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Non-foods state of the industry

Older consumers: A force to be reckoned with

Packaging: Function without limit July 2017 | www.storebrands.com

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Non-foods state of the industry

Older consumers: A force to be reckoned with

Packaging: Function without limit July 2017 | www.storebrands.com

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Contents

Volume 39 No. 7 July 2017

20 Cover Story Facing up to the Task

20

Sam’s Club’s Chandra Holt leads Member’s Mark makeover, taking an ordinary brand into premium territory

Features 28 Non-Foods State of the Industry Incredible inedibles Private brands still dominate value-driven categories but have more growth potential in under-developed segments such as pet products and personal care, say retail analysts

35 Marketing to Aging Consumers A force to be reckoned with

28

Retailers with store brands could better meet the needs of baby boomers and elderly shoppers with convenient packaging, special-diet SKUs and more emphasis on key categories

40 Packaging Function without limit Packaging companies on continued quest to take utility to another level

Departments 6 8 10 18 66

35

Editor’s Note Promotional Insights Around the Industry Getting Social End Cap

Category Intelligence 46 50 53 56 59 62

Oils and vinegars Fruit and nut snacks Baked good and desserts Sauces and marinades Paper products Foot care products

About the cover: Sam’s Club’s Chandra Holt and her team have infused new life into the club chain’s private brands. Photo by Spencer Tirey and cover design by Jeff Bowes.

40 4

Store Brands (ISSN-0190-9851; USPS # 0488-370) is published monthly by EnsembleIQ, 570 Lake Cook Rd., Deerfield, IL 60015. 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 2017 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.

Store Brands / July 2017 / www.storebrands.com


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Editor’s Note Business Intelligence for an Evolving Market

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Aldi, Lidl, Amazon and the store brands of tomorrow

T

he week of June 12 may go down in history in the private brands industry. Five years from now, it will be intriguing to look back on that week to see what effect it had on the industry. On Monday, June 12, German retailer Aldi announced a U.S. expansion to enlarge its chain from 1,600 to 2,500 stores nationwide by the end of 2022. Aldi’s assortment is about 90 percent private brands. On Thursday, June 16, Lidl opened its first 10 stores on the East Coast. Lidl, Aldi’s German counterpart, has more than 10,000 stores across Europe and plans to open hundreds more in the U.S. in the next few years. Lidl’s assortment is also about 90 percent private brands. And then on Friday, June 17, Amazon announced its was purchasing Whole Foods Markets for $13.7 billion. When the deal is approved later this year, Amazon will not only become a sizable player in the grocery business (brick-and-mortar and e-commerce), it will become a sizable player in private brands and organics. I have several views (and questions) as to what impact Aldi’s and Lidl’s presence and Amazon’s possible dominance will have on store brands throughout the grocery industry as well as at convenience stores, mass merchandisers, club outlets and drug stores. Let’s begin with Aldi and Lidl. As far as store brands go, the grocery industry will get a jolt of them throughout the country in the coming years considering Aldi’s and Lidl’s expansion. Hence, more consumers will be introduced to more store brands. Aldi and Lidl, known as deep-discount retailers, will also continue to push their low prices. But at a time when many food retailers are looking to differentiate by offering store brands that are of value — a selling point based on quality and price but not the lowest price — one has to wonder what Aldi’s and Lidl’s push to have the lowest prices in town will have on private brands throughout the entire sector. Will competitive retailers be forced to play the price game and place a greater emphasis on value lines? Or will they be able to convince their customers that their premium store brand offerings are of better quality and are still priced low enough, just not at the prices that Lidl and Aldi are offering? This is not to say that Aldi’s and Lidl’s private brands are low-priced chopped liver. They offer good products. As you know, Aldi and Lidl offer fewer SKUs — and highvolume ones at that — so they have more buying power and can keep prices lower. They also offer an abundance of private brands, which means they have lower supplier costs. On to Amazon and Whole Foods. Amazon CEO Jeff Bezos said Whole Foods is “doing an amazing job and we want that to continue.” That’s debatable, considering Whole Foods was losing customers amid slipping same-store sales for months before being acquired. Also, the Austin, Texas-based retailer gained the nickname “Whole Paycheck” for its high prices, a reason why competitive retailers were able to successfully capitalize on the organic movement through private brands. So what will Amazon, known for driving down prices, do with Whole Foods’ prices? The guess here is that Bezos will find a way to cut them. If that happens, you have to wonder if the momentum gained by competing retailers in sales of organic private brands will slow. Then again, don’t expect competing retailers — consider The Kroger Co. and its successful Simple Truth organic line — to let that momentum slip away faster than you can say “grocery delivery” three times real fast. Like I said, come 2022, it will be intriguing to look back on the week of June 12, 2017, to see what impact it had on the store brands of tomorrow. SB

Lawrence Aylward, Editor-in-Chief laylward@ensembleIQ.com

2015

6

Store Brands / July 2017 / www.storebrands.com


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Promotional Insights

Amazon’s Whole Foods acquisition could boost perceptions of private brands even more

By Ryne Misso

8

he retail landscape is experiencing significant disruption. While many may point to the rise of e-commerce and Amazon’s acquisition of Whole Foods Market as the only momentous changes occurring, there is another disruption happening due to the rise of store brands. In the grocery channel in the United States, private brands have seen market share grow to 24 percent across all categories. The shift is even more extreme overseas — private brands account for over 70 percent of grocery sales in Europe. This fact is not lost on retailers and manufacturers based in the United States, especially with the June launch of Lidl’s first store locations on the East Coast. Lidl is set to bring its store brand strategy with it, which will have big implications for national brand manufacturers and competing retailers. Historically, consumers have considered store brands to be the value option on the shelf — products that will save them money but may be of inferior quality to national brand alternatives. With private brand’s market share growing in the U.S., that perception has changed. Shopper survey data from Market Track suggests that consumers may have fewer concerns about private brand options today. The survey revealed that the majority of grocery shoppers buy private brands. Across all ages, 78 percent of shoppers buy store brands. What’s more, a majority (69 percent) also believe that private brands contain the same ingredients as national brands, while 67 percent believe they are of the same quality as national brands. Private brands also tend to skew more toward female than male. Eighty percent of women surveyed currently buy store brands, compared to 76 percent of men. The data was even greater when the discussion shifted to ingredients — 73 percent of women believe store brands have the same ingredients as national brands versus only 64 percent of men. Interestingly, household income did not have a clear correlation with consumer

Store Brands / July 2017 / www.storebrands.com

attitudes around private brands. Given that store brands have historically been priced favorably relative to other options on the shelf, you might assume store brand consumers skew less affluent. However, survey respondents debunked that theory. Seventythree percent of shoppers with an annual household income of less than $25,000 said they currently buy store brands, while 79 percent of those in households making $50,000 or more claimed the same. When asked about quality and ingredients, it was the more affluent shopper segments that showed less concern about quality and ingredients. Across all income demographics, though, the majority of consumers buy private brands today and believe ingredients and quality compare favorably to national brand options. Amazon’s acquisition of Whole Foods Market could further the growing positive perception of private brands among consumers. Today, several Whole Foods’ 365 products are listed on Amazon’s Marketplace. After the acquisition, consumers can expect a big spike in the number and variety of Whole Foods’ private brands available on Amazon. By making these high-quality private brands more accessible to average consumers, it is not out of the question that in the near future consumers may even prefer or seek out private brands over national brands. The story isn’t all hunky-dory for private brands, however. Although the average consumer may be buying private brands today, younger shoppers may not be so bought-in. According to Market Track’s survey, only 69 percent of shoppers age 18-21, and 73 percent of those 21-29 buy private brands today. There are some opportunity areas for grocery stores to drive adoption of their private brands across different shopper demographics, but by and large the majority of grocery shoppers are consumers of private brands today. National brand manufacturers will continue to be under threat from private brands as retailers grow their assortment and as consumers become less concerned about taking a hit on quality by choosing a store brand. National brands will need to find ways to enhance their value and quality proposition relative to private brands, knowing that retailers like Lidl and Amazon may be carrying the store brand flag forward in the U.S. market over the years to come. SB Ryne Misso is director of marketing for Market Track, a provider of advertising and promotional tracking, brand protections and e-commerce pricing solutions.


AroundtheIndustry SHORT TAKES Kroger sues Lidl for trademark infringement Germany-based grocer Lidl, which opened its first stores in the United States in June, is being sued by The Kroger Co. for trademark infringement. Cincinnati-based Kroger claims Lidl’s “Preferred Selection” private brand is too close in name to its “Private Selection” store brand, which Kroger created 20 years ago. Kroger filed the lawsuit in U.S. District Court in the Eastern District of Virginia. Lidl’s U.S. operations are in Arlington, Va. “As a direct result of Lidl’s wrongful conduct, Kroger has suffered and will continue to suffer irreparable injury,” the lawsuit states. Kroger’s Private Selection consists of artisan foods and gourmet groceries. Lidl’s Preferred Selection brand includes sustainability-certified fresh and frozen seafood, fresh-cut flowers, European-style cured meats, imported chocolate, fresh bread and baked goods made daily in the store, and a variety of shelf-stable items. Lidl plans to open up to 100 stores in the U.S. by the middle of next year. Kroger is the the largest grocery chain in the U.S. with almost 3,000 stores in operation. The parties were to appear before a judge on July 25.

Godshall named Independent Processor of the Year Telford, Pa.-based Godshall’s Quality Meats was named Independent Processor of the Year for 2017 by meat industry trade publication The National Provisioner and will be featured as the cover story in its supplement. Independent Processor, in August. The award recognizes the best in American producers of meat and poultry. Godshall’s has been a family business for over 70 years. Godshall’s produces a variety of products as a specialty in both branded and private label offerings.

Walgreens-Rite Aid merger scrapped Deerfield, Ill.-based Walgreens Boots Alliance has decided to terminate its merger with Camp Hill, Pa.-based Rite Aid Corp., instead entering into a new agreement to buy 2,186 of Rite Aid’s 4,153 stores for $5.2 billion in cash. Walgreens will also pay a $325 million termination fee. The deal is expected to close within the next six months pending FTC approval, at which point the drugstore chain will begin acquiring Rite Aid’s assets and converting locations to the Walgreens banner. Plans for a merger between Walgreens and Rite Aid, the first and third largest drugstore chains, respectively, lagged for more than a year after the initial announcement due to scrutiny from the FTC over antitrust concerns.

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Store Brands / July 2017 / www.storebrands.com

5 ways to personalize with private brands To engage ‘participatory shoppers,’ retailers need to differentiate the shopping experience, says Daymon’s Nicole Peranick By Carolyn Schierhorn

D

espite the growth in e-commerce, consumers today are not rejecting physical stores. In fact, nearly six in 10 are “participatory shoppers” who shop multiple brick-and-mortar stores to find exactly what they’re looking for and expect a personalized, fun, convenient and digitally enhanced experience, according to Nicole Peranick, director of global thought leadership for Daymon. “Private brand,” a term that encompasses services as well as store brand products, will play an ever-greater role in differentiating the retail experience to engage these demanding wellness- and sustainability-focused consumers, said Peranick in her June 21 presentation, “From the World: Bringing Scale to Personalization,” which concluded Store Brands’ four-part webinar series examining “The Power of Private Brands,” a recent report by the Food Marketing Institute (FMI) Private Brand Leadership Council, IRI and Daymon. Also participating in this final webinar were Doug Baker, FMI’s vice president of industry relations, and moderator Kevin Francella, brand director for Store Brands. To better understand contemporary consumer behavior, Daymon surveyed 8,500 respondents from eight countries, including both developed and developing markets. The global retail services and brand development firm uncovered “a new wave of participatory shoppers” that spans all generations, with the most engaged “vocal aficionados” being primarily GenXers and millennials. “These shoppers seek out interaction in the retail experience,” Peranick explained. “They desire inclusion and want to provide opinions, feedback and ideas to make their mark.” Peranick shared several insights into this new shopping mindset that should be of particular interest to retailers with private brands: • Co-creation is the future of retail innovation. Consumers increasingly desire to provide direct input into products and services and even to codesign new ones. • Fresh is the gateway to shopper loyalty. But this extends beyond a single department. “Fresh has taken on an expanded meaning, and solving for this new interpretation is really imperative to capture and retain customers,” she stressed. • A new dimension of private brand is emerging. It’s not enough for store brands to be me-too imitators of national brands. “Shoppers are giving private brands permission and even expecting them to differentiate, elevate, innovate and personalize,” Peranick said.


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AroundtheIndustry • Conversational engagement must extend outside of the store.

SHORT TAKES Family Dollar changing store brands Chesapeake, Va.-based Dollar Tree Inc., which owns both the Dollar Tree and Family Dollar banners, is revamping the private brands at its 8,200 Family Dollar outlets. “We’re in the process of moving away from family-branded labels such as Family Wellness, Family Gourmet and Family Chef with the intention to drive relevant brandings with new and improved packaging to refresh our assortment,” said Gary Philbin, Dollar Tree’s Enterprise president, in a recent conference call with investors. “You will see Homeline replacing the Family Dollar brand in household products. You also see we’re transitioning from our private brand candy assortment from Family Gourmet where you will now see Catawba Candy Co. In the months ahead, we’ll be transitioning labels in several other pipelines mainly on the consumables categories. These private brands are being developed to provide national brand comparable quality and terrific values to support the compare and save component of our smart ways to save program.”

Consumers want a two-way “feedback exchange” with retailers that often includes digital engagement. • Seamless integration with mobile is not a choice. “Beyond out-ofstore connectivity, more and more shoppers are demanding a different in-store experience that’s digitally enhanced for mobile,” Peranick noted.

What can retailers do to attract these participatory shoppers? The answer, Peranick told her webinar audience, is “destination retailing,” or incorporating differentiated experiences to drive deeper consumer engagement and increase dwell time in the store. One way to do that in grocery retailing is “to accent fresh as a total store initiative,” she said. A good example of this is Aldi’s Pop-Up Bistro concept in Germany, in which shoppers can enjoy chef-prepared meals for a limited time. In addition, stores can offer “private branded fresh solutions,” a section where made-to-order salads, sandwiches and other healthful meals are prepared. A few retailers Store Brands’ webinar series can be viewed on demand are even growing their at https://event.webcasts.com/viewer/portal.jsp?ei=1137260. own produce in small greenhouses in the store. Webinars include: • From the Register: Looking Deeper for Answers To become a • From the Consumer: Understanding Disruption destination retailer, • From the World: Bringing Scale to Personalization stores should also • From the Industry: New Partner Perspectives think about adding

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AroundtheIndustry SHORT TAKES Dollar General testing produce at its traditional stores Goodlettsville, Tenn-based Dollar General Corp. is testing fresh produce as its traditional dollar stores. Todd Vasos, CEO of Dollar General, said the chain is remodeling about 300 of its traditional stores to increase cooler space about 160 percent. “Additionally, across about a third of these locations, we are testing an assortment of fresh produce. While it’s still very early, initial remodels are yielding strong same-store sales improvements,” Vasos said on a recent conference call with investors.

