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5 disruptors shaking up the industry

Grocerants help retailers Organic and all-natural up their own brands a perfect fit in fresh April 2018 | www.storebrands.com

The Private Label

Hallof

Star 2018

POWER This year’s five inductees into the Private Label Hall of Fame helped take store brands to another level


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Volume 40 No. 4 April 2018

DEPARTMENTS 6

Editor’s Take

8

Viewpoint

10

Around the Industry

12

Getting Social

54

End Cap

CONTENTS The Private Label

Hallof 2018

14

CATEGORY INTELLIGENCE 39

Cheese

42

Salty snacks

48

Juices, water and seltzer

50 52

Cookies and crackers Wet wipes

COVER STORY

Star power This year’s five inductees into the Private Label Hall of Fame helped take store brands to another level

FEATURES

37 FOCUS ON FRESH

25 TRENDING Shake it up Five current disruptors impacting private brands

34 TOTAL STORE Grocerants galore Retailers of all sizes are winning over customers with their fresh-prepared offerings

25

Fresh and organic — a dynamic duo The time is ripe for retailers to strengthen their own-brand fresh organic and all-natural selections

37 34

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

Store Brands / April 2018 / www.storebrands.com


EDITOR’S TAKE Business Intelligence for an Evolving Market

8550 W. Bryn Mawr, Suite 200, Chicago, IL 60631 (773) 992-4450

Senior Vice President/Group Brand Director 917-859-3619

THIS CUSTOMER EXPERIENCE WILL NEVER BE THE SAME

Katie Brennan

kbrennan@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

I was saddened to hear that Toys “R” Us is closing its stores after 70 years of business. For me the news means the end of the exceptional customer experience that Toys “R” Us continually offered me and my friends — if only for one day out of the year. I realize that Toys “R” Us has nothing to do with grocery-related private brands, but Toys “R” Us did offer a brick-and-mortar customer experience that I have never encountered at any other retailer. And such a positive experience — an intangible store brand— is vital to any retailer’s image. For 30 years my friends and I shopped at Toys “R” Us as part of a charity we operate in Akron, Ohio, called Santa’s Helper. Every year on a Saturday in December, our group of about a dozen shoppers would head into the local Toys “R” Us to spend about $12,000 we had raised on toys and other gifts for underprivileged children. And every year we were met with a staff of over-accommodating people to meet our needs. They were friendly and worked hard to appease us. They helped us in the store aisles with selections. They helped us carry out bag after bag of toys to an awaiting truck. They knew we were helping the less fortunate, and they took joy in being part of the process. I often thought, if there is a North Pole with courteous and kind-hearted elves, this was it. Funny thing, most people these days want to get in and out of a store, be it a grocer or a department store, as fast as possible. But when our group finished our shopping after about three or four hours in Toys “R” Us, we were sad to leave. That shopping day was a highlight of our holiday season, akin to opening presents with our families under our respective blue spruce trees on Christmas morning. But now that customer experience is gone, like the Grinch stealing toys in the middle of the night. I’m not sure where our charity will shop now. No other brick-and-mortar retailer offers the selection that we need to get our shopping done for nearly 200 kids every year. We will probably have to do our shopping online. Ugh. Nothing against e-commerce, but the customer experience that Toys “R” Us provided us can never be replicated online. Chalk one up for brick and mortar. And while I feel bad for myself and our group that we will no longer be able to enjoy shopping at Toys “R” Us, I feel worse for the employees at our local store and the employees at the retailer’s other more than 800 stores who will lose their jobs. While I can only speak of the employees I dealt with at our local store in the last 30 years, I can say the customer experience would be a lot less without them. They are a testament to how important the human element is to a positive customer experience, which has everything to do with building a positive image for a retailer’s brand. Truth is, it will probably be easier and faster for our group to shop online. But those courteous and kind-hearted elves — the Toys “R” Us employees — won’t be around to help make it such a festive experience. It will never be the same without them.

Rich Mitchell, 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 Director of Client Services, Enterprise Solutions Kaeli Elisco (224) 632-8221

kelisco@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

Pat Wisser pwisser@ensembleIQ.com

Creative Director

Colette Magliaro cmagliaro@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 Executive Officer

David Shankar

Chief Brand/Operating Officer

Richard Rivera

Chief Business Development Officer & President, Ensemble IQ Canada

Korry Stagnito

President and Executive Director Path to Purchase Institute

Mike McMahon

President of Enterprise Solutions/ Chief Customer Officer Chief Digital Officer

Ned Bardic Joel Hughes

Chief Human Resources Officer

Jennifer Turner

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

2015

6

Store Brands / April 2018 / www.storebrands.com


On

e v i w L NoMA PL

PLMA

®

The Nielsen Bombshell Nielsen’s new report predicts dramatic increases in private label in the US and around the world. What is causing this boom? Are the changes permanent? PLMA Live puts Nielsen’s findings in the spotlight. How high can store brands go?

