Store Brands - Sept 2017

LiDL’s LOGIC The deep-discount retailer, with its emphasis on highquality private brands, low prices and convenience, could change the grocery landscape for many years to come

Store Brand Growth 100

Eating on the go spurs snack growth

Zeroing in on Generation Z September 2017 | www.storebrands.com

LiDL’s LOGIC The deep-discount retailer, with its emphasis on highquality private brands, low prices and convenience, could change the grocery landscape for many years to come

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Contents

Volume 39 No. 9 September 2017

16 Cover Story

16

Lidl’s logic The deep-discount retailer, with its emphasis on high-quality private brands, low prices and convenience, could change the grocery landscape for many years to come

Features 24 2017 Store Brands’ Growth 100 The numbers say it all The fastest-growing categories in private brands are clearly innovating with distinctive products, meeting consumers’ needs and capitalizing on current trends

32 Emerging Snacking Trends Eating on the go Consumers are snacking like never before, spurring innovations in a range of categories that offer growth opportunities for store brands

24

39 Private Brand Marketing Zeroing in on generation Z Sustainability-conscious age group prioritizes convenience and ‘digital discovery’ but enjoys in-store experiences

42 Packaging Innovation On the upgrade The right packaging — with on-trend materials, functional features and compelling design elements — can help retailers attract attention to premium private brand non-food products

Departments

32

6 8 10 14 66

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

Category Intelligence 48 52 56 60 63

Spices and seasoning Pasta, rice and grains RTD coffee and tea Allergy and sleep aids Vitamins and supplements

About the cover: Lidl has landed in the U.S. and will have opened 34 stores by the end of September. Cover photo courtesy of Lidl. Cover design by Jeff Bowes.

39 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 / September 2017 / www.storebrands.com

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Editor’s Note Business Intelligence for an Evolving Market

570 Lake Cook Rd. Suite 310, Deerfield, IL 60015 (224) 632-8200 • Fax: (224) 632-8266

Brand Director

Kevin Francella

(973) 264-4389

kfrancella@ensembleIQ.com

EDITORIAL Editor-in-Chief

Lawrence Aylward

(330) 635-2586

laylward@ensembleIQ.com

Managing Editor

Carolyn Schierhorn

(224) 231-6359

cschierhorn@ensembleIQ.com

Contributing Writers

Kathie Canning, Dana Cvetan

ADVERTISING & SALES Associate Brand Director Suzanne Caputo (201) 855-7628

scaputo@ensembleIQ.com

Regional Sales Manager

Lisa Adams

(224) 265-5486

ladams@ensembleIQ.com

CUSTOM MEDIA VP, Custom Media Division Pierce Hollingsworth (224) 632-8229

phollingsworth@ensembleIQ.com

MARKETING VP, Marketing & Communications (224) 632-8214

Bruce Hendrickson

bhendrickson@ensembleIQ.com

AUDIENCE DEVELOPMENT Director of Audience Development

Gail Reboletti

greboletti@ensembleIQ.com

Audience Development Manager (215) 301-0593

Shelly Patton spatton@ensembleIQ.com

List Rental

The Information Refinery

(800) 529-9020

Brian Clotworthy

Subscriber Services/Single-copy Purchases 978-671-0449

EnsembleIQ.com@e-circ.net

ART/PRODUCTION Director of Production Kathryn Homenick (973) 358-4875

khomenick@ensembleIQ.com

Advertising/Production Manager (973) 607-1322

PatWisser pwisser@ensembleIQ.com

Creative Director

Jeff Bowes jbowes@ensembleIQ.com

REPRINTS, PERMISSIONS AND LICENSING Please contact Wright’s Media at ensembleiq@wrightsmedia.com or (877) 652-5295.

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

Alan Glass

Chief Operating Officer Chief Brand Officer

Richard Rivera Jeff Greisch

Chief Financial Officer

Len Farrell

Chief Business Development Officer & President, Ensemble IQ Canada President of Enterprise Solutions/ Chief Customer Officer Chief Digital Officer

Korry Stagnito Ned Bardic Joel Hughes

Chief Human Resources Officer

Greg Flores

T

Game of organics

he big news in late August was that Amazon began lowering prices at Whole Foods Market — on the same day that Amazon officially acquired the organic retailer. I guess it’s no surprise that aggressive Amazon came out swinging.

There is a plethora of private brands involved in the Amazon-Whole Foods merger, from Amazon’s burgeoning own brands to Whole Foods’ lines of natural and organic products. It will be intriguing to see what Amazon’s next steps are for Whole Foods as well as its own private brands.

But let’s remember something about Whole Foods. The Austin, Texas-based retailer, which helped put organics on the map, wasn’t exactly knocking it out of the park when Amazon acquired it. Whole Foods saw same-store sales drop for eight straight quarters before the deal, meaning it was losing customers left and right. Whole Foods lost customers for at least two reasons: One, its products were deemed expensive by consumers, hence the “Whole Paycheck label”; and, two, “other” grocery retailers began curating and selling organic products as private brands and at a lower cost.

The “other” grocery retailers aren’t exactly selling organic chopped liver, either.

Consider The Kroger Co.’s Simple Truth line and Ahold Delhaize’s Nature’s Promise line, which are abundant with well-regarded organic products. Also consider Costco, which is the nation’s top-selling organic retailer with products under its Kirkland Signature store brand.

No doubt that Kroger, Ahold Delhaize and Costco have gained loyal customers of their organic private brands. As any private brand pundit will tell you, loyalty is one of the key attributes that defines a successful private brand.

Organic is still small — comprising about 5 percent of all U.S. food sales — but consumers bought more organic fare in 2016 than ever before, according to the Organic Trade Association. There is no reason to believe organic growth will slow anytime soon.

And there’s no reason to believe that “other” grocery retailers will stop investing in organics. “You are investing in the fastest-growing part of private brands,” Carl Jorgensen, Daymon’s director of global thought leadership/wellness, recently told me.

According to a recent report from the Food Marketing Institute, Daymon and IRI, private brands represent about 20 percent of overall food and beverage sales among supermarkets but 30 percent among all organic items.

Kroger debuted its Simple Truth Organic line in 2012, and it has grown to be one of the largest-selling organic brands in the country. Kroger CEO Rodney McMullen said that Simple Truth “grew at an impressive rate again [in 2016],” reaching total sales of $1.7 billion from $1.5 billion the previous year.

“We still see more growth ahead,” McMullen noted.

Of course, Amazon, known for its online wizardry, will sell Whole Foods’ products and deliver them to doorsteps in addition to selling them at Whole Foods’ 470 stores.

And there’s no doubt that Amazon will further its omni-channel to sell Whole Foods’ goods in the future.

But don’t expect the “other” retailers to just roll over and watch Amazon do its thing.

And consumers — especially those loyal to the “other” grocers’ organic private brands — will have a big say in what happens.

Obviously, pricing will be a huge factor. And now that Amazon has begun to lower prices on many of Whole Foods Markets’ items, it will be interesting to see how low Amazon will go.

It’s time to sit back with a bowl of organic white corn tortilla chips and watch this ball game play out. SB Lawrence Aylward, Editor-in-Chief laylward@ensembleIQ.com

2015

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Store Brands / September 2017 / www.storebrands.com

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Promotional Insights

Hey marketers, not all millennials are created equal

M

arketers have a tendency to lump all young people into the “millennial” cohort, also known as Generation Y, those reaching young adulthood around 2000.

Many group millennials into a bucket of consumers that behave the same way and prefer the same things. They are early and fast adopters of technology. They care more about what their friends and family like more than considering what they want themselves. They are conscious of product quality and ingredients but also appreciate a good deal (and are confident they can find one). They are also disloyal and are willing to try something new the second their needs go unmet.

I’m here to tell you that this line of thinking can get marketers in trouble. The reality is that not all millennials are created equal.

Within the Generation Y and Generation Z consumer groups exist different subgroups that shop differently, prefer different things and have different motivations.

Take organic groceries as an example. According to Market Track’s 2017 Shopper Insight Series survey, Generations Y and Z have a higher preference for organic groceries than those ages 40 and older, yet Gen Z-ers are less willing to pay more for organic groceries than Gen Y. This exemplifies one key difference between those on the older end of the millennial spectrum: Younger consumers in Gen Z are more price-sensitive than older millennials.

Gen Z-ers are also less loyal than their elders in the millennial group. In general, younger shoppers are known for their store- and brand-hopping, but those in the 18- to 21-year-old age group bring disloyalty to a new level. Eighty-three percent of

Gen Z-ers would switch stores if price were lower elsewhere, and 81 percent will buy a different brand than usual if it’s on sale.

Maybe most concerning for retailers should be Generation Z’s feelings toward private brand products. Where the elder half of Generation Y is more in line with older consumer cohorts when it comes to their perception of private brands, younger shoppers have their own opinions.

Older millennials along with Gen X-ers and baby boomers buy store brands at higher rates than younger

By Ryne Misso demographics, according to Market Track’s survey data.

These groups also agree in higher volumes that private brands are of the same quality and have the same ingredients as national brand alternatives on the shelf.

The positive perceptions shift a bit for shoppers ages 18 to 29 … and not in store brands’ favor. While 81 percent of shoppers age 30 to 39 buy private brands, only 72 percent of the 18 to 29 age group said the same. Beyond purchase behavior, there is an even greater disparity in sentiment towards the quality of store brands. Seventy-three percent of millennials that are 30 and older find store brands to be of the same quality as national brands, compared to only 62 percent of shoppers 18 to 21.

Nearly three-quarters of shoppers age 30 to 39 believe store brands have the same ingredients as national alternatives, compared to only 60 percent of Gen Z-ers.

Is this a trend that is gaining momentum among the youngest segment of U.S. consumers? Or is it simply a set of preferences that will remain consistent going forward?

Either way, as retailers continue to improve how they engage with specific segments of shoppers, there is little doubt that Generations Y and Z are much more nuanced than they’re given credit for. The most successful marketers will embrace Do you buy private brands, and how do you feel this reality, and work to private brands compare to national brands? differentiate their messaging 100% to subgroups among shoppers 35 and younger. SB 80% 60% 40% 20% 0%

18-20

■ Buy Private Brand

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21-29

30-39

■ Quality of Private Brand = National Brand

Store Brands / September 2017 / www.storebrands.com

40-49

50-59

60 & Over

■ Ingredients of Private Brand = National Brand

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

Game Changer?

Or More of the Same?

PLMA Live analyzes the real impact of Amazon’s takeover of Whole Foods. n What are the numbers? n What will it mean to big national retailers? n How does it affect popular regional and local supermarkets? n Where does it leave the other direct-toconsumer players? n Will private label get a huge push forward? n Has e-commerce found a winning formula for online grocery?

Amazon’s takeover of Whole Foods could be the biggest story of the decade and determine the future of e-commerce and bricks-and-mortar.

PLMA Live presents a comprehensive review with reports by Tim Simmons and Bob Vosburgh and the rest of the PLMA Live news team.

Plus, featured commentaries on the future of Save-A-Lot by David Merrefield, the impact of deflation on supermarkets by Roy White, marketing to disabled shoppers by Brad Edmondson, and a profile of private label at IKEA by Christopher Durham.

Starting September 14 on your desktop, laptop, tablet or smartphone. Watch the news.

Don’t just read about it.

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AroundtheIndustry SHORT TAKES Daymon expands offerings Daymon is expanding its portfolio of services to include national representation for select suppliers and brands across the United States.

Stamford, Conn.-based Daymon, an expert in private label development, said the decision to extend national coverage to manufacturers of private brands as well as suppliers of niche, specialty and fresh products is a natural progression for the company and its subsidiaries Interactions and SAS. Jim Holbrook, CEO of Daymon, said the demand from private brands manufacturers to assist them in the retail landscape has increased the past few years.

“Manufacturers need help and want advice on where to innovate,” Holbrook says.

While Daymon will continue to focus on private brand strategy, it said it will now offer a cost-effective solution for suppliers to increase their reach and national footprint in the grocery, mass, drug, online and c-store channels. Daymon said the service brings an all-inclusive approach to a previously fragmented8” industry.

And the top products at Trader Joe’s are ...

Retailer celebrates 50 years by identifying its top 50 (plus a few more) private-branded products

M

onrovia, Calif.-based Trader Joe’s celebrated its 50th anniversary last month by identifying its top 50 private brands (plus a few more) based on suggestions from customers and staff. Trader Joe’s opened its first store in Pasadena, Calif., on Aug. 25, 1967.

Can we get a drum roll? The top 50 Trader Joe’s products (plus a few more) in no particular order are: • Sliced Fresh Mozzarella • Pockets o’Pita • Unexpected Cheddar • Brewed Ginger Beer • Chicken Tikka Masala • Cold Pressed Matcha Green Tea Lemonade • Gluten Free Cheese Pizza • Hold the Cone!

• Organic French Roast Cold Brew Coffee Concentrate • Mandarin Orange Chicken • Organic Tea & Lemonade • Mango & Sticky Rice Spring Rolls 16” • Red Refresh Herbal Tea • Premium Wild Salmon Burgers • Sublime Ice Cream Sandwiches • Unsweetened Golden Oolong Tea

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Iced Lattes | Cold Brew Coffee | Coffee Energy | Coffee Nutrition | Italian Roast | Tea Lattes

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Store Brands / September 2017 / www.storebrands.com

AroundtheIndustry • • • • • • • • • • • • • • • • • • • • •

Corn & Chile Salsa Green Dragon Hot Sauce Organic Midnight Moo Organic Purple Maize Flakes Organic Sriracha & Roasted Garlic BBQ Sauce Organic Toaster Pastries Premium Extra Virgin Olive Oil Seasoning Salt 13 Roses Orchids Kohlrabi Salad Blend Organic Broccoli Slaw Plumcots All Natural Boneless, Skinless, Chicken Thighs Bruschetta Sauce Carne Asade Autentica Mediterranean Hummus Mozzarella & Tomato Salad Spatchcocked Chicken Whole Milk Mango Kefir 8” Dark Chocolate Peanut Butter Cups

• Dress Circle Crispy Crunchy Chocolate Chip Cookies • Everything Pretzel Slims • Five Seed Almond Bars • Gochujang Almonds • Just Mango Slices • Sweet & Salty Kettle Corn • Organic Corn Chips • Peanut Butter Pretzels • Restaurant Style Tortilla Chips • Sea Salt & Sugar Dark Chocolate Almonds • Triple Ginger Snaps • Facial Cleansing Oil • Super Green Drink Powder Chocolate Flavor • Drive Thru Red Dry Hopped Red Ale • Secco Mango Mangocini • TJ’s Grand Reserve Chardonnay Santa Lucia • TJ’s Highland Single Malt Scotch Bourbon • TJ’s Petit Reserve Meritage Paso Robles 2014 • Wish Flower White Wine. SB

Daymon’s portfolio of customized retail services, now available to suppliers, includes: strategy and insights; global business management and sales support; packaging and brand design; comprehensive merchandising solutions; and consumer experience marketing.

Hy-Vee rolls out first products in clean label initiative West Des Moines, Iowa-based Hy-Vee Inc. said it will eliminate more than 200 artificial ingredients or synthetic chemicals from 1,000 Hy-Vee store brand products by July 2018 as part of its new Clean Honest Ingredients label initiative. A handful of these private brand food items bearing the Clean Honest Ingredients logo can already be found in Hy-Vee stores.

