies, accessing top-tier carriers, and providing experts in the industry who can offer quick solutions when problems arise.” DEREK BEELEN, ACCOUNT EXECUTIVE FOR CHOPTANK TRANSPORT

Store Brands /July 2018 / www.storebrands.com

chandise to customers in at least two days, if not two hours. Shippers are looking at reconfiguring everything in their supply chain from where their warehouses and stores are located down to how to provide accurate visibility into tracking shipments.” Vander Zanden says the direct-to-consumer e-commerce model creates a significant shift in how food moves through a supply chain of the final mile. “Instead of retailers moving products from a distribution center to a store where a consumer will ultimately pick up the purchased item, a significant focus is put into the fulfillment at a distribution center that feeds into a parcel service for the final mile of the journey to the customer,” she adds. EMERGING TRENDS Regarding private brands, other emerging trends in logistics and transportation are related to real-time visibility and new technologies that improve the timeliness, transparency and safety of products to market, Beelen says. “There are a large number of breakthrough apps that are streamlining everything from pickup to delivery to reducing idle time to truck parking availability and more,” he adds. “We have seen an increase in the number of our customers that are requesting real-time monitoring for temperature and location. As blockchain becomes more and more relevant, retailers and potentially consumers will be able to track products from the fields to store shelves.” Byrne agrees that visibility continues to be a dominant trend in logistics — and more than just being able to track a delivery. “With advanced data analytics, we are trying to help shippers understand the true costs of shipping, and make recommendations on how to route freight, schedule shipments, optimize loading and unloading, and intelligently source carriers so they can meet consumer expectations of one-day and at most two-day delivery windows,” he states. Vander Zanden says many food and consumer products shippers have recently expressed challenges with the rising costs in moving products to market during shareholder meetings. “The cost in moving products to market has felt upward pressure on two fronts over the past year: one, fuel prices have increased by more than 30 percent from 2017 to 2018; and two, the transportation market has had upward pressure due to carrier capacity. For private brands, where prices may be locked in for an extended period of time, these price increases can cause challenges. to margin,” she adds.. SB

TOTAL STORE

POLITICS AND

PRIVATE BRANDS As store brands become more about than just creating and selling tangible products, retailers are trying to improve their own brand images through non-tangible measures. But they might want to stay out of politics B Y L AW R ENC E AY L W AR D

Publix made Time magazine. But not like Publix wanted to make Time magazine. In the June 11 issue of Time, a photograph spanning two entire pages depicts a “die-in” protest at a Publix supermarket in Coral Springs, Fla., organized by David Hogg, a survivor of the Marjory Stoneman Douglas High School shooting in Parkland, Fla. A die-in is a demonstration in which people lie down as if dead. Hogg, now a gun control activist, rallied others to protest Publix’s support for Florida gubernatorial candidate Adam Putnam, a stout supporter of the National Rifle Association (NRA). WHAT DOES THIS HAVE TO DO WITH STORE BRANDS? PLENTY. As store brands evolve and become more about than just creating and selling tangible private brand products, retailers are trying to make a good name for themselves through excellent customer service and other non-tangible measures to improve their own brand images. But they might want to stay out of politics. Publix made national news when the Tampa Bay Tribune reported in May that the Lakeland, Fla.-based grocery chain donated $670,000 in the last three years to support Putnam’s campaign. The Republican politician said last year that he’s “proud” to be an “NRA sellout.” The feeling is mutual: The embattled NRA loves Putnam. Of course, the acronym “NRA” is a sizzling hot potato these days, especially in Florida, mainly because of the