With expansion, Aldi will be nation’s third-largest food retailer Already in the midst of a $1.6 billion renovation initiative that aims to bolster the chain’s fresh food choices and other product assortments, Batavia, Ill.-based Aldi U.S. said it will invest $3.4 billion to increase its store count from 1,600 to 2,500 by 2022. At that number of stores, 8” Aldi will be the third-largest food retailer in the United

value through new private branded services, Peranick suggested, citing examples of European retailers that are doing this. Carrefour in Italy, for instance, has a new urban concept store that is open 24/7, includes laundry facilities, and features a handyman team that can be hired to make repairs in shoppers’ homes. And in France, the hypermarket E. Leclerc has debuted a drive-thru lane that allows customers to pick up online-ordered products and ready-to-eat meals without leaving their cars. “Private brand is truly well-positioned to serve as a competitive advantage to retailers,” Peranick emphasized. To leverage this advantage, stores must move beyond “me-too emulation” and toward “made-for-me differentiation,” which requires a solutions-based approach, she said. SB

Consumers want and are willing to try innovative private brands

S

upermarket and regional grocers mention in a recent study that store brands are their No. 1 tool for building a competitive advantage, yet many of these same retailers say that the biggest threat to store brands is a lack of capital investment to drive innovation. Well, if supermarkets, regional grocers and all retailers, for that matter, need more reasons to invest for innovative private brands, they should consider these eye-popping statistics from BrandSpark International’s 2017 American Shopper 16”than 10,000 consumer responses: Study, which is based on more • 74 percent of shoppers like trying new products. Sixty-three percent say

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AroundtheIndustry •

they will pay a little more for a new product that appears to be better than what was previously available. Product innovation is as important as ever to capture shopper’s attention, as 45 percent say they are less brand loyal than they were a few years previously. 66 percent of American shoppers say they enjoy cooking. An even greater number, 77 percent, say they try to prepare food at home as often as they can, specifically citing this to the enjoyment and money saving benefits of at-home cooking. 63 percent of beauty shoppers believe that ongoing R&D is consistently leading to more effective beauty products, and they don’t just think these come from prestigious brands. Price is not always number one with over-the-counter products: 57 percent agree that they will often spend a lot more for health products they know work. The word “natural” resonates well with health product shoppers. Household care products are rarely an impulse buy; just 23 percent of consumers say they often make impulse purchases of household care products. Yet household shoppers are always looking for new things: 57 percent are increasingly seeking out environmentally friendly products, 47 percent are interested in “natural” household care products and 75 percent appreciate multi-purpose household care products, which are 8” perceived to add convenience and value. SB

States behind Wal-Mart and The Kroger Co. Aldi is known for its store brands, including Fit & Active and liveGfree. According to a report from Bain & Co., a management consulting firm, the deep discount stores in the U.S. is expected to grow by 8 percent to 10 percent annually through 2020. “This torrid pace of growth is fueled by discounter store economics that quickly generate cash to reinvest into both store expansion and remodeling programs that attract new customers,” the study stated. In other news concerning Aldi, the retailer was reprimanded by the National Advertising Division (NAD) for running ads in print and on YouTube in Texas telling grocers there that they can save up to 50 percent on their grocery bills by shopping at Aldi instead of The Kroger Co., Walmart and H-E-B Grocery. NAD recommended that Aldi stop running the challenged ads and “ensure that future price comparisons clearly define the basis of comparison, are limited based on the scope of the comparison.” San Antonio, Texas-based H-E-B challenged the ads to the NAD, a self-regulatory unit administered by the Better Business Bureau. HEB said Aldi’s ads were problematic for several reasons. SB

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www.storebrands.com / July 2017 / Store Brands


AroundtheIndustry Lidl’s low-priced store brands will surely get consumers to ‘rethink grocery’ By Lawrence Aylward

15 percent cheaper than its main ou can buy a strip steak, competitor, Asda. But with Lidl’s low kayak and selfie stick all in prices, consumers are sure to “rethink one place … can’t get any grocery.” Lidl has made no secret that it better than that.” wants to offer the lowest prices in the That’s what my friend said after grocery business. reviewing the 32-page circular that According to the circular, some of the German-grocer Lidl released for its specials Lidl offered on its private brands store opening in Greenville, S.C., on during the week of its store openings June 15. Lidl opened 10 stores on included an 18-ounce jar of peanut the East Coast that week and several butter for $1.19 (20 percent off), a The view upon entering a Lidl. more in July. The retailer, which has 48-ounce box of ice cream for $1.99 (16 about 10,000 locations in 27 countries, is aiming to win over percent off), six rolls of paper towels for $5.49 (21 percent off) Americans with low prices on its slew of private brands (90 and a bottle of California chardonnay for $3.79 (15 percent off). percent of its offerings) and other brand-name items. Lidl, The retailer also offers line of premium Italian-style with U.S. operations in Arlington, Va., has adopted “rethink products under Lidl’s Italiamo brand, which features grocery” as its motto. attractive blue packaging with the Italiamo logo in green, According to Kantar Retail Director Mike Paglia, Lidl is white and red — the colors of the Italian flag. looking to price its assortment at up to a whopping 50 percent By the way, the two-person inflatable kayak will cost you less than other supermarkets in the United States. But Paglia $59.99, the Bluetooth selfie $4.99 and the Black Angus strip said the figure “should be taken with a grain of salt.” According steak about $7 a pound. Kantar expects Lidl to generate to a Kantar Retail price survey in the UK, Lidl was on average nearly $700 million in sales by the end of 2018. SB

“Y

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Store Brands / July 2017 / www.storebrands.com


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Getting Social

A

Q A with Carrie Mesing

Senior director of private brands for FreshDirect, an online grocer based in Long Island City, N.Y. How did you come to the world of private brands? My career started in the world of private label — with the intention of moving over to the CPG side after I gained a few years of experience. Little did I know, I would fall in love with the industry, and I’ve been part of it ever since.

asking for more visibility into not only the products themselves, but also the supply chain — how were they sourced and manufactured. This push for transparency leaves some retailer-owned brands at a disadvantage. How much can you share without giving away your “secret sauce”?

What do you like most about the industry? I became interested in the private brand business because I saw the incredible potential to create and build brands that add meaning to customers’ lives. Feeling connected to the value proposition of the brand(s) you support is truly a rewarding experience. Our primary brand at FreshDirect, Just FreshDirect, highlights the importance of knowing what’s in the food you’re eating and where it comes from, which is a mission I feel personally connected to.

What’s the best advice someone ever gave you? My dad is always full of good advice. He taught me that relationships matter, the business world is surprisingly small and to treat others always with love and respect, and it will pay dividends down the road.

You have a week off. Where do you go and why? This is a tough one because I love to travel. While I have a long list of places on my bucket list, if I have a week off I would probably go to my home away from home in Tulum, Mexico. My husband Austin and I were recently married in Tulum, so it’s a special place for us.

Carrie Mesing and her husband Austin Rutz love to visit Tulum, Mexico, where they were married in May.

What do you dislike most about the industry? I dislike the perception that the private brands industry is unoriginal or uninspired … the idea that private brands “copy” national brands. It’s been a pleasure to be part of the inception of a brand like Just FreshDirect that shatters those preconceived notions. Retailerowned brands continue to help retailers differentiate from their competitors, and I’m happy to see brands that are becoming more sophisticated in terms of sourcing, product innovation and packaging design. What is the industry’s biggest challenge? Today’s consumers want more information about the products they buy — they want to know specific ingredients used and where the products came from. They are 18

It’s 5 o’clock (or later), what do you do for fun? The restaurant scene in New York City is too enticing to pass up, so you’ll often find me trying out a new cocktail bar or restaurant at the end of the work day. While I love to cook, the size of my kitchen makes entertaining a challenge, so if I’m meeting up with friends it’s usually at a restaurant or workout class.

Store Brands / July 2017 / www.storebrands.com

What’s the best book you’ve ever read? I’m an avid reader, but the book that’s stuck with me is “When Breath Becomes Air” by Dr. Paul Kalanithi. It is an incredibly moving memoir, written by a dying neurosurgeon grappling with his own mortality. I highly recommend it. What movie can you watch over and over? I don’t rewatch movies often, but “It’s a Wonderful Life” and “A Christmas Carol” are two exceptions. Around the holidays, there is something nostalgic about watching an old classic in the company of family or friends. What song do you love to crank up in the car? I don’t have a car in the city, so when we are planning to rent one and visit family in Pennsylvania, my husband and I go crazy creating new playlists to listen to on the road. Because I have Mexico on my mind, “Are You with Me” by Lost Frequencies comes to mind. But really … I’ll crank up and sing every song that comes on. SB


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Cover Story

FACING UP TA TO THE

Sam’s Club’s Chandra Holt leads Member’s Mark makeover, taking an ordinary brand into premium territory

C

handra Holt removes her shoe to rewere “typical” of many store brands, to a veal a cluster of bites and stings premium tier to distinguish them from By she endured from an army of the competition. Lawrence fire ants while walking in a During an interview inside the Aylward field of coffee plants in Medellin, Sam’s Club located a few miles from Colombia. Holt, the vice president the company’s headquarters, Holt explains of private brands for Sam’s Club, toured that the Member’s Mark makeover all began the field in Colombia recently while with Sam’s Club’s members, the consumers meeting with growers and suppliers regardand business people who pay $45 a year for ing the Bentonville, Ark.-based warehouse membership. club chain’s new line of coffee products for its “One of the first things I did when I came recently revamped Member’s Mark line. on board was conduct both quantitative and “Sometimes … this job is just brutal,” Holt qualitative research with our members to says while surveying her swollen foot. And figure out what they wanted from our private then Holt smiles and lets out a laugh. She brands,” Holt says. wouldn’t have her job any other way. What she learned is that many members In the past year, Holt and members of her priwant more than just products that are national vate brands team have literally combed the globe brand equivalents. They desire a variety of — from visiting olive and tomato farms in Italy innovative and high-quality products with fewer to wine orchards in France and to a smokehouse ingredients that are exclusive to Sam’s Club. in East Texas — to procure the best ingredients The members are getting what they asked and processing methods to create new prodfor. Last fall, the 600-store chain, founded ucts and improve existing ones for Sam’s Club’s in 1983, rolled out the first of the new and “new” Member’s Mark line. In April, Sam’s Club revamped products in the line, which include announced the 20-year-old line’s revitalization, everything from fair-trade certified 100 percent which will touch about 1,200 products in food, Arabica coffee to organic virgin coconut oil beverage and general merchandise by the end to smoked pulled pork to honey sourced from of 2018. It includes 600 new products — 300 a U.S. bee cooperative. (See “A premium introduced in late 2016 and 2017 and 300 in approach with products” on page 10.) 2018 — and enhancements to 600 others. But Holt and her team also decided to the revitalization won’t stop there. Holt and her streamline 21 previous Sam’s Club private team will continue to develop and introduce new brands including Simply Right, Bakers & products in the coming years. RIGHT: When Chandra Holt joined Sam’s Club When Holt joined Sam’s Club in August in August 2015, she challenged herself to take 2015, she threw down the gauntlet … to herself. Sam’s Club’s private brands, which she says were The 37-year-old challenged herself to take “typical” of many store brands, to a premium tier to Sam’s Club’s private brands, which she says distinguish them from the competition.

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Cover story photos by Spencer Tirey.


ASK

www.storebrands.com / July 2017 / Store Brands

21


Cover Story Chefs and Daily Chef into Member’s Mark, a brand that Holt says has maintained strong equity. Holt wouldn’t say how much Sam’s Club invested in the undertaking, only that it was a “heavy investment.” Early signs indicate that the Member’s Mark makeover is a hit. Under Holt and her team, it has grown swiftly from a $9 billion brand to $10 billion.

“It’s amazing how everybody has worked together to make this happen so fast. We are going like gangbusters. It has been rapid-fire excitement.” — Julie Woods, director of product development for private brands/Sam’s Club

Chandra Holt (middle) examines coffee plants in Medellin, Colombia.

“We started with a white board for this … just wanting to take the brand to a different level,” Holt says. Tim Campbell, senior analyst for Boston-based Kantar Retail, says Member’s Mark has smashed the mold of mediocrity. “Previously, Member’s Mark was more generic, what you would think of as a traditional store brand,” Campbell says. “What [Sam’s Club] is doing is driving loyalty to their stores with a more branded private label strategy that is less financially focused and more branded and loyalty focused.” WHEN HOLT INTERVIEWED with Sam’s Club, it wasn’t about leading private brands. But the

Photo courtesy of Sam’s Club. 22

Store Brands / July 2017 / www.storebrands.com

Sam’s Club brass asked if she might be interested in the position. “I was surprised because I had never run a private brands team in the past,” Holt says. “My background is in core merchandising.” Holt worked in merchandising at Target Corp. for 10 years and most recently at Walgreens for three years. But when Holt toured Sam’s Club during the interview and saw its store brands, she began to envision leading the private brands team. “The thing I’m really passionate about is driving positive change,” she says. “And I saw the opportunity to come in and really impact the organization in a big way. Very few times in your career do you get the opportunity to take over a $9 billion brand and completely redo it.” After Holt accepted the job, she wasn’t given a blueprint of what to do. Her marching order was basically to do what was needed to take Sam’s Club’s store brands to another level. Although the directions were a bit ambiguous, Holt says she thrives on the unknown. “That is what really attracted me to the job,” she adds. One of Holt’s first moves was to recruit top people to be part of the private brands team and give them the leeway that they needed to accomplish the task. There were about 25 people on the team when Holt began, but only three of those members remain. Holt has hired more than 50 new people and is still looking for a few more. Most of the team members, including Julie Woods, director of product development for private brands, and Derek Warner, the senior director of private brands for global sourcing, have been with the team for only a year. Woods previously worked at ConAgra Brands Inc. and has several years of experience in private brands and consumer packaged goods. Warner previously spent 16 years at Daymon where he specialized in private brands development. Their groups work together closely. Woods and the nine product developers she oversees research opportunities for products and identify product attributes and sensory characteristics. Warner and his unit then work to procure the best ingredients and items at the best value to manufacture those products. Other specialists, from those in analytics to those in merchandising, also play key roles. “It’s amazing how everybody has worked together to make this happen so fast,” Woods says. “We are going like gangbusters. It has been rapid-fire excitement.” Woods and Warner joke that their jobs have been made easy (“but don’t tell Chandra we said that,” Woods says with a chuckle) because upper management, including President and CEO John Furner and


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Cover Story

Chandra Holt (front) and her team, including Derek Warner and Julie Woods, have worked hard to build the Member’s Mark brand. But they aren’t afraid to goof off and have fun on occasion.

Chief Merchandising Officer Ashley Buchanan, has offered unwavering support for the venture. Sam’s Club’s tremendous purchasing power and vast scale of sourcing have also benefitted the project “Everybody is fired up about this,” Warner says. “It doesn’t feel like work because it’s fun. It has been a fantastic experience.” WHEN WARNER SAYS HE has a “whole world” of suppliers to partner with, he means it. In the past year, Warner has strolled through guava orchards in Mexico, pineapple plantations in Indonesia and coconut trees in the Philippines to view and learn about potential suppliers’ products. Warner has also visited the United Kingdom, Spain, Italy, China, Thailand, India and Malaysia since beginning his job. While she hasn’t traveled as much as Warner, Holt has traveled overseas frequently in addition to trekking throughout the U.S.

“I always tell people that sourcing is about knowledge and relationships.” — Derek Warner, senior director of private brands for global sourcing/Sam’s Club

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They travel abroad for several reasons, the most obvious being that they want to see how suppliers cultivate ingredients that are native to their countries, like the fourth-generation olive producer they visited in Italy that creates Member’s Mark’s new extra virgin olive oil. They also get to see the quality that those suppliers put into the products or don’t put into them. Considering Sam’s Club’s strict procedures for quality assurance, being able to vet for it on site was crucial. Warner says Sam’s Club invests significant resources to ensure all suppliers of Member’s Mark products are thoroughly vetted for proper manufacturing processes, responsible and ethical business practices and are accredited by independent third-party agencies. (Sam’s Club would not name suppliers to the Member’s Mark line.) “When you go to the place where products are made, like olive oil in Italy, you get to see things that you wouldn’t see if it was a sales representative from that company coming to visit you,” Holt says. “You get a glimpse behind the curtain to see things that nobody else in the world might be seeing.” Nothing against seeing innovative products at trade shows, but Holt says she would rather see innovation up close and personal. “Sometimes we see innovation that is years in advance,” she says. Also, face-to-face negotiation is critical and can go a long way in securing a favorable business transaction. “By taking these trips we were able to reduce costs [for some products] and add additional


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Cover Story economic value for our members while increasing quality,” Holt says. For instance, Holt and her team worked with one supplier during a visit to upgrade a conventional chicken broth that was a national brand equivalent to a broth that was organic and made from cage-free chickens. “And the price [for our members] didn’t go up a cent,” Holt says. Not all trips were taken abroad; some were taken not far from Sam’s Club’s headquarters, such as to East Texas. There, Sam’s Club met with with a longtime smoker to create its Member’s Mark Pitmaster Seasoned Pulled Pork. There is a difference when it comes to sourcing a premium product from a national brand equivalent or value product, which lies in going deeper into the value chain to find suppliers for premium products, Warner explains. Those suppliers are more knowledgeable about their products, and they are the people you want to form business relationships with, he notes. “I always tell people that sourcing is about knowledge and relationships,” Warner adds. Sometimes it’s not just a manufacturer; it might

A premium approach with products This year Sam’s Club is introducing 300 new items and another 300 in 2018 under the Member’s Mark brand. The product lineup will span from food and beverage to non-food items. Here are some of the new products:

w Donut Shop Coffee K-cups — a fair-trade-certified

100 percent Arabica medium roast that features red fruit, caramel and almond notes.

w Organic Virgin Coconut Oil — billed as a healthy substitute for margin and butter in cooking.

w Mozzarella & Roasted Garlic Chicken Sausage — a fully cooked heat-and-serve offering.

w Special Selection Extra Virgin Olive Oil — grown and pressed in the best olive regions of Italy.

w Pulled Pork — produced in Texas by a family-owned

smokehouse with over 70 years in the meat smoking industry.

w Organic Chicken Broth — made with free-range chicken. w Bee Proud All-American Fancy Clover White Honey —

sourced from a U.S. bee cooperative representing hundreds of independent beekeepers.

w Wines — partnered with award-winning wineries to produce Chardonnay, Riesling and Cabernet.

w

Lasagna — created from an Italian family recipe from a woman-owned business.

w Sea Salt Caramels — handcrafted caramels covered in milk chocolate and sprinkled with sea salt.

w Non-food products — they include bath tissue, paper plates, sunscreen, makeup remover and gummy vitamins.