Brian Sharoff / Jodi Daley

Tim Simmons

Bob Vosburgh

News Anchors

Monthly Interviews

Category Profiles

Dr. Kantha Shelke Judith Kolenburg Science and Technology

International News

Watch the news. Don’t just read about it. www.plmalive.com Presented by the Private Label Manufacturers Association


VIEWPOINT

By Ryne Misso

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

8

Why retailers may need to put on their brand hats … and soon The private brands saga reached something of an inflection point in the past year. There are no more surprises for national brand manufacturers when it comes to private brands. New store brand on the shelf? Not shocking. Retailers developing new private brand products in new categories? We could have guessed that. The growth of Amazon’s, Walmart’s and Target’s store brand programs, coupled with the growth of private brand-heavy retailers such as Aldi, Trader Joe’s and newcomer Lidl are all reasons why brands are past the figuring-it-out phase and on to the let’s-make-some-changes phase. Retailers continue to allocate a growing portion of their promotional support to store brands, especially as they rely more on their private brand programs to differentiate themselves. What’s interesting about this inflection point is that in many ways brands are trying to take more control over their own destinies. Rather than exploring how to slow the growth of private brands at retail or expending effort trying to supplant private brands in retail promotions, many brands are investing more time and money into areas such as the following to help solve the problem: ● Direct-to-consumer channels. Brands like Dell and Apple have sold direct for years. Now brands from all categories from electronics to consumer packaged goods (CPG) are establishing direct channels to sell to consumers. ● Providing experiences, both physical and emotional. Consumers today consider how they feel about a brand in their purchase processes more than they ever did before, and brands seem to do more than retailers in fostering emotional connections with their customers. ● Transparency around their products and their sources. Product quality as well as the ethical sourcing and

Store Brands / April 2018 / www.storebrands.com

production of said product are increasing in consumer demand. Brands of all sizes and trades have shed new light on where and how they produce their products, providing customers confidence that they are standing for honesty and integrity when they shop that brand. Not coincidentally, emerging brands have taken this approach from the outset, and many have earned meaningful market share in their categories quickly. Take Epic Provisions or Halo Top Creamery, for example. Both have integrated well with current health trends and have developed authentic voices through which they communicate with their customers. It is clear why major CPG brands are jumping on these trends quickly and working to become nimbler as consumer preferences shift in lockstep with new trends and technologies. But why should retailers care? What does this mean for the regional grocery chain expanding its private brand program? We are a long way off from not being able to find a bag of Doritos at the local Jewel-Osco, Kroger or Food Lion, but one can envision a world in which the national brands that consumers love have established a massive direct-to-consumer business and no longer depend on sales at physical retail locations to meet their business goals. What may come sooner, however, is the need for retailers to market their private brand products and associated experiences the way brands are already doing today. Retailers most often differentiate their private brand products through price. “Here is our store brand at $4. The quality is no worse than the national brand next to it, and you’ll save $2!” How long will that message resonate with shoppers? When will consumers demand more transparency about how their private brands are produced or where they are sourced from or what organization they are benefitting by purchasing that private brands? When will they require private brands to offer them both savings and a memorable experience? Simply expanding the number of private brand offerings available may not cut it five years from now — or even a year from now. Retailers should take notice of the changes national brands are making to cope with the private brand problem and put their brand hats on to prepare for when private brands must adjust to the increasing demands of their shoppers. SB


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AroundtheIndustry

Where ideas for private brands are born The Natural Products trade show is billed as the world’s largest event for natural and organic products — and a place where retailers can find distinct products for store brands

By Lawrence Aylward

When the Natural Products Expo West trade show was first held in Anaheim, Calif., in 1981, a mere 3,000 people attended to see what was new in natural and organic foods. It has been said the show had a hippie feel to it, which may have something to do with the way natural and organic foods were perceived almost 40 years ago. In March, the 38th-annual Natural Products Expo West concluded after attracting a whopping 85,000 attendees, a record for the show. The show had a full-of-life feel to it, which probably has something to do with the way natural and organic foods are perceived today. Natural Products Expo West is billed as the world’s largest natural, organic and healthy products event. After strolling the show for a few days, I will not argue with that. And I’ll bet you a bag of organic lentil with turmeric crackers that the show hits 90,000 attendees next year. In its early years, Natural Products Expo West attracted plenty of momand-pop companies as exhibitors. It still does, but several large corporations including General Mills, Cargill and Tropicana Food Products have seen the light that is natural and organic and are now exhibiting at the show. This year’s show featured 3,521 exhibiting companies, including more than 600 first-time exhibitors. For retailers of store brands, Natural Products Expo West is a place to find products to help them differentiate, although some products might be ahead of their time for private brands. Unless you’ve been living under a tall row of organic corn stalks, you know that natural and organic products have been a boon for private brands. The Kroger