heartbreaking school shootings that have occurred throughout the country, including in February at Stoneman Douglas High School, where 17 people died. Don’t forget the 2016 shooting at the Pulse nightclub in Orlando, where 49 people were killed. Publix operates most of its 1,160 stores in Florida. In the wake of the Tampa Bay Tribune’s report — when Publix began to be criticized for supporting an NRA proponent — the retailer said it was supporting Putnam for his “pro business values,” and made it clear it was donating money to Putnam, not the NRA. It’s a point well-taken, but it didn’t seem to resonate with everyone. “A lot of people don’t support who Publix is supporting,” Haylee Shepherd, a 15-year-old sophomore at Stoneman Douglas, told the Associated Press. “It’s going to reflect on them as a brand and people shopping there.” Soon after the news hit, there were calls to boycott Publix through social media and other mediums, including the die-ins organized by Hogg, which occurred at several Publix stores where protesters laid down in aisles. Opposing politicians also pounced. State Rep. Carlos G. Smith, a Democrat from Winter Park, Fla., tweeted: “How many flowers did I buy from your stores for funerals, graves, + memorials for Pulse + MSD victims? #BoycottPublix” Realizing it had a potential public relations nightmare on its hands, Publix issued a statement saying it was suspending corporate-funded political contributions and was going to re-evaluate its giving processes. Publix also said, “We www.storebrands.com /July 2018 / Store Brands

TOTAL STORE respect the students and members of the community who have chosen to express their voices on these issues. We regret our contributions have led to a divide in our community. We did not intend to put our associates and the customers they serve in the middle of a political debate.” But gun control is the hottest political debate on the table, and more Americans want tougher gun laws than ever. So you can see how Publix got itself in this situation. However, this too shall pass for Publix, which is highly regarded for the many altruistic deeds it does in the communities it serves. If there’s a hurricane or other natural disaster in Florida, you can count on Publix to be one of the first businesses there with people and product to help those in need. Publix also donates money to house the homeless and food to feed the hungry. Publix is often commended by third-party studies for its customer service and regularly appears on “Best Companies to Work For” lists. Unfortunately, the good news that businesses and people make is

U.S. Alliance Paper manufactures private label household paper – period. “Private label paper is not a sideline for us,” says John Sarraf, President. Our mission is to be the preferred, low-cost supplier of high-quality private label paper products every single day of the year.” To succeed, he looks for excellence in four areas: strategic category support; flexibility in manufacturing; full spectrum of paper grades; and guaranteed coast-to-coast delivery. “We are a family-owned and operated company,” adds Steve Saraf, Vice President of Sales. “We don’t answer to a corporate parent or outside shareholders. So, we can aggressively invest in equipment, facilities and innovation to help drive our customers’ margin growth in the paper aisle.” U.S. Alliance Paper works closely with its retail customers to help develop their paper programs. Looking at store and customer data, the company helps create custom programs and identify opportunities to slot in private label alternatives to top-selling SKUs in each quality tier and product segment. As retailers increasingly adopt a multi-tiered shelving and pricing strategy to satisfy both their brand-loyal and valueconscious consumers, U.S. Alliance Paper offers a complete range of paper grades and types – from ultra, premium and FSC® Certified, to 100% recycled and traditional grades – providing its customers options and flexibility in building out their programs.

Store Brands / July 2018 SB_US AllianceAdv.indd 1 / www.storebrands.com

not reported like the controversial news they make, whether that news is reported by the mainstream media or Joe Schmo on Twitter. Being a private company, Publix can support any political leader or political issue it wants. Publix, in fact, has supported Putnam for more than 20 years and nobody ever seemed to care. But this was a perfect storm of sorts, with gun control serving as the lightning rod. So there is a lesson to be learned here if you are a business — especially a business with public-paying customers — and elect to play in politics in a very divided country. If you play, you had better consider every conceivable angle of what might cause possible repercussions and a negative backlash that could grow bigger than you ever realized. SB Aylward, editor-in-chief of Store Brands, can be reached at laylward@ensembleiq.com.

The company’s computerized ‘flex manufacturing’ lines allow for a wide range of product customization - from “supersized” rolls, sizes and bundles, to pre-packed displays and end caps. For customers who don’t have the volume for their own private label program, U.S. Alliance Paper offers a range of pre-packaged and shelf-ready control brands. The company recently launched its award-winning line of Azure ultra-premium paper towels and bath tissues in bold, eye-popping packaging. Its Daisy line of kitchen towels, bath tissues, napkins and facial tissues was developed specifically for the discount and dollar store segment. The Delicate Touch line offers consumer-tested package configurations for grocery, club and mass. Its specialty line of Earth First products is manufactured with 100% recycled fiber with 80% post-consumer content, without chlorine bleaching. U.S. Alliance Paper delivers to private label customers coast-to-coast from over a million square feet of manufacturing and warehousing facilities in New York and Arizona. “Our customers won’t care about our service and quality if the product does not deliver when and where they need it,” adds Steve Saraf. “That’s why we aim for nothing short of 100% reliability.”