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“We have a number of competitors that do a good job with their private label. But I don’t want any one competitor to define what we are going to do. We are going to do what’s best for our members.” — Chandra Holt, vice president of private brands/Sam’s Club

be a farmer or a fisherman. “It’s people who are so intimately involved with that product that they know more about it than anybody else,” Warner says. “And they have a ton of passion behind it.” Being on site also allows Sam’s Club to source responsibly. “There is a whole ethical piece that we are very conscious of,” Warner says. “We want to make sure we are sourcing from the right people.” After the products are developed, the key is to tell the story of their origins on their packaging and through other promotions, including social media. On the back of its Pitmaster Seasoned Pulled Pork package, there is a story about the product: “Texas is known for legendary barbeque and our familyowned smokehouse deep in the Pinewoods of East Texas has perfected this heritage for generations,” the story reads. “Our pulled pork has three ingredients — pork, seasoning and water,” Holt says. “Transparency in sourcing is something that people are interested in.” The products and packaging in the Member’s Mark line score high in the cool factor, which was Holt’s intent. And it was critical not to follow a template with the packaging for all products, which Holt says would make them all look similar. “A lot of private labels have a template for packaging,” Holt says. “We completely threw that thinking out the window and did the exact opposite. So it’s about the item being first and making sure the packaging talks about the unique attributes and the quality of the item. Because that’s what members are going to respond to. The brand follows.” Holt wanted to bring the packages “to life” through bright colors to make them stand out in the large confines of the clubs. The creative approach seems to be working. Consider Member’s Mark Spanakopita, not a new product but one that received a few ingredient tweaks and a packaging overhaul. The package is now colored in light blue and includes a drawing of a goat (it’s made with goat cheese) and


The packaging for products in the Member’s Mark line does not follow a template. The goal was for each package to look and feel different. Sales for Member’s Mark Spanakopita (upper left) nearly doubled after its packaging was redesigned.

includes the words “party animal.” Holt admits the packaging is “out there,” but the product’s sales nearly doubled shortly after the redesign. One of the design firms that Sam’s Club hired to redesign the packaging was Chicago-based Equator. Michael Duffy, Equator’s group creative director, says the goal was to ensure Sam’s Club’s creative vision was realized across all categories. “We worked with Sam’s Club to create an approach that brought fresh thinking to each and every pack in its category,” Duffy says. “To do this successfully, we had to look through the eyes of Sam’s Club members to create designs that had maximum shelf standout and personality.” Holt says Sam’s Club is receiving feedback from members saying that some of the Member’s Mark products are so innovative and the packaging so creative that they think they are purchasing brand names. “They are shocked that this is our private brand,” Holt says. WARNER CRANES HIS NECK and scans the vastness that is Sam’s Club, imagining the continued expansion of Member’s Mark from corner to corner of the 140,000 square-foot building. “Just look at this place,” Warner says, amid the sounds of bustling shoppers and the beeping of product loaders stocking shelves. “We have a lot of places left to touch. It’s a continuous process.”

Holt calls 2017 a year of transformation for Member’s Mark. “We are going to transform the Sam’s Club shopping experience,” she says. “When you come back in September, the club is going to look different because we will have many more items rolled out. When you come back in January, it will look even more different.” There are three- to five-year goals for Member’s Mark. One of them — achieving a 20 percent penetration rate — has already been met. Holt says she is often asked if Sam’s Club upped the ante on Member’s Mark to compete with Costco Wholesale, its Issaquah, Wash.-based warehouse competitor, which has garnered a following for its Kirkland Signature private brand. “We have a number of competitors that do a good job with their private label,” Holt says. “But I don’t want any one competitor to define what we are going to do. We are going to do what’s best for our members.” Doing best for the members means traveling to faraway places to meet with possible business partners — even at the risk of your feet getting bit and stung by fire ants while walking through coffee fields. SB Aylward, editor-in-chief of Store Brands, can be reached at laylward@ensembleiq.com

www.storebrands.com / July 2017 / Store Brands

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Non-Foods State of the Industry

Incredible Inedibles Private brands still dominate value-driven categories but have more growth potential in underdeveloped segments such as pet products and personal care, say retail analysts n By Carolyn Schierhorn s recent data from Chicago-based IRI make clear, Indeed, some of the categories led by store brands bring private brands continue to dominate many nonin hundreds of millions of dollars a year for retailers — and a food categories, for several years ranking No. 1 few such as paper towels, toilet tissue and disposable plates in retail dollar sales in segments such as garbage and bowls, $1.5 billion-plus each. But the news isn’t all good bags, food storage bags, disposable tableware for store brands, many of which have been experiencing and utensils, paper napkins, hand sanitizers, moist towelettes diminished dollar and unit sales in a post-recessionary period and baby wipes. Store brands also rank in the top five in of economic recovery — a time when some consumers are many health, beauty and household product categories. willing to pay more for branded environmentally sustainable or “Private brands are just premium-quality options. a lot better than they used Consistent across IRI data to be,” says Peter Killian, a for the 52 weeks ending April principal with Chicago-based 16, store brand non-food The Cambridge Group, products have a lower average On page 29, 30, 32 and 34, sales data from Information explaining store brands’ price per unit than leading Resources Inc. (IRI) is featured in four categories: pet success in the non-food national brands do, and the food and supplies, laundry products, personal cleaning realm. “The quality is better. difference is striking in some products and baby care. The data depicts private The design and packaging are cases. For example, private brand performance among national brands in non-food better. And retailers are better brand disposable garbage and segments. For more data tables across a variety of nonat marketing and promoting trash bags have an average food categories, visit www.storebrands.com. their private brands.” unit price of $5.33 compared

About the charts

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Store Brands / July 2017 / www.storebrands.com


to $9.09 for the leading national brand manufacturer, The Glad Products Co. Similarly, there is a big average unit price difference between category-leading private brand disposable cups, at $2.52, and those produced by the leading national brand manufacturer, Georgia Pacific Consumer Products, at $5.22. In the domain of over-the-counter (OTC) drugs, private brands are less than half the price of national brands in some cases. Private brand laxatives, for example, have an average unit price of $5.41, while the leading national brand has an average unit price of $13.27. The story is the same for the cold/allergy/ sinus segment: Private brands’ average unit price is $7.86, while the average unit price of the top national brand is $15.80. The

Cat’s Meow Though ranking 4th in dollar sales, private brand cat litter grew faster than the brands of the three leading manufacturers, increasing 7% to $218.1 million.

PET FOOD AND SUPPLIES DOG BISCUITS/TREATS/BEVERAGES Big Heart Pet Brands Nestle Purina Petcare Company PRIVATE BRANDS Mars Inc Tyson Pet Products Inc DRY CAT FOOD Nestle Purina Petcare Company Big Heart Pet Brands PRIVATE BRANDS Mars Inc Ainsworth Pet Nutrition D DRY DOG FOOD Nestle Purina Petcare Company Mars Inc PRIVATE BRANDS Ainsworth Pet Nutrition Big Heart Pet Brands FRESH/REFRIGERATED/FROZEN DOG FOOD Nestle Purina Petcare Company J & J Snack Foods Corporation BIL-JAC Foods Inc PRIVATE BRANDS SEMIMOIST CAT FOOD Nestle Purina Petcare Company PRIVATE BRANDS Natural Polymer International Company SEMIMOIST DOG FOOD Nestle Purina Petcare Company PRIVATE BRANDS Big Heart Pet Brands Supreme Pet Food Company

much lower price points for store brands drive unit sales but can also affect consumers’ impression of their quality. Even though non-food store brands are much better now than in the past, according to Killian, “generally they are about value, and good-better-best [tiering] has not been as relevant,” he says. “Some key categories are almost by definition commoditized.” Take vitamin and mineral supplements, robust segments for private brands. “If you look at Vitamin D, for example, there is only so much you can do to differentiate it from the national brands,” Killian observes. “You can clean up the label or change the cap. Innovation is still possible, but it’s still really a commodity product by definition.” The recent report titled “The Power of Private Brands,” by the Food Marketing Institute, IRI and Daymon, reveals that consumers across all generations perceive the quality of private brand non-foods to be less than that of private brand food. Millennials, GenXers, baby boomers and the silver (senior citizen) generation all perceive dairy, bakery or fresh produce and even canned/packaged goods to be at the top of the private brand quality hierarchy while relegating store brand personal care and OTC products to the bottom of that scale.

DOLLAR SALES

% CHANGE

DOLLAR SHARE

% CHANGE

UNIT SALES

% CHANGE

PRICE/UNIT

2,369,481,216 $ 871,469,824 $ 444,556,512 $ 259,369,504 $ 212,662,544 $ 109,785,984 $ 2,309,660,672 $ 1,310,913,664 $ 525,099,648 $ 198,351,840 $ 191,202,864 $ 45,172,104 $ 5,069,669,888 $ 2,161,068,800 $ 1,224,916,992 $ 768,347,072 $ 385,425,920 $ 383,251,648 $ 138,203,520 $ 20,123,522 $ 6,899,414 $ 3,387,725 $ 3,176,659

4.21 (1.82) 3.69 9.47 (8.14) 86.52 (1.09) 0.34 (3.67) (6.09) (5.04) 60.12 (0.14) (4.47) 2.72 (5.31) 39.98 (2.96) 18.04 13.04 19.07 (9.57) 75.52

100.00 36.78 18.76 10.95 8.98 4.63 100.00 56.76 22.73 8.59 8.28 1.96 100.00 42.63 24.16 15.16 7.60 7.56 80.13 11.67 4.00 1.96 1.84

(2.26) (0.09) 0.53 (1.21) 2.04 0.81 (0.61) (0.46) (0.34) 0.75 (1.93) 0.67 (0.83) 2.18 (0.22) 0.54 (0.43) 0.06 (0.58) 0.61

525,704,160 223,171,744 105,382,136 66,393,112 37,854,892 11,094,235 299,560,512 164,846,944 72,229,552 31,237,448 17,668,540 5,027,892 390,311,072 165,606,144 84,800,768 54,552,856 25,176,828 44,939,188 19,336,990 4,941,288 2,243,823 489,128 1,057,304

0.40 (1.60) 1.78 (2.73) (11.11) 64.22 (2.10) 0.21 (2.52) (9.96) (14.14) 64.97 (0.31) (3.82) 6.29 (11.89) 40.32 (1.29) 12.64 13.66 19.76 (13.39) 75.19

4.51 $ 3.90 $ 4.22 $ 3.91 $ 5.62 $ 9.90 $ 7.71 $ 7.95 $ 7.27 $ 6.35 $ 10.82 $ 8.98 $ 12.99 $ 13.05 $ 14.44 $ 14.08 $ 15.31 $ 8.53 $ 7.15 $ 4.07 $ 3.07 $ 6.93 $ 3.00

36,748,028 36,707,564 $ 33,772 $ 6,691 $ 124,149,488 $ 87,654,752 $ 36,231,708 $ 246,796 $ 16,235

2.35 2.51 (49.25) (77.02) 1.13 (2.77) 11.15

100.00 99.89 0.09 0.02 100.00 70.60 29.18 0.20 0.01

0.16 (0.09) (0.06) (2.83) 2.63 0.20 0.00

24,910,138 24,828,332 80,274 1,534 24,280,736 14,331,544 9,892,835 53,225 3,133

(2.86) (2.81) (10.71) (79.03) 2.33 (3.82) 12.10

$

$ $

10.01

11.79

$

1.48 1.48 $ 0.42 $ 4.36 $ 5.11 $ 6.12 $ 3.66 $ 4.64 $ 5.18 $ $

% CHANGE

0.16 (0.01) $ 0.08 $ 0.44 $ 0.18 $ 1.18 $ 0.08 $ 0.01 $ (0.09) $ 0.26 $ 1.04 $ (0.27) $ 0.02 $ (0.09) $ (0.50) $ 0.98 $ (0.04) $ (0.15) $ 0.33 $ (0.02) $ (0.02) $ 0.29 $ 0.01 $

$

0.08 0.08 $ (0.32) $ 0.38 $ (0.06) $ 0.07 $ (0.03) $ 0.34 $ (0.08) $ $

SOURCE: IRI. Total U.S. supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending April 16, 2017. For the complete “Pet Food and Supplies” table and other “Non-foods State of the Industry” tables, visit www.storebrands.com.

www.storebrands.com / July 2017 / Store Brands

29


Non-Foods State of the Industry This means that retailers have the chance to change shoppers’ minds by generating excitement and developing premium solutions in the health and beauty care (HBC) space. In fact, there are real opportunities for retailers to differentiate themselves in certain underdeveloped non-food categories that have high growth potential for store brands, Killian notes. These categories include pet care, personal care and laundry products, he says.

Rolling Out Faster Growth 1st place in unit sales and 4th place in dollar sales, private brand toilet tissue is increasing at a faster rate than the top manufacturers’ brands.

LAUNDRY PRODUCTS

DOLLAR SALES

PET CARE POISED FOR EVEN GREATER GROWTH Pet care is already a bright spot for store brands. In the dog/ cat needs category, a $594 million segment for private brands, retail dollar sales increased more than 10 percent from the previous year and unit sales rose more than 9 percent. Private brands lead the category, with a 25 percent value share. When it comes to dog food, the picture is more complicated, DOLLAR SHARE

% CHANGE

UNIT SALES

% CHANGE

PRICE/UNIT

% CHANGE

FABRIC SOFTENER LIQUID CONCENTRATE $1,242,917,632 3.15 $ Proctor & Gamble 699,564,608 3.17 $ 233,859,552 1.66 Colgate Palmolive Company $ 201,095,200 4.27 The Sun Products Corporation $ 42,295,784 1.20 PRIVATE BRANDS $ 27,392,958 5.41 Alen Americas $ FABRIC SOFTENER SHEETS 700,338,752 0.58 $ 446,842,432 0.71 Proctor & Gamble $ 115,413,952 (4.16) PRIVATE BRANDS $ 92,292,192 (2.11) The Sun Products Corporation $ 13,376,022 20.84 Colgate Palmolive Company $ 12,618,281 (6.49) Church & Dwight Company Inc $ COLOR-SAFE BLEACH 158,932,432 0.14 $ 126,516,472 (4.63) Clorox Company $ 30,843,568 26.86 PRIVATE BRANDS $ 787,900 8.21 Seventh Generation $ 366,544 (3.97) Phoenix Brands LLC $ 124,885 (41.73) Northern Labs $ FINE WASHABLE LAUNDRY DETERGENT 79,636,160 (0.99) $ 78,233,000 (1.18) Reckitt Benckiser Inc $ 1,115,590 15.50 PRIVATE BRANDS $ 88,298 (6.92) Tyler Candle Company $ 76,840 14.35 Ecover Inc $ 55,437 2.15 Personal Care Products LLC $ LAUNDRY STARCH 37,935,312 (6.38) $ 23,984,860 (6.12) Fautless Starch Company $ 9,579,594 (14.53) Phoenix Brands LLC $ 3,301,660 16.04 The Dial Corporation $ 228,411 (1.83) ACH Food Companies $ 205,037 3.14 PRIVATE BRANDS

100.00 56.28 18.82 16.18 3.40 2.20 100.00 63.80 16.48 13.18 1.91 1.80 100.00 79.60 19.41 0.50 0.23 0.08 100.00 98.24 1.40 0.11 0.10 0.07 100.00 63.23 25.25 8.70 0.60 0.54

0.01 (0.28) 0.17 (0.07) 0.05 0.08 (0.81) (0.36) 0.32 (0.14) (3.98) 4.09 0.04 (0.01) (0.06) (0.18) 0.20 (0.01) 0.01 0.00 0.17 (2.41) 1.68 0.03 0.05

245,070,096 122,503,432 53,937,476 41,965,932 7,733,580 7,362,578 188,018,336 96,763,392 38,205,304 31,247,958 5,888,682 5,064,699 51,314,240 40,015,760 10,774,272 177,513 194,312 39,987 9,200,710 8,551,562 541,099 3,300 14,057 55,652 24,516,038 17,778,754 5,104,473 1,075,042 152,991 89,037

2.49 3.52 0.70 5.22 (3.61) (0.18) (0.63) (0.46) (8.61) (5.90) 21.29 (6.17) 0.72 (5.11) 31.42 6.31 (2.62) (38.96) (4.49) (4.39) (6.44) (18.52) 14.39 2.95 (8.50) (7.71) (16.88) 15.49 (3.56) 10.39

5.07 $ 5.71 $ 4.34 $ 4.79 $ 5.47 $ 3.72 $ 3.72 $ 4.62 $ 3.02 $ 2.95 $ 2.27 $ 2.49 $ 3.10 $ 3.16 $ 2.86 $ 4.44 $ 1.89 $ 3.12 $ 8.66 $ 9.15 $ 2.06 $ 26.76 $ 5.47 $ 1.00 $ 1.55 $ 1.35 $ 1.88 $ 3.07 $ 1.49 $ 2.30

0.03 (0.02) $ 0.04 $ (0.04) $ 0.26 $ 0.20 $ 0.04 $ 0.05 $ 0.14 $ 0.11 $ (0.01) $ (0.01) $ (0.02) $ 0.02 $ (0.10) $ 0.08 $ (0.03) $ (0.15) $ 0.31 $ 0.30 $ 0.39 $ 3.33 $ (0.00) $ (0.01) $ 0.04 $ 0.02 $ 0.05 $ 0.01 $ 0.03 $ (0.16)

POWDER LAUNDRY DETERGENT Proctor & Gamble Fabrica De Jabon La Corona Church & Dwight Company Inc The Sun Products Corporation PRIVATE BRANDS

100.00 70.26 10.37 7.70 4.85 2.47

1.00 1.09 (0.19) (1.18) (0.07)

79,434,496 42,941,764 17,856,958 5,635,397 4,595,367 1,153,957

(11.58) (10.18) (0.57) (16.33) (29.08) (20.13)

$ $

688,211,776 483,552,544 $ 71,343,760 $ 53,004,056 $ 33,346,814 $ 16,970,970

% CHANGE

Two other categories with tremendous potential are health and wellness and, less obviously, eye glasses and optometry services, adds Kieran Forsey co-founder of Nottingham, U.K.-based Solutions for Retail Brands (S4RB). Across various non-food segments, but especially in household cleaning products, retailers should also consider developing sustainable, free-from store brands, Killian suggests. Some retailers have been reluctant to do this, he says, because it could raise consumers’ expectations and lead to insistence that all of a chain’s cleaning products be reformulated.