“Hy-Vee takes great care to provide customers with authenticity and transparency when it comes to the products in our stores,” said Jeremy Gosch, Hy-Vee’s executive vice president of strategy and chief merchandising officer. “As the demand increases for food products that contain natural, familiar and simple ingredients, we are doing our best to meet those expectations within our Hy-Vee label offerings.” SB

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www.storebrands.com / September 2017 / Store Brands

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iGPS, which has been providing innovative, world-class supply chain solutions to markets throughout the U.S., has created a sustainable shipping platform that is disrupting the dynamics of the industry. iGPS’s recent growth in new business recognizes the shift from traditional pallets to the more protective and sustainable platform provided through iGPS. The key is the company’s plastic pallet pooling system, which provides lighter, safer, stronger recyclable and more environmentally friendly pallets than wooden counterparts.

Because iGPS’ pallets always are of consistent size specification, have no protruding nails, eliminate splinters, have a crucifix bottom deck, engineered corners and cannot absorb bacteria, they have structural reliability and cleanliness, no contamination, greater stability and less interruption of the automated manufacturing or shipping processes. In fact, this system creates a complete “flow-through efficiency”, which is novel to the iGPS pallet.

Just as important, that process simplification also reduces product damage.

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splinters, cracks, nails and surface contamination of standard pallets, the iGPS platform removes the primary elements that, otherwise, contribute to product damage – as well as hygiene concerns. Yet, the advantages go even further. This sturdier and greener iGPS platform also introduces three critical elements into the supply chain: 1) Sustainability; 2) Cost Savings; and 3) Efficiency.

Improved Sustainability: A comprehensive independent life-cycle analysis examined the cradle-to-grave impact of all three types of pallets, finding that the iGPS platform had dramatically less impact on all measured dimensions. Since they are 27 pounds lighter than typical wood pallets, requiring far less transport fuel, the iGPS platforms actually reduce pollution and greenhouse gas emissions. Also, the new iGPS Generation 3 (Next Gen) pallets are 100% recyclable.

Proven Cost Savings: An independent study also found that when supply chains in produce, dairy and protein switch to the iGPS platform, those companies

have enjoyed meaningful savings per pallet load. The results were unambiguous, accruing across all stages of the supply chain, with benefits for both manufacturers/growers, shippers and retailers.

Greater Efficiency: All iGPS pallets are constructed of sturdy, lightweight (48.5 lbs.) plastic, in true 48” x 40” size. Always exceeding or meeting ISO and GMA standards, the iGPS platform is the only pallet to receive NSF’s Food Equipment Certification – of critical importance in today’s high tech ASRS, AGV, robotic and food safety sensitive environment. iGPS pallets are always in excellent, uniform condition, creating greater efficiency through simplicity and consistency in the supply chain.

It’s no wonder that iGPS has seen a significant increase in customers and expanded use among existing clients within just the past year. is has included new agreements with Ainsworth Pet Nutrition, Niagara Bottling, Nestle Waters and Gerawan Farms among others.

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Getting Social

A

Q A with Jacqueline ‘Jac’ Ross

Senior director of product development, innovation and integrity of own brands/ Retail Business Services, an Ahold Delhaize Company How did you come to the private brand world?

I studied food technology at the University of Reading in the UK, and three internships were required as part of the course. Two of these internships were with UK retailers (that I later worked for) with a high focus on private label and specifically the opportunity to be innovative.

Describe the private brand industry in one word.

Dynamic or limitless.

What do you like most about the industry?

The opportunity to influence and impact what customers put in their baskets, and see the results of what you do quickly.

What do you dislike most about the industry?

The perception that private label products are not good quality in comparison to national brands. As with all consumer products, there are different levels of quality dependent upon the target market regardless of brand.

What trait in yourself do you attribute most to your success?

I always believe that there is no such word as impossible, so combining my tenaciousness with the fact that I’m willing to take risks (albeit calculated risks) and build on any learnings from them is where I’ve seen most success.

What is the biggest obstacle you have ever overcome?

Personally and professionally would be relocating from the UK to the U.S. With 20 years of experience within the UK food and retail industry, I essentially started from scratch in the U.S. where I did not know anyone — personally or professionally.

What’s the best advice someone ever gave you?

A friend of mine relocated overseas, and she encouraged me that when I moved to a new place/ country to take up any offers to do different things to get me out of my comfort zone.

It’s 5 o’clock (or later), what do you do for fun?

I’m passionate about food and trying new cuisines, recipes or places. I try to meet up with friends and eat out somewhere every week. Often this might be after a short hike or run as I love to experience the outdoors.

Jac Ross (far right) goes white-water rafting in West Virginia. In her spare time, you can find Ross in the outdoors.

You have a week off. Where do you go and why?

I love to visit new places and try new things, so I always try to visit somewhere I haven’t been.

What one great thing does the industry have going for it?

The ability to work at pace as well as the opportunity to test products quickly.

What is the industry’s biggest challenge?

Consumers perception of the quality of private label products. The constant challenge to persuade consumers that own-brand products really are as good, if not better in some cases, than the national brands.

Who is your hero and why?

My grandfather, Poppa, who was a prisoner of war in World War II. His approach to life was not diminished

14

by his experiences, and he spoke of his time in captivity with no malice towards his captors. His gentle manner was a great example to see growing up.

Store Brands / September 2017 / www.storebrands.com

If you were born 100 years ago, what would you do for a living?

I imagine it would still be related to the food industry, though in a more agriculturally based environment.

What song do you love to crank up in the car?

It really depends on the mood I’m in. However, any Muse song generally works for me.

What’s the best book you’ve ever read?

Might not be the best book I’ve ever read, but it is certainly my favorite since the first time I read it at the age of 10 — the “Lord of the Rings” trilogy by J.R.R. Tolkien. SB

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LEVEL 2 | EXCELLENT RATING

Cover Story

LiDL’s LOGIC The deep-discount retailer, with its emphasis on high-quality private brands, low prices and convenience, could change the grocery landscape for many years to come

By Lawrence Aylward

I

t’s 7:30 a.m. on a sultry July morning in Norfolk, Va., and about 400 people are gathered in line to be the first to shop in the sleek-looking new grocery store, its massive window-wall façade sparkling in the early-morning sun. Party music is blaring, balloons are dangling over the store’s entrance and local government officials are standing by for the 8 a.m. ribbon-cutting.

It’s another opening day for Lidl, the 17th of the summer, and Norfolk seems primed for the retailer’s arrival.

The German-originated deep-discount retailer, with U.S. operations based in Arlington, Va., opened 24 stores on the East Coast this summer. By the end of September, Lidl will have 37 stores open in Virginia, North Carolina, South Carolina, Delaware and Georgia.

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Store Brands / September 2017 / www.storebrands.com

Lidl, which has more than 10,000 stores in 28 European countries, has planned its U.S. arrival for several years and aims to have opened 100 stores by mid2018. Lidl won’t say how many stores it plans to open nationwide, but it could be hundreds in coming years.

Lidl’s landing has garnered much media attention and notice from its competitors. Shortly after Lidl opened its first stores in June, The Kroger Co., the nation’s secondlargest grocery chain, announced it was suing Lidl for trademark infringement, claiming that Lidl’s Preferred Selection private brand was too close in name to its 20-year old Private Selection store brand. Whether an indictment or a shot across the bow, Kroger’s lawsuit, which goes to trial in January 2018, made for great theater in the ever-competitive grocery industry.

By the end of September, Lidl will have opened 34 stores in the U.S. It was not uncommon for hundreds of people to be waiting outside in line on grand opening days so they could shop Lidl’s 90 percent assortment of private brands.

Photos by David Hollingsworth and courtesy of Lidl

Lidl is getting noticed because it’s different from traditional grocers — and not just because of its stylish building design. It’s Lidl’s logic that has captured the grocery industry’s attention. The retailer promises it will offer high-quality products at the lowest prices through its slew of store brands, which make up 90 percent of its assortment. Lidl also says it will make grocery shopping more convenient for consumers with its 36,000-square-foot stores (27,000 square feet dedicated to the sales area) that consist of six wide and easy-to-navigate aisles, compared to 12 or more at traditional grocers. And Lidl maintains that its product selection, featuring fewer SKUs in each category, reduces clutter and makes buying decisions easier.

“We keep it pretty simple,” says Will Harwood, Lidl’s U.S. public relations and communications manager.

Lidl has been compared to Aldi, its German counterpart, which opened its first U.S. store in 1976. Aldi also touts low prices through its 90 percent assortment of private brands as well as convenience, with stores smaller than Lidl’s. When Aldi first opened and began expanding in the U.S., it was viewed as a low-end discounter, an image it has been shedding.

While Lidl touts the low prices of its private brands — stating that other retailers won’t be able to match them — it is simultaneously touting the high quality of those products. Lidl is not viewed as a low-end discounter.

“Lidl has done a good job of communicating quality, which is something that is tried and true to its operating model,” says Todd Maute, a brand expert and partner at New York-based branding agency CBX. “While Lidl www.storebrands.com / September 2017 / Store Brands

17

Cover Story really plays up price, what it hasn’t done, which is typical in the industry, is scream price as part of its packaging strategy. Lidl screams quality product as its packaging strategy.”

(Right) Lidl’s Will Harwood shows off one of the retailer’s 120 listed private brand wines. (Below) Lidl also offers several craft beer selections under its Craft Explorers store brand.

Reducing “compromises” Lidl formally announced in 2015 that it would expand to the United States.

Lidl learned from focus groups that U.S. consumers wanted to improve their grocery experience through three “reduced compromises,” Harwood says.

“The compromises customers told us they wanted to reduce centered around convenience, price and quality,” he adds.

It’s Lidl’s goal to “over-deliver” on those aspects, Harwood stresses.

There’s no doubt that Lidl had millennials on its mind when planning its U.S. expansion. Millennials, those born between 1980 and 1995, comprise the biggest U.S. generation ever and are moving into their prime spending years. Most millennials are brand agnostic and more open to buying private brands than other generations — hence Lidl’s large assortment of store brands. Many millennials also grew up during the Great Recession and are careful spenders, often seeking value — hence Lidl’s high-quality, low-price approach. And millennials, like many of today’s consumers, are time-starved and don’t

want to devote a lot of time to grocery shopping — hence Lidl’s approach toward convenience and limited assortment.

“Lidl is very diligent about the categories it feels it needs to sell,” Maute says.

Lidl’s entry, with its obvious goal to steal market share in an already furiously competitive market, has triggered reaction among some of its competitors. Consider the timing of Kroger’s lawsuit — smack in the middle of Lidl’s first store openings — and that Kroger wanted a judge to issue a preliminary injunction order to stop Lidl from selling its Preferred Selection line, a request that was denied. Also consider that Walmart, the nation’s largest grocery retailer, was reportedly conducting extensive price tests to make sure it can compete with Lidl’s everyday low pricing. And Aldi, coincidentally, announced the week of Lidl’s initial store Lidl operates about 10,000 stores across 28 countries in Europe. openings that it would expand from 1,600 to Lidl arrived in the U.S. this summer and will have opened 34 stores in 2,500 stores nationwide by the end of 2022, Virginia, North Carolina, South Carolina, Georgia and Delaware by the obviously trying to steal a little thunder from end of September. the new kid on the block.

Lidl won’t say how many total stores it plans to open nationwide in the future, but it could be hundreds in coming years.

Products, prices and convenience The first thing customers encounter upon Lidl’s U.S. stores are 35 percent larger than its European stores. walking into a Lidl are pleasant smells …

Lidl’s assortment is 90 percent private brands. courtesy of the fresh-flower section and the Lidl’s premium brand is Preferred Selection, which includes packaged store’s on-site fresh bakery, where items such meats, cheese, candy, olive oil, sauces, condiments, coffee, fruit spreads, as croissants, donuts, quiche and pizza are pasta, sorbet and other items. prepared several times daily. While leading a Lidl also features limited-time offerings, including several innovative tour of the Norfolk store, Harwood picks up and authentic products under its Italiamo (Italian) and Eridanous (Greek) a bouquet of flowers, which are sold under private brands.

Lidl’s The Flower Market brand, and explains Lidl also offers a mainstream private brand in food and beverage how they and other products are procured. that has no name.

“Our buyers look at every aspect of these — how many pedals are on the stem, how In June, Lidl announced a collaboration with international fashion icon thick is the stem and what is the density of and designer Heidi Klum, whose new fashion collection will be available exclusively at Lidl. the bulb inside,” Harwood notes. “They do this for every product we put on the shelves.”

Lidl sports a vast wine selection. The retailer hired Adam Lapierre, When Lidl’s buyers began negotiating a master of wine, to be its U.S. wine buyer. with potential suppliers, some of the

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Cover Story (Right) Its Preferred Selection line features suppliers told the buyers that the premium products, including meat and questions they asked about products had cheeses. (Below) Lidl offers nut bars under never been asked before, Harwood says. its mainstream line. (Bottom left) Lidl’s on“We look at quality rigorously, with an site bakery prepares fresh products daily. attention to detail,” he adds.

As Harwood strolls down the store’s first aisle, he points to an abundance of specialty products comprising Lidl’s Preferred Selection brand. He holds up a 3-ounce package of serrano dry-cured ham, made in Spain.

“We are able to sell this for $1.99,” he says. On Amazon, a 3-ounce package of serrano ham sells for $13.49.

The packaged meats also include prosciutto crudo dry-cured ham, pastrami skirt steak ($8.79 a pound) and 80-20 roast beef, coppa and a line of bratwursts hamburger patties ($3.70 a pound). in different flavors, among other products. Next to the packThe tidy-looking packages feature a logo with an American aged meats is Lidl’s vast line of imported cheeses, including flag that says “Born and Raised in the USA.” manchego, pecorino romano, asiago stagionato, Dutch gouda Lidl also offers a plethora of organic and non-GMO and others. Eleven of the cheeses received awards at the products, including tofu, granola bars, virgin coconut oil recent Los Angeles International Dairy Competition. and free-range chicken. In the household and personal “If you look at our assortment, 80 percent of our products care category, there are a variety of store brands, including are sourced domestically, but we also have the ability as a big Lidl’s allMan line that features razors, shaving cream and international company to bring in some of the best European after shave. In June, Lidl announced a collaboration with specialties,” Harwood explains. international fashion icon and designer Heidi Klum, whose In addition to packaged meats and cheeses, the Preferred new fashion collection will be available exclusively at Lidl.

Selection line includes candy, olive oil, sauces, condiments, Lidl’s mainstream line of food and beverage products coffee, fruit spreads, pasta, sorbet and other items. Lidl’s doesn’t have a name; the back of the packages simply U.S. stores also feature limited-time offerings, including read, “Distributed exclusively by Lidl.” Harwood says Lidl’s several innovative and authentic products under its Italiamo mainstream brand includes products as good or better than (Italian) and Eridanous (Greek) private brands. the national brand equivalents but are priced lower.

“These are the exact same products you would be getting Lidl sports a vast wine selection and clearly aims to become if you were shopping at a Lidl in Italy,” Harwood says while a destination for its 120 listed bottles. Lidl hired Adam Lapistanding in front of the Italiamo display. erre, a master of wine, to be its U.S. wine buyer.

