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Volume 42 No. 1 January 2019
DEPARTMENTS 6
Editor’s Take
8
Viewpoint
10
Around the Industry
13
Getting Social
42
End Cap
CONTENTS
14
COVER STORY
CATEGORY INTELLIGENCE 30
Ground Coffee
34
Sauces and Marinades
36
Olive Oil and Vinegar
39
Beauty Care Products and Cosmetics
They mean business The dedicated team at Albertsons Companies is determined to take the company’s store brands to another level … and another level after that
FEATURES 21 TRENDING All aboard If you haven’t caught the premium private brands train, it might be time to do so
26 FOCUS ON FRESH Case-ready revolution For all the buzz about plant-based substitutes, consumers are eating more prepackaged fresh meats 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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EDITOR’S TAKE Business Intelligence for an Evolving Market
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IT’S TIME TO LEAD, NOT FOLLOW
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“I don’t like store brands that just try to copy a national brand or those that are just fake versions of a national brand.” That’s what one consumer recently told Magid, a consumercentered business strategy company, which recently issued a report called “Consumer Attitudes Toward Private Label.” But that’s not the only consumer who feels this way. Magid found that many shoppers are shunning private brand products that are national brand equivalents like a kid would a bowl of soggy knock-off Cheerios. Magid’s survey of 3,000 consumers found that many consumers expect store brands “to offer unique and trendy styles that are ahead of national brands.” But the finding that really jumps out from Magid’s research is that national brand equivalent products can lower the overall evaluation of a retailer “and cause more harm than good,” particularly among millennials. It’s a finding that’s an ear-splitting wake-up call for retailers. Does this mean that retailers that offer national brand equivalent products are losing their all-important shoppers’ trust? And considering that many retailers have national brand equivalent programs in place, how should they react to this finding? “It’s a finding that provides tremendous insight,” David Bilicic, Magid’s senior vice president, told me. Bilicic says that national brand equivalent products can indeed decrease customers’ trust of a retailer, especially when the emphasis on that national brand equivalent is on it being lower-priced. The message is clear: Retailers selling national brand equivalent store brands and differentiating them only by price had better rethink their strategy. Apparently, shoppers are perceiving them as inferior products, not just cheap products. “It’s a strategy that has been in place for decades, but I think we can agree it’s coming to the end of its lifespan,” Bilicic said of the price-only-to-differentiate factor. Even though disruptive, this is a great win for store brands — that is, if you’re a retailer wanting to make a name for yourself by offering innovative and exclusive store brands. If you’re not that retailer, good luck with your mainstream-only private brand program. It’s time for retailers to move away from national brand equivalent-only programs. They’re old school. It’s time to stop imitating and to start innovating. “Retailers that have national brand equivalents need to invest in these brands and differentiate them in ways that draw consumers in,” Bilicic says. There is a drawing board for this, Bilicic notes. Look at what Costco Wholesale has done with its Kirkland Signature private brand line and what Wegmans Food Markets has done with its Wegmans brand. They have taken products in these lines and taken them beyond national brand equivalents by adding simple twists, from upping product quality to introducing eye-catching packaging. “They’ve established their own identities,” Bilicic says. We tell our kids to lead and not to follow. Consumers appear to be telling retailers the same thing with their store brands.
gacosta@ensembleIQ.com
Contributing Writers
Rich Mitchell, Dana Cvetan, Nevenka Jevtic
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EVENTS • MARKETING • DIGITAL • RESEARCH • CIRCULATION CORPORATE OFFICERS Executive Chairman - Alan Glass Chief Executive Officer - David Shanker Chief Financial Officer - Dan McCarthy Chief Digital Officer - Joel Hughes Chief Innovation Officer - Tanner Van Dusen Executive Vice President, Events & Conferences – Ed Several
Lawrence Aylward, Editor-in-Chief laylward@ensembleIQ.com
2015
6
Store Brands / January 2019 / www.storebrands.com
What the Crystal Ball Says About 2019 Reading a crystal ball can be difficult but PLMA’s Year-End /Year-Ahead Panel does its best to evaluate 2018 and see what’s ahead for the coming year. Will retailers’ investment in technology pay off? Can the private label industry meet the demands of innovation? Join moderator Tim Simmons and panelists Jim Hertel of Inmar Analytics, Don Stuart of Cadent Consulting, Becky Schilling, editor-in-chief of Supermarket News, and industry guru Todd Hale as they look into the future. Watch the news. Don’t just read about it. On your desktop, laptop, tablet or smartphone.
Tim Simmons
Jim Hertel
Don Stuart
Becky Schilling
Todd Hale
Moderator
Inmar Analytics
Cadent Consulting
Supermarket News
Nielsen
PLMA
®
www.plmalive.com Presented by the Private Label Manufacturers Association
VIEWPOINT
By Todd Maute
Todd Maute, a partner at CBX, a brand agency and retail consultancy, can be reached at todd@cbx.com.
8
Looks aren’t everything when it comes to a winning design Designers are aesthetes by nature. But a critical question is whether the most beautiful and inspiring designs — those that stand to win awards and earn toasts from our peers — actually count as “good designs” for our clients. Let’s say a national retailer wants to redesign its private brands program. Having sent a request for proposals to the top brand agencies, executives at the chain evaluate these firms in part by poring over their past work and price. If, in doing so, these decision-makers rely primarily on cost and elegant and sophisticated aesthetics, their efforts will in many cases be misplaced. Why is that? In a world marked by razor-thin profit margins, the rise of e-commerce and intense competition among global brands, choosing a design firm should not be seen as a beauty contest. The executives in question should be looking for firms that know how to leverage design to meet a business objective in ways that are strategically aligned with the go-to-market strategy. Good design can only be evaluated in its full context. Good design strategy balances the functional needs of the business with the emotional needs and wants of consumers. What counts most is whether the design propels brand penetration, connects with consumers and ultimately yields a solid return on investment. Truth be told, many redesigns of private brands accomplish such aims without winning design awards. And yet even merchants sometimes put a disproportionate emphasis on aesthetics. Consider the way retailers often treat private brands programs with thousands of SKUs. They will redesign every product, roll out the program and then sit back and wait for the program’s “shelf life” to expire. Often, though, that shelf life is
Store Brands / January 2019 / www.storebrands.com
not determined by anything strategic. It could be something as simple as an exec walking down the aisles and saying, “Geez, our design is looking old. We need new packaging.” For brands to succeed, design is a critical component of the marketing infrastructure and strategy. Strong brands constantly evaluate how their products are performing and talk to consumers. They watch for encroachment by competitors and are prepared to make a marginal upgrade to the design or even launch a total redesign as a strategic response. A string bean is a string bean. A can of corn is a can of corn. So a private brand canned commodity program doesn’t have the same shelf life as, say, salty snacks or health and wellness items. In some categories, consumer behavior and market conditions change more frequently. Just think of all of the iterations we have seen in the health food aisle: natural, organic, gluten-free, etc. In fastmoving categories, design needs to keep pace. Waiting to redo the whole program based on an aesthetic judgment is slow and costly. Instead, retailers should constantly ask their category managers and design firms for updates on how dynamics are shifting and make changes accordingly. It’s the only way to ensure that what you’re putting on the shelf is as relevant and effective as it can be. What we’re designing for is the intersection of people, brand and culture with great and effective package design. Aesthetic sensibilities need to be balanced against the goals of the brand and the business objectives of the retailer. Effective designs also fully honor the functional features and benefits of the product. They do so within the rigid confines determined by the specified size and shape of the package, and they succeed at being relevant and meaningful to consumers. This is no easy task or small accomplishment. If you can really savor how a package looks, that’s great. More important, though, is how well it does the job. SB
AroundtheIndustry
A wine awakening Retailers and suppliers should leverage the new opportunities bubbling up in the wine category By Gina Acosta
Maryrose Rinella, director of Own Brands at the Albertsons Cos., and wine marketer Paul Tincknell speak at the Private Label Trade Show wine seminar in Chicago.
A generation ago, the American wine drinker went to the grocery store, headed straight for the wine aisle, and looked for the Robert Mondavi brand or perhaps a cabernet from Louis Martini. Well, those days are long gone, according to Dave Falchek, executive director of the American Wine Society, who spoke during a special wine seminar held during the 2018 Private Label Trade Show in November in Chicago “Today, consumers really don’t care about brands anymore. They’re seeking alternatives,” Falchek said. “And people increasingly are less motivated to purchase certain varietals. So people may not go to the market and think, ‘Well I’m going to get a chardonnay or a merlot. They’re more open-minded to the types of grapes that are being used to make 10
wines. And they’ve also become much more adventurous and open-minded to different varietals.” Falchek was part of a panel seminar called “What Does America Like to Drink?” The seminar, organized by the Private Label Manufacturers Association, detailed all of the new and exciting trends in the wine category. As American wine consumers have become more educated, they are seeking out new experiences in the wine aisle (especially if the wine is a value-priced wine). Consumers are also gravitating toward more complex wines as their knowledge and willingness to try new offerings increase. “There was a time in the past where a wine buyer might have gone into a store and seen albarino wine and said to
Store Brands / January 2019 / www.storebrands.com
himself, ‘Oh no. I don’t want to bother with that,’ ” Falchek said. “But today the consumer might have a different reaction. They might say, ‘Oh, an albarino. I’ve never tried that before. I think I want to try it.” Falchek said the spectrum of different types of styles and tastes that consumers are interested in when it comes to wine is expanding, and this presents a major opportunity not just for retail assortment but also for the wines that retailers might look to develop as private brands. Millennials especially are very experiential and want to experience different types of foods and beverages, especially wines. And this is one of the reasons why millennials are willing to spend more per wine bottle than other age groups, Falchek added.