7/3/18 12:21 PM

CATEGORY INTELLIGENCE SAUCES AND MARINADES

AN AVERSION TO AVERAGE Opportunity is knocking for merchandisers of sauces and marinades. With more consumers seeking novel and more vibrant flavors along with healthier alternatives, merchandisers of store brands are in a position to propel activity, analysts note. “Shoppers are looking for ways to conveniently cook at home, but to do so at an elevated level,” says Diana Sheehan, vice president of retail and shopper insights for Kantar Consulting, a Boston-based research and consulting firm. “Many want ethnic flavors and selections that they haven’t tried before. They also seek sauces and marinades that can spice up a meal or meal occasion quickly and easily. That is the place and play that retailers should be making with store brands.” The sector already is active with sales of cooking and pasta sauces and marinades increasing 15 percent between 2012 and 2017 to $5.9 billion, states Mintel, a global market research firm, in its December 2017 “Cooking and Pasta Sauces and Marinades U.S.” report. Mintel forecasts sector revenues to further increase 12 percent to $6.6 billion from 2017 to 2022. Merchandisers are benefiting from nearly universal activity, as 92 percent of consumers who do at least some home meal preparation report using a sauce or marinade in the previous six months, Mintel notes. Interest is especially strong for fresher and lessprocessed alternatives, as well as newer flavors and products that enable simple and faster meal preparation, Mintel states. Though most shoppers are purchasing sauces and marinades, their use of and interest in selections often varies by demographic. While application of sauces and marinades on chicken, pasta, beef and pork is prevalent for all age groups, younger adults between 18 and 34 are more apt to buy products for vegetables, grains, tofu and other vegetarian selections, Mintel notes. Persons between 35 and 54, meanwhile, who are more likely to prepare most or all of the meals in their households, are prone to try newer alternatives, Mintel states. A larger base of shoppers also are seeking fresher alternatives. Though interest in convenience is causing more consumers to leverage packaged instead of homemade selections, it still is important for the packaged items to mimic the taste and quality of homemade sauces and marinades, Mintel notes. Mintel research found that 57 percent of category shoppers say they would be interested in trying packaged sauces and marinades that are freshly made, and 45 percent cite interest in handmade selections.

Forty-three percent of users also indicate that a simple ingredient list is a top priority when selecting a cooking sauce, pasta sauce or marinade, and that they are inclined to associate such products with being less processed and more healthful. Also desirable is the absence of high-fructose corn syrup in sauces and marinades, which was noted by 35 percent of survey respondents, as well as products with no additives or preservatives (stated by 32 percent). The merchandising of natural and organic selections can further enable store brands to stand apart from national brand offerings, along with the availability of ethnic flavors and new packaging concepts, Sheehan notes. Co-merchandising sauces and marinades with center-of-the-plate selections and side dishes to create meal solutions will also boost interest in products, she says. That includes having sauces and marinades in meal kits along with vegetables and proteins. Among the major marketing challenges is determining the optimal amount of SKUs to offer, and garnering the necessary merchandising space to display signage and other promotional vehicles, she says, adding that stores can more easily spotlight specific items by situating products on separate displays.

DO offer flavors and selections consumers haven’t tried before.

DON’T forget that demand for healthier, premium ingredients is preferred by consumers, as health concerns have escalated. www.storebrands.com /July 2018 / Store Brands

CATEGORY INTELLIGENCE SAUCES AND MARINADES Barbecue Sauce Private Brands

All Brands

Dollar Sales (in millions)

$52.4

$727.7

Change vs. Year Ago

3.4%

0.2%

Dollar Share

7.2%

100%

Unit Sales (in millions)

38.4

323.0

Change vs. Year Ago

6.7%

-1.8%

Avg. Price Per Unit

$1.36

$2.25

Private Brands

All Brands

Dollar Sales (in millions)

$234.1

$2,402.8

Change vs. Year Ago

9.9%

1.7%

Dollar Share

9.7%

100%

Unit Sales (in millions)

133.5

1,048.5

Change vs. Year Ago

12.7%

0.6%

Avg. Price Per Unit

$1.75

$2.29

Spaghetti/Italian Sauce

Source: InfoScan Reviews, IRI, a Chicago-based market research firm. Total U.S. supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending March 25, 2018.