Lidl sells several nut products under its Just Nuts line “There are only about 350 masters of wine in the world,” of products, including wasabi soy almonds and roasted Harwood says. “Every bottle that makes it to the shelf has to cashews with spices and chili peppers. Its fresh meat go through Adam.” includes top sirloin Black Angus steak ($4.99 a pound), Lidl is already winning awards in the U.S. for its wines.

At the recent Los Angeles International Wine Competition, Lidl ranked No. 1 among all retail exhibitors, winning 101 medals including 16 gold medals and five best-in-class medals. Lidl’s Sweet Red Wine, which received a best-inclass medal, costs $2.89 a bottle.

Lidl maintains low prices through several means. Because it mostly offers private brands, its manufacturing costs are lower. Because it offers fewer SKUs, and high-volume ones at that, it orders larger quantities of fewer products so it has more buying power.

Consider wine, where Harwood says Lidl has “incredible buying power” because of its number of worldwide stores.

“There have been cases where we have bought 10 percent of the Prosecco wine in the world because we serve so many different countries,” he says. “So we can pass on these amazing prices to our customers.”

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Store Brands / September 2017 / www.storebrands.com

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Cover Story (Right) Lidl’s Just Nuts private brand Harwood says Lidl has hundreds of features several innovative flavors, “great, small suppliers” in Europe that including roasted cinnamon almonds. have grown into major players in the (Below) Lidl’s limited time offerings include private brand arena.

Italiamo, a line of Italian products.

“We’re taking the same approach [in the U.S.],” he says. “What’s most important for us is establishing a shared vision with our suppliers, which requires agility and flexibility. … We are always looking for new suppliers. We like to have long-term relationships with them so we can grow with them … and [create] products that resonate with consumers.”

Lidl’s keep-it-simple philosophy permeates its operation, which also impacts prices. The company cuts costs assortment. Lidl wants consumers to wherever it can, like not using paper at its realize they can shop there quickly.

Arlington corporate headquarters. And all those windows in its Eighty-percent of the products that most consumers will stores? Well, they just allow for more natural light and less use purchase at Lidl are in the first aisle, Harwood says. “That of electricity. Simply, Lidl is big on reducing any kind of waste way, consumers can get on their way or continue to shop the to pass the savings onto consumers. store,” he adds.

Lidl understands the strategy behind private brands these Education also plays a role in convenience. Throughout days isn’t just about offering premium products; it’s also about the store, Lidl uses signage to inform consumers about intangibles such as service. Lidl wants to make a name for sustainability and product sourcing. For instance, Lidl’s itself through convenience with its smaller stores and limited coffee section includes signage emphasizing its fair trade status. “Fair trade is a global organization working to secure a better deal for farmers and workers that believes that trade can be a fundamental driver of poverty reduction and greater sustainable development,” it reads.

Lidl down the line Lidl is somewhat mum about its future. Harwood confirms that Lidl is looking in Ohio and Texas to expand, but he won’t comment on what Lidl’s presence might look like in five years. Harwood did acknowledge that Lidl’s first stores caused grocers located nearby to lower their prices to compete.

Many grocers are ratcheting up their omnichannel strategies with an emphasis on online grocery ordering and pickup and online grocery delivery to compete with Amazon and Walmart. While Harwood says Lidl is watching industry trends closely, he notes that the chain’s focus “remains on delivering a superior experience in our physical stores.” But it’s hard to imagine Lidl not getting involved in online grocery considering its emphasis on convenience.

Like Aldi, and unlike other traditional grocers, Lidl doesn’t have to worry about everything that comes with slotting national brands such as trade dollar dependency, which can inhibit the marketing and sales of private brands.

As Maute points out, Lidl has made it clear that it doesn’t need the slotting fees and promotional dollars from the national brands to succeed. Maute says Lidl is focused and knows how to succeed with its simple business model.

“It’s a recipe for success,” he adds.

Karen Strauss, a principal with Cadent Consulting Group, a Wilton, Conn.-based firm that monitors shopping 22

Store Brands / September 2017 / www.storebrands.com

trends, says Lidl will be a key player going forward in a retail environment experiencing dramatic change.

“Lidl is making the investment to make a difference in the U.S. marketplace,” she adds.

Strauss also expects that Lidl’s continued expansion, which will familiarize more consumers with its store brands, will continue to enhance the positive image that store brands in general have gained the past several years.

What do Norfolk consumers who attended the Lidl store

Lidl’s stores are dominated with creative signage aimed at consumers.

opening think of the retailer and its offerings? Lisa Melita says she was “counting the days” for the store to open.

Melita has shopped at Lidl before in Europe and is familiar with its products. “Lidl says quality,” the 52-year-old says.

Melita understands why Lidl is popular in Europe.

“European consumers don’t just buy anything,” she says.

“Much of their culture revolves around the quality of food. If they trust [Lidl’s] store brands, then they are probably good.”

Norfolk couple Bart and Erin Irwin attended the Norfolk store opening because “we heard a lot about Lidl being different and lower cost,” Bart says. The Irwins are familiar with store brands, having purchased them at other retailers.

“We heard the prices here are better than some of the local stores,” the 42-year-old Bart says, noting that he takes a “trust and verify” approach to store brands. “I’ll try anything once if it’s for a cheaper price.”

A millennial, 36-year-old Erin says she is more brand agnostic and open to purchasing private brands.

“I tend to go more toward a private brand if I see it. I’ve had good experiences for the most part with them,” she says.

Lidl is counting on the good experiences with its store brands continuing for Irwin and consumers alike. SB Aylward, editor-in chief of Store Brands, can be reached at laylward@ensembleiq.com.

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2017 Store Brands’ Growth 100

The

numbers say it all The fastest-growing categories in private brands are clearly innovating with distinctive products, meeting consumers’ needs and capitalizing on current trends

by Lawrence Aylward

S

tore brand sales of food, beverage and non-food items have been relatively flat the past year, according to Chicago-based market research firm IRI, which reports that dollar sales of private brands at supermarkets and other food retailers inched up .6 percent with unit sales up .9 percent compared to the previous year. So there is something to be said for the 2017 Store Brands’ Growth 100 list, featuring data compiled by IRI highlighting categories where private brands posted dollar and unit sales gains of 5 percent or more and accounted for $5 million or more in total sales in the last year (see chart on page 25).

Clearly, these categories are innovating with distinctive products, meeting consumers’ needs and riding the wave of popular current trends. Making our 2017 list, based on data from IRI for the 52 weeks ending July 9, are 45 non-food, 42

24

Store Brands / September 2017 / www.storebrands.com

food and 13 beverage categories. Non-foods account for the top nine categories in terms of year-over-year sales increases.

Looking at top dollar and unit sales, Susan Viamari, vice president of thought leadership for IRI, says it’s easy to see “themes” that are spurring store brand growth.

“What we’re seeing is more micro-level growth, and it’s happening in categories that are supporting industry trends,” she says, noting health and wellness, sustainability and convenience among those trends.

While some larger categories experienced lower dollar and unit scale increases than smaller categories — consider “dog and cat needs,” a $607 million category that grew more than 10 percent in dollar and unit sales from a year ago — Viamari points out that a 10 percent gain “is a really good number,” considering the category’s size and that current private brand sales overall are relatively flat.

TOP GROWTH 100 LIST Categories where private brands had dollar/unit sales gains of 5% or more and accounted for $5 million or more in total sales (52 weeks ending July 9, 2017). Includes supermarkets, drugstores, mass market retailers, military commissaries and select club & dollar chains. Non-foods in green, Beverage in blue and Food in orange.

DOLLARE SALES INCREASE VS. UNIT SALES (IN MILLIONS) YEAR AGO (IN MILLIONS)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

Female contraceptives Body accessory Makeup combo Auto fluids Hair spray/spritz Foundation Electrotherapy device Baby care & safety accessories Nasal spray/drops/inhaler Refrigerated kefir Bottled other fruit juice Lipstick Rfg meat/cheese/cracker/dessert Cartridges Refrigerated chili Hot cocoa Automobile waxes/polishes Testing accessories Refrigerated pasta/noodles Baby play & discovery accessories Dried meat snacks Refrigerated flavored spreads Rfg appetizers/snack rolls Bottles Pepper Hair styling/setting gel/mousse Power toothbrushes Soap dishes Single-cup coffee Chocolate candy box/bag/bar Razors Paints Ready-to-drink coconut milk Popcorn/caramel corn Paper/plastic tablecover Non-disposable gloves Pita bread Refrigerated almond milk Outdoor insect/rodent control chem Dry dinner mixes (add meat) Spice/seasoning-no salt/pepper ii Refrigerated salad dressing Color-safe bleach Eye/lens care tablets/accessories Household/kitchen storage Ready-to-drink almond milk Diarrhea medicine liquid/powder Specialty nut butter Salad toppings Shaving cream

10.2 11.9 $ 5.9 $ 77.3 $ 9.1 $ 11.2 $ 5.9 $ 16.8 $ 280.0 $ 5.3 $ 11.5 $ 12.6 $ 34.9 $ 42.8 $ 7.5 $ 47.4 $ 17.0 $ 27.8 $ 49.9 $ 8.0 $ 9.9 $ 113.6 $ 41.2 $ 60.3 $ 143.9 $ 10.5 $ 32.7 $ 12.2 $ 735.3 $ 16.4 $ 44.1 $ 9.0 $ 8.4 $ 66.5 $ 96.6 $ 57.9 $ 7.1 $ 157.3 $ 24.8 $ 12.2 $ 436.1 $ 6.9 $ 32.0 $ 48.2 $ 371.2 $ 7.6 $ 11.0 $ 55.5 $ 109.9 $ 40.8 $

$

26,290% 120.8% 98.4% 80.2% 78.5% 71.8% 63.2% 62.2% 61.7% 58.5% 49.6% 45.7% 46.8% 41.0% 40.0% 39.5% 37.9% 36.6% 36.3% 35.3% 34.2% 33.6% 32.3% 32.1% 32.0% 30.3% 30.2% 30.0% 29.9% 29.5% 27.5% 27.4% 26.9% 25.9% 25.8% 25.8% 24.8% 23.5% 23.4% 23.1% 23.0% 22.5% 22.4% 22.3% 22.3% 22.2% 21.7% 21.1% 20.6% 20.2%

0.26 1.6 0. 69 28.6 2.5 1.0 0.22 2.2 46.5 2.3 3.4 2.1 9.8 6.8 1.3 17.2 6.5 4.2 8.5 1.3 3.8 36.2 5.3 27.54 43.2 2.3 4.4 8.1 88.3 11.1 7.8 3.5 4.8 32.3 55.5 20.8 3.3 58.5 6.7 10.0 174.4 2.8 11.2 11.7 92.4 2.9 2.4 9.5 49.8 22.8

INCREASE VS. YEAR AGO

26.1% 132.5% 60.7% 30.1% 61.2% 56.4% 50.0% 24.6% 18.0% 28.7% 40.4% 57.5% 187.6% 20.4% 15.3% 21.8% 50.7% 26.7% 18.3% 109.5% 27.0% 32.5% 29.7% 32.6% 13.4% 6.2% 21.1% 17.4% 25.2% 20.4% 25.8% 19.6% 29.8% 20.3% 19.4% 12.8% 23.2% 24.6% 10.4% 18.7% 8.9% 52.6% 27.1% 28.6% 15.8% 10.6% 23.7% 21.1% 11.2% 18.6%

DOLLARE SALES INCREASE VS. UNIT SALES (IN MILLIONS) YEAR AGO (IN MILLIONS)

51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100

Croutons (no stuffing croutons) Refrigerated biscuit dough Cheese spreads/balls Baby ointments/creams Concealer Moist towelettes Bath/body scrubbers/massagers Toothpaste Refrigerated cheesecakes Cheese snacks Laundry detergent (packet/bar) Pastry/danish/coffee cakes Semi-moist dog food Oral pain relief Wet broth/stock All other fish/seafood Energy drink mix Liquid fruit drink mixes Wet soup Fruit-flavored syrup Canned and bottled tea Bottled pineapple juice Refrigerated butter blends Muffins Breadcrumbs Jug/bulk still water Refrigerated dough (pastry) Corn snacks (no tortilla chips) Pork rinds Dog/cat needs Processed/imitation cheese loaf Light bulbs Makeup remover implement Tooth bleaching/whitening Disposable training pants Automotive treatment Cosmetic storage Refrigerated fish/herring/seafood Shelf-stable honey Aerosol/squeezable cheese spreads Dip Refrigerated dinners/entrees Chalk Refrigerated fresh soup Non aerosol whipped toppings Other home testing kits Refrigerated pizza crust/dough Worcestershire sauce First-aid kits Dental accessories/tools

$ 51.7 142.6 $ 35.4 $ 16.3 $ 7.8 $ 298.5 $ 97.2 $ 12.7 $ 174.9 $ 54.4 $ 32.9 $ 368.2 $ 37.9 $ 29.8 $ 285.3 $ 12.4 $ 26.0 $ 54.4 $ 65.5 $ 7.5 $ 20.9 $ 10.6 $ 14.0 $ 298.2 $ 52.5 $ 571.4 $ 81.9 $ 18.8 $ 13.7 $ 606.9 $ 14.3 $ 393.4 $ 114.5 $ 48.1 $ 209.1 $ 111.8 $ 21.9 $ 100.6 $ 294.2 $ 19.5 $ 11.8 $ 141.0 $ 9.0 $ 178.9 $ 283.7 $ 33.3 $ 32.7 $ 22.5 $ 12.8 $ 134.9 $

20.1% 20.0% 19.9% 19.5% 19.3% 18.1% 18.0% 17.7% 17.4% 17.2% 17.2% 16.7% 16.5% 15.3% 16.5% 15.8% 15.6% 15.5% 13.8% 13.5% 13.4% 12.8% 12.8% 12.5% 11.1% 10.9% 10.8% 10.5% 10.4% 10.2% 10.1% 13.2% 10.5% 10.3% 10.1% 10.1% 10.0% 10.0% 10.0% 9.9% 9.9% 9.7% 9.7% 9.6% 9.6% 9.2% 9.1% 8.8% 8.8% 8.8%

36.7 122.0 8.1 4.2 1.2 97.9 52.1 3.8 24.6 29.0 3.3 114.3 10.5 5.9 184.9 6.1 14.4 21.8 35.2 4.3 12.7 3.3 5.4 83.7 34.7 590.4 42.0 12.4 8.2 100.9 2.6 82.1 34.9 2.9 21.5 31.9 4.0 19.3 58.5 6.6 5.4 21.1 4.4 38.2 93.7 1.1 14.6 15.1 2.1 30.0

INCREASE VS. YEAR AGO

16.6% 22.3% 13.5% 27.7% 27.6% 13.4% 24.6% 14.2% 23.5% 20.1% 30.3% 12.6% 20.0% 23.3% 15.3% 15.5% 21.9% 16.8% 9.9% 13.8% 29.4% 9.2% 15.8% 13.9% 10.5% 10.3% 18.3% 17.9% 12.6% 10.8% 11.8% 5.5% 9.2% 8.4% 7.8% 12.0% 51.4% 11.7% 9.7% 8.5% 23.3% 10.9% 6.0% 6.2% 9.2% 26.0% 8.7% 8.5% 11.4% 5.1%

SOURCE: Infoscan Reviews, IRI

www.storebrands.com / September 2017 / Store Brands

25

2017 Store Brands’ Growth 100 TOP 10 FOOD CATEGORIES Categories where private brands had dollar/unit sales gains of 5% or more and accounted for $5 million or more in total sales (52 weeks ending Jul 9, 2017) DOLLARE SALES INCREASE VS. UNIT SALES (IN MILLIONS) YEAR AGO (IN MILLIONS)

1 Rfg meat/cheese/cracker/dessert

$

34.9

46.8%

9.8

7.5

40.0%

1.3

15.3%

49.9

36.3%

8.5

18.3%

2 Refrigerated chili

$

3 Refrigerated pasta/noodles

$

9.9

34.2%

3.8

27.0%

33.6%

36.2

32.5%

41.2

32.3%

5.3

29.7%

143.9

32.0%

43.2

13.4%

16.4

29.5%

11.1

20.4%

66.5

25.9%

32.3

20.3%

7.1

24.8%

3.3

23.2%

$ $

6 Rfg appetizers/snack rolls

$

7 Pepper

$

8 Chocolate candy box/bag/bar 9 RTE popcorn/caramel corn 10 Pita bread

187.6%

113.6

4 Dried meat snacks 5 Refrigerated flavored spreads

INCREASE VS. YEAR AGO

$ $

$

SOURCE: Infoscan Reviews, IRI

Foods for thought Refrigerated meat/cheese/crackers/dessert — the four products comprising pre-packaged meals that compete with Oscar Mayer’s Lunchables — is the first food category on the list, ranking 12th with nearly a 47 percent increase in dollar sales ($34.9 million) and a 187 percent increase in unit sales ($9.8

million) from the previous year. This year’s growth comes on the heels of last year’s 75.7 percent increase in sales and 147 percent increase in unit sales from 2015.