(10.26) (8.96) 0.24 (12.40) (27.84) (12.73)

$

$ 8.66 11.26 $ 4.00 $ 9.41 $ 7.26 $ 14.71 $

SOURCE: IRI. Total U.S. supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending April 16, 2017. For the complete “Laundry Products” table and other “Non-foods State of the Industry” tables, visit www.storebrands.com.

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Store Brands / July 2017 / www.storebrands.com

$

$

0.13 0.15 $ 0.03 $ 0.42 $ 0.12 $ 1.25 $ $


Non-Foods State of the Industry however. Ranked No. 3, private brand dry dog food declined nearly 12 percent in unit sales and 5.3 percent in dollar sales from year-earlier figures. But private brands saw huge gains in the refrigerated/frozen dog food segment, which grew more than 75 percent in both dollar and unit sales. The takeaway: Retailers need to focus more on developing premium pet products.

Beauty Marks Store brands lead the cosmetic sharpener and makeup applicator segments, with sales of $14.7 million and $80.6 million, respectively. But growth is stronger in the $111.1 million makeup remover implement segment, in which private brands (ranked No. 2) increased 9.1% in dollar sales. PERSONAL CLEANING PRODUCTS BATH FRAGRANCES/BUBBLE BATH Advanced Beauty Inc The Village Company LLC PRIVATE BRANDS MZB Accessories LLC ME Bath BATH/BODY SCRUBBERS/MASSAGERS PRIVATE BRANDS Paris Presents Inc Bradford Soap Mexico Inc Unilever Drake-Williams Consumer Products DEODORANT BAR SOAP Colgate Palmolive Company The Dial Corporation High Ridge Brands Company Proctor & Gamble PRIVATE BRANDS HAND SANITIZERS PRIVATE BRANDS VI-JON Labs Inc GoJo Industries Inc Edgewell Personal Care Nice-Pak Products Inc LIQUID HAND SOAP Colgate Palmolive Company The Dial Corporation PRIVATE BRANDS Method Products Inc The Caldrea Company MOIST TOWELETTES PRIVATE BRANDS Kimberly Clark Corporation Proctor & Gamble Edgewell Personal Care Little Busy Bodies Inc

DOLLAR SALES

% CHANGE

$209,393,824 21.87 $ 67,086,960 25.93 $ 32,352,224 3.20 $ 28,150,362 (2.29) $ 11,414,325 (30.26) $ 10,482,351 288.35 $ 247,124,880 8.67 $ 90,620,888 13.14 $ 90,530,920 9.02 $ 22,613,604 (7.70) $ 8,445,333 4.28 $ 3,957,038 0.56 $ 394,084,096 (3.97) $ 156,532,128 (1.66) $ 147,920,352 0.09 $ 65,701,008 (13.23) $ 16,010,034 (5.76) $ 3,842,877 (29.42) 208,577,120 $ 66,997,328 $ 51,844,352 $ 49,208,480 $ 19,313,092 $ 4,623,622 $ 758,036,160 $ 225,151,280 $ 183,601,984 $ 177,276,560 $ 60,613,484 $ 33,814,032 $ 670,190,720 $ 293,052,896 $ 214,733,552 $ 63,924,576 $ 50,298,860 $ 15,960,688

$

(6.93) (4.91) (8.03) (7.58) (23.02) (7.70) 0.53 (1.65) 5.46 (5.81) 14.18 29.43 22.86 20.65 25.29 49.31 13.79 8.89

“Pet care is a market that continues to grow year on year,” says Forsey, noting that “2016 was another record and 2017 looks on track to beat it again.” Shoppers in the United States, according to a Nielsen survey, “are likely to continue spending top dollars on premium pet food and compromise their own personal consumption,” he adds. Millennials, many of whom have delayed having children, are driving the growth in pet products, according to Killian. “They’re having kids later and buying houses later, and what they’re doing instead is having pets,” he says. “It’s not an exaggeration to say that they are pet parents. They have higher health standards and are scrutinizing ingredients more. And they are pushing big brands out of their comfort (i.e., profit) zone, allowing retailers to step in with ultrapremium, healthier private brands.”

HBC’S YET UNTAPPED POTENTIAL It’s not that retailers haven’t discovered the potential of OTC for store brands. Private brands lead the sleeping aid tablet DOLLAR SHARE

% CHANGE

UNIT SALES

% CHANGE

PRICE/UNIT

% CHANGE

100.00 32.04 15.45 13.44 5.45 5.01 100.00 36.67 36.63 9.15 3.42 1.60 100.00 39.72 37.54 16.67 4.06 0.98

1.03 (2.80) (3.32) (4.08) 3.44 1.45 0.12 (1.62) (0.14) (0.13) 0.93 1.52 (1.78) (0.08) (0.35)

53,298,428 13,095,533 10,198,075 9,733,533 4,107,293 1,449,916 123,691,208 46,555,836 39,376,492 21,646,058 1,967,598 2,027,461 127,812,272 46,268,520 49,688,940 22,968,422 4,028,881 2,836,446

15.76 26.63 7.61 (1.02) (33.94) 275.85 6.94 15.37 7.97 (7.76) 5.03 0.92 (3.32) 1.94 0.88 (14.49) (10.63) (24.44)

$3.93 $ 5.12 $ 3.17 $ 2.89 $ 2.78 $ 7.23 $ 2.00 $ 1.95 $ 2.30 $ 1.04 $ 4.29 $ 1.95 $ 3.08 $ 3.38 $ 2.98 $ 2.86 $ 3.97 $ 1.35

$0.20 (0.03) $ (0.14) $ (0.04) $ 0.15 $ 0.23 $ 0.03 $ (0.04) $ 0.02 $ 0.00 $ (0.03) $ (0.01) $ (0.02) $ (0.12) $ (0.02) $ 0.04 $ 0.21 $ (0.10)

100.00 32.12 24.86 23.59 9.26 2.22 100.00 29.70 24.22 23.39 8.00 4.46 100.00 43.73 32.04 9.54 7.51 2.38

0.68 (0.30) (0.17) (1.94) (0.02) (0.66) 1.13 (1.57) 0.96 1.00 (0.80) 0.62 1.69 (0.60) (0.31)

108,362,488 33,215,910 26,579,880 23,712,410 10,466,976 2,649,045 344,050,816 112,872,688 104,607,552 78,350,560 17,474,016 7,954,325 198,309,552 96,991,760 48,343,716 10,726,472 24,963,812 3,437,031

(11.83) (10.18) (11.78) (9.61) (40.46) (4.11) 0.23 (3.48) 5.18 0.77 15.05 25.55 11.10 15.86 4.67 3.47 14.46 8.15

1.92 2.02 $ 1.95 $ 2.08 $ 1.85 $ 1.75 $ 2.20 $ 1.99 $ 1.76 $ 2.26 $ 3.47 $ 4.25 $ 3.38 $ 3.02 $ 4.44 $ 5.96 $ 2.01 $ 4.64

0.10 0.11 $ 0.08 $ 0.05 $ 0.42 $ (0.07) $ 0.01 $ 0.04 $ 0.00 $ (0.16) $ (0.03) $ 0.13 $ 0.32 $ 0.12 $ 0.73 $ 1.83 $ (0.01) $ 0.03

$

$

SOURCE: IRI. Total U.S. supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending April 16, 2017. For the complete “Personal Cleaning Products” table and other “Non-foods State of the Industry” tables, visit www.storebrands.com.

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Store Brands / July 2017 / www.storebrands.com

$

$

$


segment, the internal analgesic tablet segment, the antacid liquid/powder segment, three smoking-cessation product segments, and several segments in the home health device category, including blood-pressure kits, glucose monitoring devices, and urine testing kits — to name just a few. But the global wellness market (food as well as non-food) is “expected to eclipse $1 trillion this year,” says Nicole Peranick, Daymon’s director of global thought leadership. Emphasizing that the term “private brand” means services as well as products, Peranick notes that grocery retailers can do much more to leverage the natural synergies between a store’s pharmacy department and the various departments selling healthful food. For example, retail dietitians could help customers plan dietary solutions based on data from private brand fitness trackers, medical devices and even DNA kits. “Health and wellness is exploding,” Forsey agrees. “It’s a category that is both high-profile and high-ticket.” Personal care — a category grouping that includes a wide variety of items such as deodorant, body lotion, soap and shampoo — is ripe for innovation by retailers with private brands, Killian notes. The IRI data confirm the growth opportunities. In the liquid body wash segment, a nearly $2.4 billion category, for example, private brands rank sixth place in dollar sales, but that represents a 4 percent increase over the previous year. Branded body washes targeting men are performing even better, suggesting a possible investment area for store brands. Deerfield, Ill.-based Walgreens Boots Alliance is one retailer that has been especially creative with its store brands in the personal care realm. Its Soap & Glory brand brings fun and whimsy to the pink-packaged, cleverly named skin-

Downward Slide In 5th place among manufacturers of deodorant bar soap, private brands plunged 29.4% in dollar sales and 24.4% in unit sales, a much steeper decline than that experienced by manufacturers of the leading national brands.

Prevent Wipe Out Private brand baby wipes rank No. 1 in sales at $484.1 million, but this represents a more than 3% decline over the previous year. In contrast, free-from and organic wipe manufacturers are posting dollar sales gains of 40%-plus. care and bath products that feature retro black-and-white photography of attractive young women from an earlier era. The chain’s premium No7 beauty brand is aimed at older, more sophisticated women who have discriminating taste, while the newer nature-inspired Botanics brand, proclaiming “the power of plants,” targets consumers who value natural and organic products.

OPPORTUNITY IN LAUNDRY Laundry products, traditionally a commodity or value area for store brands, represent a largely untapped opportunity for differentiation, Killian notes. The IRI data show a number of laundry care segments experiencing growth in private brands. Ranked No. 5, store brand liquid laundry detergent, for instance, increased in retail dollar sales by 6.2 percent over the previous year, while the three leading national brands declined in dollar sales. Private brands also accounted for the only dollar sales increase among the top five brands in the liquid static control/fabric protection category. But the most impressive gains for store brands in laundry occurred in the color-safe bleach category. Ranked No. 2 in this segment, private brand color-safe bleach increased nearly 27 percent in dollar sales and 31.4 percent in unit sales, while top-ranking Clorox color-safe bleach suffered a 4.6 percent decline in dollar sales and a 5 percent decline in unit sales.

RECLAIMING BABY CARE Baby care, however, is a category grouping in which store www.storebrands.com / July 2017 / Store Brands

33


Non-Foods State of the Industry brands have been steadily losing ground, though they still have a relatively high ranking in all segments. Private brand baby wipes, for instance, still rank at the top with $484 million in sales, but this figure represents a 3.2 percent decline in dollar sales and 4.8 percent decline in unit sales from the previous year. In contrast, Seventh Generation baby wipes, a free-from brand, grew 45 percent in dollar sales and 38 percent in unit sales. Private brands also declined from first to third place in disposable diapers, with dollar sales sinking 11.3 percent. Ranked No. 4, The Honest Co.’s natural and organic disposable diapers grew 4.6 percent in dollar sales, while fifth-ranking Seventh Generation disposable diapers, which are free of chlorine and several other chemicals, increased 12.7 percent in dollar sales. To appeal to millennials who are starting families, it’s clear that private brands need to innovate in the baby care category with free-from and organic choices. BABY CARE PRODUCTS BABY LOTIONS Johnson & Johnson PRIVATE BRANDS Naterra International Inc Sundial Brands Burts Bees Inc BABY POWDER Johnson & Johnson PRIVATE BRANDS Chattem Inc Insight Pharmaceuticals The Honest Company BABY SHAMPOO Johnson & Johnson PRIVATE BRANDS Grisi Hnos SA de SV Expanscience Laboratories Beiersdorf Inc BABY WIPES PRIVATE BRANDS Kimberly Clark Corporation Proctor & Gamble Seventh Generation The Honest Company DISPOSABLE DIAPER Proctor & Gamble Kimberly Clark Corporation PRIVATE BRANDS The Honest Company Seventh Generation DISPOSABLE TRAINING PANTS Kimberly Clark Corporation PRIVATE BRANDS Proctor & Gamble Seventh Generation Rockline Industries Inc

DOLLAR SALES

$120,277,232 $ 89,323,856 $ 6,515,208 $ 6,082,960 $ 3,652,449 $ 2,625,406 $ 95,130,496 $ 67,214,784 $ 21,614,574 $ 2,833,741 $ 1,888,551 $ 709,076 $ 51,449,544 $ 40,758,652 $ 7,774,220 $ 1,985,745 $ 349,633 $ 194,229 $ 1,213,089,664 $ 484,083,040 $ 401,849,824 $ 260,534,464 $ 12,082,559 $ 9,961,742 $ 3,868,604,416 $ 1,973,272,704 $ 1,120,833,536 $ 705,535,424 $ 39,200,900 $ 15,651,542 $ 1,029,547,392 $ 635,270,528 $ 203,486,000 $ 189,313,104 $ 407,329 $ 323,185

NEED FOR DIFFERENTIATION Strong private brands can be an important differentiator for retailers at a time when consumers have a huge variety of ways and places where they can buy non-food merchandise. “It’s clear that retailers with more developed private brands are outperforming competitors significantly,” Killian says. To be successful today, private brands need to offer consumers what they can’ get anywhere else, Forsey adds. “They need to be meaningful to shoppers and create intrigue and demand,” he says. “Retailers that simply go for me-too private label with limited branding will find it increasingly difficult to remain relevant to the current demographic of shoppers.” Despite flat private brand growth over the past two years, “consumer attitudes toward private brands are still strong, even improving,” Killian observes. “It’s now up to retailers to make the next move and exceed shopper expectations.” SB

% CHANGE

DOLLAR SHARE

% CHANGE

(2.98) (5.08) (9.96) (0.58) 0.59 (6.26) (11.36) (10.46) (14.44) 4.12 (22.95) 3.11 (1.84) (1.09) (3.98) (6.80) (36.14)

100.00 74.26 5.42 5.06 3.04 2.18 100.00 70.66 22.72 2.98 1.99 0.75 100.00 79.22 15.11 3.86 0.68 0.38 100.00 39.90 33.13 21.48 1.00 0.82 100.00 51.01 28.97 18.24 1.01 0.40 100.00 61.70 19.76 18.39 0.04 0.03

(1.64) (0.42) 0.12 0.11 (0.08) 0.71 (0.82) 0.44 (0.30) 0.10 0.60 (0.34) (0.21) (0.36) 0.38 0.16 (0.30) (0.74) 0.33 0.25 0.81 0.05 (0.96) 0.11 0.07 (2.61) 0.39 2.28 (0.01) (0.02)

(3.63) (3.23) (4.50) (6.83) 45.04 39.35 (6.68) (5.19) (6.54) (11.33) 4.64 12.67 5.01 0.75 7.12 19.87 (9.12) (34.02)

UNIT SALES

21,834,468 15,337,182 2,787,826 1,696,749 422,424 315,001 30,462,168 18,565,490 10,437,008 663,700 349,285 60,900 14,215,725 9,778,049 3,701,972 545,163 30,511 18,054 308,389,888 116,555,384 114,505,928 53,159,808 2,750,987 1,511,028 239,611,408 110,898,304 63,328,888 61,558,732 1,794,983 1,089,412 78,824,616 45,799,792 21,130,312 11,700,368 36,868 58,781

% CHANGE

PRICE/UNIT

(8.36) (10.12) (10.11) (0.66) 0.47 (7.27) (14.23) (13.90) (16.40) 2.34 (21.18) 2.11 (5.95) (6.31) (5.02) (5.15) (35.93)

$5.51 $ 5.82 $ 2.34 $ 3.59 $ 8.65 $ 8.33 $ 3.12 $ 3.62 $ 2.07 $ 4.27 $ 5.41 $ 11.64 $ 3.62 $ 4.17 $ 2.10 $ 3.64 $ 11.46 $ 10.76 $ 3.93 $ 4.15 $ 3.51 $ 4.90 $ 4.39 $ 6.59 $ 16.15 $ 17.79 $ 17.70 $ 11.46 $ 21.84 $ 14.37 $ 13.06 $ 13.87 $ 9.63 $ 16.18 $ 11.05 $ 5.50

(0.69) (4.83) 6.44 (0.71) 37.72 (0.08) (5.32) (2.74) (7.34) (7.33) (4.77) 4.05 4.98 1.38 4.72 23.68 (1.36) (41.81)

SOURCE: IRI. Total U.S. supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending April 16, 2017. For the complete “Baby Care Products” table and other “Non-foods State of the Industry” tables, visit www.storebrands.com.