10

Store Brands / April 2018 / www.storebrands.com

Chef Shamy’s gourmet butters are touted as healthy and natural. Co. recently announced that its Simple Truth line of natural and organic products became a $2 billion brand. The Albertsons Cos. recently stated that its O Organics line reached $1 billion in sales. What’s great about Natural Products Expo West is seeing the spin that companies are putting on natural and organic foods. Considering they are natural and organic, the products are already different and regarded as upscale. But when you consider the ingredients (plants, plants and more plants), flavors (curried sweet potato anyone?) and other twists (“nutrient dense” and “packed with super foods”) attached to these products, many take differentiation to a new level. And guess what? Many of them taste good. Angola, Ind.-based Foods Alive, which exhibited at the show, offers a variety of plant-based products including crackers, dressings and oils, which are available for private brands. Matt Alvard, vice president of Foods Alive, says the company’s crackers are made

with flax seeds, chia seeds and other nutrient-dense ingredients. “So you are getting fiber, protein, omega 3s and actual nutrition,” Alvard adds. “There is so much junk food out there. When people see [our products] they recognize it has some real nutrition and provides real value.” Another exhibitor, Boulder, Colo.based Sage V Foods, specializes in producing rice- and grain-based ingredients and includes non-GMO and organic frozen rice among its offerings for own brands. In addition to its goodfor-you and free-from attributes, Sage V Foods’ Brian Wendelschaefer touts the convenience of frozen rice. “You put a pouch of it in the microwave and it’s done in three minutes,” says Wendelschaefer, the company’s manager of sales and marketing. At its booth, Denver-based NestFresh Eggs was also promoting convenience with its organic, clean-label and cage-free hard-cooked eggs. “The eggs come peeled and are ready to eat,” says Brandy Gamoning, NestFresh’s marketing manager. “We try to make it as convenient as possible.” At the Chef Shamy booth, the Salt Lake City, Utah-based company was promoting its all natural butters, which are available for private brands. Butter is back, of course, and has gained a more positive reputation as a healthy product the past few years. “Butter is probably one of the biggest comeback stories in food history,” says Stephen Shamy, regional sales director for Chef Shamy. “What we have brought innovatively to the market place is shelf-stable gourmet butter.” If you’re a retailer looking to invigorate your store brands program, you might want to check out this show, if you already haven’t. Yes, some products might be a little out there for store brands, but there are plenty of companies offering distinct products for private brands that just might help retailers stand out from their competition. SB


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GETTING SOCIAL

Q A with Jim Wisner Private Brands Consultant and Owner/ President of Wisner Marketing

How did you come to the world of private brands? Many years ago early in my career I was a category manager at Jewel food stores with responsibility for private brands across many categories. The fun fact from that experience was that I was responsible for procuring the first generic store brand that made it to the shelf in North America. Describe the private brands industry in one word. I’m going with exciting. What do you like most about the industry? More than in other industry segments, there is a shared sense of purpose and collegiality.

Jim Wisner’s business travels take him many places, like China, where he loves to sample the culture and food.

What do you dislike most about the industry? In spite of all that is said about innovation and quality, there are still some retailers that are still price first (not cost and quality) in their approach to store brands. What one great thing does the industry have going for it? For the first time there are virtually no significant headwinds for the industry to overcome. How fast we grow is up to us. What is the industry’s biggest challenge? National brand manufacturers are adapting faster to the social and digital marketing ecosystem and e-commerce. If you could create one private brand product, what would it be? All of them.

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Store Brands / April 2018 / www.storebrands.com

Who is your hero and why? Politician Robert F. Kennedy, who once said: “There are those that look at things the way they are and ask why? I dream of things that never were and ask why not?” What trait in yourself do you attribute most to your success? I genuinely give a $#!+ about most everything I do. What is the biggest obstacle you have ever overcome? When I was at Jewel in the early 1980s, there was high inflation, a terrible economy, and a raging price war in many of our markets. We were able to succeed by strategically emphasizing our store brands. If you did it right, you could lower prices and increase margins at the same time What’s the best advice someone ever gave you? “No matter how much great planning and good work that you do, remember, the object is always to make the line go up.” It’s 5 o’clock (or later), what do you do for fun? Family gatherings are still the most fun for me. From a hobby standpoint, I’ve been playing fantasy football for more than 25 years. If you were born 100 years ago, what would you do for a living? It would not be unlikely that I would be teaching something — or maybe inventing store brands. What song do you love to crank up in the car? Unfortunately, Ryan Gosling in “La La Land” did not completely save jazz, but it is my go-to music.