It makes sense that the category is growing, considering the continued need for convenient, grab-and-go items.

According to IRI data, retailers are capitalizing on consumers’ increased liking of specialty nut butters, a nearly $55.6 million category that increased more than 21 percent in sales the past year. Private-branded specialty nut butters, including cashew, almond and hazelnut, are appearing more on retailers’ shelves.

Clearly, it’s a category that is helping to differentiate retailers.

Last year, specialty nut butters did not make the top-100 list.

“Nut butters are not only healthier options, they provide consumers with different taste and texture experiences, Viamari says. “They also add a little savoir faire to your toast, instead of just having peanut butter on it.”

Spices/seasonings also saw substantial growth, despite not appearing in the top 100 last year. A $436.1 million category, spices/seasonings saw a 23 percent sales increase from the previous year. Viamari is not surprised, considering that many consumers (particularly millennials) are embracing new flavor trends and are willing to try new spices/seasonings.

“Spice/seasonings companies are doing a great job with new solutions that make it easier to cook more eclectic meals at home,” Viamari says, noting that retailers and manufacturers are

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Store Brands / September 2017 / www.storebrands.com

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2017 Store Brands’ Growth 100 also offering “turnkey solutions” in the form of pre-measured spices and recipes cards for consumers to create specific dishes.

The turnkey solutions are an added benefit to help create additional sales, and consumers like them because it allows them to save money by cooking lower-cost and healthier meals at home.

Cooking at home, despite the notion of the time-starved consumer, is becoming more popular, according to The Food Institute, a national food industry association. The Food Institute says more consumers are eating at home because of a decline in food prices as well as the increased popularity of online grocery shopping.

Viamari attributes the growth of some items, including refrigerated chili (up 40 percent in dollar sales), refrigerated pasta and noodles (up 36 percent), refrigerated flavored spreads (up 33 percent), salad toppings (up 20 percent), croutons (20 percent), bread crumbs (11 percent), refrigerated dinners/entrees (up 10 percent) and other grocery foods to the increase in eating at home as well as the chance to prepare healthier foods at home with items such as wet broth and stock (up 16 percent) and shelf-stable honey (up 10 percent).

Overall, Viamari stresses that categories that bring more excitement and experiential eating to consumers will continue to break out with higher sales.

“That’s really important, particularly to younger consumers like millennials who tend to not necessarily be wedded to

brands but are wedded to the products with the benefits they are looking for,” she says.

TOP 10 BEVERAGE CATEGORIES Categories where private brands had dollar/unit sales gains of 5% or more and accounted for $5 million or more in total sales (52 weeks ending July 9, 2017) DOLLARE SALES INCREASE VS. UNIT SALES (IN MILLIONS) YEAR AGO (IN MILLIONS)

1 Refrigerated kefir

$

2 Bottled other fruit juice

$

28.7% 40.4%

49.6%

3.43

39.5%

17.2

21.8%

735.3

29.9%

88.3

25.2%

8.4

26.9%

4.8

29.8%

157.3

23.5%

58.5

24.6%

7.6

22.2%

2.9

10.6%

26.0

15.6%

14.4

21.9%

54.4 20.9

15.5% 13.4%

21.8 12.7

16.8% 29.4%

5 Ready-to-drink coconut milk 6 Refrigerated almond milk

2.3

11.5

$ $

58.5%

47.4

3 Hot cocoa 4 Single-cup coffee

5.3

INCREASE VS. YEAR AGO

$ $

7 Ready-to-drink almond milk

$

8 Energy drink mix

$

9 Liquid fruit drink mixes 10 Canned and bottled tea

$ $

SOURCE: Infoscan Reviews, IRI

Coffee continues to perk in beverage Single-cup coffee, a more than $735 million category for private brands, continues to be a go-to category for private brands. Dollar sales soared 30 percent this year from the

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2017 Store Brands’ Growth 100 previous year, and unit sales are up 25 percent. In 2016, single-cup coffee sales were $552 million after increasing 38 percent from the previous year.

“We see private label manufacturers doing a great job getting into this sector with unique flavors and higher-end solutions,” Viamari says. “There is a lot of innovation in private label premium single-cup coffee.”

Shelf-stable bottled other fruit juice — those being juices with alternative flavors such as mango, coconut and watermelon — posted the highest gain in the beverage category, with a 49 percent increase in dollar sales and a 40 percent increase in unit sales. The category, with total sales of $11.6 billion, is clearly a burgeoning opportunity for store brands.

“Carbonated beverages are struggling,” Viamari says. “[Shelfstable bottled other fruit juice] not only offers an alternative [to carbonated beverages], but they provide an emotional connection to consumers, [in that] they allow them to feel a little pampered while [still being able to drink] something that is healthier.”

Health and wellness is also driving growth in lactose-free “dairy” drinks. Dollar sales and unit sales are up for readyto-drink coconut milk (27 percent and 30 percent) and for refrigerated almond milk (23 percent and 25 percent) “We see milk substitutes and alternative milks growing overall, and private label is playing a nice role there. There is a lot of innovation,” Viamari adds.

Retailers should also keep an eye on refrigerated kefir, a probiotic beverage made with either milk kefir grains or a powdered kefir starter culture. Although the category is small with $5.3 million in sales, it grew nearly 62 percent in dollar sales and about 29 percent in unit sales from the previous year.

Refrigerated kefir posted the top sales gain among beverages.

TOP 10 NON-FOODS Categories where private brands had dollar/unit sales gains of 5% or more and accounted for $5 million or more in total sales (52 weeks ending July 9, 2017) DOLLARE SALES INCREASE VS. UNIT SALES (IN MILLIONS) YEAR AGO (IN MILLIONS)

1 Female contraceptives

$

2 Body accessory

10.2

26.2%

0.2

26.1%

11.9

120.8%

1.6

132.5%

$

3 Makeup combo

5.9

98.4%

0. 6

60.7%

77.3

80.2%

28.6

30.1%

9.1

78.5%

2.5

61.2%

11.2

71.8%

1.0

56.4%

$

4 Auto fluids

$

5 Hair spray/spritz

$

6 Foundation

$

5.9

63.2%

0.28

50.0%

16.8

62.2%

2.2

24.6%

280.0

61.7%

46.5

18.0%

12.6

45.7%

2.1

57.5%

7 Electrotherapy device

$

8 Baby care & safety accessories 9 Nasal spray/drops/inhaler 10 Lipstick

$ $

INCREASE VS. YEAR AGO

$

SOURCE: Infoscan Reviews, IRI

Innovation drives non-foods Among non-foods, nasal spray saw substantial growth among over-the-counter remedies. The $280 million category posted a dollar sales increase of 62 percent and a unit sales increase of 18 percent from the previous year.

30

Store Brands / September 2017 / www.storebrands.com

“We are seeing innovation in healthcare-related solutions,” Viamari says. “It wasn’t too long ago that a lot of the nasal sprays and inhalers were national brand alternatives.”

Private-branded female contraceptives posted the largest gain in the 2017 Store Brands’ Growth 100 list. Although a small category at $10.2 million, store brand sales soared more than 26,000 percent this year. An increase in the childbearing population of women is driving growth along with the increased availability of private-branded products.

Also driving sales increases of healthcare products among non-foods is consumers’ move toward self-health care, especially in a time of high health insurance premiums and increased out-of-pocket spending.

While total beauty care sales in private brands are lower than other categories, that does not mean that there are not opportunities in the category for store brands to grow. Consider makeup, body accessories, hair spray/spritz, foundation and lipstick, which are smaller categories in dollar sales but showed substantial growth in dollar and unit sales in the past year.

“Consumers tend to be more brand loyal when it comes to beauty care,” Viamari says. “But when you look at younger consumers, they are more driven than just by the brand name on the package. So I definitely think it’s an opportunity [for private brands].”

Storage bottles now constitute a $60.3 million category, thanks to a 32 percent increase in dollar sales and a nearly 33 percent in unit sales. Viamari considers growth in the bottle sector to sustainability — that more consumers are buying bottles for food and beverage storage and reusing them to reduce waste.

Viamari says technological advances in kitchen storage and cleaning supply containers are also beginning to drive dollar and unit sales in private brands. In the former, she cites stretch bags for waste disposal, which have the ability to stretch around objects to prevent rips and tears. While name brands brought stretch bags to the market, private brands are now capitalizing on the concept.

As the IRI data make clear, store brands are gaining serious traction in many categories, but opportunities for substantial growth remain. SB Aylward is editor-in-chief of Store Brands magazine.

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Emerging Snacking Trends

Eating on the go Consumers are snacking like never before, spurring innovations in a range of categories that offer growth opportunities for store brands

By Carolyn Schierhorn

I

t’s 2 o’clock in the afternoon and hunger gnaws at the young office worker who last ate at around 11 a.m., when he enjoyed a microwaved samosa and a hardboiled egg at his standing desk.

“Should I eat a buffalo bar now or some lentil chips with salsa and a handful of cashews on the side?” he asks himself.

This hypothetical millennial represents one aspect of today’s snack food market. Just as significant, though, are consumers of all ages who nosh on potato chips, cheesy popcorn, doughnuts, chocolate candy and rich, premium ice cream. In fact, sometimes the individual who “behaves” and snacks lightly on nutrient-dense food throughout the day is the same person who binges on high-calorie confections in the evening.

It’s really a free-for-all in the snack foods market right now, which presents both challenges and product development opportunities for retailers with store brands.

Fortunately, a number of market research firms have recently released reports on snacking trends, which help cut through the clutter.

First, retailers need to understand that the distinction between snacks and meals has become ever blurrier in terms of what is eaten and when. Many American 32

Store Brands / September 2017 / www.storebrands.com

Top 10 reasons for snacking

Mintel Group’s May 2017 report “Snacking Motivations and Attitudes — US” reveals that 94 percent of U.S. adults snack daily, while 15 percent snack at least four times a day.

Those who consume snacks do so for many reasons, reports Mintel, which identified the following top 10 motivating factors based on a survey of nearly 1,900 adults who snack.

1. To treat myself (selected by 50 percent of respondents).

2. To give myself a break during the day (37 percent).

3. To eat on the go (27 percent).

4. To eat healthier (26 percent).

5. To relieve stress (24 percent).

6. To refuel when exercising (21 percent).

7. To avoid overindulging at meals (19 percent).

8. To control my weight (17 percent).

9. To socialize with friends or family (14 percent).

10. To get through late nights (14 percent).

Source: Mintel “Snacking Motivations and Attitudes – US,” May 2017.

Emerging Snacking Trends

consumers nowadays will eat traditional snacks and hors d’oeuvres such as veggies and dip, cheese and crackers, and mixed nuts as a quick meal, while others will grab a cheeseburger or a grilled chicken wrap for a portable “dashboard dining” snack.

Millennials and the oldest members of Generation Z, in particular, have been driving the trend toward eating whenever hungry and eating on the go, pressured by their busy multi-tasking lifestyles and expectations of immediate gratification, according to The NPD Group’s new report “A Generational Study: The Evolution of Eating.”

Furthermore, millennials, who tend to be foodies and champions of health-promoting and sustainable ingredi-

ents, have spurred the launch of a number of alternative plant-based snacks such as Hippeas organic chickpea puffs and BRAMi lupini beans. It’s not that most millennials are vegan or even vegetarian — only a small minority are. But many are “flexitarians”; they believe they are improving their own health and that of the planet by eating plantbased food on a regular basis.

Millennials, moreover, have influenced older generations to demand health-related benefits in their snacks.

“Consumers today expect snacks to work for them; the snack is no longer just a reward,” observes David Portalatin, NPD Group’s vice president of industry analysis, in his introduction to the generational study.

Indeed, the better-for-you and clean label movements are having a sizeable impact on the traditional “treat yourself” segments, from chips to frozen novelties. Be that as it may, indulgent snacks as a whole are growing faster than health-oriented ones, reports Chicago-based IRI in its “2017 New and Emerging Snacking Trends” publication.

In fact, dollar sales of “core indulgent snacks” increased 3.4 percent over the past year compared to a 0.9 percent gain for “core healthy snacks,” states Sally Lyons Wyatt, IRI’s executive vice president and practice leader, who authored the snacking trends study.

Private brands, however, have only begun to scratch the surface of the growth potential in both the indulgent and

Segments with strong sales potential for store brands

Quite often the categories in which private brands already perform well or have significant market share are not the ones with the most growth potential. Industry experts and market research firms have determined that private brands are underrepresented and could flourish in the following segments: Pork snacks and corn chips. National brands constitute 92 percent of dollar share in the salty snacks category, notes Jordan Rost, vice president of consumer insights for New York-based Nielsen. But salty snack mixes and pretzels are two segments in which store brands have notable market share, with 30 percent and 15 percent retail dollar share, respectively. Nevertheless, these are not “the segments to watch out for at the moment,” Rost says.

“Pork snacks and corn chips are the snacks seeing the largest growth specific to store brands, gaining 21.1 percent and 22.6 percent in retail sales dollars,” he explains.

Frozen sandwiches. Overall, according to Nielsen data, frozen sandwiches have experienced flat 0 percent growth, Rost says. However, store brand frozen sandwiches are growing at a 16 percent rate in dollar sales.

“Right now, store brands comprise just 5 percent of frozen sandwich sales,” Rost observes. “But with growth outpacing that of the national branded varieties, there is certainly room to grow [even further],” he says.