34

Store Brands / July 2017 / www.storebrands.com

% CHANGE

$0.31 $ 0.31 $ 0.00 $ 0.00 $ 0.01 $ 0.09 $ 0.10 $ 0.14 $ 0.05 $ 0.07 $ (0.12) $ 0.11 $ 0.15 $ 0.22 $ 0.02 $ (0.06) $ (0.04) (0.12) $ 0.07 $ (0.40) $ (0.32) $ 0.22 $ 1.87 $ (0.24) $ (0.46) $ 0.15 $ (0.52) $ 1.96 $ 1.10 $ 0.00 $ (0.09) $ 0.22 $ (0.52) $ (0.94) $ 0.65 $


Marketing to Aging Consumers

A force to be reckoned with Retailers with store brands could better meet the needs of baby boomers and elderly shoppers with convenient packaging, special-diet SKUs and more emphasis on key categories

I

t seems like millennials get Of course, individuals in the 50-plus By almost all of the attention these age range are not a monolithic group, notes Carolyn days and with good reason, as private brands consultant Jim Wisner of Schierhorn retailers and manufacturers bend Libertyville, Ill.-based Wisner Marketing. This over backwards to win over this highly broad demographic classification includes people in demanding, digitally savvy generation that their prime earning years, active retirees with considerwill only gain in buying clout in the years ahead. able savings, retirees on fixed incomes who are strugBut it’s important not to take baby boomers, gling to make ends meet, individuals with debilitating the generation born between 1946 and 1964, and health conditions and mobility problems, people carelderly consumers for granted when developing ing for extremely frail and elderly parents, and so forth. and marketing store brands. Not recognizing and Be that as it may, retailers can make several catering to the needs of older consumers amounts general assumptions about consumers older than to a missed opportunity — make that multitudinous 50, Wisner says. First, they are heavy buyers missed opportunities, retailing experts say. of certain categories, many of them non-food. Currently, 108.7 million people in the United Second, they have emerging if not full-blown States (one-third of the population) are age 50 and health and wellness concerns. Third, they value older, according to AARP, which has conducted convenience; they don’t want to walk far to find research showing that 66 percent of these individuals what they’re looking for. Fourth, they don’t want spend at least $100 a week on groceries. Although to struggle to open and close containers and they millennials now outnumber boomers (82 million verwould like to be able to read product labels easily sus 76.4 million), there are far more older consumers despite worsening vision. Fifth, unlike millennials, in the United States than 20- to 36-year-olds. many of them still look through newspaper www.storebrands.com / July 2017 / Store Brands

35


Marketing to Aging Consumers circulars, even though they may also learn about promotions online. Most important, according to Wisner, aging consumers don’t like to be called “old.” Marketing to these individuals means calling out those aspects of a product that are important to this demographic while stressing the positive — the active, interesting, vibrant lives led by the no longer young.

Leverage OTC, need for eyeglasses Over-the-counter medications, vitamins and minerals, and home health devices are disproportionately purchased by older consumers. In fact, “half of OTC products are purchased by people over the age of 50,” Wisner says.

10 tips for winning over older consumers Much can be done to target the needs of older consumers and make the shopping experience more enjoyable for them. To win over these potentially most loyal customers, here are some recommendations: 1 Strengthen the pharmacy section to draw more shoppers to store brand over-the-counter products. 2 Develop food products with specific chronic health conditions in mind such as diabetes mellitus, hypertension and heart disease. 3 Don’t suggest on packaging or signage that certain products are intended for frail elderly consumers. 4 Packaging callouts should address the common health issues of individuals older than 50 and be in a large enough font size for them to read. 5 Large stores should have comfortable seating in several locations, not just a bench at the entrance. 6 Retailers should encourage retirees to gather at the store for coffee and conversation or for an early dinner in the grocerant dine-in section. 7 Do recognize the opportunity to develop and sell private brand reading glasses to older customers. 8 Like millennials but for different reasons, older shoppers prefer containers that are lightweight and easy to open and close. 9 Aging consumers often desire smaller portion sizes in private brand heat-and-eat refrigerated, frozen and shelf-stable meals. 10 Although they generally prefer to shop in the store, aging consumers might like to order certain bulky and personal products online such as paper towels, moistened toilet paper and adult incontinence products.

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Among the OTC segments dominated by aging consumers are analgesics for arthritic pain, antacids and other remedies for digestive problems, laxatives to address the common medication side effect of constipation, eye drops for dry eye syndrome, foot care products, first aid products such as wound care items, and sensitive toothpastes and denture-cleaning products. In addition, older individuals are more likely to buy calcium and Vitamin D supplements to prevent or combat osteoporosis as well as multivitamins targeted to middle-aged and senior populations. “OTC is also a category where store brands are extraordinarily powerful,” Wisner says. “By volume, store brands account for more than 50 percent of sales. It’s a huge category, and it’s a growing category.” Just as most consumers now realize that generic prescription drugs are comparable to brand-name drugs and much less expensive (not to mention much more likely to be covered by health insurance plans), shoppers today recognize the quality and tremendous value of private brand OTC products. To fully leverage the OTC category to increase sales to older consumers, supermarket chains and other large grocery retailers need to strengthen and leverage their pharmacies, Wisner suggests. “Once you lock in pharmacy customers, they are more loyal than any other customers,” he emphasizes. To improve sales to older customers, the in-store pharmacy should be in clear view and a short walk from a store’s main entrance. The pharmacists and technicians should be able to answer customers’ questions about —and help them find — all manner of OTC products. In-store events such as osteoporosis screenings and heart health programs can drive more traffic to this part of the store, Wisner adds. In developing new OTC drugs or when revamping packaging, retailers with store brands should consider that senior citizens often have trouble removing standard child-proof caps. Elderly people with memory problems would also find the newer combination-lock pill bottles challenging to open. There is much room in this realm for invention, and retailers who come up with the perfect pill bottle for their store brand medications stand to benefit. What’s more, the font sizes on OTC drug labels and other packaging should be larger. “The packages should be easier to read and find,” Wisner says. Speaking of diminishing vision, reading glasses constitute a category that retailers should play up in targeting middle-aged and older consumers, he adds. “One spinner rack in a store is not enough,” Wisner says. “You need several of these racks.” Indeed, many people own two or more pairs of reading glasses at a time and frequently buy replacements.


“You don’t just buy one pair of reading glasses,” Wisner explains. “You need one upstairs and one downstairs. And you need to replace the pair that you left at your kid’s house by mistake and the one you sat on last week.” Reading glasses and eyeglass frames in general are an underdeveloped category for store brands, one with considerable growth potential, says Kieran Forsey, co-founder of Nottingham, U.K.-based Solutions for Retail Brands (S4RB). He notes that grocery retailers might want to consider adding optometry services to take full advantage of this category’s possibilities.

Address special dietary issues Like millennials, older consumers tend to prioritize health and wellness, but their particular concerns are different. Millennials are known for eschewing artificial preservatives and other chemical additives they deem harmful, and they seek out organic and clean label products. This generation believes in making better choices today in the hope of having a longer, healthier life and preserving the planet for future generations. Baby boomers and elderly consumers, in contrast, often are forced to restrict their diets because of pressing medical problems. They may have to limit

sugar intake due to Type 2 diabetes mellitus, sodium due to hypertension, or saturated fat due to heart disease — or all of the above. “When you look at the older generations, particularly with food, they are much more focused on specific health issues and immediate health benefits,” says Matt Sargent, senior vice president of retail with Minneapolis-based Frank N. Magid Associates. “Younger age segments are more focused on sustainability issues, local sourcing and things like that.” Despite the prevalence of health concerns among older shoppers, U.S. grocery retailers, for the most part, have not developed store brand ready-toeat or heat-and-eat meals or meal kits with aging consumers’ dietary needs in mind. And seldom does a supermarket grocerant section feature a hot or cold bar targeting customers with dietary restrictions. Kristi Maynard, a United Kingdom-based senior manager of branding and marketing strategy for Daymon, points out that Europe (including the U.K.) and Japan are way ahead of the United States when it comes to addressing the dietary demands and preferences of older consumers. British retailer Marks & Spencer, for example, has created a brand called Active Health aimed at www.storebrands.com / July 2017 / Store Brands

37


Marketing to Aging Consumers consumers with cardiovascular and other health concerns. In addition to selling Active Health meals in its stores, the retailer provides nutritional information and heart-healthy recipes online. This brand does not target older consumers specifically, Maynard observes. In advertising, packaging and merchandising, “people don’t want to be talked to like they’re old,” she explains. “Similarly, you don’t want to have a section in the store where the merchandising and products are obviously aimed at older customers.”

“When you look at the older generations, particularly with food, they are much more focused on specific health issues and immediate health benefits.” — Matt Sargent

What retailers should do, says Maynard, is develop private brand food lines that reflect older consumers’ needs and preferences but also can be consumed by younger individuals with similar health concerns. Any promotional pieces and signage that do specifically target middle-aged and older consumers should capture the dynamism, fun and adventure of this stage of life. Meeting the needs of truly elderly consumers is another matter, however. In Japan, which among all countries has the largest proportion of consumers over age 65, grocery retailers have made serving this demographic a high priority. Maynard, who works with a Daymon retailer client in Japan, notes that private brand “soft foods”

aimed at elderly consumers who have trouble swallowing have gained traction in this country’s grocery sector. “These foods come in easy-to-open pouches,” she says. “They are pureed but are not baby food products. They are designed to meet the specific nutritional needs of the elderly.”

Older consumers want quality, value But in the United States, do older consumers, who remember well the days of low-priced “generic” private label products in plain packaging, have respect for private brands? Among this population, the quality perception of store brands has improved as the products themselves have risen in quality, Wisner says. Still, the value aspect of private brands is what resonates with many aging consumers — those who need to keep to a tight budget, he points out. Sponsored by the Food Marketing Institute, IRI and Daymon, the “Power of Private Brands” research report notes that the quality perception of private brands differs somewhat but not significantly by generation and by product category. Boomers and older “silver” consumers regard dairy and fresh produce as the categories in which store brands are of the highest quality, with boomers ranking dairy No. 1 and silver consumers ranking fresh produce at the top. Millennials and GenX consumers have the highest regard for the quality of store brand dairy and bakery items. Interestingly, all four generational groups rank private brand personal care products and beverages near the bottom in terms of quality perception. The “Power of Private Brands” study can help grocery retailers identify underdeveloped product categories in their store brand portfolios, in which new lines and products would likely win over mature consumers.

Double duty Fortunately, when it comes to product and packaging trends, some of the preferences of older consumers are similar to those of millennials, Wisner says. Millennials, who snack throughout the day rather than having three square meals, want smaller portion sizes. Older shoppers, who typically have slower metabolism rates and less ravenous appetites than their younger selves and frequently live alone, also desire smaller meals. Notorious for not owning can openers, millennials want easy-to-open and easy-to-close containers when they purchase CPG food products and beverages, Wisner notes. Aging consumers, who may have arthritic hands and declining fine 38

Store Brands / July 2017 / www.storebrands.com


motor skills, also strongly prefer containers that are simple to open and close. Younger shoppers may wish to avoid cans because of bisphenol A in can linings or because heavier packaging is perceived as less sustainable, whereas elderly shoppers might appreciate the lighter weight of alternative materials such as aseptic packaging. Millennials are known to be foodies who fanatically seek out the new and different while caring deeply about what’s in the products they consume. Baby boomers, who also like ethnic foods and care about ingredients, enjoy many of the millennial-driven product introductions. SmartLabel technology, an industry-wide initiative to enable consumers to have easy and instantaneous access to detailed information about thousands of products, is one solution to the challenge of giving different generational segments the specific information they need to make smart, healthful purchasing decisions.

Make them feel comfortable Aging consumers, especially those with mobility issues, may be good candidates for buying certain products online for home delivery. Why go to the store to buy paper products or personal care items such as moist toilet paper? But far more than younger generations, people over age 50 prefer to shop in the store. For elderly consumers in particular, going grocery shopping is an opportunity for social engagement, perhaps the only time they get out and interact with other people during the day, Maynard notes. In Europe, she says, grocery retailers are starting to provide specific training to employees on how to assist elderly shoppers. “In the U.K., Asda has dementia-friendly days; that’s been a huge initiative here,” Maynard says. She notes that these scheduled shopping times are aimed at people with severe dementia, who can be dropped off at the store by caregivers. Employees in the store are trained to accompany the elderly shoppers, offering help when needed in selecting products, navigating the store, and getting out the money to pay for the items. “This is a way for individuals with dementia to be around people and do familiar tasks without being completely overwhelmed,” Maynard says. Similarly, at Albert Heijn stores in the Netherlands, cashiers are trained to spot loneliness in elderly people. “The cashiers are trained to engage with older consumers and connect with them,” Maynard says. When these shoppers check out, they are not rushed but encouraged to take their time. “That cashier may be the only person they talk to for a week,” she notes.

Grocery retailers everywhere should think more about the needs of older consumers in the layout and design of stores, Maynard suggests. There should be more places for senior citizens to sit comfortably, well-placed couches rather than a single hard bench near the store entrance. There should be magnifying glasses available to help them read product labels, as well as long-handled reaching and pickup devices to help them retrieve items from store shelves independently. Senior citizens could be encouraged to have early dinners in the supermarket grocerant dine-in section before the evening rush. Or they could be invited to gather for coffee and conversation and board games or other hobbies during the day.