The Private Label

Hallof

2018

Star

By Lawrence Aylward and Carolyn Schierhorn

PLMA’s Brian Sharoff on inductees

Tom Stephens “Tom became the evangelist who marketed the concept of premium private label to supermarket chains throughout the U.S. With his own company, Brand Strategy Consultants, he has been a tireless advocate for store brands, advising retailers and suppliers on five continents.” 14

This year’s five inductees into the Private Label Hall of Fame helped take store brands to another level

POWER

Brian Sharoff, president of the Private Label Manufacturers Association (PLMA), presided over the 2018 inductions into the Private Label Hall of Fame on March 24 at PLMA’s Annual Meeting & Leadership Conference in Bonita Springs, Fla. Here is what Sharoff had to say on this year’s five inductees before presenting them with their hall-of-fame statuettes:

Prem Virmani

Lori T. Latta

Greg Baskin

“As senior vice president of science and research for Cott Beverages, Prem served mostly out of the spotlight but ensured that the flavor profiles for Cott in its private brands products would compete up against the biggest and best-known national brands.”

“Trader Joe’s unique approach to sourcing and product development remains a hallmark of the chain’s astonishing store brands success. From the 1990s to the present, Lori has combined her roles as world traveler, sourcing agent, chef, food scientist and nutritionist.”

“For nearly two decades until his retirement in 2015, Greg was the face of private label business with Hormel. Greg’s example has extended well beyond the interest of his company alone by mentoring countless other PLMA members and giving back to the private label industry as a whole.”

Store Brands / April 2018 / www.storebrands.com

David Glass

“Taking the reigns as CEO in 1984 after the company’s founder Sam Walton, David Glass was involved in [Walmart’s] expansion into private label. Famous for its discounts and national brands, nonetheless [Walmart] would become one of the most important retailers involved in private label.”


epresenting retailers, private brand vendors and industry thought leaders, the 2018 inductees into the Private Label Manufacturer Association’s (PLMA) Private Label Hall of Fame helped catapult the profession to new heights. On the retail side, former Walmart CEO David Glass led the company when it launched its Sam’s Choice and Great Value brands. Meanwhile, Lori T. Latta, vice president of product innovation at Trader Joe’s, continues to play a huge role in developing the retailer’s internationally inspired, creatively marketed private brand products. Dedicating his 50-year career to private brands, Canadian consultant Tom Stephens developed and brought Loblaws’ President’s Choice brand to the United States and transformed the South African chain Woolworths into a retailer that carried own brands exclusively. On the manufacturing side, Greg Baskin spearheaded Hormel’s private brand business while assuming positions of leadership as an active member and an officer of the PLMA. Working behind the scenes in research and development, Prem Virmani, in turn, formulated many successful store brand colas during his 25 years with Cott Beverages USA. To identify those worthy of induction into the hall of fame, each year the PLMA and Store Brands solicit nominations from a wide range of people in the private brands industry. The individuals selected must have contributed significantly to store brand development and innovation; advanced the growth of private brands through creative marketing, merchandising and promotions; improved manufacturing, packaging or quality assurance processes in the industry; and/or served as champions of store brands within their own companies, business communities and the consumer marketplace. This year’s honorees join the 55 other luminaries who’ve been inducted into the Hall of Fame since its establishment in 2006.

(From left) This year’s hall-of-fame class includes David Glass (pictured is Erik Winborn, who accepted on behalf of Glass), Prem Virmani, Lori Latta, Tom Stephens and Greg Baskin. (Photo courtesy of Arista Collective)

www.storebrands.com / April 2018 / Store Brands

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The Private Label

Hallof

2018

Tom Stephens: A ‘global apostle’ for private brands In nominating Tom Stephens for the Private Label Hall of Fame, store brands consultant Jim Wisner noted that Stephens is the industry individual who would elicit the most “I can’t believe he already isn’t in the hall of fame” comments from those familiar with Stephens and his accomplishments in the store brands industry. “He may have done more to singlehandedly move the needle forward for the store brands industry than anyone else,” Wisner, president of Wisner Marketing Group, said on the nomination form. When told of Wisner’s comments, the cheerful Stephens cracked, “I guess I better write him a check.” Then he let out a hearty laugh. Jokes aside, Wisner is spot on — Stephens is an exemplary choice. He was also voted in on a landslide. During his near 50-year career, Stephens has had several milestones, including developing and bringing Canadian retailer Loblaws’ lauded President’s Choice private brand to the United States in the early 1990s. Stephens, who spent seven years as executive vice president of President’s Choice International, introduced the Loblaws’ brand in 16 retail chains with more than 2,000 stores in 36 states, including Fred Meyer, Harris Teeter and D’Agostino Supermarkets.