Pulse-based snacks. Chickpea-based pulse snacks “did phenomenally well in 2016,” increasing more than 150 percent in the 52 weeks ending Oct. 30, 2016, according to Packaged Facts’ January 2017 report “Snack Food Nutrition Trends: Pulses, Vegetables and Grains in Salty Snacks & Crackers.” Lentil and pea snacks also experienced double-digit growth.

Refrigerated hand-held non-breakfast entrées. Portability is a key factor in the healthful snack segments that are on the rise, states Chicago-based IRI’s report “2017 New and Emerging Snacking Trends.” Two popular high-protein snacks that can be fresh- or commissary-prepared by grocery retailers include refrigerated hand-held non-breakfast entrées, such as ready-to-eat wraps and heat-and-eat burritos, and refrigerated appetizers and snack rolls that resemble egg rolls but have various fillings and carriers.

Meat snacks. High in protein and easy to eat on the go, meat snacks remain a robust segment. There has been considerable innovation in this space by specialty brands, which spells opportunity for store brands. Among the branded items to watch are Wild Zora bars, meat and vegetable bars that come in a variety of flavors such as Mediterranean Lamb; Epic Bars, meat bars available in such flavors as Chicken Sriracha, Smoked Salmon Maple, Lamb Currant Mint and Venison Sea Salt Pepper; and Tanka Bars, which are bison-based and have intriguing flavor combinations such as Cranberries and Pepper Blend.

34

Store Brands / September 2017 / www.storebrands.com

Emerging Snacking Trends healthful snacking realms. Accounting for just 6.4 percent of market share in the $17.6 billion salty snacks category per IRI data, private brands have had trouble competing with the aggressive multichannel distribution strategy of major national brands, explains marketing expert Jerry Cole of Chicago-based Starpoint Consulting Group.

Millennial tastes influence baby and toddler snacks

As millennials begin to settle down and have children, their penchant for snacking and for better-for-you and clean label foods is having a significant impact on packaged baby and toddler snacks. And this bodes well for innovative store brands.

Montréal, Québec-based Private Brands Consortium (PBC), for one, offers an organic fingerfood snack line for young toddlers that includes whole grain puffs, mini rice cakes and fruit bites.

With unit sales of 30.5 million, according to 2017 data by Statista, private brands collectively rank No. 5 in total baby food and snacks sales, behind the Gerber, Gerber Second Foods, Beech-Nut Stage 2 and Gerber Second Foods Nature Select brands. Clearly, the time is ripe for store brands to consider this category.

It’s time for retailers to become more aggressive themselves and place their store brand snack foods in off-site vending machines and other convenience settings, Cole contends.

In addition, inherently nutritious fresh fruits have become increasingly popular snacks, and in this arena grocery retailers already have a strong private brand identity.

Nonetheless, retailers could do much more in the freshprepared space, leveraging their success with individually portioned packaged snacks such as crudités and dip, pre-cut fruit, and pita chips and hummus. There is also room for much more creativity in shelf-stable and frozen snacks.

Revealing numbers

In its May 2017 report “Snacking Motivations and Attitudes – US,” Mintel Group notes that 94 percent of U.S. adults snack daily, while 66 percent snack at least twice a day and 15 percent snack four or more times a day.

Although contemporary U.S. consumers are increasingly health-conscious in their food choices, the top reason Americans snack is to treat themselves, states the Mintel report (see the list on p. 32). Also noteworthy, more than onequarter (28 percent) of American consumers agree that taste is more important than healthfulness when choosing a snack.

That said, nearly one-third of consumers say that most of

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the snacks they eat are healthy, Mintel reports.

“While health is a factor for consideration in food and drink decisions, the majority of snackers do so for a treat, meaning that even health-focused snacks should appeal with messages about enjoyment and indulgence,” says Beth Bloom, associate director of U.S. Food and Drink Reports at Mintel.

Further complicating the issue, consumer perceptions of what is healthful have been changing significantly. For example, multigrain snacks have been declining, dropping nearly 10 percent in dollar sales during the 52 weeks ending July 1, according to Nielsen data.

“Looking more broadly across the retail landscape, this aligns with the downward trend we’ve seen in products boasting ‘multigrain’ health and wellness claims on packaging,” says Jordan Rost, vice president of consumer insights for Nielsen.

“Grains, in general, appear to be losing their clout, as amaranth, whole grain and brand claims have all shrunk in dollar sales — by 2.0 percent, 2.3 percent and 1.4 percent, respectively,” he elaborates. “Conversely, gluten-free, grainfree and carb-conscious claims have grown substantially — by 6.0 percent, 40.8 percent and 3.6 percent, respectively.”

On the other hand, alternative vegetable-based snacks, 7.25 x 4.875_NB_Layout 1 8/30/17 9:10 AM Page 1 such as those made from pulses and sweet potatoes, have

experienced strong growth — rising 5.2 percent from 2015 to 2016, according to a January 2017 report by Packaged Facts titled “Snack Food Nutrition Trends: Pulses,

Salty snacks remain consumer favorites

In its September 2016 report “Better for You Snacks – US,” Mintel Group states that half of U.S. consumers purchase snacks for their health and wellness properties. That may be a significant proportion, but better-for-you snacks are surpassed in popularity by seven varieties of salty snacks, according to a Mintel survey of roughly 2,000 adult Internet users, asked to identify the salty snacks they’ve purchased in the past six months: l Cheese-flavored snacks (purchased by 73 percent of respondents). l Corn snacks (73 percent). l Microwaveable popcorn (71 percent). l Regular pretzels (66 percent). l Pretzel thins/pretzel crisps (55 percent). l Ready-to-eat popcorn (54 percent). l Meat snacks such as beef jerky (53 percent).

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Emerging Snacking Trends Vegetables and Grains in Salty Snacks & Crackers.”

What’s more, full-fat dairy products, including cheese and yogurt, are now in vogue as snacking options, thanks to recent epidemiological research showing that fat slows down the body’s absorption of sugar, helping to reduce the risk of diabetes mellitus. Fat in food also contributes to a sense of fullness, which helps prevent weight gain.

Trending snack products

Anything can be considered a snack, say 38 percent of consumers, according to Mintel’s “Snacking Motivations” study. The size of this mega–food category is staggering.

IRI’s “2017 New and Emerging Snacking Trends” report offers many insights that should be helpful to retailers in developing private brand snack lines and products.

In the indulgent realm, IRI points to six snack segments where innovation is driving strong growth: 1. Regular cookies.

2. Whole-fat yogurt.

3. Whole-fat freezer novelties.

4. Regular salty snacks.

5. Sweet popcorn.

6. Refrigerated dips.

38

Store Brands / September 2017 / www.storebrands.com

In the natural realm, the IRI report identifies three snack trends that will be growth contributors in 2017 and beyond: Portability. Fresh juices, nut-based smoothies, and handheld farmer’s cheese are predicted to be star performers.

Meat snacks. Animal welfare and environmental factors will influence this category. Look for free-range chicken chips and no-waste “snout-to-tail” usage claims for pork rinds.

Holistic health. Farming practices will be emphasized more in snacks as will functional ingredients such as probiotics.

“In fact, probiotic chips, pretzels and snacks are showing exceptional growth across all channels,” writes IRI’s Lyons.

Prospering in the snack foods sphere is all about “seizing the opportunity,” insists the IRI report.

What can retailers with private brands do? Consider implementing the following suggestions: “Leverage new flavors and forms to retain loyal consumers and capture new ones,” IRI recommends. “Continue to communicate ingredients and sourcing in simple and effective ways. And ensure that innovative packaging and design are part of your portfolio.”

Although it seems like anything goes in today’s snack food market, a systematic approach to product development and marketing can pay off for private brands. SB

Private Brand Marketing

Zeroing in on Generation Z Sustainability-conscious age group prioritizes convenience and ‘digital discovery’ but enjoys in-store experiences

E

ver hear of vlogger Roman and 83 percent “trust product information By Atwood? Or singer Jacob shared by other shoppers on social media Carolyn Sartorius, who first more than advertising.”

Schierhorn gained fame lip-syncing on Born between 1995 and 2009 (or Musical.ly? “LOL UR old,” as any thereabouts), Generation Z already has access 12-year-old might text. to $44 billion in purchasing power, according to With unprecedented access to information and the National Retail Federation (NRF). The oldest to digital communication tools, Generation Z finds members of Gen Z are college-age or recent its own heroes on YouTube and favorite social media graduates, individuals who are responsible for buying channels such as Instagram and Snapchat rather their own groceries for the first time in their lives. than passively absorbing the adult-created pop The youngest are at an age when they may relish culture of traditional television. going to a store on their own to buy snacks or a cold To understand and target this generation, retailers drink, a sign of their increasing independence. But need to be on the platforms that tweens, teenagers even the vast majority who aren’t yet the primary and young adults actually use, observes Phil grocery shoppers in their families wield considerable Lempert, a Santa Monica, Calif.-based retailing and influence over purchasing decisions. consumer behavior analyst. “They’ve grown up on Gen Z encompasses a broad age range and it’s social media, so you have to be using social media to the most multicultural generation in U.S. history, attract them and communicate with them,” he says. with just 52.9 percent identifying themselves as Indeed, Mediakix, a Santa Monica-headquartered non-Hispanic white. Such diversity notwithstanding, marketing agency, reports that 85 percent of Gen there are some commonalities private brand Z-ers use social media to learn about new products developers and marketers should be aware of. www.storebrands.com / September 2017 / Store Brands

39

Private Brand Marketing Because technology is second nature to these individuals, it’s a means rather than an end, points out Carol Spieckerman, the founder of Bentonville, Ark.-based Spieckerman Retail. Members of Gen Z use their smart phones and tablets as tools as they go about their daily lives. And that’s good news for retailers with store brands, she says.

“Generation Z exhibits some retro habits,” Spieckerman explains. “With digital connectivity being a given, this generation seeks out real world experiences and has a propensity to shop in brickand-mortar stores.”

Five hooks for reeling in younger Gen Z-ers Middle schoolers don’t do much grocery shopping by themselves, but they do have the cash and independence to buy soda and snacks on their own and splurge occasionally on a Frappuccino.

It’s not too early for grocery retailers to get this age group excited about their total brand and store brand products.

40

In fact, 98 percent of Generation Z shops in stores, with 67 percent shopping in brick-and-mortar establishments most of the time, reveals a study released earlier this year by the NRF and IBM. Spieckerman notes that teenagers and young adults often search the Internet (via Google or the lens of social media) to comparison-shop and read product reviews but then visit a store to make the purchase. To reach Gen Z then, retailers need to have a strong presence online but not necessarily a comprehensive e-commerce platform (though that wouldn’t hurt).

“What’s key is your ‘digital discoverability,’ ” Spieckerman emphasizes. In other words, when someone in this generation is searching online for a product that a local retailer happens to carry, that person should be able to learn this in an instant and immediately call up the location of the retailer’s closest store.

Here are five suggestions:

Price, quality, fairness

u

Be sure to have bike racks outside of your store entrances. These adolescents are too young to drive and do not like long walks.

v

Leverage the latest fun but harmless craze that involves a product kids can purchase. For example, during the 2016-17 school year, fidget spinning toys were all the rage. Hy-Vee, for one, was selling five brands of these spinning devices, all priced below $10, over Memorial Day weekend. What will be the must-have item in 2017-18?

w

Thanks to YouTube, tweens and young teens love elaborate pranks. To the delight of their fans, several pranksters have posted videos of themselves stealthily building toilet paper forts at Walmart. Could you stage a fun competition in your store that might involve building a structure out of store brand paper products, whether a zany fort or a potentially useful end cap?

x

Children in this age range are do-it-yourselfers. When they want to learn how to do something, they merely need to search for a YouTube video on the topic. Not surprisingly then, many kids are budding chefs, whether they simply enjoy making smoothies and milkshakes at home or they can prepare more sophisticated culinary creations. What’s more, a significant proportion of young Gen Z-ers have used a 3-D printer at school or their local library. To engage these skilled, imaginative and action-oriented youth, retailers need to involve them in product and experience “co-creation.”

When it becomes more widely available and affordable, 3-D food printing could be one way to entice youngsters into your store. Until then, consider holding a contest for the best smoothie made with you store’s products. Or have a competition for young inventors, asking them to submit prototypes for new non-food products that satisfy an unmet need or provide a solution.

y

Invite middle school classes to tour your stores and see your sustainability initiatives firsthand. Partner with local park districts to provide cooking classes, as Whole Foods Market has done.

Community engagement is key to winning over Gen Z.

Because they are not yet big earners for the most part, Gen Z-ers are currently price-driven in the grocery space, says Ryne Misso, director of marketing for Chicago-based Market Track. And research has shown that this generation will likely remain frugal.

The older members of Gen Z would remember any family financial struggles during the last recession.

In addition, the parents of Gen Z, who are predominantly members of Generation X, tend to stress financial planning and responsibility so their kids will not make the same mistakes they did, according to “The State of Gen Z 2017: Meet the Throwback Generation,” a study by the Center for Generational Kinetics.

Consequently, Gen Z-ers “are very cautious financially; they are savers, and they like good value,” adds Lempert, a columnist for Progressive Grocer, a sister publication to Store Brands. These characteristics bode well for the success of private brands with this generation, he says.

In addition, members of Generation Z “feel that product quality and availability are the most important factors when they are choosing one brand over another,” Lempert says. “They are not brand loyal either to a store’s banner or to the [brand-name] products in the store. And they really don’t see any difference between store brands and national brands, which is obviously a huge opportunity for store brands.”

Todd Maute, a partner with New York-based branding agency CBX, agrees. “This age group is very attuned to wanting the best quality at the best price,” he says. “And, historically, private label has been about value.”

Store Brands / September 2017 / www.storebrands.com

In contrast to foodie millennials, always on the lookout for their next culinary adventure, Gen Z-ers “want simple,” Lempert observes. “According to a survey I saw a few months ago, their No. 1 choice of food is fresh chicken.

They’re not looking for roasted alligator.”

What’s more, even to a greater degree than millennials, the older members of Generation Z care about environmental sustainability, animal welfare and social justice. Think of the popularity of self-avowed socialist U.S. Senator Bernie Sanders among college-age voters. Although roughly 75 percent of Gen Z-ers aspire to be entrepreneurs, this is not a generation that idolizes corporate America.

Certain big national brands, though, such as Nike and Apple have garnered Generation Z’s respect. What’s critical is aligning with this generation’s still-evolving values, Maute suggests.

When it comes to food, members of Generation Z look at four attributes, according to Lempert: “Who made it? How was it grown or raised? How was it made? And how does it taste?” Transparency and authenticity matter to Gen Z as do fair trade issues such as equitable pay for everyone from farmers to the cashiers who work in a store.

Cause marketing to this generation must be sincere and reflect sustained commitment, Lempert adds.

Grab their attention As any parent of a Gen Z-er knows, this generation has an extremely short attention span, estimated to be about seven seconds. While previous generations of children (through Gen X at least) had to go to the library and open an encyclopedia volume to look up information, members of Generation Z have only known a world in which the vast majority of human knowledge is available at their fingertips. And they don’t even have to type anything; they can just ask Siri.

“They need immediate gratification,” Maute observes. “And they are impatient.” As a result, convenience is of utmost importance to them.