AroundtheIndustry SHORT TAKES “So a fizzy white wine from Portugal. That’s something that wouldn’t be on anybody’s radar, but it’s different and millennials want different,” Falcheck said. “I have a friend who’s a big fan of beer and wine, and he says I never want to drink the same beer or wine twice. There are so many opportunities out there for suppliers and retailers.” The panel, moderated by Jeff Siegel, who oversees a website called the “wine curmudgeon (winecurmudgeon. com),” featured Falchek and other experts in the category including leading wine marketer Paul Tincknell and Maryrose Rinella, director of Own Brands product management at Albertsons Companies. Rinella puts
“The current trend in the entire U.S. wine industry is of course premiumization, and what we think of as private label wine — lower-priced tiers, two-buck chuck – that’s over.” MARYROSE RINELLA, ALBERTSONS COMPANIES
together the private brand wine program for Albertsons’ footprint of stores. “The current trend in the entire U.S. wine industry is of course premiumization, and what we think of as private label wine — lower-priced tiers, two-buck chuck – that’s over,” Rinella said. “Retailers are assorting private label wines at all price points and in unique blends, imports, domestics, etc.” Rinella said Albertsons sees its private brand wine assortment as an opportunity for the retailer to have a point of differentiation compared with the competition. “We can choose and curate unique wines that fit our customer profile. And we can achieve better margins,” she said. Typically, your branded wines get a 3035 percent margin. Private label margins are at 50-55 percent. And premium
private label wines offer even higher margins than that.” About 42 percent of wine purchases are from the millennial segment, Rinella said, so the retailer is focused on curating its assortment to the millennial customer. “They are experimental. They are looking for a brand identity that they can support. And they are willing to pay more for wine than other groups,” she said. Retailers such as Aldi, Costco Wholesale, Lidl, Whole Foods Market, Trader Joe’s and others are becoming major players in wine retailing, especially in the private brand arena. But there’s one area where retailers and manufacturers need to ramp up their innovation: the mid-price private brand wine. “More than half of the wine sold in the United States is sold in grocery stores. But there’s a lot of really bad grocery store wine and a lot of really bad private label grocery store wine,” Siegel said. “In Europe, they’ve done a really good job of communicating quality to their consumers when it comes to a private label portfolio delivering quality wine, really over-delivering on price point. There’s a lot of education that retailers and suppliers can do in the U.S. to showcase private label quality, so that shoppers buy the $12 private brand wine instead of the $15 national brand wine.” On that point, Rinella had some suggestions for retailers, including strategies that Albertsons has itself implemented: • Offer in-store private brand wine tastings. • Pair the private brand wines with meal kits. • Put the private brand wine adjacent to the national brand on shelf. “We have 14 different regional buyers across the nation and a lot of times they’re meeting with a lot of different wine companies and people in the industry,” Rinella said. “So I’m constantly looking for new ideas, new varietals and new partnerships. Ideas can come from anywhere when it comes to wine.” SB Acosta, managing editor of Store Brands, can be reached at gacosta@ensembleiq.com.
Kroger, Microsoft team to offer new store experience The Kroger Co. and Microsoft are joining forces to create an even more efficient way to grocery shop. Cincinnat-based Kroger said it has remodeled two stores to test out the new features, which include “digital shelves” that can show ads and change prices on the fly, along with a network of sensors that keep track of products and help speed shoppers through the aisles. Kroger could eventually roll out the cloud-based system it developed with Microsoft in all of its 2,780 supermarkets, according to Bloomberg. “Together we can create something that, separately, we could not,” Kroger Chief Executive Officer Rodney McMullen said in a joint interview with Redmond, Wash.-based Microsoft Chief Satya Nadella. According to Bloomberg, the alliance is the latest example of how big U.S. retailers are deploying data-rich technology to improve the often-tedious ritual of food shopping and keep pace with Amazon, which is bent on grabbing a bigger share of the $860 billion U.S. food retail market. Kroger also hopes to sell the technology to other retailers, potentially opening up a new revenue stream with larger profit margins than selling groceries.
Ahold Delhaize acquires King Kullen stores Ahold Delhaize is buying out the competition, as the company’s largest U.S. banner Stop & Shop will acquire rival King Kullen Grocery Co. The deal includes King Kullen’s 32 supermarkets, five Wild By Nature natural foods stores and use of its corporate offices in Bethpage, N.Y. “This transaction underscores our commitment to further strengthen the positions of our great local brands in the U.S., both through organic growth and fill-in acquisitions,” said Frans Muller, CEO of Ahold Delhaize.
Amazon reportedly will expand ‘just walk out’ technology to Whole Foods Seattle-based Amazon is working on bringing its Amazon Go technology to Whole Foods Market, according to a report from the Wall Street Journal.
www.storebrands.com / January 2019 / Store Brands
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AroundtheIndustry SHORT TAKES POINT OF VIEW
Why I would miss Sears and Kmart The company was a pioneer when it came to store brands and customer service
By Gina Acosta
My first flat-screen television came from Sears. When I needed a new PlayStation in the early 2000s, I went to Kmart, not Walmart. And sometimes, when I feel really nostalgic, I take a drive to Sears and Kmart just to look at what’s new on the shelves and bathe in that uniquely dim fluorescent light found only in those stores. Yes, I am one of those people who (still) loves shopping at Sears and Kmart. Problem is, there aren’t enough of us. The probable liquidation of Sears and Kmart has been anticipated for a while now as Sears Holdings Corp., which operates both banners, has struggled to attract shoppers since the 1990s. It has sold off iconic private brands and real estate and closed hundreds of stores as competitors Walmart and Amazon have flourished. In December, when a liquidation announcement was almost certain, Sears Holdings CEO Eddie Lampert offered to buy the company out of bankruptcy in a $5 billion bid to salvage the failing retail empire he has controlled for more than a decade. But there’s no question that Sears and Kmart are on the brink of extinction. Even though it’s easy to dismiss Sears and Kmart as relics of the past in the Amazon age, the fact is that Sears was a pioneer when it came to discounting, mail-order shopping and private brands. It was Sears that in 1894 published the first retail catalog, which the company called a “book of bargains; a money saver for everyone.” The book gave shoppers the idea that Sears was synonymous with 12
saving money, way before Walmart’s “Everyday Low Prices.” The book, known as the Sears catalog, was also how many American consumers became accustomed to and fond of mail-order shopping. Amazon Founder and CEO Jeff Bezos can thank Sears for that. It was Sears that developed the original mass retailer format, opening stores that were assorted to offer shoppers everything from beauty products to food to hardware. And it was Sears that first created a range of quality private brands that helped draw customers to its stores. Long before the current trends of premiumization in consumer packaged goods, Sears blazed a trail by having its high-quality private brands become indelibly linked to the shopping experience in the store. Many of us grew up with our parents saying that Kenmore appliances, DieHard batteries and Craftsman tools were “the best,” above and beyond the quality of branded competitors. Sears Holdings plans to close 80 stores by March, leaving only around 400 Sears and Kmart stores open. A hearing on Lampert’s bid was scheduled for mid-January. If Lampert lost, the company will be broken up and liquidated. If you want to know where to find me in January, I will be at Sears or Kmart, wandering through the aisles, looking at the Kenmore brand gas grills, more than a little sad. SB Acosta, managing editor of Store Brands, can be reached at gacosta@ensembleiq.com.
Store Brands / January 2019 / www.storebrands.com
The company recently started testing automated checkouts in “a larger space” in Seattle, the Journal reported. The most likely candidate for the Amazon Go “just walk out” tech would be Whole Foods stores, which are much larger than the Amazon Go stores the company has been opening in cities across the country. “It’s part of a larger revolution that’s happening in food retail,” former Whole Foods CEO Walter Robb told journalists on CNBC. “What people miss about the AmazonWhole Foods deal is that physical retail really matters. And what Amazon is trying to do is streamline the physical retail experience.” Amazon currently operates three Amazon Go stores in Seattle, three in Chicago and one in San Francisco. In other news, Austin, Texas-based Whole Foods is taking a digital approach to increase its consumer engagement. The company announced the launch of a digital product catalog on wholefoodsmarket.com that allows shoppers to find items by dietary preference and provides complete nutritional information and ingredient lists at customers’ fingertips.