“There were some really great chains that took the President’s Choice program and embraced it,” Stephens says. But it was a major challenge for Stephens at the outset. At the time, U.S. retailers weren’t willing to take on Canadian private brands, mainly because they didn’t think they needed them to succeed. So Stephens had to convince U.S. retailers of the quality and distinction of the upscale premium brand and develop products for them that would succeed. He did both. “[President’s Choice] really picked up steam and in time became very successful,” Stephens says. Before coming to Loblaws, Stephens spent 19 years with Woolworths in South Africa, a chain modeled after Europe’s leading food and clothing chain Marks and Spencer. At Woolworths, Stephens transitioned the grocery department from 100 percent national brands to 100 percent corporate brands in only two years. He also built the distribution network for the program. “That was a great opportunity for me,” Stephens says. “People [involved in the decision] thought it couldn’t be done because it would be too difficult. It was a huge challenge. But customers accepted it very quickly, and we were able to build a fabulous business.” Wisner also calls Stephens “the most global apostle of the store brand movement.” No doubt. Since founding Brand Strategy Consultants in 1994, Stephens has advised store brand retailers and manufacturers in the U.S., Italy, Britain, Holland, the Caribbean, Australia, South Africa and South Korea. In 2002, Stephens developed a series of classes in private label marketing for PLMA’s Executive Education Program developed in conjunction with St. Joseph’s University in Philadelphia that he still teaches today as well as at Nyenrode University in Holland. Stephens has a store brand legacy that few can match. No longer will people be saying he should be in the hall of fame.

Previous Private Label Hall of Fame inductees 2006

• E.W. Williams, Private Label magazine • Etienne Thil, Carrefour Hypermarkets • Dave Nichol, Loblaws Supermarkets

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2007

• Bob Anderson, Walmart Stores Inc. • Nick Hahn, The Kroger Co. • Dr. Herb Shuster, Shuster Laboratories Inc. • Larry Weisberg, Personal Care Products Inc.

Store Brands / April 2018 / www.storebrands.com

2008 • • • •

Sir Terry Leahy, Tesco PLC Don Watt, DW+Partners Marvin Benjoya, Perrigo Co. Peter Schwartz, Daymon Worldwide Inc.

2009 • • • • • •

Joe Coulombe, Trader Joe’s Kenton Gast, The Kroger Co. John Huffman, Fleming Cos. Don Spellman, PLMA Karl Albrecht, ALDI Group Theo Albrecht, ALDI Group


The Private Label

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2018

Greg Baskin: Propelled Hormel’s private brand business Best known for iconic national brands Spam and Hormel Chili, Austin, Minn.based Hormel Foods has also become a powerhouse in the private brands realm, thanks largely to the energy and leadership of Greg Baskin, who retired from Hormel in 2015 after 37 years of service, 26 of those devoted to the company’s store brand business. When he became Hormel’s private label sales manager in 1989, Baskin consolidated

what had been a fragmented private brands program into one division and soon started strengthening and expanding the business. “I was the face for Hormel’s shelf-stable private label products,” Baskin remembers. “While our branded business was the primary driver of sales and profits at Hormel, we had a nice niche business and we did a very good job of growing it and working with our customers.” For Baskin, developing relationships with colleagues and customers is what he has liked best about both his career at Hormel and his broader involvement in the private brands profession. Soon after he started attending the Private Label Trade Show in the late 1980s, he became active in the PLMA, serving on various committees and eventually the board of directors and the executive committee. He was elected chairman of the PLMA Board in 2012, serving in that capacity for two years. As chairman, Baskin fostered leadership diversity in the PLMA and helped launch Women Impacting Storebrand Excellence (WISE), on whose governing board he sits today. At around the same time he was also serving on a Hormel executive committee on diversity and inclusion, a role he found tremendously satisfying as well as eye-opening, he says. “I had the pleasure of working beside Greg during the initial founding meetings of WISE,” notes Kristal Sevcik, vice president of business development for Evansville, Ind.-based AmeriQual Foods, who nominated Baskin for the Private Label Hall of Fame. “He provided valuable insight as WISE was forming into an official organization. His commitment to inclusivity throughout the private label industry is evident in everything that he does.” Baskin has been a friend and mentor to many people in the store brands profession. For example, he reached out to Sevcik and made her feel welcome when she attended her first PLMA leadership conference in the spring of 2012. “Although I had been in the private label industry for 10 years, I had just gotten involved in the PLMA and knew very few people at the conference,” she recalls. “But Greg made a point of introducing himself to me and made sure I felt comfortable. As one of the younger attendees, it meant a lot to me that a very experienced attendee took an interest in who I was.” Sevcik describes Baskin as a “game changer” in the private brands profession. “He has taken on some very public high-profile positions within the industry and has capitalized on the visibility of his positions by always showing authentic concern for those around him,” she says. In retirement, Baskin works part time as a substitute teacher in the Austin school district. “I just love the relationships with the kids, and you hope that you’re making a difference,” he says. He certainly has made a difference to the private brands industry and to the people who know him.