“Convenience is starting to become an even more important choice-driver than price,” Spieckerman notes. “So rather than trying to narrow down what a particular generation might favor, the trend these days is for retailers to offer lots of different options, both in-store and online.”

When it comes to communicating with Gen Z-ers, the more succinct, the better.

Compared to previous generations, Generation

Z does not read for pleasure; instead this cohort watches and shares video clips and plays video games. Even the brightest members of this generation are turned off by dense text.

“The way that Gen Z-ers consume information, you can’t send them a printed flyer or an email and expect them to read every word and believe what you say,” Misso says. “You need to have interactive content, a way to engage their interest and bring an experience to Gen Z about your products.”

In-store messaging needs to be at eye level or below, Spieckerman adds. “This generation is just not used to looking up,” she explains. “Way-finding signs above eye level have become less effective across the board.”

To entice the younger members of Generation Z to come into the store, retailers need to leverage tweens’ and teens’ penchant for fun and fascination with the whimsical and quirky. For example, inspired by school “spirit days,” stores could host a “crazy hat day” or “crazy hair day” contest, in which winners would have their pictures posted on the retailer’s social media sites and receive free store brand snacks and beverages as a prize.

Better yet, retailers could partner with local social media celebrities and stage outlandish in-store pranks that Gen Z kids could help execute (see also the accompanying tips on p. 40). The goal is to create a memorable experience they will share with their friends while ensuring that the retailer’s banner and brand remain top of mind. SB Schierhorn, the managing editor of Store Brands, can be reached at cschierhorn@ensembleiq.com.

www.storebrands.com / September 2017 / Store Brands

41

Packaging Innovation

On the

The right packaging — with on-trend materials, functional features and compelling design elements — can help retailers attract attention to premium private brand non-food products n By Kathie Canning he past decade or so has brought with it a major wave of premium private brand food and beverage products.

Moreover, the design and structure of the packaging for such products has improved with each passing year.

Although many retailers also have introduced a number of premium non-food products, albeit a smaller collection, the packaging for such items doesn’t always get the attention it deserves. As they develop and rework packaging here, retailers would be wise to consider something that global market research firm Mintel relays in its “Global

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Packaging Trends 2017” report: “Good packaging protects your product. Great packaging protects your brand.”

Materials matter A winning package for premium non-food products incorporates a variety of trends that mesh with today’s consumer wants and needs. And materials-related trends should be a big part of the consideration set.

For premium personal care items, flexible packaging is gaining in popularity, says Rebecca Casey, senior director of marketing for TC Transcontinental Packaging in Vaughan, Ontario.

“Flexible packaging, with its barrier technology, laminates and printing expertise, has helped brand owners capitalize on getting consumers to notice their package and enjoy how the packaging protects the product,” she notes. “For example, consumers are purchasing their favorite canister wipes in three-, four- and six-packs, and the shift has moved from corrugated sleeves with plain film overwrap and labels to printed shrink film.”

The printed film helps reduce over-packaging and enhances sustainability, Casey explains.

Outside of the personal care space — in cleaning and laundry care, for example — bottles still account for the majority of packaging, notes Kris Kenyon Jackson, who works in category solutions for Stamford, Conn.-based Daymon. The perception among many consumers is that bottled products are less expensive.

“However, more flexible materials are gaining traction in new product development with the popularity of standup pouches,” she says.

“Malleable materials solve the issue of space, a problem that 25 percent of consumers face since they cannot find a place to store their items.

Regardless of practicality, larger sizes are still seen as valuable.”

Casey points to an ongoing trend in this segment involving downgauging in flexible packaging, which results in significant reductions in packaging and transportation costs, as well as less waste entering landfills.

“Another growing trend to watch is an increase in high-performance polyolefin films for demanding applications and environments that require a higher shrink performance for odd-shaped products while keeping all print elements in place,” she says.

Overall, there’s also a push toward transparency, Casey adds.

“Consumers don’t want to see a product that is hidden by shrink sleeves, corrugate and labels,” she says. “They want to see the shape of the product, the size, and learn more about the product.”

Form doesn’t trump function Packaging for premium non-food products also needs to be created with consumer usage in mind.

The packaging should consider consumers’ busy lifestyles — meaning it should be easy to open, easy to reclose and easy to dispose of, Casey stresses.

Retailers also need to understand that what consumers want, in terms of packaging functionality, varies by generation.

“Millennials are always looking for customization and how it relates directly to them,” says Millie Nuno, director of global marketing for ProAmpac in Cincinnati. “Baby boomers want easy to open and easy to reclose.”

“Good packaging protects your product.

Great packaging protects your brand.”

— Mintel Beyond these basics, retailers might want to consider tubing or inverted bottles, as well as premeasured dosing. After all, consumers “want the most bang for their buck,” Jackson suggests, especially when it comes to premium non-food items.

“Shoppers look for functionality that includes tubing or inverted bottles so that they can use all of the product they purchased,” she explains. “And

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43

Packaging Innovation 36 percent of consumers agree that more product is used when a bottle is inverted or turned upside down. Clorox promotes several products that adhere to this need under the Smart Tube line.”

Pod, tablets or caps that deliver premeasured dosing also help to eliminate waste. Jackson points to the Libman Freedom multi-surface cleaner as an example of a product offering a dosing cap.

Pods that deliver premeasured dosing can eliminate waste.

Convenience-minded features such as scrubbers built into a cap also add value in consumers’ eyes, she says, as do child-resistant caps and zippers.

But retailers will want to be sure to publicize any value-added packaging features on the secondary packaging, Casey says.

“If a handle is added, call it out — ‘New handle to make your life easier,’ ” she says. “Consumers will understand once they use the product, but why not use the packaging itself to inform them upfront and help entice them to purchase the product?”

Today’s packaging functionality enhancements also go beyond the physical package. Patrick Mallek, owner of Boulder, Colo.-based Mighty Fudge Studios, calls digital integration “the future of functional packaging.” He believes mobile technologies such as augmented reality (AR) open up almost unlimited opportunities for couponing, loyalty and other functions out of reach for traditional packaging.

“AR can unlock a dozen or more relevant features right in the aisle from a single PDP scan — shopping list, product info, comparisons, instant coupons,

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Packaging Innovation

Sustainability counts, too The right packaging — with on-trend materials, functional features and compelling design elements — can be critical to sales of premium private brand non-food products. But a fourth element — packaging sustainability — also is becoming a more important factor in consumer purchase decisions.

Rebecca Casey, senior director of marketing for Vaughn, Ontario-based TC Transcontinental Packaging, points out that personal care items traditionally have been overwrapped in either hard plastic or boxes. Today’s eco-minded consumers aren’t too keen about all of that dead space.

“One of the tenets of the sustainability movement is reducing the amount of materials used in packaging and shrinking the overall environmental footprint of that package,” she says.

Although she contends that sustainability is not yet a driver for premium non-food purchases, Kris Kenyon Jackson, who works in category solutions for Stamford, Conn.-based Daymon, says ingredient transparency is.

“There are certain brands that have served this need well, like Tide PurClean, Mr. Meyers and Method, which all have clear bottles displaying the product so consumers feel the brand is being transparent about what’s inside,” she says.

Jackson does note that younger adults — aged 18 to 34 — are most interested in environmental and health claims and natural ingredients.

“They look for labeling programs with a focus on health, safety and the environment such as EPA’s Safer Choice program, the SmartLabel program and the How2Recycle program, among others,” she says.

Meanwhile, the importance of packaging sustainability is sure to grow in the years to come, suggests Patrick Mallek, owner of Boulder, Colo.-based Mighty Fudge Studios.

“Less packaging is more to the consumer, and with less real estate, marketers will have to get creative to deliver all the messaging and information needed,” he stresses. “We’ve recently seen innovative things like laser-printed branding on fruit and … mobile technologies like augmented reality, which can deliver important nutritional and dietary information by scanning a label as small as a nickel.”

customer reviews and more,” he says. “These innovative technologies appeal strongly to younger demographics, who, if they don’t already, will come to expect this convenience both in-store and at home.”

Don’t discount design Retailers also will want to dress up their premium non-food items with a design that’s on-trend and engaging. Jackson points to two elements wielding an influence on design here: modernity and practicality.

Color, too, is currently an important element when it comes to packaging design in this space.

“More brand owners are using color to strengthen their brand and to send strong messaging,” Casey says.

But a brand often encompasses many flavors, scents or sizes, so keeping the consistency across the board can be a challenge, she adds.

“Recently, we had a customer challenge us to not only match their rotogravure quality, but to execute running multiple SKUs per press run in expanded gamut,” Casey notes. “This required many color builds and extremely tight register control.”

The customer was very happy with the results, she reports, and the brand was elevated across the product line.

Independent of trends, it’s critical that the package design represents the product itself.

“Forty percent of consumers judge product quality by packaging aesthetics,” Jackson maintains.

“Packaging should also include labels that display clear and concise usage information.” SB Canning is a freelance writer from Libertyville, Ill.

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Category Intelligence: Spices & Seasonings

Go beyond the basics Retailers could grow store brands’ share of the spices and seasonings category by investing in globally inspired products and health-minded formulations

By Kathie Canning

Do

use packaging that captivates the consumer by imparting a sense of romance to the spice or seasoning.

n old adage contends that good things come in small packages. And that’s certainly true of spices and seasonings.

These cooking and baking staples help define the flavor and aroma profiles of just about everything home cooks prepare in the kitchen.

What’s more, many spices and seasonings are associated with specific health benefits.

And the near-term outlook is bright for retail spices and seasonings in the United States. In its August “Spices and Seasoning in the US” report, London-headquartered Technavio forecasts that the market will expand at a compound annual growth rate of 6.72 percent between 2016 and 2020.

Go global for inspiration According to data from Chicago-based market research firm IRI, private brands currently account for 19.3 percent of dollar sales within the retail spice and seasoning space. That’s an impressive number, but store brands still have room to grow.

Retailers that focus on emerging trends within the category will likely see sales soar.

One of the trends Technavio expects will gain

traction is that toward increased demand for ethnic foods.

“The U.S. population is experimenting with new flavors, which will drive the demand for unconventional spices and seasonings,” the market research firm states.

Authentic ethnic spice blends already are very popular, notes Shannon Cushen, director of marketing for Fuchs North America in Hampstead, Md. “Flavored salts are also trendy right now, as people are looking for new and exciting ways to make food even more flavorful,” Cushen adds.

Naomi Novotny, president of Woodinville, Wash.-based SaltWorks, agrees with the trends toward ethnic items and flavored salts. She says shoppers — millennials, in particular — are seeking out spice blends and seasonings that are globally inspired or that offer thought- and tasteprovoking spins on classic flavors.

“These shoppers want to be romanced by a product and travel the world through taste,” she says, adding that SaltWorks offers naturally flavored salts in varieties such as spicy curry, black truffle, sriracha and ghost pepper to help retailers meet these trends.

For its part, The Spice Lab in Pompano Beach, Fla., recently introduced Peri Peri Pepper seasoning, which traces its roots to African and Portuguese cuisine, says Brett Cramer, the company’s cofounder. It is also offering Caribbean seasonings and other regional spices for retailers’ store brands.

And Fuchs North America looked to Africa for inspiration as well for a recent product launch.

Its African Exploration Collection of seasonings, bases and flavors includes berbere BBQ seasoning, Maghreb-style boharat seasoning, Mozambiquestyle piri piri sauce base and Senegalese-style tamarind & coconut snack seasoning. neglect to drive “As people have been trial by allowing becoming more adventurous customers to eaters, there’s been an taste the spice increase in demand for or seasoning on authentic ethnic cuisines and product samples. flavors inspired by different regions of the world. As a

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Category Intelligence: Spices & Seasonings result, African cuisine and Africaninspired flavors have been gaining traction both in foodservice and at retail,” Cushen stated in a press release announcing the launch.

Give it health appeal Health-minded products also are in vogue. Cushen says her company has seen a major rise in requests for organic and all-natural seasonings, as well as seasonings that can make other popular claims such as “vegan,” “gluten-free” and “GMO-free.”

“People are more health-conscious now than ever, and products that have certain claims or meet particular standards are typically perceived to be healthier or ‘better for you’ even if they aren’t proven to be,” she says.

Lower-sodium sea salts also boast appeal among health-conscious consumers. Ramona Cappello, founder and CEO of Santa Monica, Calif.-headquartered Sun Harvest Salt LLC, says her company specializes in sea salts with reduced-sodium content. Unlike most other lower-sodium salts, which are made with a blend of salt and potassium chloride, Sun Harvest Salt’s all-natural products are made through a patented process that relies on the sun, gravity-fed condensation ponds and time.

On the spice side, turmeric has become a sought-after item because of health benefits.

“It contains curcumin, which is a natural anti-inflammatory and beneficial for pain relief, arthritis diabetes, cancer and many other health problems,” Cramer says. “A key ingredient in curry, turmeric also is part of the trend in Spices and Seasoning seeking spicier tastes and seasonings from around the world.”

Private All Brands Brands Like the ethnic flavors trend, the better-for-you Dollar Sales (in millions) $739.0 $3,832.3 trend is being led by Change vs. Year Ago +20.1% +6.1% millennials.

Dollar Share 19.3% 100% “Millennials Unit Sales (in millions) 317.2 1,404.4 especially are purchasing Change vs. Year Ago +6.4% +2.2% products that are Avg. Price Per Unit $2.33 $2.73 healthful, convenient, *Includes extracts/flavorings/food colorings, garlic spread, loaded with flavor and pepper, salt/seasoned salt/salt substitutes, and spices/ also contribute to their seasonings — non-salt/pepper.

Source: IRI, a Chicago-based market research firm. Total ideal lifestyle,” Novotny U.S. supermarkets, drugstores, mass market retailers, stresses. “Millennials military commissaries and select club and dollar retail chains for the 52 weeks ending June 11, 2017. are sophisticated

Spice and seasoning category performance*

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Store Brands / September 2017 / www.storebrands.com

consumers and seek out foods with authenticity and artisanal products that are handcrafted with unique or uncommon ingredients such as spicy peppers, truffles or even smoke.”

SaltWorks’ new handcrafted cold-smoked and natural flavorinfused sea salts “are a versatile and easy way to add a punch of unique and delicious savory flavor,” she adds.

Position it to sell Packaging, marketing and merchandising also are critical factors in boosting trial — and sales — of store brand spices and seasonings. On the packaging front, Novotny recommends a bit of storytelling, along with a one-of-kind look that provides an artisanal, handcrafted feel.

“Packaging that captivates the consumer and shares a bit of romance about the product while offering convenience and quality will dominate the spice aisle, as in other areas of the store,” she says.

“Shoppers want to know, at a quick glance, that the ingredients they’re purchasing are safe, and they’re unwilling to compromise on quality.”

And when it comes to marketing, you can’t go wrong with sampling, Cramer suggests. For example, retailers could stir up excitement for a store brand seasoning by sprinkling it on burger bites, roast beef or a pork roast — and getting it into shoppers’ mouths.

Storytelling — via packaging, signage, a website or social media — works magic in marketing, too, Novotny suggests. Consumers, particularly millennials, are drawn to foods that are exotic and want to know the stories behind them.

“Beautiful pink salt mined from ancient ocean beds in the Himalayan Mountains is much more enticing than plain white table salt,” she asserts.