Dollar General is now ‘better for you’ Goodlettsville, Tenn.-based Dollar General is expanding its private brand assortment to offer consumers health food options that won’t break the bank, according to a CNN report. The company recently added around 125 “better-for-you” items to its shelves in 2,700 stores, according to CNN. The products appear under Dollar General’s Good & Smart house brand, and the store also carries Annie’s, Back to Nature, Honest, Nature Valley and Kashi brands. “Our goal is to build Good & Smart into a unique private brand that becomes a go-to product line for customers,” said Jason Reiser, Dollar General’s chief merchandising officer. Dollar General’s move signals the wider consumer shift to healthier foods is beginning to take hold among low-income shoppers, according to the CNN report. The company, which sells most of its items for under $10, serves a wide range of demographics. However, its primary customers are valueconscious and come from low- and fixedincome households. SB
GETTING SOCIAL
Q A with Chandra Wiggs Senior brand manager, Topco Associates LLC
How did you come into the world of private brands? After spending several years converting consumer insights into growth-driving strategies for various national brands at two large consumer packaged goods (CPG) companies, I became more aware of the growing power of store brands as a formidable competitor in the industry. So I took advantage of an opportunity seven years ago to shift to the store brands side of the industry to apply my classical brand marketing strategy skills to help develop effective go-to-market strategies for retailer brand portfolios. Describe the private brands industry in one word. Transformative. What do you like most about the industry? It has evolved from just being focused on cheaper me-too solutions to including innovative, strategic solutions designed to address consumer needs and need gaps. What one great thing does the industry have going for it? The positive perception that private brands have among millennials, driven by the fact that millennials have a totally different attitude about national brands versus their parents’ generation and see private brands as authentic, quality options at a good price value. What is the industry’s biggest challenge? The rapid reduction in brand loyalty among shoppers when it comes to both brands and retailers. As a result, retailers have to constantly innovate their go-to-market strategies in order to attract and retain shopper interest and business.
critical to always step back and think carefully before you act, as the way you choose to respond can determine if you’ll come out of that challenge victorious versus defeated. It’s 5 o’clock (or later), what do you do for fun? I would spend quality time with my pre-teen/teen kids, either just conversing to hear about their day, watching a TV show together or coaching them through their school work. You have a week off. Where do you go and why? I would spend the week with my 105-year-old grandmother, because being with her brings me ultimate joy and reminds me that every day of life is a gift.
If you could create one private brand product, what would it be? This is a good question, but if I gave you my real answer, then I’d have to. ... Seriously, if we look at it from a strategic perspective, here are some of the emerging trends I’d seek to capitalize on if I were developing a new private brand product: plant- or vegetable-based proteins, Middle Eastern-influenced foods, and plant-based beauty and skincare products.
If you were born 100 years ago, what would you do for a living? Given the limited job opportunities available to African-American women 100 years ago, I would have likely chosen to be a teacher so that I could help shape the minds of future leaders and change-makers.
Who is your hero and why? The key thing that attracted me to the CPG industry as a brand marketer was the desire to identify consumer needs and need gaps, and help identify solutions to meet or exceed those needs better than anyone else. Therefore, one of the business leaders I currently admire most is Jeff Bezos, founder and CEO of Amazon. From what I’ve read, he is very customer-centric in his approach to developing business strategies and solutions.
What’s the best book you’ve ever read? “The Game Changer” by A.G. Lafley. This book taught me how to think out of the box, or more creatively, about ways to grow a business and to make innovation a part of your everyday life.
What trait in yourself do you attribute most to your success? Being a creative problem solver who’s always looking for new and different ways to effectively address business and life challenges or opportunities. What’s the best advice someone ever gave you? That challenges are an inevitable part of life, but failure is optional. Therefore, it is
What song do you love to crank up in the car? “Survivor” by Destiny’s Child because it has a great musical beat and empowering message about the importance of never giving up when life gets hard. SB www.storebrands.com / January 2019 / Store Brands
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ALBERTSONS’ OWN BRANDS EXECUTIVES From left to right: Don Davidson, vice president of strategic sourcing; Nancy Cota, vice president; Geoff White, president; Chad Coester, group vice president of sales, marketing and service; Elizabeth Strydom, vice president of product development compliance; Jennifer Jesser, vice president of finance and analytics
THEY MEAN B
The dedicated team at Albertsons Companies is determined to t to another level ‌ and another level after that
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Store Brands / January 2019 / www.storebrands.com
BUSINESS BY LAWRENCE AYLWARD
take the company’s store brands
The guys at Geoff White’s barbershop talk about sports, politics and their kids. White wants to get them chatting about store brands … as in Albertsons Companies’ store brands. White is the president of Albertsons’ Own Brands, which comprises the retailer’s several store brand lines, including its Signature brands (Signature SELECT, Signature Café, Signature RESERVE, Signature Farms and Signature Care), O Organics, Open Nature, Lucerne Dairy Farms and others. White wants to make Albertsons’ store brands so dang awesome that people will be talking about them everywhere, including his barbershop. “When I go to get my haircut and the barber asks me what I do for a living, I will tell him,” White says. “And when everybody in the barbershop hears what I say, I want them all to start talking about how much they like the private brands they purchase from us. I want our store brands to have a cult-like following where people just talk about them constantly.” Boise, Idaho-based Albertsons, founded in 1939, is the third-largest retail grocer in the U.S. behind Walmart and The Kroger Co. and operates more than 2,300 stores in 35 states and the District of Columbia under 20 banners, including Albertsons, Safeway, Vons, Jewel-Osco and others Today, it offers 12 store brands lines and more than 11,000 private brand products in over 500 categories. White assumed his role in April 2017 with the goal to take Albertsons’ store brands to another level and another level after that. He assembled a management team, located at the retailer’s campus in Pleasanton, Calif., comprised of smart and seasoned grocery professionals who are just as zealous as White about making Albertsons’ store brands famous in the grocery world. And they love to come to work every day to make that happen. “Geoff has put together a diverse team; everybody brings something different to the table,” says Nancy Cota, Albertsons’ vice president of Own Brands, who has spent 42 years in the grocery industry. “That’s what makes us so strong. And when you trust each other like we trust each other, you want to win together.” The latest sales numbers show that they are winning together. During a recent meeting with Store Brands at a Safeway store in Walnut Creek, Calif., to discuss Albertsons’ private brands program, White revealed the
www.storebrands.com / January 2019 / Store Brands
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Albertsons launched 1,100 new private brand products in 2018, more than double the amount launched in 2017.
retailer’s Own Brands achieved a record 25 percent penetration rate in the company’s 2018 fiscal second quarter. UNDER WHITE, the Albertsons’ Own Brands team has moved swiftly but efficiently to launch 1,100 new products in 2018, more than double the amount launched in 2017. “When you have store brands with double-digit growth, why wouldn’t you do that?” White asks. “We want to have a portfolio that meets all consumer needs.” Consider Albertsons’ O Organics, which debuted in 2005 under Safeway, the grocery banner Albertsons acquired in 2015. O Organics is Albertsons’ top-selling organic brand and achieved sales of $1 billion in 2018. The line has grown to over 1,200 products, including nearly 300 introduced in 2018, which are featured in produce, dairy, meat, deli, snacks and baby items. The line also recently extended to laundry detergent. “If you live an organic lifestyle, you can do a full shop here,” White says. Open Nature, which launched under Safeway in 2011, is also expanding. The natural and free-from line, which extends across food and non-food categories, was redesigned in 2018 with a new logo and larger callouts to emphasize its highquality ingredients and minimally processed stature. White expects Open Nature, which features more than 500 products, to soon be Albertsons’ fifth $1 billion store brand after Signature SELECT, Signature Café, Lucerne and O Organics. Cota, who spent 38 years at Safeway and whom White calls the “heart of our team,” helped launched O Organics
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and Open Nature while at Safeway and has played a big part in their expansion. Cota, who has worked in private brands for 20 years, says “now” is the most exciting time she has spent in the sector because Albertsons has transformed into an innovator of private brands and is no longer just a supplier of national brand equivalent products. “Our store brands have become a pillar of our organization,” she adds. Albertsons’ innovation is especially evident in its new Signature RESERVE brand, which debuted last February as an addition to the retailer’s Signature line. Signature RESERVE, hailed as an “ultra-premium” line, features ice creams, coffee, pasta sauces, loose-leaf tea and other products, all dressed in upscale and elegant packaging. Products in the line also offer exclusivity. It’s safe to say that consumers can’t purchase Signature RESERVE Brazilian guava cheesecake ice cream or Signature RESERVE made-in-Italy tomato, porcini and black truffle pasta sauce from another retailer. Exclusivity, along with personalization and transparency, are the cards Albertsons is playing in the big game among grocers to differentiate. White and his team realize if they play their cards right in those areas, they will continue to gain the trust of their customers. Because of its breadth of store brand products across many categories, White believes Albertsons has become a leader in personalization. “Where national brands struggle and are very focused on fewer categories, we can touch everything across an entire store,” he says.