Store Brands /July 2018 / www.storebrands.com

While merchandising the proper variety of selections is critical for attracting different consumer segments, Sheehan says that there “also comes a point where stores may be offering too many SKUs. Retailers and manufacturers have to lean into the data science to understand what the category looks like and how to optimize it.” Indeed, using syndicated data to understand shopper purchasing patterns will enable private brand retailers to quickly respond to sales trends, says Angelo Fraggos, chairman and CEO of Italian Rose Garlic Products LLC, a Riviera Beach, Fla.-based sauce supplier. To further grow revenues, it is important that retailers educate shoppers about attractive product ingredients; earmark enough shelf space to merchandise the proper range of selections; and tailor the variety of store brands to a location’s specific customer base, he says. “Private brands are a great way to add excitement and variety to a category, but many retailers have forgotten this key element,” Fraggos states, adding that retailers also will benefit by offering locally produced private label selections that do not have direct national brand equivalents. SB

CATEGORY INTELLIGENCE COUGH AND COLD

THE PRICE IS RIGHT Merchandisers of store brand cough and cold medicines are finding that price can be a very powerful sales remedy. With a substantial profit disparity between over-thecounter (OTC) private brands and national brands, marketers have a strong incentive to spotlight the lower cost of high-margin private brand selections. Indeed, OTC store brands typically have profit margins in the mid 30 percent range, which is usually 15 to 20 percent greater than margins for national brands, says Jim Wisner, president of Wisner Marketing Group Inc., a Libertyville, Ill.-based retail, consumer packaged goods and private brands consulting, research and education firm. Many shoppers embrace store brands after recognizing that private brands and comparable national brands have identical active ingredients, he notes. “It makes so much more sense for shoppers to buy the retailer’s brand,” Wisner states. “Cough and cold store brands often are priced 35 percent lower than the national brands, and product differences have nothing to do with function, but typically just result from color and form.” The margins for store brands are so large, however, that retailers may risk underpricing their products, he notes. “When a private brand is half the price of a similar national brand, it puts doubt in the consumer’s mind over how the products can be the same,” Wisner states. Retailers can enhance shoppers’ comfort levels by having callouts on store brand packages that urge consumers to compare the products to specific national brands, he notes. “You don’t want customers to be

confused over what they are buying,” Wisner says. Because shoppers typically trust pharmacists, retailers also should involve the staffers in their store brand’s marketing, Wisner says. Measures can include signage that states the in-store pharmacist recommends a specific private brand, or encourages shoppers to ask pharmacists about the store’s cough and cold offerings. In addition, retailers’ should base their marketing strategies on evolving consumer interests, analysts say. Shopper demand, for instance, is building for medicines that have healthier ingredients, states global market researcher Mintel in its April 2017 “Cough, Cold, Flu and Allergy Remedies” report. Mintel found that 29 percent of people who experienced at least one cold, cough, sore throat, flu or allergy in the previous 12 months took natural remedies in addition to conventional medicine for the symptoms. Demand is also increasing for medicines that simultaneously treat such symptoms as runny noses, runny eyes, sneezing, coughing and nasal congestion for eight to 12 hours, says Mark Bolling, executive vice president of sales and marketing for PuraCap Pharmaceutical LLC, a Piscataway, N.J.-based supplier of soft gel medicines. It is important that packages have a minimal amount of messaging to enable shoppers to quickly decipher product features, Bolling says. “The package should be free of clutter, with a lot of open space and just a couple of key points on what the product is going to do for cough and cold relief,” he states. SB

DO pay attention to evolving consumer interests, demand for new formulations and those offering various formats.