“Half of OTC products are purchased by people over the age of 50.” — Jim Wisner

“I used to live in China. And it was very interesting that when you’d go to a grocery store at 7 a.m., it would be packed with elderly people,” Maynard shares. “They wanted to pick up specials and fresh produce. And they were enjoying this social time together. There was definitely a community aspect to it.” To reach out to older consumers, she advises U.S. retailers to “create more opportunities for consumers to engage and interact with each other.” SB Schierhorn, the managing editor of Store Brands, can be reached at cschierhorn@ensembleiq.com.

www.storebrands.com / July 2017 / Store Brands

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Packaging

Function without limit

Packaging companies on continued quest to take utility to another level

By Lawrence Aylward

ebecca Casey realizes the future of private brands lies in three elements: creating new products, value propositioning and enhancing the consumer experience. As the senior director of marketing for TC Transcontinental Packaging, a flexible packaging supplier based in Vaughan, Ontario, Casey says one of her company’s biggest challenges to help private brands endure is to continually push the bar higher to create functional packaging as it pertains those three components. “Private brands are fighting for space at retail and need a packaging solution that will grab consumers’ attention and connect with them so they pick up the packages and purchase them,” Casey says. For her company’s part, Casey says TC Transcontinental Packaging continues to study new film substrates; the latest print technologies; working features of a package; general packaging characteristics that will influence consumers to purchase; and making better sustainable packaging solutions focused on renewing, reusing and end-of-life packaging. Structure is one of the most important features of a package, Casey says, noting that TC Transcontinental Packaging will work closely with retail packaging development teams to understand the requirement and needs (barrier, moisture, machinability for filling and consumer 40

Store Brands / July 2017 / www.storebrands.com

needs) to develop a structure that meets and protects the content as well as any consumer feature that is necessary such as portability, easy-to-open or other convenience characteristics. Robert Tupta, product manager for Mold-Rite Plastics in Twinsburg, Ohio, says consumers want functional packaging that is simply easy to open, easy to close, easy to dispense, and easy to hold and carry in addition to keeping product fresh, safe and secure. “Safe and secure would include tamperresistant features and damage-free, which is becoming even more important with the growth of e-commerce,” Tupta adds. Mold-Rite Plastics has a robust market research, product design and manufacturing process that takes into account the needs of its customers related to functionality, sustainability, cost-effectiveness and consumer appeal, Tupta notes. “We have ongoing programs to make our energy supply renewable, to reduce scrap, and to produce plastics that are recyclable and lighter weight, and we are designing innovative dispensing closures that are liner-less,” he adds. Mike Enayah, director of industrial design for Amcor Rigid Plastics, an Australian-based multinational packaging company that produces flexible and rigid plastic packaging, says Amcor’s design team is actively assessing solutions to functional packaging needs relevant to different age


groups, including using digital technology such as connectivity. As electronics become cheaper, Enayah believes connectivity will soon be available for consumer packaged goods. How would connectivity work? Consider a graband-go package of carrots and dipping sauce sold at a convenience store. Through connectivity on a person’s smart phone, the package would inform consumers about its history when a consumer points a smart phone at it — when and where it was made, its nutritional components and how long it will stay fresh after it has been opened. Enayah says ergonomics plays a big role in functional packaging for the elderly, who need closures on packages that are easy to open and close. Amcor is also exploring packaging to function with smart phone magnification apps for those with poor eyesight. The company is researching a method where codes would be placed on packages so consumers can scan them with their smart phones and read labels that would appear on their phone screens in larger type. In beverage, Amcor is studying packaging such as palm grips so elderly people don’t have to use their fingers to hold containers. Amcor also designed built-in spoons with exact measurements for over-the-

“We have ongoing programs to make our energy supply renewable, to reduce scrap, and to produce plastics that are recyclable and lighter weight.” — Rebecca Casey, senior director of marketing, TC Transcontinental Packaging

counter private brands, such as cough syrup. In some cases, Enayah says baby boomers are more loyal to the design of certain packages and won’t switch even when presented with more functional alternatives. But millennials are open to new things and will gravitate to improved functional packaging solutions, especially as it relates to graband-go convenience, Enayah adds. “Millennials don’t have time to sit down and eat breakfast, but they still want want something to eat quickly that is packaged conveniently — a package that is small and easy to open,” he adds. “They like to buy such packaged products in bulk.” Mold-Rite Plastics is also developing packaging rel-

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Packaging evant to age groups. Tupta says millennials want functional packaging that fits in with their 24/7 lifestyle. “Millennials are more likely to purchase a product if it makes them feel special either through a personal connection or exclusivity. So what’s on the outside counts for millennials,” Tupta adds. “Customized packaging could include smart features that expand their engagement with the product.” Tupta says baby boomers want packaging that is modern and relevant. “They are interested in their health and keeping up with modern trends and are one demographic that still likes to touch actual products,” Tupta adds. “Functional packaging that is sleek and fresh and uses rich and youthful colors can be effective with this group. But the reality of age also dictates that the packaging needs to be clearly seen and read, and that it is easy to hold and open. The size, weight,

and style of font, and color contrast in the package design can help them make the right choice.”

Functional is sustainable The demand for more environmentally friendly packaging continues to increase and has become more of the norm than a trend. “Younger consumers especially are voicing for more of a change,” Casey says. “The sustainable attributes of packaging should be top of mind with private brands if they want to keep consumers happy. Consumers often form a relationship with the package.” Private brand owners can reduce packaging materials and gain packaging line efficiencies through the use of flexible print registered films or bags and pouches for a variety of products, Casey says. “Switching to printed film helps private brand owners reduce materials by replacing plain film and

A functional look is a distinctive look — for every product Functional packaging doesn’t just relate to structure. It has much to do with design, too. A well-designed private brand package that is functional will pop on the store shelf and attract consumers’ attention, says Michael Duffy, group creative director for Equator, a packaging design firm based in Chicago. Some of Equator’s clients include Aldi and Roundy’s Supermarkets. Duffy says one of Equator’s mantras is “to design to shelf without compromise.” “What that means is that when we design, we are considering the creative for every single package,” he adds. It’s not just about designing 50 SKUs the same; it’s about looking at every single SKU and designing it differently, Duffy stresses. That’s what Equator did when it redesigned Roundy’s store brands a few years ago. Duffy says the Roundy’s packaging had a “cookiecutter look” throughout many products and appeared sterile and dated. “You just can’t take the design on a cereal box and roll it into a package of bread,” he adds. Equator’s goal was to inject personality and uniqueness into each category sector of Roundy’s store brands. While the products look different, there is a common thread in the theme of the design that unites them, Duffy says. For instance, the designs of the tortilla chip and potato chip packages, while

42

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different, both display a hand-crafted feel through artistry. “But it’s not a thread that handcuffs the ability for the design to have personality,” Duffy adds. “So from bread to ice cream to frozen products to pizza to chips, we created something exciting for customers.” Duffy says the most important thing a design agency must do is look through the eyes of its customer. “Our customer is obviously the retailer but it’s also the customer’s customer, which is the person buying the product,” Duffy says. “If you don’t look through that lens, then you are going to miss making that design relevant.” Duffy says its important to appeal to the masses in packaging design, not just millennials or baby boomers but both age groups and others. So it’s important to consider color code as well as messaging and language on packaging. Considering that most consumers feel better about products if they know they aren’t mass-produced, such as kettle chips that are made in batches, Duffy points out that it’s smart to take advantage of such situations. “We did a lot of hand-crafted type typography [on the chip packages], which makes it feel less mass-produced,” Duffy says. Duffy says Equator’s goal is to analyze and strategically assess what the tier strategy is according to a product’s or line’s price point. “The partnership between the retailer and the design agency has to be a complete understanding,” Duffy says. “We have to understand their business. We have to listen and hear what the retailer is about and be able to offer them solutions.” — Lawrence Aylward


Packaging

Amcor offers built-in spoons with exact measurements for over-thecounter privatebranded products such as cough syrup.

paper labels, shrink bands, chipboard or J-board sleeves used for printing valuable information,” she adds. “This source reduction means using less material to hold or package a product and reduces the amount of packaging material that must be recycled or discarded after use.” Bags and pouches are becoming more popular with consumers because of their ease of use and environmental components. “Pouches typically use less fossil fuel and emit less carbon dioxide than most rigid containers and boxes during the manufacturing process,” Casey says.

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Tupta says that while millennials and Generation Z consumers are interested in earth-friendly packaging, it won’t matter to them if the product doesn’t have shelf or online visual impact. “Private label manufacturers and retailers are looking for packaging that gets noticed — color, shape, design functionality — and effectively communicates their message,” Tupta adds.

Making strides In the past, private brands have been criticized for cheap-looking packaging when compared to national brands. Casey says that has changed thanks to more functional structural designs in addition to high-end graphic design. Tupta says private brand manufacturers now have more access to cost-effective packaging customization and printing through improvements in technology, manufacturing processes and digital printing. “This is showing up on the shelves with private label packaging that is clean, sleek and elegant,” Tupta says. SB Aylward, editor-in-chief of Store Brands, can be reached at laylward@ensembleiq.com.


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Category Intelligence: Oils & Vinegars

All dressed up Oil and vinegar gain traction in the ‘good and good-for-you’ realm By Dana Cvetan

oasting taste-worthy credentials as well as health-promoting attributes, edible oils and vinegars are gaining prominence in the private brand marketplace. According to Chicago-based market information provider IRI, private brand vinegar accounts for nearly 42 percent of market share, and dollar sales rose 4 percent over last year. In cooking and salad oils, private brands also score a 42 percent market share, and dollar sales increased 4.8 percent compared to last year. Olive oil accounts for almost 29 percent of its category’s sales, up 1.1 percent compared to the same period last year. Plant-derived oils are more widely available, and their healthfulness and naturalness are piquing consumer interest, according to “Food Formulation Trends: Oils and Fats,” a March report from Packaged Facts. Consumers are showing more interest in taste, while avoiding genetically modified organisms (GMOs) and seeking out organics, according to the report. Millennials and younger consumers tend to view fats as permissible and good for their health, according to Packaged Facts. They want minimally processed fats and oils that are free of GMOs and are organic, unrefined,

cold or expeller-pressed, the report says. Regarding health benefits, the report cited a study of 7,500 people at risk of cardiovascular disease published in the New England Journal of Medicine in 2013. The study found that a Mediterranean diet, including extra-virgin olive oil or nuts, reduced the incidence of major cardiovascular events. In 2016, the Journal of the American Medical Association Internal Medicine reported that older adults following a Mediterranean diet that included either olive oil or nuts indicated possible cognitive improvement compared with those following a lowfat diet, the report noted. U.S. News & World Report revealed in its Jan. 18 issue that flavored and herb-infused gourmet vinegars are not only tempting consumers, but also have antibacterial and antioxidant properties. The article further reported that vinegar shows promise as a tool to control blood sugar and cholesterol levels.

All cleaned up Clean, minimally processed, organic oils and vinegars are what consumers want now, says Michael Giaimo, vice president of sales and marketing for Modena Fine Foods & Wine, a Clifton, N.J.-based importer of gourmet products from Italy. Retailers should also focus on developing and offering innovative new products in this mature category, Giaimo suggests. There is growth in certified organic oils, and top sellers are coconut, olive, canola and sunflower, adds Mark Griffin, president of brands for Kenwood, Calif.-based New Organics Inc. Retailers are looking for more value in their products and want high-end oils at affordable prices, says Agron Kosova, manager of Naperville, Ill.-based Fine Italian Food, the North American branch of Compagnia Alimentare Italiana.

Impart information Giaimo advises retailers to offer marketing information in a simple and clear manner so that consumers can easily identify and understand the 46

Store Brands / July 2017 / www.storebrands.com


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Category Intelligence: Oils & Vinegars

Do

understand the importance of attractive, sustainable bottles for olive oil.

positive health benefits of oils and vinegar. “Clearly communicate how the products meet [consumer needs] and anticipate where this sort of natural/ healthy revolution will lead,” he suggests. Consumers will also welcome usage advice, Griffin says. “There are so many options, it can be confusing,” he notes. “In oil, it’s the temperature that’s the big deal. For instance, olive oil is good

for sautéing, but you can easily hit the smoke point with olive oil. Canola has more heat stability” for applications such as roasting vegetables. Entice interest in your products by highlighting where they came from, Kosova advises. Distinguish the products based on their country of origin and the variety of olives, grapes or other types of produce used to make them, he explains.

Oil and vinegar category performance Shortening and Oil

Cooking and Salad Oils

Olive Oil

Vinegar

Private Brands

All Brands

Private Brands

All Brands

Private Brands

All Brands

Private Brands

All Brands

$1,245.0

$3,530.8

$760.5

$1,812.4

$342.3

$1,187.3

$263.5

$628.5

Change vs. Year Ago

+2.9%

+1.1%

+4.8%

-0.2%

+1.1%

+4.7%

+4.0%

+12.4%

Dollar Share

35.3%

100%

42.0%

100%

28.8%

100%

41.9%

100%

Dollar Sales (in millions)

Unit Sales (in millions)

309.4

752.1

203.3

428.7

50.3

155.4

125.2

232.1

Change vs. Year Ago

+0.1%

+0.0%

+0.9%

+0.0%

+2.1%

+3.7%

+0.2%

+5.9%

Avg. Price Per Unit

$4.02

$4.69

$3.74

$4.23

$6.80

$7.64

$2.10

$2.71

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 19, 2017.

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Bottles matter

Tastes matter

today, and their sales are growing. Variety is another selling point, Kosova adds, noting that some consumers prefer lighter oils while others prefer the more intense varieties. The growing availability of specialty oils allows consumers to experiment in the kitchen, and their appeal is as much about taste as about health or nutrition, Packaged Facts reports. Once available only from specialty retailers, oils such as almond, avocado, walnut, hazelnut, sesame, pistachio and pumpkin seed are now available in mainstream supermarkets and even mass merchandise stores, the report says. The younger generations are driven more by their interest in food than by price, though that remains important, Giaimo notes. “The trends in food are becoming more global, natural and healthconscious, even if that [means products] cost more,” he says. Older generations are historically more reluctant to discover new things, Giaimo says. But that gap is narrowing as technology brings all generations more information about what is available, he adds. SB

Flavored oils are the next big thing, Kosova says, noting there are more flavored oils on store shelfs

Cvetan is a freelance writer from Barrington, Ill.

Attractive bottles sell oil and vinegar, marketers agree. “There are more darker glass bottles and attractive bottles on store shelves,” says Kosova, who believes glass protects oil from heat and light better than plastic does. Griffin agrees that aesthetics are important, but says that plastic PET bottles have improved in quality and are more economical to ship because they weigh less and don’t break. Amber-colored PET bottles are capable of protecting oils for the length of their shelf life, Griffin says. Both the environmental and health impact of bottles matter to consumers, Griffin says. “We’re seeing more BPA-free bottles, and their recyclability is very important to people,” he notes. More retailers are offering recycled or more sustainable packaging, especially in oils, Giaimo adds. Smaller bottles of 8, 12 and 16 ounces are also becoming more sought after, perhaps for spacesaving reasons, Griffin says.

Don’t

neglect the growth potential of avocado and various nutbased oils.

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Category Intelligence: Fruit & Nut Snacks

Convenience plus nutrition Healthy snacking for on-the-go consumers is here to stay By Dana Cvetan

Do

he realities of modern life provide a pretty good opportunity for the fruit and nut snacks category. Pairing a strong nutritional profile and convenience with consumer interest in snacking and betterfor-you foods has made this category a winning one. Ninety percent of U.S. households buy nuts, seeds or trail mix. Nearly half (45 percent) eat these snacks on the go, and a third buy them specifically for travelling, according to global market research firm Mintel Group Ltd. Not only has this $8.6 billion category grown 28 percent from 2011 to 2016 at current prices, it’s expected to grow another 23 percent to reach $10.6 billion in 2021 at current prices, Mintel states in its June 2016 report, “Nuts, Seeds and Trail Mix, U.S.” Scott J. Reindel, vice president of business development and retail strategy for the Trophy Nut Co. in Tipp City, Ohio, says private brands are getting more representation in the category. “While the entire category is growing, private brands are outpacing that growth,” Reindel notes, adding that private brands are also innovating more in the category than the national brands.

Take on the competition

provide new Some consumers are snacking several times a day and flavors to are looking for healthier, great-tasting snacks, says differentiate. Wesley D. Edwards, channel account manager for Edison, N.J.-based Woodstock Farms.

Don’t

Perhaps as a result, fruit and nuts snacks are now sold in all trade channels: grocery, mass, just feature convenience, drug, club, specialty, typical core gourmet, office supply and home items. improvement, Edwards observes. To compete, seek innovative products that target consumer trends and provide differentiation in the marketplace, Edwards advises. Retailers can use their brands to create a consumer destination for their stores and offer unique items that are different from those offered by competitors. Retailers are taking two distinct approaches to product offerings, says Efrain Mendoza, director of business integration for Mount Franklin Foods in El Paso, Texas. “First is the safe standard, a national brand knockoff that has been proven with consumers. Most of the time, they also request new and innovative products that are either trending in different markets or trades,” Mendoza relates. The second approach requires retailers to arm themselves with research and data and usually represents a calculated risk for both manufacturer and retailer, he notes. To compete against other types of snacks, Mintel advises emphasizing the nutritional value of nuts and fruit, especially their fiber and protein content, while also reassuring consumers about their offerings’ sodium and fat content. Mintel found that 90 percent of consumers consider nuts, seeds and trail mixes a good source of protein, and 84 percent agree they are a good source of energy. More retailers are emphasizing quality in the category, Reindel states. “It’s not a price play as much,” he adds. “[Consumers] feel like they are getting more than they paid for with private brands in this category.”