ALBERTSONS’ OWN BRANDS LINES Personalization also extends to packaging, where Albertsons has placed a huge focus to upgrade. While walking the aisles of the Walnut Creek Safeway, White points to the retailer’s Soleil sparkling water line, which is self-manufactured and comes in flavors including blackberry vanilla, pineapple coconut, mango passion fruit and cherry lime. But it’s the packaging, just as much as the on-trend flavors, that engages customers’ attention. It’s colorful, vibrant and just plain cool. Not long ago, the packaging design of Albertsons’ store brands were similar across all categories. Coffee flavors looked the same. So did frozen foods. But White and his team have changed things up dramatically with a focus on personalization. “You have to be able to compete within a category,” says White, realizing the importance of having packaging that pops. Pointing at a 12-pack of Soleil, White comments that he wants Albertsons’ products to be packaged so that they are “Instagrammable.” “Can’t you see a millennial taking a photo of that with his phone and proudly sharing it on social media,” he says of Soleil. White says he and his team are keeping a close eye on the continued evolution of the food industry and studying where they think Albertsons’ private brands can make an impact. He points to veganism, which he says “was once a moral choice and now has morphed into a lifestyle choice” for how people eat. Hence, Albertsons plans to offer more of such products as private brands. “Again, it goes back to personalization,” White says. “How do you want to eat? What do you want to feed your kids?” TRANSPARENCY ALSO PLAYS a key role in gaining customers’ trust, White says. Albertsons wants to offer all the information possible on product labels so consumers can make informed choices. But that’s not all. Albertsons is partnering with Label Insight, a Chicago-based data science company that captures, sorts and analyzes information gathered from food product packaging, to use its SmartLabel program. SmartLabel is a tool that gives consumers a way to digitally access more detailed product information than could ever fit on a package label. Albertsons is using SmartLabel QR or digital codes on packages so consumers can get that information quickly. Consumers can simply scan the QR codes on the packages with their phones and be taken to website landing pages where they can learn more about products, such as information about ingredient sourcing or country of origin, explains Elizabeth Strydom, Albertsons’ vice president of product development compliance for Own Brands. “Sustainability has become a huge part of what customers are demanding, not just from national brands but from private brands,” Strydom stresses. “You can really go deep [with information] by using the QR codes.” Of course, exclusivity, personalization and transparency must go in hand with quality and excellent-tasting products. Don Davidson, Albertsons’ vice president of strategic sourcing, says the bar that Albertsons has set for private brands has made his job more complex. In the past, it was about working with suppliers to achieve a national brand equivalent product, getting a great price on that product and making sure suppliers could deliver it on time, says Davidson, who has been in his role for 16 years. But with Albertsons focus on
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O Organic USDA Certified Organic products, including produce, dairy, meats, snacks, cereal, baby food and more. Open Nature Minimally processed products across various food and non-food sectors that are free from 110 undesirable ingredients. Lucerne Dairy Products Milk, cheese, ice cream, butter, yogurt, etc. Signature RESERVE Ultra-premium food and beverage products Signature SELECT Premium food and beverage products Signature Farms Fresh fruits and vegetables Signature Café Ready-to-serve entrees, sides, soups and more Signature Care Wellness products Primo Taglio Premium quality meats and cheeses debi lilly design Bouquets, home décor and other gifts waterfrontBISTRO Seafood Value Corner Everyday products at affordable products
Albertsons has made a name for itself with its premium offerings, including O Organics and most recently Signature RESERVE.
ication is our recipe d e D ess is your story c c u S
Trust us with your name naturestouchfrozenfoods.com
Albertsons offers 12 lines of private brands consisting of more than 11,000 products in over 500 categories.
premium products and distinguished packaging, he says the retailer now requires much more from its suppliers. “We need suppliers that can not only deliver what we need today, but that can grow with us for what we want to be tomorrow,” he adds. Albertsons also operates 20 of its own manufacturing plants to make milk, bread, ice cream, yogurt and other store brand products. Davidson says the retailer has just as high expectations of its own plants as it would for any contract manufacturer. Albertsons is utilizing analytics and data in store brands more than ever to learn what consumers are purchasing, how loyal they are to certain products and what categories are ripe for growth. “Data is big and data is valuable, but not all by itself,” says Jennifer Jesser, vice president of finance and analytics for Own Brands. “You have to know what to do with it and know what it’s telling you.” Analytics and data will also help Albertsons find other avenues to sell its store brands through online grocery and digital marketplaces, she adds. OF ALL THE MEMBERS of Albertsons’ Own Brands team, it’s hard to tell who has the most fun coming to work every day. But Chad Coester, group vice president of sales, marketing and service for Own Brands, probably wouldn’t have a problem if he was asked to work every Saturday. Coester, who began working with Safeway in 1995 and joined White’s group more than a year ago, epitomizes the team’s enthusiasm.
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“I love what I’m doing,” he exclaims. “I get to interact with this team, evangelize their ideas and bring them to life within our divisions. We are a consumer packaged goods company inside a massive retailer, and we have a point of difference. We get to take advantage of that, and it’s a blast.” This year, Albertsons will continue on its quest to innovate and introduce new Own Brands products. White and his team aren’t following grocery trends as much as they are setting them. For White, collecting information for potential new products is 24/7. When he goes out to dinner, he studies menus to see what Albertsons might be able to adapt as store brand products. He talks to restaurant chefs to see what’s hot and what’s not. The goal isn’t to make store brands 95 percent of Albertsons’ sales, White says, noting that brands will always have a place in the retailer’s offerings. But White says he and his team will focus on consumers’ everchanging wants and needs and adapt Albertsons’ store brands accordingly. “We won’t stop at a certain market share,” White adds. “We have grown tremendously over the last two years, and we haven’t seen any customer pushback.” Actually, it has been just the opposite of customer pushback. According to White, Albertsons recently achieved alltime high marks for customer satisfaction for its Own Brands. “Our customers are telling us that they believe in our brands,” he says. The guys at White’s barbershop talk about sports, politics and their kids. It’s just a matter of time before they’re talking about Albertsons’ Own Brands. SB
TRENDING BY L AW R E N C E AY LWA R D
ALL ABOARD If you haven’t caught the premium private brands train, it might be time to do so Consider premium private brands as a train rolling down the tracks. And it’s a train that’s gaining some serious steam. If you’re a retailer, you had better think seriously about catching this caravan, if you already haven’t. Because this train exemplifies the future of private brands in consumer packaged goods (CPGs). There are already several grocery retailers on board, with their premium private brands filling several cars. There goes The Kroger Co. boxcar, packed with the retailer’s Private Selection, Simple Truth and HemisFares store brands. And there’s the Albertsons Companies boxcar, packed with its Signature Reserve, O Organics and Open Nature private brand lines. And here comes the Trader Joe’s, Sam’s Club, Aldi and Ahold Delhaize USA box cars, all packed with their own brands. These retailers realize that this is a train bound for glory in the private brands sector. Get this. According to a recent report from market researcher Nielsen, sales of private brands eclipsed $125 billion across traditional retail from March 2017 through
March 2018, thriving at plus 3 percent in dollar sales year-over-year with premium private brands bringing in a locomotive-sized 13.7 percent increase in dollar growth. What’s more is that premium private brands are still a babe in the world of private brands. Garett Chau, Nielsen’s senior vice president of professional services, says that while sales of premium private brands grew nearly 10 percent in the last year, they account for only 8 percent of all private brand CPG sales. “Premium products account for about 20 percent of branded sales, which is more than double [that of private brands],” Chau notes. “So there’s a real opportunity for premium products in store brands.” ABOUT PREMIUM What makes a premium product? While it begins with top-notch quality — from product to packaging — it doesn’t end there. Premium products can be exclusive products that consumers can’t buy anywhere else. Premium products also emphasize health and wellness, and include organic and free-from undesirable
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TRENDING
Premium private brands can be offered through several avenues, including (1) non-GMO and organic, (2) premium ingredients and flavorings, (3) high-end fresh such as bakery and (4) indulgence products. ingredient offerings. In addition, they can be products produced with premium ingredients from another land and have stories to tell behind their origins. They are also products produced in a sustainable manner — manufactured without negatively impacting the environment and its creatures. And premium store brands are even extending to other non-food categories. One pet food manufacturer recently introduced a kibble for dogs and cats that includes lamb or chicken as the main ingredient, fruit and vegetable pieces that contribute antioxidants, omega 3 and omega 6 fatty acids for healthy skin, and added vitamins to promote joint health. Kelly Thompson, North American market strategy director for Trace One, a Boston-based collab-
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orative retail business network for private brands, says the increase in premium private brands is driven by retailer maturity and more consumer acceptance of such products. “As retailers evolve, we are seeing them launch premium private brands to increase margin and up the image of their stores,” Thompson says. “Retailers realize they can charge a little more for premium brands as long as the value the products present is coming across to consumers.” Philip Melson, Nielsen’s vice president of retail services, says what’s driving premium private brand sales is “the evolution of the meaning of value to shoppers.” Once upon a time, most all consumers saw value in private brands as being strictly about price — low price. “Value is graduating into being
about more about a mix of attributes that are equally important to shoppers,” Melson adds, noting that more consumers are willing to pay more for premium products. “With the shift in consumers’ mindsets, it’s a great opportunity for retailers to develop these products.” Retailers with established overall private brand programs will find more success with premium programs simply because their customers already trust their store brands and will be willing to try their new store brands, Melson explains. “Retailers doing well in premium are very customer-focused and less concerned about national brand equivalents or even the innovation coming from the larger CPGs,” he adds. “They are really dialed into their shoppers. They are also open to experimenting and taking risks.”