Cold/Allergy/Sinus Tablets/Packets Private Brands

All Brands

Dollar Sales (in millions)

$1,468.1

4,748.2

Change vs. Year Ago

0.2%

2.5%

Dollar Share

30.9%

100%

Unit Sales (in millions)

187.7

476.3

Change vs. Year Ago

0.6%

0.1%

Avg. Price Per Unit

$7.82

$9.97

DON’T make it difficult for consumers to make their product choice. Use simplified messaging on packaging. www.storebrands.com /July 2018 / Store Brands

CATEGORY INTELLIGENCE TRAIL MIX AND JERKY

HIGH-OCTANE FUEL

DO market products to women, who also want healthy, highprotein snacks.

Heavily scheduled people on-the-go tend to need nourishment often, and many find that trail mixes and meat snacks come in pretty handy in such situations. With scarce time available for sit-down meals, people are snacking up to seven times a day, and nearly a third of those snacking occasions occur before noon, says Scott J. Reindel, vice president of business development and retail strategy for Trophy Nut Co. in Tipp City, Ohio. In trail mixes, retailers focusing on current health and wellness snacking trends are using their private brands to give them a competitive edge, says Wesley D. Edwards, regional sales manager for Woodstock Farms in Edison, N.J. “Organic and natural trail mixes are the perfect subcategory to provide differentiation, as recipes and blends [can provide] endless opportunities,” for variety, Edwards says. Standard trail mixes of the past were primarily composed of peanuts, raisins, chocolate “gems” and other less-expensive ingredients, but today’s trail mixes use unique commodities that target a demographic, day part or health benefit, Edwards explains. Retailers that, for instance, target moms who want to give their kids healthy snacks or commuters who need an easy, portable breakfast could establish their

DON’T forget to offer more premium trail mixes.

Store Brands /July 2018 / www.storebrands.com

stores as a destination for such shoppers, he says. Edwards also sees the meal kit phenomenon that targets busy consumers and is having such a major impact on food shopping behavior extending into snacking. “I hope this transforms to snack kits at retail,” Edwards says. “There are a few refrigerated packs with meat and cheese, but snack trays of high protein nuts and dried fruit will increase healthy snacking.” Nut and fruit and tropical mixes are the basics, but retailers are starting to expand on those, Reindel observes. The trail mix segment is growing, he says, driven by a move to premium items and extending assortments beyond the traditional. Reindel admires big box retailer Target as well as the drug store class of trade for their “comprehensive and impressive” trail mix offerings. Private brands account for 55 percent of dollar sales in the nutritional snacks/trail mixes category, and dollar sales rose 3.9 percent compared to a year ago for the 52 weeks ending March 25, according to Chicagobased global market information provider IRI. The jerky category is growing rapidly, says Jeff Sigouin, managing director, for Classic Jerky Company in Taylor, Mich.Private brand dried meat snacks, with an 8.5 percent share of the category, saw dollar sales shoot up 11.2 percent for the 52 weeks ending March 25, IRI reports. The meat snacks category is expected to grow by $1 billion between 2016 and 2021 to reach $4.3 billion, Sigouin relates, citing global market research firm Mintel statistics. In a category with a fair amount of competition, retailers are asking for meat snacks that check all the boxes, says Ron Godshall, chief operating officer for Godshall’s Quality Meats in Telford, Pa. “Hearty, satisfying flavors that are also allnatural, uncured, free of things like gluten and MSG … in unique flavors with tastes that will bring customers back for high-quality items they can only get at that retailer,” constitute a winning formula for jerky category sales, Godshall declares. Grab-and-go is an important component of the category, as “jerky is one of those things that tends to be opened in the car,” Sigouin adds. Surprisingly, Sigouin says, growth is coming less from innovation (he estimates innovation as a factor in 10 percent of the category’s growth), and more from retailer behavior.

sales@cjcjerky.com or 800.644.0445

2457687

CATEGORY INTELLIGENCE TRAIL MIX AND JERKY Dried Meat Snacks Private Brands

All Brands

Dollar Sales (in millions)

$124.7

$1,470.1

Change vs. Year Ago

+11.2%

+5.5%

Dollar Share

8.5%

100%

Unit Sales (in millions)