Winning packaging Convenience and portability are so vital in this category that packaging takes on added importance. Grab-and-go, re-sealable bags are a good fit for families with active lifestyles, Edwards says. Another trend gaining momentum in the category is the single-serve, bag-in-a-bag. Edwards adds. “Retailers can offer a multi-pack bag with 10, 12 or 20 single-serve pouches in it that can be consumed anywhere — for a school lunch, on the 50

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soccer field, at work or during summer traveling.” Consumers seek packaging options that work for different consumption occasions, Mintel reports. Its survey found that 43 percent wanted re-sealable packaging and 27 percent wanted single-serve packaging. When it comes to labeling, cleaning up the ingredient list and nutritional panel should always be a focus, Mendoza says.

Focus on taste, breakfast Product innovation is key to keeping the category strong, says Joseph Setton, vice president of domestic sales for Setton International Foods in Commack, N.Y. The company, which started out selling sponge cake and jelly donuts in 1959, is now the nation’s second largest pistachio grower and processor. It was named an Innovation Award Finalist at the May Sweets & Snacks Expo in Chicago for its new plant protein, fiber, potassium and antioxidant-rich Pistachio Chewy Bites variety featuring pistachios, blueberry-infused cranberries, coconut and maple brown rice syrup. Other Setton products include flavored pistachios, dark chocolate pistachios and premium

pistachio blends with dried fruit. Private brand manufacturers need to understand their retail partners’ marketing objectives so they can match the retailers’ in-store goals with current consumer trends, Edwards says. “Healthy snacking is here to stay and the consumer is the boss,” Edwards says. “A manufacturer must collaborate with the retailer to develop products that meet the brand’s objectives and the consumer’s wants. Manufacturers cannot just offer a new mix, dried fruit or flavored nut without knowing what consumer want or need it satisfies.” The food business is extremely exciting and dynamic right now and is constantly changing as consumers seek “what’s next,” Edwards adds. “Plus, new flavors provide the differentiation needed for the private brand retailer to compete with the store next door and the national snack brands. Nuts traditionally were mesquite, hickory or smoke flavored — that’s it. Now we can provide sriracha, tequila-lime, apple and honey or pumpkin crème seasoning to a trail mix or straight commodity that will generate trial in the category.”

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Category Intelligence: Fruit & Nut Snacks Reindel says one of the hottest growing flavors in nuts is dill, which Trophy Nut has incorporated into a cashew. Reindel also says hot and spicy flavors continue to be popular, especially among millennials. “Millennials want big and bold flavors,” Reindel adds. An area that is gaining popularity is healthy snacks for breakfast, Edwards points out. “We are all on the

go, and both mom and dad work, so a trail mix that targets a breakfast flavor will provide a healthy snack as we run out the door. A coffee crunch trail mix, blueberry muffin trail mix or even an organic ‘morning commuter’ mix with apple cinnamon granola balls provide traditional morning flavor profiles.” SB Cvetan is a freelance writer from Barrington, Ill.

Fruit and nut snack category performance Snack Nuts, Seeds and Corn Nuts

Sunflower and Pumpkin Seeds

Snack Nuts

Private Brands

All Brands

Private Brands

All Brands

Private Brands

Dry Fruit Snacks (Fruit Rolls, Bars and Snacks)

All Brands

Private Brands

All Brands

$1,244.8

$4,196.0

$1,200.6

$3,942.5

$43.5

$236.7

$993.80

$119.30

Change vs. Year Ago

-3.5%

-1.0%

-3.2%

-0.9%

-9.2%

-2.90%

-5.5%

-0.9%

Dollar Share

29.7%

100%

30.5%

100%

18.4%

100%

12.0%

100%

Unit Sales (in millions)

281.1

996.2

261.9

861.2

18.7

124.5

42.3

365.7

Change vs. Year Ago

-4.5%

-1.7%

-3.8%

-1.0%

-12.4%

-5.3%

-16.1%

-4.9%

Avg. Price Per Unit

$4.43

$4.21

$4.58

$4.58

$2.33

$1.90

$2.82

$2.72

Dollar Sales (in millions)

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 19, 2017.

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Store Brands / July 2017 / www.storebrands.com

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Category Intelligence: Baked Goods & Desserts

Feel-good indulgences Even when it comes to dessert, ‘better-for-you’ is important By Dana Cvetan

esserts are an indulgence, yet consumers still expect certain things from their treats — that they be worth the indulgence and that unhealthful attributes be minimized in their formulations. Millennials are leading the charge on food trends, and buyers are taking notice, says Rebecca Velázquez, client relations executive for Crêapan USA in Chicago. “Millennials crave and demand an all-around eating experience, including innovative and unique recipes, as well as interesting flavors and ingredients,” Velázquez says. Consumers are also calling for minimally processed packaged goods and are actively avoiding certain controversial ingredients, Velázquez adds. “It’s incumbent upon manufacturers to create or reformulate recipes with simple, cleaner ingredients without compromising flavor and quality in order to remain competitive and to capitalize on this rapidly growing better-for-you [trend],” she says. Private brand cakes and pies, excluding snack sizes, comprise the bulk of the category’s market share at 72 percent, according to Chicago-based market information provider IRI. Considered an affordable indulgence during the economic recession, retail sales of prepared cakes and pies grew 23 percent between 2010 and 2015, when sales reached $11.6 billion, according to global market research firm Mintel, as reported in “Prepared Cakes and Pies, U.S.” from May of last year. Still, consumers remain concerned about their health and weight management, Mintel notes. The report found that nearly 40 percent of consumers from the millennial generation or younger eat prepared cakes and pies to boost their moods. Mintel also reports that a quarter of women age 18 to 34 expressed feeling guilty for eating these desserts. The firm advises offering single-serve packaging, realize that mini or bite-sized options and using healthier sweeteners and consumers want other ingredients to assuage clean label baked those negative feelings and desserts. help consumers control their consumption of these treats.

A 2016 internet survey of 1,381 adults, conducted with Lightspeed GMI, found that 38 percent would consider purchasing or purchasing more of ready-toeat, baked-in-store cakes or pies if they were offered free samples. Thirty-one percent would be favorably influenced by the availability of individual portion sizes and 22 percent by baked goods made with alternative sweeteners.

Wholesome innovation More than ever before, retailers are asking for baked goods and desserts with clean labels, says Matt Cobb, national sales manager for Sylmar, Calif.based Fantasy Cookie Co. “For the most part, gone are the days of selling [products with] artificial colors, preservatives and flavors,” he explains. “Many retailers are also looking for non-GMO products and some are even looking for organic. They really value the healthierfor-you movement, as that’s what consumers want nowadays.” A privately held company, Fantasy Cookie

Don’t

ignore the potential of natural and organic in this category.

Do

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Category Intelligence: Baked Goods & Desserts specializes in better-for-you natural and organic baked products such as cookies, baked bars, fruit filled bars and inclusions. The company sweetens some products with fruit juice and does not use any hydrogenated oils in its baked goods, Cobb says. Consumers also want innovation in their bakery products, something “new and exciting,” says Jan Marien, a partner in Dallas-based BellEATalia, which represents Italian bakery manufacturers to the U.S. market. American consumers are more accepting of international bakery products than they were a decade ago, Marien says. “It was always a nobrainer that bakery products be high quality and [available] for a good price,” he says. “But now consumers want better-for-you products, such as multi-grain and organic.” Consumers also want clean labels, so manufacturers must move away from preservatives and use packaging instead to extend product shelf life, Marien adds. Packaging such as take-and-bake sealed plastics bags and clamshells that extend shelf life without adding artificial preservatives is essential to growing the category, he says. BellEATalia’s clamshell packaged cookies boast a six-month shelf life, Marien says. It’s important to be mindful of extended shelf-life packaging’s effect on the environment as well, Cobb says. Choosing the right ingredients also contributes to extending shelf life. “We are continually looking for new natural ingredients to achieve longer shelf life while still maintaining the product without preservatives,” he adds.

Functionality and convenience The most prominent trend in the category, says Cobb, is “protein, protein, protein.” Thin and crispy goodies are also a very hot trend

that seems to go hand-in-hand with on-the-go snacking, Cobb observes. “Millennials want convenience for their busy lifestyles, but they also want healthy, functional food,” he says. “Functional bars are extremely popular and have seen huge growth in the category. Millennials are also very big on substituting at least one, and sometimes more, meals a day with a functional baked bar.” While added protein has the greatest potential for growth, gluten-free formulations continue to be popular, Cobb adds. Fresh foods, which consumers view as healthful, continue to be in demand, Velázquez says. Fresh food sales have steadily increased, while retailers have seen stagnant growth in the freezer section the past few years, she notes. In response to this trend, Crêapan is introducing its fresh line of fully cooked crepes and pancakes, which the company has been selling internationally for 20-plus years to U.S. consumers, according to Velázquez. All natural and organic brands of prepared cakes and pies could attract consumers shopping for their families, Mintel asserts. Millennial consumers, the report continues, are much more likely than other groups to feel that prepared cakes and pies have too many preservatives, and they express a willingness to pay more for gourmet and premium products. “Millennials are really interested in what they eat,” Marien says. “They look at the label, they notice if [the product contains] a ‘superfood,’ like chia, spelt flour or ancient grains. They are very conscious about what they eat. They are more aware of what is good for them, especially the parents.” SB Cvetan is a freelance writer from Barrington, Ill.

Baked good and dessert category performance Pies and Cakes

Cakes (excluding snack and coffee cakes)

Private Brands

All Brands

Private Brands

All Brands

Pies (excluding snack pies) Private Brands

All Brands

Refrigerated Desserts (Pudding, Mousse, Gelatin and Parfaits) Private Brands

All Brands

$1,336.9

$1,853.3

$1,017.0

$1,426.70

$320.0

$426.6

$48.9

$662.9

Change vs. Year Ago

+4.2%

+5.5%

+2.5%

+4.9%

+10.2%

+7.6%

+7.9%

+0.6%

Dollar Share

72.1%

100%

71.3%

100%

+75.0%

100%

7.4%

100%

Dollar Sales (in millions)

Unit Sales (in millions)

214.2

316.1

146.6

228.7

67.6

87.4

23.8

302.7

Change vs. Year Ago

+11.0%

+9.4%

+7.5%

+7.8%

+19.4%

+13.7%

+28.5%

+2.3%

$6.24

$5.86

$6.94

$6.24

$4.73

$4.88

$2.06

$2.19

Avg. Price Per Unit

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 19, 2017.

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Category Intelligence: Sauces & Marinades

Pour it on A drizzle of on-trend product development and a splash of strategic marketing and merchandising could help retailers grow sales of store brand sauces and marinades By Kathie Canning

Do

consider offering single-use packages in this category.

hen it comes to flavoring up entrées and side dishes, it’s hard to beat the convenience of prepared sauces and marinades. They allow time-pressed home cooks to create a tasty meal in no time flat. It should come as no surprise, therefore, that some segments within the U.S. sauce and marinade category continue to enjoy strong growth. For example, soy sauces and chili sauces experienced retail value growth rates of 5 percent and 6 percent, respectively, in 2016, according to “Sauces, Dressings and Condiments in the US,” a March report from London-based Euromonitor International. And sales of marinades rose 34 percent between 2010 and 2015 to reach $1.4 billion, Mintel relays in its December 2015 “Cooking and Pasta Sauces, Marinades — US” report. The global market research firm forecasts that the marinade segment will reach $1.6 billion in 2020. The picture isn’t quite as bright in the cooking sauce segment, however. Retail value dropped 2 percent here in 2016, Euromonitor notes. Private brand cooking sauces struggled in particular, posting a 5 percent decline in current value terms.

To succeed within this space, retailers need to consider important current trends in any new product development. One key ongoing trend is the development of better-for-you formulations. “We are still seeing an interest in certifications, authentications and health-related endorsements for sauces and marinades,” notes Erkin Peksoz, brand manager for Elk Grove Village, Ill.-based Topco Associates LLC. “These include labeling such as non-GMO, gluten-free, vegan and certified organic, to name a few.” Three-quarters of U.S. consumers avoid specific ingredients when food shopping, Peksoz points out, citing findings from the “2017 Label Insight Shopper Trends Survey.” Easy-to-understand health-minded certifications and claims enable these shoppers to make informed decisions, he explains. Natural and organic not only still resonate strongly with consumers, but also are becoming an expectation, adds Ernest Dieterle, corporate manager of innovation and culinary product development for Chelten House in Bridgeport, N.J. “Keep your eye out for ‘no sugar added,’ as that becomes the next move to appease the organic and natural consumer,” he says. As salty snack manufacturers add better-for-you options, consumers are even demanding healthminded tweaks from the cheese-based products and other sauces that complement those snacks. Todd Mullane, vice president of private label for Dakota, Ill.-headquartered Berner Food & Beverage LLC, says more customers are asking for the removal of ingredients such as artificial coloring agents and MSG. Berner is able to collaborate with such customers to make many health-minded tweaks. Outside the health and wellness realm, James Hedges, senior manager for Stamford, Conn.-based Daymon, calls out a current trend toward versatility. If a pasta sauce can also be used on meat or poultry or a marinade can be used as a dipping sauce, forget to crossit adds value to the product in merchandise consumers’ eyes. sauces and Some emerging trends also marinades in the are worthy of consideration. meat and seafood One such trend is that toward departments. authentic global flavors. “Cooking sauces and

Don’t

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marinades are a great way for consumers to experience these [global] flavors because of their convenient format, contributing to easier meal preparation,” Hedges notes. Another intriguing trend is that toward sauces and marinades with multi-sensory properties that “can lead to more dynamic dishes,” he says. Retailers might want to consider creating flavor profiles that boast aromatics such as ginger or “fire” elements such as smoked, charred or burnt notes. Dieterle notes a larger emerging trend toward giving consumers, particularly millennials, a restaurant experience. “That means new and interesting flavors they could not make at home,” he explains. “Emerging trends include eating with a purpose for medicinal or health benefits and social responsibility, the rise of vegetables to the center [of the] plate, elements like sea plants, fire plus smoke, emerging international flavors such as regional Indian and Mexican [and] hyper-regional Asian, and beer and liquor infusions.” Consumers also are willing to pay more for premium sauces and marinades, Dieterle maintains. For chip-friendly cheese sauces, hotter flavors such as jalapeno and cheddar are definitely

building a fan base, Mullane notes. He adds that Berner looks to trends in the restaurant sector so it can get a grasp on up-and-coming retail flavor trends.

Make it shine A change or two to private brand packaging could be very good for the category, too. And with strong consumer interest in all things “culinary,” retailers have an opportunity to showcase the application of the product onpack, Dieterle suggests. “We believe we will start seeing more serving suggestions, recipe ideas and regionality rather than ingredients as descriptors,” he says. “ ‘Small batch,’ ‘artisan,’ ‘hand-crafted,’ ‘curated,’ ‘inner chef ’ — also naming the food like a chef would on a menu.” In line with the better-for-you mega trend, a clean packaging design that highlights ingredients and any relevant health claims is a plus as well, Hedges points out. Glass bottles continue to dominate the category overall, Hedges says. But flexible packaging and smaller serving sizes have been gaining in popularity, too.

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Category Intelligence: Sauces & Marinades “Easy-to-use, single-use tear-and-dispense pouches could be a large area of opportunity to encourage trial for new sauces and marinades,” he says. Even the best packaging can benefit from strategic marketing and merchandising. Sampling kiosks showcasing a marinade or sauce on a bite-size protein or vegetable could drive trial, Peksoz says. “Trial sizes are also effective for cooking sauces,

Sauce and marinade category performance Spaghetti/Italian sauce category performance Private Brands

All Brands

Dollar Sales (in millions)

$211.2

$2,358.0

Change vs. Year Ago

+1.7%

+3.1%

Dollar Share

9.0%

100%

Unit Sales (in millions)

117.3

1,039.7

Change vs. Year Ago

+0.6%

+0.9%

Avg. Price Per Unit

$1.80

$2.27

Source: 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 19, 2017.

as are short videos shown in the store that showcase how to cook with the product,” he adds. Limited-edition and seasonal offerings, too, could foster a sense of “urgency and excitement,” Hedges says. He also advises retailers to crossmerchandise sauces and marinades in the meat and seafood departments. “Serving ideas and recipes highlighted at the shelf adjacent to the products can also encourage consumer purchase,” he says. Retailers should enhance online efforts as well. “Better-developed online interaction, recipe videos and private brand incorporation could elevate the sauces and marinades segment for more versatility and usability,” Dieterle says. For sauces that go hand in hand with salty snacks, retailers will want to free up space in the salty snack aisle. Mullane says many successful retailers are willing to compete with the big direct store delivery dip vendors. “We find that most successful programs typically are in the snack sections,” he stresses. “It’s your store; you own it. Be supportive of your program.” SB Canning is a freelance writer from Libertyville, Ill.