Premium private brands require immediate, clear and relevant differentiation and value recognition from shoppers versus a retailer’s mainstream store brands, Melson notes. “This is in terms of shelf presentation to make sure the products are visible and stand out, and also in terms of marketing and communications,” he adds. Thompson has noticed the upscale packaging being used on some premium store brand products, from high-quality print material to more attractive designs. But she says the best premium product packages, even though upscale, focus on showing the product, not the pizzazz of the packaging. “The packaging is being driven to consumer profiles,” she adds. “There’s also a lot of smart packaging with the use of digital codes, chips and films.” GETTING THERE Going the premium route isn’t easy. Two key attributes of premium products — innovation and differentiation — present challenges for any retailer to achieve. According to Melson, two-thirds of CPG company executives that Nielsen recently polled said that one in four products their companies had recently launched hadn’t met sales expectations. And this included products across all tiers, not just the premium tier. “So there is even more of a headwind when the focus is just on premium products,” he points out. When considering premium, retailers need to study consumption patterns and discern what categories can drive innovation, Melson adds. They have to learn what products in what categories consumers are willing to pay more. And consumers need to be convinced by retailers that the products they’re purchasing are worth the extra money they’re spending. “A product needs to stand out in
the mind of the consumer and truly have an unmet need,” Melson adds. Retailers with successful premium programs allow “bigger boundaries” for such programs than the retailers that haven’t embraced premium lines, Melson stresses. For instance, the successful retailers are doubling down in their investments in innovation to offer premium products. “They are better understanding what unmet needs are out there, what shoppers are looking for, and what trends are really important to differentiate,” he states. When discussing plans to introduce premium products, Thompson stresses that retailers and manufacturers need to take their discussions to a higher level. “If retailers are working on national brand equivalent items, [their discussions] will be a lot simpler with their suppliers,” she says. “[The suppliers] probably already have formulations of such products in place that they provide to other retailers.” When discussing premium products with suppliers, there is much more for retailers to talk about, such as risk assessment and ingredient origin and supply, Thompson notes. This level goes beyond a retailer just sending an email to a supplier inquiring about obtaining a private brand version of Cheerios, she adds. “[Retailers] really need to be more specific with suppliers about all the attributes they are looking for,” Thompson says. Categories where private brand penetration is growing the fastest make sense for premium offerings, Melson says. But retailers need to find the gaps and where premium products — whether they’re focused on health and wellness, indulgence or unique flavor profiles — fit in such categories. They also need to evaluate categories based on a category’s relative price range and figure out
TAKEAWAYS • According to a recent report from market researcher Nielsen, sales of private brands eclipsed $125 billion across traditional retail from March 2017 through March 2018, with premium private brands bringing in a whopping 13.7 percent increase in dollar growth. • Retailers with established overall private brand programs will find more success with premium programs simply because their customers already trust their store brands and will be willing to try their new store brands • Premium private brands require immediate, clear and relevant differentiation and value recognition from shoppers versus a retailer’s mainstream store brands. • Categories where private brand penetration is growing the fastest make sense for premium offerings.
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TRENDING where to price premium products on that spectrum, Melson adds. “If there is a lot of variability in terms of product selection for the shopper, that is an entry point for private label products to get in the upper echelon and compete,” he adds. It’s vital for retailers and manufacturers to ensure the premium products they’re developing don’t stray from the original vision, Melson notes. Sometimes there might be voids between the discovery and production phases that need to be addressed, he adds. And then there is deployment, which is a crucial phase, Melson says. “Make sure the value proposition is loud and clear, and that the products pop on the shelf,” he says. “[Retailers] need to get shoppers excited about trying the products and then repeating their purchases.”
MAKING THE CONNECTION Interestingly, retailers’ premium own brands may be suffering from mistaken identity in the U.S., Thompson notes. According to recent research from Trace One, 69 percent of consumers from eight countries, including the U.S., don’t consider private brands as more innovative than national brands. The finding surprised Thompson, who says many consumers might not realize that premium private brands are actually private brands, and that they are products from smaller CPG companies. “But I would say that is one of the highest complements that private label products can receive,” Thompson adds. “People are still trained in the U.S. to see private label products as [being similar] to national brand equivalents.” But that stigma in the U.S. is
slowly eroding, Thompson adds. And as more premium private brands appear on store shelves with the proper merchandising and messaging behind them, more shoppers will make the connection. Melson agrees and says the premium segment presents retailers with “a foundational avenue” to grow their store brand programs. “We are forecasting the growth to continue,” he says. “More retailers will get into premium, and more consumers will gravitate to premium.” And about that train moving down the tracks? Melson says “the time is now” to catch it. “This is not a passing trend,” he adds. SB Aylward, editor-in-chief of Store Brands, can be reached at laylward@ensembleiq.com.
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FOCUS ON FRESH
CASE-READY REVOLUTION For all the buzz about plant-based substitutes, consumers are eating more prepackaged fresh meats BY G I N A AC O S TA
Sales of meat substitutes and plant-based products are soaring — but you would never know it from a visit to the meat department of Whole Foods Market, a major purveyor of vegan foods. On a recent Saturday in December in Tampa, Fla., scores of shoppers at Whole Foods could be seen “oohing” and “ahhing” over prepackaged chimichurri-
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marinated chicken breasts and Tex-Mex spiced organic beef burgers. Taking a closer look revealed a cooler packed with a variety of case-ready premium meats, organic and conventional, all of which had the 365 Everyday Value Products brand on the label. While it’s true that consumers are craving more plant-based foods for their health and a desire
to help the environment, not everyone wants to go vegetarian or vegan. In fact, Americans still love their red meat: American consumption of red meat and poultry per capita was forecast to hit 222.2 pounds per person in 2018, up from 216.9 pounds in 2017 and 210.2 pounds in 1998, according to the U.S. Department of Agriculture. That’s the highest amount of meat consumption within the last 50 years. The popularity of animalbased protein and protein-heavy diets are prompting many retailers, including Whole Foods, to up their case-ready meat game. And case-ready meats, especially in the private brand arena, have emerged as a strong growth area for retailers in recent years. According to Information Resources Inc. (IRI), sales of private brand refrigerated uncooked meats (not including poultry)
FOCUS ON FRESH soared nearly 27.7 percent in sales during the 52-week period ended Dec. 2, 2018, with sales reaching $3.9 billion. Dollar share for private brands in the category increased to a meaty 76 percent, a 19 percent improvement from the previous year. Unit sales are up nearly 24 percent. According to IRI’s 2018 Power of Meat Report, 18 percent of shoppers are buying more fresh meat compared to last year. The report found that millennials are driving the trend, with 41 percent of millennials surveyed saying they bought more fresh meat versus the year before. Today, the meat department racks up $49.5 billion in annual sales for food retailers. Clearly, staying on top of consumer preferences and responding to shopper needs is essential for retailers looking to drive sales in the meat aisle. That’s one reason why more retailers are putting private brand refrigerated uncooked meats in the fresh section. “Trends are always top of mind for us, but the goal of our private label program is to provide the widest variety of premium products at the lowest prices, and ultimately give our customers an exceptional shopping experience every time they walk through our doors,” says Chris Skyers, vice
president of Own Brands for Keasbey, N.J.-based Wakefern Food Corp. in an interview with Store Brands about the grocer’s caseready meat strategy. “We believe our success in the private label space is a direct result of listening to our customers and staying in tune with their evolving needs and preferences. Today’s customer is more adventurous and wants to try new things, including healthier options and global fare.” While the recent growth of case-ready meats is impressive, it isn’t actually new. The case-ready meat trend began in 2001 when Walmart transitioned all of its stores and meat departments to case-ready only. Since then, case-ready meat penetration at retail has increased across all major categories, according to the 2015 National Meat Case Study. The research was conducted at 114 major supermarket chains, supercenters, club stores and small format retailers around the U.S. The scope of the research included a physical count and recording of attributes of the all the beef, pork, veal, chicken, turkey and lamb products in the meat case. According to the study: • Sales of boneless meat products increased (not including ground meats) — from 59 percent in 2007 to 63 percent in 2010 to 67 percent in 2015. • Store branded meat products gained significantly from 2010 to 2015 — from 36 percent to 51 percent. • Case-ready products increased in the total meat case — from 66 percent in 2010 to 76 percent in 2015. And the most important trend in meats, especially in the private brand case-ready category, might be the way in which retailers are assorting to
shoppers’ evolving preferences. “While many retailers have carried private-label meat, SPINS has seen strategy shift to meet evolving consumer demands, especially when it comes to transparency and clean-label attributes,” said Sara Clifford, vice president of OMNI channel retail for SPINS, an analytics firm and provider of retail consumer insights. “Natural and organic products are earning their shelf space — and not just with core natural retailers. Many significant conventional retailers are incorporating these and other animal welfare attributes into their private-label meat sets, featuring label language including no added antibiotics or hormones.” As shoppers increasingly have more choices of where to buy their meats, many retailers are trying to deliver the kind of caseready assortment that competitors can’t match. A shopper visiting a Sprouts Farmers Market, a Target or a Trader Joe’s will see an assortment of private brand case-ready meats that includes boneless sirloin diced pork “for stir fry,” shawarma-marinated chicken thighs, and free-range, grass-fed leg of lamb. Retailers are maximizing their private brand case-ready assortments at a time when shoppers’ perception of case-ready meat has reached its highest favorabil-
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FOCUS ON FRESH ity rating yet, according to IRI’s Power of Meat Report. About 80 percent of shoppers believe caseready meat is as good or better than meat that is cut or packaged in-store. In addition to innovations such as exclusive cuts, clean label, organic and global-flavored marinades, retailers are also looking ahead to future trends, such as combining animal-based and plant-based proteins. Sonic Drive-In became the first national chain restaurant to serve a blended burger made with 35 percent mushrooms. The Sonic Slinger was offered for a limited time in the spring and proved so popular it was served for a limited time again in the fall and is back as part of a new promotion, according to Scott
Uehlein, Sonic’s vice president of product innovation and development, who spoke to The Washington Post. In 2019, retailers can expect to see more consumers looking for plant and meat blends at the fresh meat case. Retailers should be merchandising to guide shoppers as they navigate all of these new products and terms. To drive even more sales in private
brand case-ready meats, retailers and packers/processors should work together to enhance shopper meat knowledge and to take advantage of food trends for the best possible assortment, service and shopping experience. “Retailers today continue to do well underscoring the value proposition of private-label meats, often merchandizing these items right next to flagship brands, making price comparisons easy for shoppers. SPINS also sees a number of retailers extending their lines past the most traditional meats (beef, pork, poultry) into offerings like bison and lamb,” Clifford says. SB Acosta, managing editor of Store Brands, can be reached at gacosta@ensembleiq.com.