“Products with a farm-to-table type of narrative are appealing to the consumer right now.”

To spur impulse sales of private brand spices and seasonings, retailers should consider cross-merchandising them with complementary products. Cramer notes that one of his company’s retail customers recently set up a gondola in its meat department to market its private label taco seasoning. Along with the seasoning, taco ingredients such as tortillas, fresh tomatoes, onions and avocados were included in the display. SB Canning is a freelance writer from Libertyville, Ill.

Category Intelligence: Pasta, Rice & Grains

Cook up some excitement Retailers could help reinvigorate the stagnant pasta, rice and grains category by focusing on the better-for-you and ethnic flavor trends

By Kathie Canning

ew foods boast the versatility of pasta, rice and grains. These household staples serve as the centerpiece of mealtime favorites ranging from spaghetti with meat sauce to jambalaya.

But pasta and rice sales within the U.S. retail market have been lackluster of late (see tables, p. 54). Retailers could grow sales of the category — and own-brand items within it — by focusing new product development on some significant trends.

Give pasta a healthier spin

Do

communicate nutritional benefits on the package.

The popularity of gluten-free, paleo and raw diets has spurred the substitution of grated vegetables for grain-based pasta, notes London-based Euromonitor International in its February “Rice, Pasta and Noodles in the US” report. As a result, many pasta manufacturers have attempted to incorporate vegetables into their product offerings.

Liz Housman, director of marketing for Minnetonka, Minn.-based Dakota Growers Pasta Co., agrees that vegetable-fortified pasta is a noteworthy trend, as is vitamin-enriched pasta. But organic pasta is perhaps an even more significant trend, meshing well with the overarching health and wellness trend impacting the segment.

“Organic pasta is tracking with strong unit and dollar growth,” she says.

Although organic pasta can be made

with a variety of ingredients, more than two-thirds of purchases involve offerings made with 100 percent organic durum wheat semolina or whole durum wheat, Housman notes. The former of the two is currently driving unit growth.

“When expanding your store brand selection, one should approach it with a balanced offering of 100 percent organic semolina and whole wheat, based on your customers’ purchasing behaviors,” she advises.

Housman says growth of gluten-free pasta has moderated. Still, store brands account for less than 10 percent of unit share here, so opportunity beckons.

“The majority of gluten-free pasta purchases are varieties made with a blend of corn, rice and sometimes quinoa,” she says. “These recipes offer a well-rounded and pleasing taste and texture … that marry well with most sauces.”

But other ingredients also are gaining traction on the gluten-free pasta side.

“One of the biggest trends that we are seeing is pasta made from legumes such as chickpeas, black beans and red lentils,” says Linda Phan, category manager for Elk Grove Village, Ill.-based Topco Associates LLC. “Gluten-free pastas are evolving from the traditional corn/rice blend to include more fiber and added nutrients to entice the healthy shopper.”

Quinoa and brown rice blends are gaining in popularity, she adds, thanks to their taste and ability to hold up well during cooking.

But retailers probably will want to avoid getting too imaginative with pasta ingredients.

“Non-traditional retailers are seeing success with the novel gluten-free ingredients like red lentil or chickpea pasta,” Housman says, “though the cycle of pastas made with these types of ingredients may be shorter than pastas made primarily with corn and rice as the base, which have broader taste and texture appeal — ignore the plus, the color more closely importance of resembles traditional pasta.” storytelling when Despite all the interest in marketing glutenbetter-for-you formulations, convenience remains a purchase free pasta. driver, too.

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Store Brands / September 2017 / www.storebrands.com

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Category Intelligence: Pasta, Rice & Grains “In the mainstream pasta segment, we are seeing continued interest from shoppers in convenience features such as faster-cooking pasta and pot-sized pasta,” Phan says.

at lunch and to eat them as an afternoon or evening snack, Mintel reports.

Command attention

Think ethnic, ancient grains Like pasta, rice and grains are staples in most households. In fact, in its April 2016 “Grains and Rice — US” report, global market research firm Mintel notes that four out of five surveyed U.S. adults said they purchased a prepackaged rice or grain product in the prior three months. Unflavored dry rice and oats remain the products purchased most often.

But ethnic products and ancient grains “are currently the talk of the town,” says Erkin Peksoz, brand manager for Topco Associates LLC. In addition to quinoa, these include grains such as kamut, farro and spelt.

“The health benefit of whole grains and their long-standing presence in established older-world cuisines, especially in the Mediterranean and Latin America, is creating a fusion of healthy and ethnic food,” he maintains. “Both of these are very popular and strong trends among today’s shoppers, especially millennials and younger Gen-Xers.”

For both rice and grains, consumers are interested in a wide variety of international flavors, according to Mintel. Mexican (e.g., Spanish rice), Chinese (e.g., fried rice) and Italian (e.g., rice with garlic and tomato) were the top international flavors of interest to surveyed consumers.

Single-serve ready-to-eat rice and grain products also spell opportunity for retailers looking to attract millennial shoppers to ownbrand rice and grain products. Millennials are considerably more likely than their oldergeneration counterparts to include rice or grains

Private brand pasta, rice and grains also could benefit from some strategic marketing and merchandising. And great marketing begins with the packaging.

“When designing packaging for better-for-you pastas, you should clearly communicate the primary nutrition or health benefits,” Housman notes. “If it’s better than the national brand, share it.”

On-pack storytelling is gaining in importance, too, particularly among younger consumers, she says. They want to know the ingredients, where those ingredients are sourced and how the product was made.

“Share that story at point of purchase and other brand-building marketing vehicles as well,” Housman advises.

Storytelling is especially critical when the pasta, rice or grain product is positioned as premium, Phan suggests.

“You want a story around it, a special origin, a family recipe, a unique preparation,” she says. “These create romance on the shelf and help differentiate own-brand pastas from the national brands.”

A little creative cross-merchandising can go a long way to spur trial, too. Peksoz suggests that retailers supplement their ready-to-go salad departments with a variety of cooked popular grains. They could do the same thing in the hot deli department to encourage pairing with entrées and appetizers.

“Grocers can feature a themed area that focuses on a unique set of grains, highlighting their origin, story and uses, he adds, pointing to Inca and Aztec grains, grains of the Mediterranean and forbidden rice varieties as potential themes.

For pasta, Phan advises retailers to merchandize better-for-you varieties by health benefit first, to match the path of purchase.

All “Second to that is cut, brand and, Brands finally, packaging size,” she explains. $2,310.2 “Because the benefit is the biggest driver, -0.6% rather than brand, that gives own brand an 100% excellent opportunity to play in this space 1,022.5 and to be the category brand solution -1.3% within the pasta segment.” SB

Pasta, rice and grain category performance Pasta

Rice

Private Brands

All Brands

Private Brands

$597.3

$2,163.5

$324.6

Change vs. Year Ago

-2.5%

-1.5%

+2.1%

Dollar Share

27.6%

100%

14.1%

Unit Sales (in millions)

469.9

1,555.1

133.4

Change vs. Year Ago

+1.3%

0.0%

-2.6%

Avg. Price Per Unit

$1.27

$1.39

$2.43

Dollar Sales (in millions)

$2.26

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 June 11, 2017.

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Canning is a freelance writer from Libertyville, Ill.

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Category Intelligence: RTD Coffee & Tea

No waiting Ready-to-drink coffee and tea offers convenience amid a variety of taste sensations

By Dana Cvetan

Do

consider adding blueberry and raspberry flavors to your RTD coffee line.

erfect for those who would rather not wait and who definitely don’t want to do without, ready-to-drink (RTD) coffee and tea are making waves in their respective categories.

Reasons behind the surge include busy lifestyles, consumer preferences for beverages with antioxidant properties as well as healthier alternatives to carbonated soft drinks, and the popularity of café culture.

For years, coffeehouses have introduced consumers to finer, sophisticated brews of both coffee and tea. Though not as prevalent, tea houses are taking root around the country and are performing the same service, according to market research firm Packaged Facts’ December 2016 report “Tea and Ready-to-Drink Tea: U.S. Retail Market, 6th Edition.”

Dollar sales of refrigerated RTD coffee rose 20.5 percent and dollar sales of refrigerated tea were up 8.4 percent for the 52 weeks ending June 11, according to Chicago-based market research firm IRI. Whether from RTD varieties, cold brew or k-cups, continued reinvention is driving coffee category growth, according to Packaged Facts’ December 2016 report “Coffee and Ready-toDrink Coffee: U.S. Retail Market, 9th Edition.”

Market research firm Mintel concurs, reporting that consumers are increasingly turning to the RTD and singlecup formats. According to its July report, “Coffee U.S.,” roasted and instant coffee segments are struggling amid overall moderate coffee category growth.

Millennial and the younger iGen consumers in particular are open to trading up for premium coffee offerings, Mintel notes. In addition, the report says, consumers who are proactive about leading healthy lifestyles could be swayed by the health and wellness benefits of beverage offerings.

The tea category’s, and particularly the RTD tea segment’s, performance in recent years illustrates its strength, durability and mass appeal, according to Packaged Facts.

Packaged Facts credits smaller operators for much of the tea category’s innovation, reporting that they introduce new ingredients and flavors that consumers are eager to try.

The upswing in RTD and refrigerated categories is driving strong growth in tea, according to Packaged Facts, which predicts tea sales will reach a new high point by closing in on $9 billion by 2020.

New attitudes The success of the leading national brands groomed consumers for private label RTD coffees and teas, says Todd A. Mullane, vice president of private label for Dakota, Ill.-based Berner Food & Beverage LLC. Grab-and-go is a part of American culture now, Mullane observes, and shelf-stable as well as refrigerated RTD beverages benefit from the consumer need for quick and easy ignore the beverages that offer an energy opportunities boost to boot. in limited-time Store brands looking to be national brand equivalents can or seasonal offerings. choose to produce beverages that are very close to the

Don’t

56

Store Brands / September 2017 / www.storebrands.com

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A short trip to a long tradition in tea Meet Hälssen & Lyon

Category Intelligence industry leaders, or they can differentiate themselves with their own creations, Mullane says.

“Do you want to take the caffeine up or down, enhance the caramel, or even think outside the box and [offer] latte — where the big play is today — or cold brew because that’s what’s trendy?” Mullane asks.

Product trends

Headquartered in Hamburg’s historic warehouse district, Hälssen & Lyon is one of the leading European tea companies. Every week, containers full of quality teas are unloaded for further refinement and processing, before they are then shipped to customers internationally, including the U.S. Market.

Their office in New York offers the North American market the expertise and knowledge of a highly specialized team.

By tapping into Hälssen & Lyon’s expertise of more than 135 years in the tea business and combining that with a creative spirit of innovation they are able to customize a tea program to fit their customers needs.

They offer consulting, packaging and design here in the U.S. for projects of all scopes and sizes. The company slogan “The world of tea under one roof” speaks to the one-stop shop available to brands and private label customers.

From tailor-made tea recipes to ready-packed cartons of first class tea sachets, Hälssen & Lyon has the ability to meet your tea needs. The perfect end to the fascinating journey from the tea garden to the private label product on the shelf.

Premium products, clean labels and new cleaner label line extensions are the leading trends in private brand RTD teas, says John Harper Crandall, vice president of sales with Amelia Bay, headquartered in Johns Creek, Ga. Existing brands face a challenge when it comes to cleaning up their labels due to customer loyalty, Crandall says. “Many consumers who have been enjoying a product for years do not want a change in their product regardless of what the next healthy trend is all about,” Crandall adds. “In cases like these, [many] brand owners have been extending the brand into organic or premium areas that may use brewed tea instead of tea powders and all natural ingredients instead of artificial ingredients.”

Three in ten coffee drinkers believe coffee is healthier than other caffeinated beverages.

Unique and distinct flavors are trending in RTD lattes, coffee energy drinks and cold brews, Mullane says.

“The possibilities can be endless,” he adds. Beyond the popular vanilla and mocha, blueberry and raspberry are highly sought-after flavors. Other promising tastes include kiwi, guava, chocolate-strawberry and chocolate-cherry.

More retailers are also requesting limited-time

RTD coffee and tea category performa Refrigerated Teas/Coffee

Refrigerated Coffee Concentrate

Private Brands

All Brands

Private Brands

Dollar Sales (in millions)

$181.4

$1,324.1

$0.0

$20.5

Change vs. Year Ago

+6.6%

+11.4%

+520.5%

+141.5%

Dollar Share

All Brands

13.7%

100%

0.3%

100%

Unit Sales (in millions)

97.9

532.1

0.0

2.7

Change vs. Year Ago

+4.1%

+8.8%

+377.6%

+129.9%

$1.85

$2.49

$5.76

$7.57

Avg. Price Per Unit

Source: InfoScan Reviews, IRI, a Chicago-based market research firm. Total U.S. supermarkets, d club and dollar retail chains for the 52 weeks ending June 11, 2017.

58

Store Brands / September 2017 / www.storebrands.com

Category Intelligence assortments for their product mixes, such as chocolate mint or peppermint flavored coffee for the winter holidays; pineapple, mango or strawberry in the spring or pumpkin spice in the fall, Mullane adds.

Growth potential The premium market segment offers considerable growth potential in RTD tea, Crandall says.

“Consumers today look at the ingredient statement a lot more before making a purchase and are willing to spend more on premium, clean label products. This doesn’t mean that existing products will go away, only that the most successful new entrants will be premium entrants,” Crandall explains.

In the coffee sector, cold brew will continue to grow, Mullane notes. “It’s been huge, and will continue to get even stronger.”

Nitro-infused coffee, with its creamy texture, also shows potential for growth, Mullane adds.

Three in 10 coffee drinkers believe coffee is healthier than other caffeinated beverages, Mintel reports. For this reason, brands should consider launching RTD coffees that include health- and wellness-related benefits, Mintel advises.

The health benefits of black, green, oolong, white and Puerh teas come from antioxidants called flavonoids. Packaged Facts reports that research suggests tea (especially green tea) offers a wide range of health benefits that may slow aging, guard against cancer and promote heart health. SB Cvetan is a freelance writer from Barrington, Ill.

ance Refrigerated Ready-to-Drink Coffee Private Brands

Private Brands

All Brands

$4.8

$243.2

$176.5

$1,060.4

-8.2%

+20.5%

+7.0%

+8.4%

2.0%

100%

16.6%

100%

1.4

63.1

96.5

466.3

-11.1%

+19.8%

+4.4%

+7.2%

$3.85

$3.85

$1.83

$2.27

The world of tea under one roof contact-US@haelssen-lyon.com phone: +1-212-488-1674 www.haelssen-lyon.com

drugstores, mass market retailers, military commissaries and select

www.storebrands.com / September 2017 / Store Brands

Our business approach is simple: to be the best quality partner for quality partners offering quality brands. Starting with reliable sourcing, we deliver an astounding variety of premium teas, fruits, herbs and their extracts – produced and refined in-house. According to our very high quality standards and overseen by our experienced tea experts.

Our broad scope for innovative product creation and turnkey manufacturing allows us to offer the benefits of a true onestop shop. From tailored recipes to packaging. Whatever your needs, we find the right twist for you.