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Store Brands / July 2017 / www.storebrands.com

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Category Intelligence: Paper Products

Go bigger and better Retailers could light a fire under private brand paper product sales by focusing on larger product and pack sizes and premium quality By Kathie Canning

ike many other mature U.S. markets, the household paper products segment has been struggling in recent years. It recorded retail value growth of just 1 percent at current prices in 2016, reaching sales of $17.8 billion, according to “Retail Tissue in the US,” a February 2017 report from London-based Euromonitor International. Volume sales actually fell by 1 percent. To drive interest in — and sales of — private brand paper products, retailers need to deliver the attributes consumers are demanding. One attribute that’s important to many consumers is high quality. Jeff Leaf, director of sales/U.S. for Edgewood, N.Y.-based U.S. Alliance Paper, says premium-quality paper products that compare to the national brand leaders are trending. “There are a few new technologies available that are producing a higher grade of paper; however, it is important that you understand the technologies, as well as the attributes that each can deliver,” he says. “It is hard to ‘compare’ to the target national brand without having the same technology that is used to manufacture the national brand.” Consumers are even willing to pay more for better strength, durability and softness, notes Kris Jackson, who works in category solutions for Stamford, Conn.-based Daymon. But they still prefer to purchase such products on sale. Despite all the interest in premium products, Leaf believes retailers should not walk away from the value and mid-tier segments, which still account for the largest private brand share in paper products. “Also, the old adage of less equals more holds true for private label paper,” he says. “Confusion and frustration set in with the consumer with all of the options available in the paper aisle.” Private brands can better compete on price than the national brands, but retailers need to educate consumers about cross-merchandise private brand quality, Jackson adds. To accomplish that, retailers napkins and paper could work with their store brand towels near food vendors to offer “tie-in promoproducts that are tions and quality displays,” notes messy to prepare Marc Robinson, vice president of for consumers. business development for Global Tissue Group in Medford, N.Y.

Give them more Consumers also want more product, particularly within the paper towel and toilet tissue segments. “Club stores have trained consumers to buy in bulk, especially paper, which offers a convenience and value component which is perfect for the category,” Robinson says. The two other channels — grocery and mass — must compete with competitive offerings. And the packaging isn’t the only thing that’s getting bigger. Paper towels boasting larger rolls and/ or rolls with multi-size sheets continue to grow as more consumers opt to use paper towels in lieu of traditional napkins, Robinson notes. And a national brand focus on toilet tissue “mega rolls” is trickling down to store brands. Retailers could communicate the value proposition tied to larger rolls via packaging, Leaf suggests. For example, they could use a picture to show that a double roll is equal to two regular rolls. “Short and simple is the best way to communicate on packages,” Leaf stresses. But Katie Kraus, a brand manager with Elk Grove Village-based Topco Associates LLC, cautions retailers not to get too caught up in what the national brands are doing in terms of product sizing. After all, the national brands are constantly tweaking their paper towel and toilet tissue sheet sizes for cost sav-

Don’t

fail to communicate the value proposition of larger rolls of toilet paper and paper towels.

Do

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59


Category Intelligence: Paper Products ings and differentiation, she says. To grow sales of store brand paper products, retailers may want to look beyond trends tied to quality and size. On the facial tissue side, for example, many consumers value a decorative box. “Trendy colors/designs on boxes are worth perusing as consumers want to match their home or office décor,” Jackson explains.

Paper towels, too, could benefit from a new look. Robinson says paper towel prints sporting seasonal offerings have been growing in demand.

Connect the dots

A little merchandising magic can also go a long way to boost paper product sales. Kraus recommends retailers place their paper products near the store’s destination categories. If it’s a grocery store, that means placing them near relevant food items. Paper napkin Paper towel “Get your best napkins category category over by your sloppy joe mix,” performance performance she advises. “Get a stack of Private All Private All six-count paper towels by the Brands Brands Brands Brands toddler food and by the fresh $335.0 $711.1 $1,499.1 $5,117.5 chicken. Shoppers know that -1.4% -1.5% +4.2% 0.4% kids are messy, and chicken 47.1% 100% 29.3% 100% juice is scary. Connect the dots and save busy shoppers an 160.7 297.1 464.9 1,018.2 extra trek.” SB -2.0% -1.4% 0.0% -1.8%

Paper product category performance Facial tissue category performance

Toilet tissue category performance

Private Brands

All Brands

Private Brands

All Brands

Dollar Sales (in millions)

$361.2

$1,550.4

$1,708.1

$8,482.6

Change vs. Year Ago

+0.4%

0.0%

+1.6%

-0.9%

Dollar Share

23.3%

100%

20.1%

100%

Unit Sales (in millions)

207.9

682.8

383.7

1,307.6

Change vs. Year Ago

+0.9%

-2.0%

-0.4%

-2.0%

Avg. Price Per Unit

$1.74

$2.27

$4.45

$6.49

$2.08

$2.39

$3.22

Source: 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 19, 2017.

$5.03

Canning is a freelance writer from Libertyville, Ill. S P ON SOR ED CON TE NT

U.S. Alliance Paper Rolls Out Ultra Premium Azure F

or many of its private label customers, household paper products represent the largest non-food category, driving traffic and total basket spend, and growing faster than the overall private label market according to Nielsen. So, when their consumers gravitate toward larger-sized, premium products, they pay attention. “We’re seeing ‘premiumization’ as a growing trend in the household paper category,” said Steve Saraf, Vice President of Sales. “Working with our larger private label customers, their numbers made a compelling case for slotting value products in premium quality tiers. However, smaller retailers who did not have the volume for their own private label program also wanted to capture this high-margin opportunity. Which is why we created our new control brand, Ultra

Premium Azure, especially for them – ready-to-shelve with bold, eyecatching graphics.” The introduction of TAD (Through Air Dried) technology has made it possible for U.S. Alliance Paper to effectively manufacture products for the premium quality tiers. In the TAD process, rather than pressing and flattening the fiber, virgin fiber is dried by passing very hot air through to develop a soft and airy structure, giving consumers the stronger, more absorbent and “fluffier” product attributes they are looking for. “Our customers are increasingly offering their consumers specialized products,” continued Saraf. “Depending on their business segment, they are offering custom products such as super-sized rolls with premium attributes, and custom bundling such as club packs. We have the manufacturing flexibility to be responsive across paper grades and quality tiers. We can customize sizes and sheet counts in mixed, 100% recycled, CFP® Certified and TAD paper grades, for any quality tier, in virtually any package, bundle or display configuration imaginable.” The introduction of its Ultra Premium Azure control brand comes as the company celebrates 20 years since its founding in 1997. Starting with a single converting machine and hand-assembly lines, the company has grown into one of the largest private label paper manufacturers in the U.S. with computerized, state-of-the-art manufacturing lines and over a million square feet of manufacturing and distribution space in New York and Arizona.

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Category Intelligence: Foot Care Products

Firm footing for future growth Sluggish category would benefit from more innovative store brands, creative cross-merchandising, focus on wellness By Carolyn Schierhorn

Do

respond to the health and wellness and natural ingredient trends when developing and marketing foot care products.

62

oot problems are prevalent among older individuals, women who wear high heels, runners and people who use public showers, yet foot care as a product category is declining. Despite some favorable demographics for the category such as the aging of baby boomers, millennials often turn first to natural and home remedies for foot ailments, reports global market intelligence firm Mintel Group in its July 2016 “Medicated Skincare — US” report. In fact, millions of “life hack” postings related to foot care can be found online, ranging from using the inside of a banana peel to treat plantar warts to soaking dry, cracked feet in a solution of Listerine and vinegar. Fortunately for retailers, many of these alternative remedies require purchasing food and over-thecounter products. But even better for retailers with store brands, private brand OTC manufacturers are starting to become more innovative in this realm. Foot care products as a whole declined 7.7 percent in retail dollar sales and 5.0 percent in unit sales in the 52 weeks ending March 19, according to IRI, a Chicago-based market research company. For private brands, which account for a significant 18.4 percent share of the category, unit sales slumped 4.8 percent while dollar sales dipped 2.8 percent. One reason for the bigger downturn for all brands was the 11 percent drop in dollar sales in the foot

Store Brands / July 2017 / www.storebrands.com

Don’t

care devices segment, which includes everything from shoe fail to educate insoles to manual and batteryoperated callus removers. Private consumers about brand sales slipped only 1.1 the need for percent in this $727.4 million regular preventive subcategory. foot care through However, in the $301.5 both in-store and million athlete’s foot medication segment, store brands decreased online messaging. 4.7 percent in dollar sales and 7.2 percent in unit sales, worse than the subcategory overall. What could cure this category’s stagnation? Ana de Oliveira, vice president of sales for Olive Branch, Miss.-based Natureplex, notes that using healthful, natural ingredients in private brand products and promoting the wellness aspects of regular foot care would invigorate the category, which is not given enough attention by retailers or consumers. “Feet are equally as important if not more so than any other part of our body,” de Oliveira maintains. “It’s vitally important that our feet be healthy and functional so we can go about our daily lives. Yet feet are often neglected.” One of Natureplex’s new products is a combination kit that includes a cream and an oil “to fight fungus aggressively,” de Oliveira says. The cream, which contains the anti-fungal agent clotrimazole, is often preferred for daytime use because it is less messy than the oil, she shares. “The oil has tea tree oil, an anti-fungal,” de Oliveira continues. “Some [consumers] prefer to apply the oil at night (fast-absorbing), which offers a cooling effect with peppermint oil.” Although athlete’s foot is the leading problem addressed with OTC medications in foot care, retailers should not dwell on it — or on painful conditions such as plantar fasciitis and gout — when advertising and merchandising foot care products, de Oliveira advises. Instead, when promoting products associated with the treatment and health of feet, “the message should be one of health and revitalization as opposed to soreness and fungus, which can often be offputting to the consumer,” she emphasizes. What else should be addressed when marketing these items? Mintel, in its “Medicated Skincare”


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Category Intelligence: Foot Care Products report, presents research on the top “purchase influencers” driving adult consumers to buy OTC medication for foot ailments. First and foremost, the medication needs to be easy to use and apply, the survey participants responded. The other leading factors include price, followed by “fast-acting formula” and “doctor-recommended.”

Foot care product category performance Athlete’s foot medication

Foot care devices

Private Brands

All Brands

Private Brands

Dollar Sales (in millions)

$75.1

$301.5

$124.8

Change vs. Year Ago

-4.7%

-0.6%

-1.1%

Dollar Share

24.9%

100%

17.2%

100%

Other foot care products Private Brands

All Brands

$727.4

$15.2

$139.5

-11.0%

-6.5%

-3.7%

10.9%

100%

All Brands

Unit Sales (in millions)

13.1

39.2

29.4

96.4

3.9

23.8

Change vs. Year Ago

-7.2%

-3.3%

-2.7%

-6.1%

-10.2%

-3.6%

Avg. Price Per Unit

$5.71

$7.68

$4.25

$7.54

$3.87

$5.86

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 19, 2017.

Foot care packaging should clearly communicate how to use the product as well as the standout features. The category offers abundant opportunities for cross-merchandising, limited only by a retailer’s space constraints and imagination. Stores might want to consider establishing a comprehensive foot care “destination area.” Educational signage in the store should provide information on foot care wellness and therapeutic treatments for particular problems. In addition, retail chains should consider selling their store brand and other foot care items online. Through e-commerce, retailers can carry a much bigger variety of products and consumers can buy wart removal ointments and anti-fungal creams without any embarrassment. Products with value-added features can be differentiators in this category. “To combat attrition to alternative treatment methods, industry players can add value through functional and cosmetic benefits,” according to Mintel. “Going beyond these ‘expected’ attributes to incorporate natural ingredients, increase product transparency/education and deliver convenient format solutions will help companies develop a more compelling brand position.” SB

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Store Brands / July 2017 / www.storebrands.com

3/17/17 12:05 PM


Ad Index ADVERTISER NAME

PAGE#

Ardent Mills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

570 Lake Cook Road, Suite 310, Deerfield, IL 60015 Phone: 224-632-8200 • Fax: 224-632-8266

Advertising Sales and Business Staff

Atlas Paper Mills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IBC Berner Food & Beverage . . . . . . . . . . . . . . . . . . . . . . 14-15 Borges National USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Peter Hoyt President and CEO 773-992-4456 phoyt@ensembleIQ.org

B .O .V . Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 CaseStack . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Richard Rivera

Catania Oils . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Chief Operations Officer 973-264-4380 rrivera@ensembleIQ.com

Chelten House Products, Inc . . . . . . . . . . . . . . . . . . . . . . . 58 Colordyne . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Daymon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Jeff Greisch

Delgrosso Foods Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Chief Brand Officer 224-337-4029 jgreisch@ensembleIQ.com

Disc Graphics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Ned Bardic

Furlani’s Food Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .BC Global Tissue Group . . . . . . . . . . . . . . . . . . . . . . . . . . . IFC-3 Godshall’s Quality Meats, Inc . . . . . . . . . . . . . . . . . . . . . . 43 Hickory Harvest Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Ice River Springs Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ITI Tropicals, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

President of Enterprise Solutions Chief Customer Officer 224-632-8224 nbardic@ensembleIQ.com

Kevin Francella Brand Director 973-264-4389 kfrancella@ensembleIQ.com

Massimo Zanetti Beverage USA . . . . . . . . . . . . . . . . . . . . 19 Mold Rite Plastics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Mother Parkers Tea & Cofee . . . . . . . . . . . . . . . . . . . . . . . 7

Suzanne Caputo Associate Brand Director 201-855-7628 scaputo@ensembleIQ.com

Nepa Carton & Carier Co . . . . . . . . . . . . . . . . . . . . . . . . . 44 Packing Machinery Manufacturers Institute . . . . . . . . . . . CT

Lisa Adams

Royal Paper Converting, Inc . . . . . . . . . . . . . . . . . . . . . . . 31

Regional Sales Manager 224-265-5486 ladams@ensembleIQ.com

Saltworks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 SQFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Soundview Paper Company . . . . . . . . . . . . . . . . . . . . . . . 61 Transcontinental Robbie . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Trophy Nut . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 U .S . Alliance Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 60

www.ensembleiq.com United States Markets Canadian Markets Convenience • Grocery/Drug/Mass • Convenience Store Brands Specialty Gourmet • Pharmacy Multicultural • Green • Technology • Foodservice Hospitality • Apparel

www.storebrands.com / July 2017 / Store Brands

65


EndCAP Category Closeup: Potato Chips

Potato Chip Facts 1

2

3

Potato Chip Sales

The potato chip was invented

in 1853 and has been America’s No. 1 snack food for more than 50 years. In two

hours, a factory can make 7,000 pounds of potato chips.

2012

Throughout the years, potato chips have been packaged in cans, paper bags, cellophane, plastic, aluminum foil and cardboard tubes.

4

It takes 10,000 pounds of potatoes to make 2,500 pounds of potato chips.

5

The average

Private Brands in Millions

Total Branded in Billions

$

516.8

$

538.7

$

568.4

$

$

561.6

$

583.2

$

Dollar Sales By Year

2013

$

2014

$

2015 2016

$

6.174 6.30 6.53 6.61 6.69

Source: Nielsen

American eats over 4 pounds of potato chips a year.

6

The average thin between .04” and

cut potato chip is .08” thick.

Source: Northern Plains Potatoes

Potato Chip Unit Price

Cherishing Chips

Americans love their potato chips. According to Statista, based on information from the U.S. Census data and Simmons National Consumer Survey, most Americans consume four to seven large bags of potato chips annually. About 30 million Americans consumed 16 bags or more in 2016. 100

Private Brands in Millions

Total Branded in Billions

295.7

$

311.7

$

$

341.8

$

345.5

$

354.0

$

Dollar Sales By Year

2012

$

Number of Consumers in millions

2013 80

2014

60

20

0

None 2011

1-3 Bags 2012

4-7 Bags

8-11 Bags

2013

2014

Source: Statista 2017 66

2015

$

2016

$

Source: Nielsen

40

Store Brands / July 2017 / www.storebrands.com

12-15 Bags 2015

16+ Bags 2016

$

2.9 3.0 3.1 3.13 3.14


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Store Brands - July 2017  

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