25.3

410.3

Change vs. Year Ago

+8.5%

+4.6%

Avg. Price Per Unit

$4.92

$3.58

Nutritional Snacks/Trail Mixes Private Brands

All Brands

Dollar Sales (in millions)

$521.5

$947.7

Change vs. Year Ago

+3.9%

+1.9%

Dollar Share

55.0%

100%

Unit Sales (in millions)

109.7

219.0

Change vs. Year Ago

+0.7%

+1.7%

Avg. Price Per Unit

$4.75

$4.33

Source: InfoScan Reviews, IRI, a Chicago-based market research firm. Total U.S. multi-outlet (grocery, drug, mass market, military and select club and dollar retailers) for the 52 weeks ending March 25, 2018.

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Store Brands /July 2018 / www.storebrands.com

Three tactics are driving about 50 percent of jerky’s growth, Sigouin says: offering a good product assortment; providing a permanent home for it; and increasing space devoted to the category. A quarter of the category’s growth is due to quality merchandising, Sigouin says. “The trade is asking for innovation; they want to be out ahead of the national brands, and innovation is important,” he adds.” But it’s also fundamentally important to get the core right — stocking the most popular flavors: original, teriyaki and peppered, plus a fourth option that is a popular preferred consumer flavor, Sigouin states. About 55 percent of jerky consumers account for 95 percent of jerky consumption, Sigouin reveals. They break down into “protein-seekers” at 37 percent and satiety snackers (who want to feel full) at 18 percent, he explains. “I think the success of organic jerky has been driven by better-for-you platforms. Jerky fits in really well as a low-fat, high-protein, low-calorie, low-sugar snack,” Sigouin adds. Seasonings are making their way into trail mixes, while salt is becoming less desirable. Delicate cinnamon and bold sriracha power can enhance mixes, Edwards says, noting, “If a trail mix has a great flavor and is free from artificial ingredients, the customer will not think twice about buying it again.” Savory flavors and spices are big now, with chilies and jalapenos starting to find their way into the marketplace, Reindel says. Increasing consumer preferences for products with little or no sodium is resulting in the growth of raw nut trail mixes, he adds. Trail mix sales will increase with expanded flavor offerings, just like potato chips and ready-to-eat popcorn, and will have the added advantage of being a healthier snack, Edwards adds. Edwards notes a generational divide in flavor preferences. Millennials want products that are unique with full flavor, and will go out of their way to buy them. Baby boomers are still primarily focused on value. Because boomers grew up with national brands available at various outlets, it became habit to shop by price. COURTING WOMEN Jerky is not just for men anymore — if it ever was. “The audience has expanded beyond what I think was always a stereotype,” Godshall says. “We have a substantial potential consumer base, not just of men, but of women craving a healthier, high-protein, lowfat snack that isn’t loaded with carbs or fat.” There is an effort to bring more females into the category, and two ways to do that are by offering organic product, as well as meat snacks that are softer and easier to chew, Sigouin says.SB

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CATEGORY INTELLIGENCE OILS AND VINEGARS

GOODNESS!

DO offer single-use bottles of oil to capitalize on consumer needs.

Mature categories need nudging, and edible oils and vinegars are no exception, category observers note. Even so, in private brands, dollar sales are up by more than 7 percent for both vinegar and oils, and store brand oil is far outpacing the overall market both in dollar and unit sales, according to statistics compiled by market information provider IRI for the 52 weeks ending March 25. Store brand oils and vinegars command significant shares of category sales. Private brand vinegar has a 41.6 percent share, cooking and salad oils have a 45.5 percent share, and shortening and oil a 37.7 percent share, according to IRI. “Habitual behaviors,” wherein consumers tend to stick with the same brands and show less than optimal interest in innovation, are stifling growth in the fats category, according to global market research firm Mintel’s March 2018 report, “Butter, Margarine and Oils U.S.” Mintel suggests targeting younger consumers who are more likely to experiment as they develop their palates and cooking skills, to kick-start and maintain growth in the category. The report further advises playing up the advantages of different types of fats, for example, whether they are best suited for cooking, baking or flavoring foods.

DON’T forget the importance of innovation to bring new vinegar products to market.