Refrigerated Teas

All Brands

We find a twist for any

59

Category Intelligence: Allergy & Sleep Aids

Susceptible to differentiation Competing in the allergy or sleep aid arena requires setting store brand offerings apart

By Dana Cvetan

Do

use upgraded packaging materials such as embossed logos and lettering to drive sales.

hough there’s a built-in demand for allergy and sleep aid remedies simply because so much of the public is beset by these ailments, growth in the overall market has slowed, according to global market research firm Mintel.

Mostly effective flu vaccines and a mild cold and flu season contributed to a market expansion of just 2.3 percent from 2015 to 2016, according to Mintel’s April report “Cough, Cold, Flu and Allergy Remedies U.S.” Meanwhile, a whopping 82 percent of U.S. adults — 206 million people — have trouble sleeping at least once a week, according to proprietary survey analysis conducted for market research firm Packaged Facts, as noted in its July report “Sleep Management in the U.S.: Consumer Strategies.”

Noting that two-thirds of adults report they “rarely” get sick, Packaged Facts reveals that insomnia and sleep disorder sufferers are 22 percent less likely than adults on average to say they “rarely” get sick.

Pointing out the health consequences of troubled sleep could spur consumers to seek a professional diagnosis, which could lead to increased usage of over-the-counter (OTC) as well as prescription remedies, Packaged Facts states.

Antihistamines, which are used to treat allergy symptoms such as itchy and watery eyes, sneezing, runny nose and skin irritation, also cause drowsiness, and can be used by adults and children 12 years of

age and older who occasionally have insomnia.

Cautions

Don’t

discount the potential of alternative cough remedy formats such as gummies and lozenges with liquid centers.

There are two impediments to growth n the OTC allergy and sleep aid market, says Mintel.

The first is consumers choosing to not treat the symptoms of these common ailments, especially among younger sufferers.

In a January Lightspeed/Mintel internet survey of 1,713 adults who experienced at least one cold, cough, sore throat, flu or allergy in the past 12 months, 53 percent of adults 34 years and younger said they felt no need to treat their ailments.

In contrast, 45 percent of males aged 35 to 54 and 47 percent of females in the same age range agreed that their ailments needed no treatment. For the 55 and older crowd, 46 percent of men and 48 percent of women felt this way. Overall, 49 percent of adults felt their symptoms required no treatment.

The second impediment comes from parents wary of exposing their children to the ingredients found in OTC remedies, Mintel warns.

A quarter of parents are concerned about this, and sales of OTC children’s remedies are declining as they turn to natural remedies for their children, according to Mintel’s February 2016 report “OTC Pediatrics – U.S.” Nonetheless, Mintel contends that family households represent the most significant demographic opportunity for brand marketers.

To take advantage of this, however, brands “must keep innovating to appeal to changing consumer preferences,” Mintel’s report states.

Target convenience, portability Retailers are always looking for product differentiation and thrive on first-to-market opportunities even if no national brand exists, says Mark Bolling, vice president of marketing for PuraCap Pharmaceutical in Piscataway, N.J., which markets a line of store brand OTC cough/cold, upper respiratory, pain relief, sleep aid, digestive solutions and allergy products.

Retailers are asking store brand manufacturers to develop innovations to take advantage of the fact that national brands tend to move more slowly internally as they strive to protect their brand equity, 60

Store Brands / September 2017 / www.storebrands.com

Bolling says, adding that “store brand manufacturers gummies rather than liquids, especially for children, can operate more freely in changing design, says da Silva. packaging, formulations, and delivery systems.”

Another important innovation is lozenges with Innovations targeting convenience, portability liquid centers, says da Silva. “It gives the consumer a and delivery systems are winning category strategies, sense of taking a cough liquid. The lozenge releases especially for remedies designed for children, says the soothing liquid and gives the consumer a sense Daniel da Silva, account manager/marketing manager of reassurance.SB for private label for BestCo, Mooresville, N.C. “Consumers are always leaning toward conveCvetan is a freelance writer from Barrington, Ill. nience, and [can be won over by] something they can take on the go, that’s easy to carry,” da Silva adds.

Sleeping Sleeping Aid Sleeping Aid Cold/Allergy/Sinus BestCo develops consumer Remedies Liquids Tablets Tablets/Packets healthcare products, including Private All Private All Private All Private All OTC lozenges for the cough/ Brands Brands Brands Brands Brands Brands Brands Brands cold category, as well as dietary Dollar Sales (in millions) $257.2 $725.3 $34.0 $141.3 $223.1 $584.0 $1,481.4 $4,655.0 supplements for private brand Change vs. Year Ago +3.3% +3.9% +5.4% +1.0% +3.0% +4.7% +0.9% +3.3% and contract manufacturing Dollar Share 35.5% 100% 24.1% 100% 38.2% 100% 31.8% 100% clients. The company specialUnit Sales (in millions) 44.0 105.1 6.5 22.6 37.5 82.6 188.1 474.5 izes in creating new delivery Change vs. Year Ago +3.6% +2.8% +4.5% -0.7% +3.5% +3.7% -1.6% +1.4% formats and flavors.

Avg. Price Per Unit $5.85 $6.90 $5.25 $6.26 $5.95 $7.07 $7.87 $9.81 In the cough remedy category, retailers are leaning Source: InfoScan Reviews, IRI, a Chicago-based market research firm. Total U.S. supermarkets, drugstores, mass market retailers, 17_0123_AD_H_Store Brands Mag_OLai.pdf 1 2/9/17 AM dollar retail chains for the 52 weeks ending June 11, 2017. military commissaries and select11:09 club and toward different forms such as

Allergy and sleep aid category performance

www.storebrands.com / September 2017 / Store Brands

61

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storebrands.com The Store Brands website is your source for the latest news, industry trends, new products, research, category intelligence and more!

Available any time of day.

Category Intelligence: Vitamins and Supplements

A healthy market The vitamin and supplement segment is booming — new dosage formats and condition-specific formulations could help retailers grab a bigger share

By Kathie Canning

.S. sales of vitamins and supplements have been on an upward climb over the past decade or so, thanks in part to consumers’ growing interest in formulations that promise antiaging and preventive health benefits.

Supplements have been experiencing the strongest gains, according to “Vitamins, Supplements and Minerals — US,” an October 2016 report from global market research firm Mintel. Within the supplements sector, probiotics, fish/animal oils and melatonin offerings are driving sales growth, Mintel says, reflecting consumers’ desire to improve their digestive and heart health, as well as to get more sleep.

Store brand vitamins and supplements already lay claim to a healthy 27.3 percent of dollar sales, according to data from Chicago-based market research firm IRI. But retailers that tap into up-and-coming trends here could grab an even larger share of the segment.

Rethink format — and get specific One trend that’s picking up steam is consumers’ desire for alternative vitamin and supplement formats. In fact, 64 percent of surveyed consumers expressed interest in trying vitamins, minerals and/ or supplements in a hard candy format, Mintel notes.

And 61 percent expressed interest in trying a beverage containing vitamins, minerals and/or supplements.

“New formats provide an appreciated departure from consumers’ routine, allowing them to have a more sensorial, enjoyable experience than with a tablet,” Mintel says. “Expanding mints and candy into products beyond multivitamins could help consumers stay more consistent with their regimens and drive more sales for the industry.”

Another trend is that toward condition-specific formulations.

“Condition-specific products are especially appealing in the recreate health and wellness market, condition-specific as we see with the success of formulations in bone-building calcium and B vitamins, which have energy various formats and mind-boosting claims,” says such as hard Patricia Jones, general manager candy and mints. for Miami Lakes, Fla.-based Mason Vitamins.

Condition-specific vitamins and supplements targeted to women spell opportunity, too. These products help promote beauty from within, strengthen bones, relieve menopause symptoms or support wellness before and during pregnancy.

“Additionally, products that meet women’s top health challenges — specifically, diet, fatigue and stress — are seeing and will continue to see success,” Jones says.

Ingredients such as turmeric and super greens that address natural health and overall wellness also are in vogue, notes Brianne Vaskovardzic, director of marketing with Norax Supplements in Newnan, Ga. Retailers could capitalize on this trend by creating custom formulations that contain these ingredients and go across multiple categories, including weight management, sports nutrition, probiotics, multivitamins and others.

And products that support brain and mental health will continue to enjoy strong sales growth, she adds.

“Other proven ingredients such as resveratrol and glucosamine will continue to see strong sales as consumers move away from fad ‘designer supplements’ and towards products backed by science,” Vaskovardzic says.

Another noteworthy trend can be found in adaptogens, herbal supplements that target the body’s stress responses, Vaskovardzic notes.

“Ginseng is a well-known market leader in this space, but more unique ingredients such as the

Don’t

fail to use mobile marketing channels to reach out to young adult consumers.

Do

www.storebrands.com / September 2017 / Store Brands

63

Category Intelligence: Vitamins and Supplements ayurvedic healing herb ashwagandha are gaining in popularity among consumers,” she says. “Other adaptogens that private label distributors should consider include maca, panax ginseng, astragalus and rhodiola.”

Although millennials trail boomers in overall supplement use, they are taking a proactive interest in their health. This interest is increasingly driving sales within the vitamin and supplements category, Jones notes. In fact, 73 Vitamins and percent of adults between supplements the ages of 25 and 34 Private All regularly take vitamin and Brands Brands mineral supplements.

Vitamin & supplement category performance

$1,913.4

$7,016.3

Change vs. Year Ago

+1.2%

+3.0%

Dollar Share

27.3%

100%

Unit Sales (in millions)

247.5

709.9

Change vs. Year Ago

+1.2%

+1.1%

Avg. Price Per Unit

$7.73

$9.88

Dollar Sales (in millions)

*Includes liquid vitamins/minerals, mineral supplements, multivitamins and one- and two-letter vitamins. Source: IRI, a Chicagobased 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 June 11, 2017.

Mind the label In recent years, some vitamin and supplement manufacturers have come under fire for mislabeling products or making false claims. So it’s crucial that retailers work with trusted manufacturers.

“I believe there is a win-win opportunity for the retailer to partner with appropriate manufacturing organizations with an industry reputation for commitment to both regulatory compliance and high quality,” says Jennifer Cusick, director of sales operations for Trividia Manufacturing Solutions in Lancaster, N.H. “Consumers will benefit in purchasing safe and effective store brand supplements. A concurrent benefit will be the improved reputation of the supplement industry as a whole.”

Vaskovardzic agrees, noting that consumer safety and efficacy will continue to be major drivers.

“This has resulted in a push toward the clean label trend, or products containing natural and simple ingredients without artificial ingredients or synthetic chemicals,” she adds. “Brand labeling is extremely important to the success of private label supplements, as truthfulness in labeling is becoming a priority to consumers.”

Retailers could boost consumer confidence by clearly communicating to shoppers that all of the manufacturing practices required by law are being diligently followed, Cusick stresses. SB Canning is a freelance writer from Libertyville, Ill.

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U.S. Alliance Paper Introduces Ultra Premium Azure U.S. Alliance Paper recently introduced its award-winning Ultra Premium Azure paper towels and bath tissue. “We’re seeing ‘premiumization’ as a growing trend in the household paper category,” said Steve Saraf, Vice President of Sales. “For our larger private label customers, it made a lot of sense to develop value alternatives for the premium quality tiers. However, smaller retailers, who did not have the volume for their own private label program, were also interested.

Which is why we created a new control brand, Ultra Premium Azure, especially for them – ready-to-shelve in bold, eye-catching packaging.”

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.

64Advertorial.indd Store Brands USAP 1 / September 2017 / www.storebrands.com

“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. l

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Alpha Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Ardagh Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 Barbours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26-27 Berner Food & Beverage . . . . . . . . . . . . . . . . . . . . . . 10-11

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Cantania Oils . . . . . . . . . . . . . . . . . . . . . . . . . . . . Covertip Chelton House Products, Inc . . . . . . . . . . . . . . . . . . . . . 23

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

Daymon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

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Delorio Foods, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

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Finlay Extracts and Ingredients USA, Inc . . . . . . . . . . 19 Furlani’s Food Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . .BC Ghigi USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53 Global Tissue Group . . . . . . . . . . . . . . . . . . . . . . . . . IFC-3 Godshalls Quality Meats Inc . . . . . . . . . . . . . . . . . . . . . . . 7

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

Haelssen & Lyon North America Corp . . . . . . . . . 58-59 IGPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12-13 ITI Tropicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36 Morgan Foods Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . .28-29

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

Nepa Carton & Carier Co . . . . . . . . . . . . . . . . . . . . . . . .38 Private Brands Consortium PBC . . . . . . . . . . . . . . . . . 33

Lisa Adams

Private Label Manufacturers Association . . . . . . . . . . 9

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

Red Monkey Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Riverbend Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . 44-45 Saltworks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Satispie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 Tower Laboratories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 U .S . Alliance Paper . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 64 Vanns Spices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 Westrock Coffee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IBC Wonder Natural Foods . . . . . . . . . . . . . . . . . . . . . . . . . . 37

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 / September 2017 / Store Brands

65

EndCAP Category Closeup: Coffee

What’s brewing?

Market research firm Mintel recently listed these coffee trends: 1 2

Nitro coffee, created by adding nitrogen to

cold-brew coffee and resulting in a drink with a naturally creamy mouthfeel, is set to take off.

Consumers are increasingly concerned with food waste and new ways are surfacing to

Coffee sales 52 weeks from October through October

repurpose ingredients to reduce overall waste. One beverage that fits into this trend is the coffee hybrid cascara, a slightly 3

By Year

tart/bitter caffeinated beverage created by the discarded skin of coffee cherries.

Is the age of aged coffee upon us? Out of all the emerging processing methods, “aged” coffee may resonate most with consumers, as

one quarter of U.S. consumers say that they would try aged coffee at a

4

5

foodservice establishment..

While alcohol and coffee pairings aren’t anything new, bars are utilizing coffee in cocktails in new and interesting ways.

Coffee cocktails are becoming more complex as bartenders use coffee to a much greater degree.

Consumers are increasingly looking for drinks that provide a functional benefit, such as energy boosting, anti-inflammatory, relaxing or antioxidant. Coffee could be an excellent carrier for these benefits.

Private Brands In Billions

All Brands In Billions

0.77

$

0.88

$

0.95

$

2011-12

$

2012-13

$

2013-14

$

8.58 9.13 9.49

1.11

$

1.25

$

2014-15

$

2015-16

$

10.30 10.59

Source: Nielsen

2016 store brand U.S. coffee sales boosted by single-cup category Single-cup coffee

528.9

$

Ground coffee

Coffee share of segment

361

$

52 weeks from October through October Refrigerated coffee/tea

$

Private Brands Percent

All Brands Percent

2011-12

8.3

91.7

2012-13

8.8

91.2

2013-14

9.1

90.9

2014-15

9.7

90.3

2015-16

10.6

89.4

166.7

By Year Whole coffee beans

75.9

$

Ground decaffeinated coffee

57

$

27.6

Ready-to-drink coffee/tea

$

0

$

100

$

200

$

300

$

Millions U.S. dollars Source: Statista 2017 66

Store Brands / September 2017 / www.storebrands.com

400

$

500

$

Source: Nielsen

We are the largest independent specialty coffee trader in the world. We believe that, in order to create the most impact, it is imperative for us to be involved at every stage of the coffee supply chain. With Westrock as your partner, the coffee inside your single serve cups will be expertly crafted and ethically sourced from crop to cup.