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CATEGORY INTELLIGENCE GROUND COFFEE
CUP COMPETITION
DO offer single cup coffee pods that stay ahead of sustainability trends.
Nothing but the best will do for java lovers, it seems. Coffee that’s not premium is losing out in the marketplace to coffee that is, reports consumer market researcher Packaged Facts in its April report, “Office Coffee Service in the U.S.: Market Trends and Opportunities.” Gourmet coffee consumption is at a record high. An impressive 59 percent of all cups of coffee consumed are gourmet — compared to 46 percent only five years ago, according to the National Coffee Association’s “2017 National Coffee Drinking Trends” report. Among the top five beverage types by household usage, only coffee increased usage penetration from 2008 to 2017, according to Packaged Facts. And the younger the head of household, the stronger the growth was. Among households headed by those 25 to 34, coffee usage grew by 10 percent. In households headed by 18- to 24-year-olds, coffee usage grew by 19 percent. Americans are drinking more coffee. Packaged Facts estimates coffee consumption will hit 8.8 billion gallons in 2018. Per-capita U.S. coffee consumption rose an average of 2.6 percent annually over the 10-year span, well over U.S. population growth of 0.8 percent in the same period, Packaged Facts reports. PREMIUM AND PRIVATE Private brands, together with premium products, are driving dollar and unit sales in the ground
DON’T ignore the new trends of functional and diet-specific coffee products. 30
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coffee category, says Darron Burke, president of Miami-based Burke Brands LLC, grower and roaster of the company’s Don Pablo Coffee brand, coffee for private brands clients and spokesperson appearing in the brand’s commercials. Brands traditionally in the value segment (such as Folgers and Maxwell House) are moving upscale as private brands continue to gain momentum, says Burke, citing Folgers 1850 as an example. “This trend is similar across all of CPG (consumer packaged goods,” Burke adds. Consumers have been willing to pay more per cup to have a better cup of coffee and a better coffee experience, Burke says, explaining what’s behind the “premiumization” trend. “All you have to do is look at retailers’ shelves to clearly understand their priorities.” Growing private brands in this category means retailers must deliver at or above the branded quality, and value, at a lower retail price while increasing margins, Burke says. “In some cases, retailer brands can lead the innovations (as has Costco Wholesale’s Kirkland Signature, Walmart’s Sam’s Choice and Sam’s Club’s Member’s Mark) and other times it [makes sense] to be a fast follower.” Burke expects single cup coffee pod sales will continue to grow as the economic barrier to entry lowers due to the competitive marketplace and private brand development. “We’re betting on an increase in demand on both the retailer level and the consumer level for sustainable packaging in single serve, and have introduced 100 percent recyclable k-cups (including the lid and filter) and compostable Nespresso-compatible capsules in order to stay ahead of the trend. As demand increases, so does innovation and the number of options manufacturers have for sustainable packaging and, as a result, costs come down,” Burke says. Single cup coffee is one of the segments largely responsible for coffee category growth, according to Packaged Facts, as outlined in its “U.S. Beverage Market Outlook, 2018” report. Coffee sales grew by a compound annual growth rate (CAGR) of 5.9 percent between 2012 and 2017, with volume growth outpacing dollar growth, according to Packaged Facts, which projects retail dollar sales of coffee (including ready-to-drink (RTD) coffee) to exceed $18 billion in 2022, increasing by a CAGR of 5.9 percent between 2017 and 2022.
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CATEGORY INTELLIGENCE GROUND COFFEE Coffee Private Brands
All Brands
Dollar Sales (in millions)
$1,494.4
$9,735.9
Change vs. Year Ago
8.1%
1.4%
Dollar Share
15.4%
100%
Unit Sales (in millions)
221.1
1,339.0
Change vs. Year Ago
8.0%
0.7%
Avg. Price Per Unit
$6.76
$7.27
Private Brands
All Brands
Dollar Sales (in millions)
$874.3
$4,146.1
Change vs. Year Ago
10.7%
4.0%
Dollar Share
21.1%
100%
Unit Sales (in millions)
105.2
444.8
Change vs. Year Ago
11.2%
3.5%
Avg. Price Per Unit
$8.31
$9.32
Private Brands
All Brands
Dollar Sales (in millions)
$427.8
$3,979.2
Change vs. Year Ago
7.3%
-0.9%
Dollar Share
10.8%
100%
Unit Sales (in millions)
81.5
612.3
Change vs. Year Ago
6.6%
0.7%
Avg. Price Per Unit
$5.25
$6.50
Single Cup Coffee
Ground Coffee
Ground Decaffeinated Coffee Private Brands
All Brands
Dollar Sales (in millions)
$50.3
$278.7
Change vs. Year Ago
-5.4%
-3.7%
Dollar Share
18.1%
100%
Unit Sales (in millions)
9.7
43.3
Change vs. Year Ago
-4.7%
-3.6%
Avg. Price Per Unit
$5.20
$6.44
Source: 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 Nov. 4, 2018.
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FUNCTIONALITY HEATS UP Pressure from consumers, government agencies and consumer activist organizations has prompted manufacturers to expand their “good-for-you” offerings in every beverage category, Packaged Facts reports. These enhanced drinks include those that are organic and fortified with nutrients as well as those containing probiotics, prebiotics and protein. “The future belongs to the health consumer and the companies that meet their needs,” the report declares. As retailers and manufacturers logically drive sales to a higher dollar ring and penny profit, they need to drive ground coffee sales in a way that does not take away from the k-cups but adds an additional consumption, Burke advises. “Value-added (with vitamin, protein, fiber and other sought-after additions) encourages consumers to trade up from the lower register of ground coffee to a mid- to higher level with flavorings [and other enticements].” The next wave of innovation for coffee includes enhanced functionality: medicinal mushrooms such as Reishi, Chaga, Cordyceps and Lion’s Mane for added health benefits; high protein (plant-based, collagen or whey); alignment with emerging diets like ketogenic; and a plus-up on energy claims, minus the jitters by formulating with natural energy boosts such as Guarana extract, says Nicole Peranick, senior director of retail transformation for Stamford, Conn.based Daymon, a global retail services company that specializes in private brands. Further, with expanding legalization, more mainstream applications of cannabis and cannabidiol (CBD) in coffee will come onto the scene, Peranick adds. “We are already starting to see this play out in products such as Four Sigmatic Mushroom Coffee and Vitacup’s line of single serve coffee infused with vitamins to boost energy and metabolism. Expect to see more coffee products tout their performance benefits in 2019 and beyond.” Beyond functionality, consumers are increasingly turning to coffee for enhanced experiences, Peranick adds. “To continue to engage shoppers, expect to see more flavor-forward seasonal varietals, alcohol-inspired flavor profiles and textures and DIY (do-it-yourself) flexible forms for a customizable experience.” As more consumers seek to align their taste preferences with social values, expect to see more premium selections that offer both high bean quality and a sustainable proposition to address a more discerning shopper, Peranick adds. “Tapping into emerging consumer needs around peak performance and enhanced experiences offers a host of opportunities for retailers to leverage their private brands to drive innovation in trend-rich categories like coffee,” she adds. SB
CATEGORY INTELLIGENCE SAUCES AND MARINADES
THE NEXT SRIRACHA?
DO add more creamy sauces to the condiment aisle and cold case.
Move over Sriracha. There’s a new sauce in town, although this one is not really new. You could even say it’s retro. While food retailers and manufacturers have been rushing to develop new sauces and marinades that leverage the popularity of Sriracha and other top-selling hot sauces, shoppers might be gravitating to old (and creamier) standbys in the condiment aisle in 2019. During the 52-week tracking period ended Dec. 2, 2018, market researcher Information Resources Inc. (IRI) reports that private brand hollandaise/ bearnaise/dill sauce sales rose 55 percent to about $638.2 million. Sales of private brand horseradish sauce rose 28 percent to $3.4 million. Premiumization in grocery is not new, of course, but the trend seems to be hitting the sauces and marinades categories more as shoppers increasingly use sauces and marinades to cook at home in an effort to eat what they perceive as better-for-you meals. According to the latest market study released by Technavio, the sauces, dressings, and condiments market in the U.S. is set to grow at a compound annual growth rate of almost 3 percent until 2021. “A major driver influencing the demand is the increasing number of cost-conscious consumers that eat at home,” the Technavio report states. “Consumers are buying ready-made sauces and dressings to add to their food. With a diverse ethnic population in the U.S., the demand for ethnic and spicy sauces is increasing. This is opening up many opportunities for
DON’T be afraid to expand beyond common sauces and marinades to differentiate.