Store Brands /July 2018 / www.storebrands.com

“Communication of new uses and helping to educate those with less advanced cooking skills and knowledge can help to draw consumers into the category more deeply,” the report states. In the vinegar category, retailers are constantly pushing manufacturers to innovate in order to drive growth in this mature category, says Thomas McHenry, national brand manager for Modena Fine Foods in Clifton, N.J. The goal is always to bring new products and innovation to retailers that are rooted in consumer data and research, McHenry continues. “This is crucial in order to allow the retailer to remain relevant in a fast-paced, tumultuous environment.” Consumer trends around apple cider vinegar continue to drive innovation and growth within the category and should remain a constant theme in the near future, McHenry states. Renewed interest in the health benefits of products that contain the “mother” (the bacteria that turns apple cider into vinegar, which is not filtered out and gives the product a cloudy look) will continue to drive significant growth in the category, says Tim Jacques, a private brands and labeling expert for Chesterfield, Mo.-based Soy Connection, an educational arm of the United Soybean Board (USB). Products made with vinegar, such as smoothies and shakes, will drive additional sales, Jacques adds. Within the balsamic vinegar category, McHenry continues, “you see a lot of products looking to differentiate themselves on a very crowded shelf. This need for differentiation will be rooted in all of the innovation and should bring some interesting bottle shapes and sizes in the future.” SMALLER AND BETTER Bottle size has become a sales driver in the extra virgin olive oil sector, reports John Mesrobian, partner with Rolland Rosenthal in The Mill at Kings River, based in Sanger, Calif. The company’s oil is made from Arbequina, Arbosana and Koroneiki olives grown on local family-owned farms and it is one of the largest olive oil producers in California. Bottles are shrinking for two reasons, Mesrobian says. Production costs (especially in California) have risen, and olive oil is sensitive to time and storage conditions. “It doesn’t really get better with age. It needs to have a nitrogen cap so air doesn’t come in contact with

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CATEGORY INTELLIGENCE OILS AND VINEGARS Cooking and Salad Oils Private Brands

All Brands

Dollar Sales (in millions)

$819.3

$1,801.9

Change vs. Year Ago

+7.6%

-0.6%

Dollar Share

45.5%

100%

Unit Sales (in millions)

216.8

423.6

Change vs. Year Ago

+6.5%

-1.1%

Avg. Price Per Unit

$3.78

$4.25

Private Brands

All Brands

Dollar Sales (in millions)

$282.0

$678.2

Change vs. Year Ago

+7.8%

+8.4%

Dollar Share

41.6%

100%

Unit Sales (in millions)

129.0

238.7

Change vs. Year Ago

+4.4%

+3.9%

Avg. Price Per Unit

$2.19

$2.84

Vinegar

the olive oil; it needs to be in a dark glass bottle and it needs to be stored at cool temperatures,” Mesrobian adds. “Not all those conditions exist in stores.” Smaller bottles of 750 or 500 milliliters offer consumers a fresh product that they will be satisfied to use, Mesrobian adds. Single-use bottles of oil will also capitalize on consumer needs, Jacques adds. “With meal prep and meal delivery services increasing in popularity, and consumers looking to reduce food waste, singleuse options will become a larger trend across all categories.” Sales of some unique oils, such as avocado and coconut, will grow in the short-term because of the public’s perception of their health benefits, Jacques says. Soybean oil (often labeled as vegetable oil) will also continue to grow. “Consumer demand for U.S.-grown ingredients will contribute to the growth of soybean oil,” he adds. Jacques foresees a continued focus on healthy claims for both oil and vinegar. Consumers care about where their food comes from, and food retailers will see demand for U.S.-grown and locally sourced ingredients gain momentum and impact the category, he adds. SB

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Store Brands /July 2018 / www.storebrands.com