Previous Private Label Hall of Fame inductees 2010 • • • •

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Jim Sinegal, Costco Wholesale Corp. Danny Wegman, Wegmans Food Markets Dan Huish, Huish Detergents Inc. Bill Robbins, American Safety Razor Co.

2011 • • • •

Mike Jandernoa, Perrigo Co. John Mackey, Whole Foods Market Bill Moran, Save-A-Lot Food Stores Herb Pease Sr., Marketing Management Inc.

Store Brands / April 2018 / www.storebrands.com

2012 • • • •

Ron Carlson, American Stores Co. David Skarie Inc, Ralcorp Holdings Peter Pappas, Clement Pappas & Co. Charles Butt, H-E-B

2013 • • • • •

Steven Burd, Safeway Inc. Peggy Davies, McCain Foods Ltd. Neil Golub, Golub Corp./Price Chopper Milt Sender, Daymon Worldwide Inc. Donald Welge, Gilster-Mary Lee Corp.

CONTINUED ON PAGE 24


C O N G R A T U L A T I O N S

GREG BASKIN ON YOUR INDUCTION TO THE PRIVATE LABEL HALL OF FAME! We are very excited for you to receive this well-deserved recognition. Your Hall of Fame status is another crowning achievement to your 37 years of stellar work at Hormel Foods. Your dedication and passion will always inspire us.

©2018 Hormel Foods, LLC


The Private Label

Hallof

2018

Lori T. Latta: Uncompromising pursuit of unique, healthful, delicious food

Monrovia, Calif.-based Trader Joe’s is a chain acclaimed for the creativity, taste and global inspiration of its private brand food products. A key reason for the retailer’s huge fan base is Lori T. Latta, vice president of product innovation for Trader Joe’s, says Marco Principato, who proposed her for induction into the Private Label Hall of Fame. Latta is “the most knowledgeable person in the private label world with an amazing track record of innovative, healthy, affordable products,” says Principato, sales manager for Roncadin Inc. in the U.S. After graduating from college, Latta worked as a pastry chef and ended up joining Trader Joe’s on a special project to streamline sandwich-making at the chain. She has worked for the retailer for 31 years in positions of increasing responsibility, leaving once to pursue a career opportunity elsewhere but returning to Trader Joe’s because “it was just the right time,” as she puts it. “I have always known that Trader Joe’s is a great company to work for, where I could pursue — without compromise — my passion for creating food as well as create the kinds of products of which I could always be proud,” Latta explains. Her commitment to quality has taken her around the world, sourcing the best products and ingredients from the countries where they originate, according to Principato. “This attitude has led to a range of products that are not only affordable but are especially authentic and good tasting,” he says.

RONCADIN INC 1101 Perimeter Dr, Suite 760 SCHAUMBURG, IL 60173 (USA) Tel. (312) 6473895 sales@roncadin.it www.roncadin.it

24 h 20

Store Brands / April 2018 / www.storebrands.com

HAND SPREAD


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The Private Label

Trader Joe’s has stayed ahead of trends and has taken risks, launching many products before any other American grocery chain, states Principato, who notes that Latta “was able to create the cult following with dedication and impressive attention to details.” An outstanding example of her persistence and high standards was the huge effort she invested in perfecting the retailer’s award-winning frozen cauliflower pizza crust, Principato points out. Latta traveled to Italy to work together with the manufacturer to fine-tune the crust, ensuring that the gluten-free, clean-label vegan product did not contain cheese or eggs and was low in sodium and calories. “What I love most about Trader Joe’s has been the ability to create private label products for our customers that meet a need for healthful and delicious products that are unique from what is being offered elsewhere,” Latta says.

Hallof

2018

Prem Virmani: A master of flavors and blending When Prem Virmani heard he was going to be inducted into the Private Label Hall of Fame, he says he looked at the list of the other 2018 honorees and humbly asked himself, “Do I really belong in that group?” If you ask people who have worked with Virmani, who has spent nearly 50 years as a soft-drink beverage quality control chemist/auditor, they will tell you that Virmani does indeed belong. “Prem was very involved in developing formulas for many private

At Seneca, we're still doing things the way we always have - the right way. Think globally, grow locally.