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vendors to manufacture new culturally authentic products.” Retailers and suppliers looking to freshen up their private brand sauce programs beyond, say, Sriracha barbecue sauce (as found in Trader Joe’s, for example) might think about developing new products that are classic creamy concoctions (a fresh béarnaise sauce, for example) or a sauce that incorporates spicy flavors with a creamy base (an ancho chili béchamel sauce). According to market research firm Transparency Market Research, the horseradish sauce market in particular is expected to grow as consumers seek out the ingredient more and use it with a variety of foods, including sandwiches, burgers and even tacos. Up to 80 percent of the world’s horseradish is grown in the United States, according to the International Horseradish Festival, which is held in Illinois every year and has grown in popularity among foodies looking for spicy flavors that are locally or regionally produced. Yet, while classic sauces such as horseradish creams and hollandaise might be experiencing a resurgence in popularity among consumers, the age of Sriracha (and the love of Asian sauces) is certainly not over. “One of the few changes in table sauces segment is the sudden rise in the demand for hot sauces, including tabasco, Sriracha, chipotle sauce, habanero sauce, and hot salsa sauce,” said Akash Pandey, a lead food research analyst from Technavio. “The influx of multicultural groups in the U.S. is a major factor that influences the adoption of these sauces.” In fact, store brand Asian sauce and marinade sales rose 26 percent to $23.4 million during the same period ended Dec. 2. Sales of private brand hot sauce were up 11 percent to $22.3 million. Manufacturers of branded and store brand sauces such as Virginia-based Sky Valley Foods are trying to work with retailers to leverage these growth opportunities. “What we’re trying to do is really just pay attention to the trends and the competition out there and make sure that we’re constantly innovating around what the consumer is looking for,” says Joel Minkoff, product development research chef for Sky Valley Foods. “So, for example, we are launching a lot of authentic ethnic marinades and sauces around Asian, Thai and Peruvian cuisines.” Minkoff says Peruvian food has become really popular among consumers and Peruvian ingredients, especially chilies, are becoming more available.
CATEGORY INTELLIGENCE SAUCES AND MARINADES “We see more Peruvian restaurants opening,” Minkoff says. “We see recipes popping up online for Peruvian food. So we see that as a trend we want to tap into.” The challenge in working with retailers, Minkoff says, is getting them to expand beyond teriyaki sauce or other common ethnic marinades. “They feel very comfortable doing very basic Asian sauces but then to get them to extend into some riskier areas like Peruvian, that’s where the challenge really is,” Minkoff says. “So what we try to do is work with some of the retailers that are better at taking a little bit more risk — Whole Foods Market, The Kroger Co. — and go into other ethnic platforms or other organic platforms to make sure that they’re staying ahead of the competition.” Other areas in the sauces and marinades categories seeing an abundance of innovation include betterfor-you, plant-based, diet-specific and vegan options. Consumers are increasingly seeking clean-label sauces that have health attributes, whether “low FODMAP” (for people with sensitive stomachs), paleo or dairyfree. As public concern over sugar and salt intake increases, manufacturers are also answering with lowsugar or low-salt sauces. Suppliers are also paying more attention to the authenticity of their recipes, because consumers are studying labels carefully, Minkoff says. SB
Italian Sauces Private Brands
All Brands
Dollar Sales (in millions)
$242.2
$2,414.3
Change vs. Year Ago
7%
1%
Dollar Share
10%
100%
Unit Sales (in millions)
$141
$1 billion
Change vs. Year Ago
10.8%
0.8%
Avg. Price Per Unit
$1.71
$2.29
Private Brands
All Brands
Dollar Sales (in millions) Change vs. Year Ago
$157.1 4.4%
$1,551.4 2%
Dollar Share
10%
100%
Unit Sales (in millions)
$78
$606
Change vs. Year Ago
6.3%
-0.2%
Avg. Price Per Unit
$2
$2.56
Other Sauces
Source: 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 Nov. 4, 2018.
www.storebrands.com / January 2019 / Store Brands
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CATEGORY INTELLIGENCE OLIVE OIL AND VINEGAR
A MATTER OF DISTINCTION With a dose of innovation, category can grow for private brands
DO focus on promoting product benefits through packaging and merchandising.
There are many, many good things about olive oil — enough to comprise a substantial list. According to Healthline.com, a consumer health information website, olive oil is: • rich in healthy monounsaturated fats; • contains large amounts of antioxidants; • has strong anti-inflammatory properties; • may help prevent strokes; • is protective against heart disease; • is not associated with weight gain and obesity; • may fight Alzheimer’s Disease; • is not associated with weight gain and obesity; • may reduce type 2 diabetes risk; • may have anti-cancer properties; and • has antibacterial properties. So the question is whether retailers are pushing these fine attributes to distinguish their store brand olive oil. If they aren’t, they should be through callouts and other merchandising strategies. That said, retailers are doing something right with olive oil, considering the latest sales numbers from market researcher Information Resources Inc. (IRI). According to IRI, sales of private branded olive oil increased 5.5 percent to $385.8 million for the 52 weeks ending Nov. 4, 2018, compared to the previous 52 weeks. Sales of private brands now occupy 31.5 percent of the category.
DON’T forget the importance of innovation, especially in a mature category. 36
Store Brands / January 2019 / www.storebrands.com
Overall, olive oil sales increased 2.3 percent for the category during the period, thanks in large part to private brands. Sales of national brand olive oil increased only .8 percent during the period. While olive oil sales are up for store brands, Mark Coleman, the senior vice president of retail for Ayer, Mass.-based Catania Oils, which manufactures olive oil for private branding, believes they can grow even more with a little innovation. “The keys to growth in the olive oil category are offering products that are different in a category that has been relatively flat in terms of innovation over the past few years,” Coleman says. “As retail buyers look to drive down the cost of goods to fight their competition, they should also be looking for the differentiators in the category that can make a difference in product quality.” Coleman points out that consumers have become more educated in the category and are looking for better-tasting and healthier oil products. “Olive oil is the opposite of wine in that it doesn’t age well; in fact, the oil’s flavor profile will flatten out in as little as four or five months after pressing,” Coleman says. To combat this, Catania Oils offers a bag-in-box olive oil product for private brands that shields the oil from the light and the air — the two biggest detractors from oil quality, according to Coleman. Retailers are doing a good job of merchandising olive oil overall, Coleman says, but there is room for improvement. “Olive oil should be merchandised in the produce department as well as at any baking displays, even at regular price,” he adds. VINEGAR AND DIFFERENTIATION Sales of vinegar, including private brands and national brands, were down 2.9 percent for the 52 weeks ending Nov. 4, 2018, from the previous period, according to IRI. But private brands decreased only 1.7 percent compared to 4.2 percent for national brands. But premiumization in the category, with retailers offering higher-quality items at a higher price point to differentiate, is good news for private brands, says Thomas McHenry, sales and marketing manager for Clifton, N.J.-based Modena Fine Foods, which manufactures vinegar for store brands. “There are a lot of retailers in the U.S. that are leveraging the category to differentiate,” McHenry adds. In the past year there has been a shift in the vinegar
CATEGORY INTELLIGENCE OLIVE OIL AND VINEGAR OLIVE OIL AND VINEGAR
category, caused by flattening sales of apple cider vinegar on the heels of three previous years of tripledigit growth, McHenry notes. “We are seeing the organic proposition grow within the category, as more retailers offer their shoppers an additional option from their conventional items,” he adds. “We are also beginning to see a new subcategory emerge of drinking vinegars which
Olive Oil Private Brands
All Brands
Dollar Sales (in millions) Change vs. Year Ago
$385.8 5.5%
$1,224.7 2.3%
Dollar Share
31.5%
100%
Unit Sales (in millions)
55.58
153.4
Change vs. Year Ago
7.5%
-0.3
Avg. Price Per Unit
$6.94
$7.98
Private Brands
All Brands
Dollar Sales (in millions)
$276.97
$661.26
Change vs. Year Ago
-1.6.5%
-2.9%
Dollar Share
41.9%
100%
Unit Sales (in millions)
125.34
231.7
Change vs. Year Ago
-3.5%
-3.8
Avg. Price Per Unit
$2.21
$2.85
Vinegar
Source: 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 Nov. 4, 2018.
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continues to grow in distribution.” McHenry notes three other factors influencing product development, including “company identity.” “Retailers are proud to put their name and brand on a product so the label design, use of color, romance copy and messaging explaining the product to the end user is key,” he adds. Sustainability is also a growing factor. “Potential customers are more and more concerned about their environment and the damage to it caused by industrial production,” McHenry says. “Can the packaging and label material be recycled? Is the product being manufactured in a green facility?” Cost is another factor. “What is the price potential customers are prepared to pay for the finished product?” McHenry asks. “Customer requirements,” which McHenry says entails the use of focus groups to learn what potential customers are looking for, also influence product development. From a merchandising perspective, McHenry explains that retailers are utilizing creative crossmerchandising solutions on the perimeter of the store to drive bigger baskets and expand usage occasions. For example, retailers are cross merchandising Balsamic vinegar and glaze in the prepared food section and utilizing smaller-size bottles to pair with deli sandwiches and salads. Vinegar is a mature category, and it’s always a challenge to grow it, McHenry says. “But we anticipate solid growth this year with the continued focus on organic items as well as the emergence of drinking vinegars, which should see some distribution growth in the coming year,” he adds. SB Aylward, editor-in-chief of Store Brands, can be reached at laylward@ensembleiq.com.