CATEGORY INTELLIGENCE PAPER PRODUCTS

PREMIUM PAPER PRODUCTS DELIVER Store brands that focus on premium quality and competitive pricing will continue to make strides When it comes to a mature market like paper products, the name brands have their work cut out for them. Despite near universal household penetration in staple products like toilet paper and paper towels, product innovation and differentiation remain challenging. Solid and steady gains are hard to come by. But store brand paper products, on the other hand, are doing just fine. According to a January 2018 report titled “Household Paper Products, U.S.” from market researcher Mintel, private brand offerings are taking a bite out of profit margins and sales growth, thanks to improved product quality and a continuing value-driven consumer mindset. This focus on value is present across product segments. In fact, half of users report buying their household paper products on sale while more than a third say they use coupons. While consumers do not want to overspend, they do want their store brand paper products to perform like they spent a pretty penny. “We continue to see the consumer trend toward higher quality products, especially with [bath] tissue,” says Jeff Kuenn, director of marketing and category management of Resolute Tissue in Montreal. “Larger count items, like tissue mega rolls, also continue to grow within the ultra segment.” And with the increased competition, demand for all products in the bath tissue segment are improving — from value to ultra-quality products, he adds. While private brand paper products are giving the name bands a run for their money, they cannot sell themselves. Merchandising and promoting store brand paper products will take some work. A generic, onesize-fits-all approach just won’t do. “[It] really depends on the retailer’s specific mer-

chandising and strategic vision for its store brand and how it competes with/ against branded items,” Kuenn explains. Packaging remains a huge opportunity for retailers to differentiate their paper product offerings. Attractive and distinctive designs are crucial to both drawing consumers’ attention and communicating the overall vision for private brand products. Kuenn encourages retailers to not underestimate the development and internal approval timing of new product artwork. “Having all the requirements, specifications and artwork ready prior to specifying a launch date [means] we can better partner with you to ensure a smooth transition and execution,” he explains. Looking ahead, store brand paper products are poised to make steady gains both in the short term and long term. “I see store brand items continuing to grow at the expense of branded items,” Kuenn explains, “as long as the quality gap continues to close, and retailers continue to build on the growing trust in/satisfaction with store brand quality.” However, savvy retailers must keep their eye on today’s small but fast-growing segments and their potential impact. According to the Mintel report, towelettes and flushable wet wipes, for example, reflect the potential for innovations in format, functionality and benefits. In the future, innovations in these areas may also impact new product development in paper towels, toilet paper and tissues. SB

DO offer improved product quality at a value.

Facial tissue Private Brands

All Brands

Dollar Sales (in millions)

$374.8

$1,535.9

Change vs. Year Ago

+4.7%

-1.4%

Dollar Share

24.4%

100%

Unit Sales (in millions)

213.5

666.4

Change vs. Year Ago

+3.1%

-2.6%

Avg. Price Per Unit

$1.76

$2.30

DON’T underestimate the development of new product artwork.

Source: Infoscan Reviews, IRI, a Chicago-based market research firm. Total U.S. supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending March 25, 2018. www.storebrands.com / July 2018 / Store Brands

CATEGORY CLOSEUP

$75

10 best ways

to cook eggs Hard-boiled Soft-scrambled Deviled Cloud eggs Basted Soft-boiled Sunny side up Over easy Poached Soft-scrambled Source: Food Beast

A hard-boiled snack With more consumers snacking daily — and wanting healthy snacks — the hard-boiled egg has become a good choice. Here’s why: • One hard-boiled egg contains only 78 calories. • Hard-boiled eggs are a good source of Vitamins B12 and E, folic acid, iron and zinc. • Hard-boiled eggs can refuel the human body and control hunger. Source: Livestrong.com

BILLION That’s how many eggs the U.S. produces each year from the approximately 280 million laying birds, which each lay 250 to 300 eggs a year.

Store Brands / July 2018 / www.storebrands.com

275

The number of eggs the average person consumes in a year. Per-capita consumption has grown by almost 20 eggs in the last two years. Source: American Egg Board

Source: American Egg Board

‘Eggcellent’ news for store brands Sales of private brand eggs are far and away tops at retail, according to Statista. Sales of private brand eggs were $624.2 million in 2017. Private Label 624.2 Eggland’s Best 182.44 Pete & Gerry’s 23.55 Nellie’s 12.71 Cal-Maine Sunups 11.38 Eggland’s Best Land O’Lakes 11.2 Farmhouse 10.93 Sauder’s Eggs 8.26 Dutch Farms 8.19 Source: Statista

Eggs

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