22

Store Brands / April 2018 / www.storebrands.com


brand beverages,” noted John Huffman, formerly of Fleming Cos. and a 2009 hall-of-fame inductee, who nominated Virmani for the honor. He is a master of flavors and blending.” Virmani spent more than 25 years with Cott Beverages USA. He retired from the company in 2016 as senior vice president of science and research. “While he was not a public face for Cott, he worked behind the scenes for many years,” Huffman noted. In his career with Cott, Virmani developed several private brand colas, including Sam’s Choice cola and Dr. Thunder for Walmart and President’s Choice cola for Loblaws in Canada. His colas are also sold as private brands at Publix Super Markets, Wegmans and Safeway. “Colas are my specialty,” Virmani says, noting he is most proud of creating Dr. Thunder. Virmani, who was born in and grew

up in New Delhi, India, began his career as a formulator with Coca Cola Export in 1969. “I took the job and never looked back,” he says. “[Coca Cola Export] provided a foundation for my career.” Virmani spent seven years at Coca Cola Export in New Delhi, and moved to Columbus, Ga., in 1978 to work for Royal Crown Cola (RCC). He joined Cott, one of the world’s largest producers of beverages, in 1991. Cott acquired Royal Crown Cola International in 2001. Last year, Cott sold its beverage manufacturing business to Refresco. For Virmani, creating beverages never felt like work. “I used to say, ‘I’m so lucky to do what I do. It’s my hobby, and I get paid for it,” he says. Throughout the years, Virmani lectured on various topics in the beverage industry such as at Columbus State University, where he earned a master’s degree in business administration in 1982. He says lecturing allowed him to stay on top and ahead of industry trends. “I had to learn to lecture,” Virmani notes. After retiring from Cott, Virmani began his own consulting firm, Soft Drink Solutions. His work continues to be his play. “I am just another guy who loves to be in the lab and create beverages,” he says.

www.storebrands.com / April 2018 / Store Brands

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David Glass rose up the ranks during his 25-year career at Walmart and had a tremendous impact on the Bentonville, Ark.-based retail giant’s private brands along the way. It’s why Glass, the former CEO of Walmart who currently owns Major League Baseball’s Kansas City Royals, is being inducted into the Private Label Hall of Fame. Glass has been

David Glass

nominated for the hall of fame several times in the past several years. “David was a big fan of private label,” says Bob Anderson, Walmart’s former vice president and general merchandise manager of private brands, who worked under Glass for several years. “He understood that if private label was done right from a quality aspect and exceeded customers’ expectations, then those customers would come back for more.” Under Glass, Walmart introduced and established its premium Sam’s Choice brand and national brand equivalent Great Value brand. Glass was also instrumental in the creation of Sam’s Club and pioneered the development of Walmart’s first supercenter. Under Glass’ leadership, Walmart became the nation’s largest retailer. Glass joined Walmart in 1976 as executive vice president of finance and held other executive roles before being appointed president and CEO in 1988, succeeding Walmart founder Sam Walton in those roles. He retired as CEO in January 2000. “He established a new foundation for the company’s growth, and my dad considered him to be one of the finest retail talents he had ever met,” said Rob Walton, chairman of the board of Walmart and Sam Walton’s son, in a press release announcing Glass’ retirement from Walmart’s board of directors in 2009. Edmund O’Keeffe, president of Royal Crown Cola (a division of Cott Beverages), which supplied Walmart with Sam’s Choice cola, says Glass never wanted to do private brands on the cheap. “It wasn’t just about taking something and making a ridiculous amount of margin on it,” O’Keeffe says. “It was about the quality and value given to the customer.” At the time, most private brands weren’t about quality and value, and Walmart “was going against the traditional grocery grain,” O’Keeffe notes. Anderson remembers that Glass had always had his back. For instance, Walmart was the first retailer to go gluten-free with many private brand food products, at Anderson’s recommendation, and the move caused much controversy with Walmart suppliers. But Glass supported Anderson’s proposal. “Now gluten-free is more of a trend than a fad,” Anderson says. Under Glass, Walmart was also the first retailer to remove trans fat from its store brands. He also supported removing monosodium glutamate (MSG) and salt from products to make them healthier. Anderson says he cherished the time he was able to work for Glass, who was unavailable for an interview about his hall-of-fame induction. “He was more like a friend and a father than the CEO of one of the largest companies in the world,” Anderson says. “He was a great leader. He has a great business mind. He is my hero.” SB

Previous Private Label Hall of Fame inductees

2014

• Donald Albrecht, Federated Group Inc. • Mark Husson, J.P. Morgan & Co. • Dennis Kinser, Associated Wholesale Grocers Inc. • Doug Palmer, Safeway Inc. • Gerry Pencer, Cott Corp. • Rick Witherspoon, Merico Inc./Earthgrains

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2015 • • • • •

Charles Carlbom, Western Family Foods David Dillon, The Kroger Co. Doug Rauch, Trader Joe’s Sam Reed, TreeHouse Foods Myra Rosen, PLMA

Store Brands / April 2018 / www.storebrands.com

2016 • • • • •

Ed Crenshaw, Publix Super Markets Tom Ewing, T. Marzetti Co. Philip Fitzell, Private Label magazine Mayro Kanning, The Kroger Co. Allan Noddle, Ahold USA and Daymon

2017

• Tom Chaffee, Presto Products • Peter Brennan, Daymon • Bob Mariano, Roundy’s and Mariano’s Fresh Market • Gary Smith, Safeway Inc.