CATEGORY INTELLIGENCE BEAUTY CARE PRODUCTS AND COSMETICS
NATURAL BEAUTY Consumers are more knowledgeable than ever about the interconnectivity between the products they use every day and the residual effects these products have, not only on their bodies and health, but also on the environment as well. They are embracing beauty care and cosmetics solutions that are as close to nature as possible, and solutions that are cleaner, healthier and gentler on the environment, observes Nicole Peranick, senior director of retail transformation for Stamford, Conn.based Daymon, a global retail services company that specializes in private brands. “We refer to this shift as the rise of the plant-centric lifestyle,” Peranick explains. The future of innovation in the beauty products space includes harnessing the power of plant-based ingredients such as adaptogens (a class of plants used in ancient Chinese and Ayurvedic medicine) and emerging superfoods (edible plants containing high levels of antioxidants, polyphenols, vitamins, and minerals) as well as leveraging eco-friendly formulations featuring upcycled ingredients and sustainable packaging, Peranick adds. There are opportunities in the beauty care and cosmetics categories for private brands to take a leadership role in the plant-centric trend and capitalize on the growing intersection between beauty, wellness and social consciousness, Peranick says. “In doing so, retailers will deliver on the needs and results shoppers seek, while making them feel good about their purchase (which could in turn help) build connectivity and loyalty,” she notes. Peranick says this is starting to play out in the United Kingdom with health and beauty retailer Superdrug, which opened a dedicated pop-up store in London to highlight its extensive range of cruelty-free, plantforward beauty and personal care products. The effort, supported by a social media campaign and influencer endorsements through local vloggers (video bloggers) and beauticians, drove shopper engagement and generated media buzz around Superdrug’s exclusive line. “Expect to see more retailers follow suit and leverage their private brands to introduce new beauty solutions that address the increasing adoption of plant-centric lifestyles,” Peranick adds. The importance of natural ingredients and claims is a major beauty trend on the rise, agrees Alex Fisher, senior analyst for global market research firm Mintel
Group Ltd.’s beauty team. In a Mintel blog post from Dec. 13, Fisher notes that Australia is quickly becoming a rising star in the beauty industry thanks to its use of indigenous plant-based ingredients in beauty product formulations. The natural products movement is also gaining traction among African-American consumers of hair care products, writes Toya Mitchell, multicultural analyst at Mintel. “As the natural hair trend continues to spread around the world, black consumers are adopting styles and maintenance habits in order to achieve hair health and a desired look,” Mitchell writes in a Dec. 6 blog post for Mintel. “Considering the specifics associated with the textures of African hair, it is important that brands develop products that target each hair type and meet consumer expectations of seeing their various hair needs addressed through product innovation.” In product packaging, consumers are demanding that beauty and personal care brands switch to a new paradigm of sustainability and zero waste, Mintel asserts in its recent report, “Sub-Zero Waste: 2019 Global Beauty and Personal Care Trends.” Mintel found that 44 percent of U.S. natural/ organic personal care product consumers (who, it must be noted, purchase a combination of mainstream and natural/organic brands) report
DO highlight clean-label and natural products in the beauty aisle.
DON’T forget to merchandise for multicultural beauty shoppers. www.storebrands.com / January 2019 / Store Brands
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CATEGORY INTELLIGENCE BEAUTY CARE PRODUCTS AND COSMETICS Cosmetics/Facial Private Brands
All Brands
Dollar Sales (in millions)
$49.0
$2,161.5
Change vs. Year Ago
0.8%
-0.6%
Dollar Share
2.3%
100%
Unit Sales (in millions)
5.9
274.0
Change vs. Year Ago
7.0%
-0.9%
Avg. Price Per Unit
$8.25
$7.89
Private Brands
All Brands
Dollar Sales (in millions)
$25.2
$2,084.1
Change vs. Year Ago
-12.3%
-0.2%
Dollar Share
1.2%
100%
Unit Sales (in millions)
4.1
341.5
Change vs. Year Ago
-13.7%
-3.8%
Avg. Price Per Unit
$6.20
$6.03
Private Brands
All Brands
Dollar Sales (in millions)
$217.4
$1,347.3
Change vs. Year Ago
13.7%
0.0%
Dollar Share
16.1%
100%
Unit Sales (in millions
91.0
368.5
Change vs. Year Ago
10.8%
-1.5%
Avg. Price Per Unit
$2.39
$3.66
Cosmetics/Eye
Cosmetics/Nail
Cosmetics/Lips Private Brands
All Brands
Dollar Sales (in millions)
$21.4
$879.4
Change vs. Year Ago
-16.4%
-0.5%
Dollar Share
2.4%
100%
Unit Sales (in millions)
3.2
163.3
Change vs. Year Ago
-29.8%
-3.2%
Avg. Price Per Unit
$6.65
$5.38
Source: 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 Nov. 4, 2018.
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that they live sustainably. This represents a lifestyle shift, says Mintel, noting, “as waste reduction becomes more evident in day-to-day lives, more … consumers will scrutinize their beauty routines.” LOOKING FOR “THE WHY” To find success in this category, it is crucial to understand the deeply rooted motivations that drive beauty product purchases, advises Priyanka Bagde, Euromonitor International senior analyst. Her Euromonitor report, “Beauty Survey 2018 Key Insights,” explores the purchase decisions and beauty and personal care habits of more than 20,000 consumers in 20 markets worldwide. Most consumers, Bagde writes, connect the concept of beauty with good health, hygiene, confidence and feeling comfortable in their own skin. Euromonitor found that 56 percent of women worldwide defined beauty as being comfortable in one’s own skin, while 38 percent of men defined it that way. Beauty, Bagde writes, is not confined to outward appearance. Consumers are seeking “intrinsic, healthy beauty and overall well-being. Brands can engage better with these consumers by tying the benefits offered by their products with consumers’ beauty-related values and desire for a healthy approach to beauty.” Fewer than half of consumers internationally define beauty in terms of “glamour,” Euromonitor found. In the United States, less than 15 percent defined beauty this way. The connection many consumers make between health, wellness and beauty attract some to products with scientific, medicated formulations and therapeutic benefits for skin and/or hair, Bagde writes. Bagde found that 18 percent of consumers reported seeking dermatologist-tested skin care products and 9 percent seek medicinal ingredients. DON’T FORGET THE MEN The men’s grooming products industry is booming, offering opportunities to expand product lines tailored to their needs, Bagde writes. Men in the U.S. use an average of 4.1 products and spend an average of 48 minutes on grooming every day, Bagde reports. Their top skin concern is battling blackheads (18 percent) and No. 1 hair concern is thinning (20 percent). More than 40 percent wash their hair with shampoo at least daily and a quarter use facial cleansers daily. The products used most often by men include, in descending order: shampoo, combination shampoo/ conditioner, post-shave products, hand care, sunscreen or sun protection products, facial cleaners, pre-shave products, hair conditioners or treatments, hair-styling products and body moisturizers. SB
CATEGORY CLOSEUP
WHAT THEY’RE SAYING Of the many high-carb foods that people give up in pursuit of a healthier lifestyle, pizza is the one they miss the most. We are on a quest to make highprotein, low-carb foods that feed people’s cravings. — SUZANNE GINESTRO, CHIEF MARKETING OFFICER AT QUEST NUTRITION, WHICH RECENTLY LAUNCHED A HIGH-PROTEIN, LOW-CARB FROZEN PIZZA
Continued improvements in flavor variety, quality, and healthfulness will help marketers and retailers take advantage of frozen and refrigerated pizza’s unique combination of convenience and fun. — JOHN OWEN, SENIOR FOOD AND DRINK ANALYST AT MINTEL
Frozen Pizza
93% $4.8 The percentage of Americans that eat frozen pizza once a month. Source: Mintel
$6.37 Average price of a frozen pizza in the U.S
BILLION
The amount that U.S. consumers spend on frozen pizza each year. Source: National Frozen Pizza Institute
11.3%
The projected global frozen pizza market by 2023, registering a compound annual rate of 6.4 percent from 2017 to 2023.
The dollar sale gains of store brand frozen pizza, which increased to $6.5 million on a 15.7 percent increase in unit sales during the 52 weeks ended Sept. 9. The biggest manufacturers in the space, including Schwan’s Co., all posted sales gains during the past year.
Source: Allied Market Research
Source: Mintel
Source: National Frozen Pizza Institute
$17.3 BILLION
1962
Year in which the first frozen pizza hit grocery stores. Totino’s, which started as Totino’s Italian Kitchen, is said to be the first company to offer frozen pizza. Pillsbury bought the company in 1975, and General Mills acquired Pillsbury in 2001. Source: General Mills
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