TRENDING

5 DISRUPTORS IMPACTING PRIVATE BRANDS

IT UP

By Lawrence Aylward

Disruption isn’t a bad thing. It can be positive — causing retail grocers to get out of their comfort zones. Disruption, even when there’s upheaval, can force retailers to go back to the drawing board to implement new strategies to preserve their businesses.

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Clean label here to stay

28

Disruption is challenging, but to discount it is to put your proverbial head in the sand. On the following pages, Store Brands identifies five current disruptors impacting private brands. How are you dealing with them?

Sustainable packaging builds momentum

30

Aldi means business

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Authentic products making "real" noise

33

Playing the price game

SPONSORED BY

www.storebrands.com /April 2018 / Store Brands

25


TRENDING

CLEAN LABEL HERE TO STAY

Sixty percent of consumers say they trust a brand less when they don't recognize the ingredients listed.

Call it a continuous disruptor. More consumers are demanding food and beverage products that are clean, sustainable and free-from artificial ingredients. While clean label is not a new movement, it continues to gain momentum with private brands. It’s no longer a trend; it’s here to stay. According to a recent study from market researcher Nielsen, shares of clean-label items continue to climb among total food and beverage products, reaching 33 percent in 2017, an increase of 1.2 percent from 2015. Retailers are realizing how vital clean label is to their private brands. West Des Moines, Iowa-based Hy-Vee Inc. recently introduced its Clean Honest Ingredients label initiative in which it will eliminate more than 200 artificial ingredients or synthetic chemicals from 1,000 Hy-Vee store brand products by July. High-fructose corn syrup, artificial flavors and colors, and partially hydrogenated oils are just a few of the ingredients that will not be found in products with the Clean Honest Ingredients logo. “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,” Jeremy Gosch, Hy-Vee’s executive vice president of strategy and chief merchandising officer, said in a press release announc-

ing Hy-Vee’s initiative. Hy-Vee and other retailers introducing clean-label private brands also realize that they can differentiate with clean-label products and gain consumer trust. According to a recent survey of 1,000 consumers by Chicago-based Label Insight, a company that specializes in product transparency data, 35 percent say they do not buy products when they find the ingredients on their labels confusing. Sixty percent said they trust a brand less when they see ingredients they don’t recognize or find confusing. “Consumer demand for product transparency is on the rise, and when brands and retailers fail to deliver, it erodes brand trust,” says Kira Karapetian, vice president of marketing for Label Insight. Of course, removing preservatives means certain pathogens might not be killed and it can also limit shelf life. This is where technologies like high pressure pasteurization (HPP) come into play. HPP is a cold water pasteurization process that removes bacteria, yeasts, molds, parasites and viruses present in food, extending the life of the product and guaranteeing the safety of food. HPP also adds to product shelf life, and products treated by HPP allow for clean labels. HPP is a natural and environmentally friendly process that helps in maintaining the characteristics of the ingredient such as nutrients and the flavor. Trader Joe’s is one retailer using HPP on products, including juices. It calls out the process — “cold pressed juice” — on packaging. Nielsen says the growth of clean label isn’t limited to natural and specialty retailers and has become a mainstream movement. Ninety-three percent of U.S. households have purchased a clean label product at grocery stores, while 70 percent have purchased one at a mass merchandiser/supercenter and 31 center at club stores.

HPP can preserve food, with the additives Clean label marketing isn’t just for health food, according to True Food Innovations. It’s for all food. Buena Park, Calif.-based True Food Innovations operates the single-largest high-pressure pasteurization (HPP) tolling facility under one roof in North America. HPP works by using extreme water pressure (cold pasteurization) to safely kill pathogens and extend food shelf life by up to 10 times without added ingredients and preservatives. HPP also retains nutrients and minerals that may be lost using traditional pasteurization processes. Foods treated by HPP also taste taste fresher, and have better appearance and texture than food processed under heat. HPP machines pressurize products in their original packaging up to 87,000 psi, which is equivalent to six times the pressure found in the deep ocean, in just a few minutes. “We are enabling food to ship without preservatives and additives, to be safe throughout distribution and to stay fresh longer” said Randy Wall, operations manager for True Food Innovations. S P O N S O R E D CO N T E N T

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Store Brands /April 2018 / www.storebrands.com


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TRENDING

SUSTAINABLE PACKAGING BUILDS MOMENTUM

Publix worked with a supplier to identify a more sustainable sealing material for its deli salads.

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As consumers continue to learn more about it, sustainability continues to disrupt the grocery sector. As concerns about the environment increase, the connection between sustainability and consumer purchase decisions is growing stronger. Food industry analyst and researcher The Hartman Group says in its “Sustainability 2017” report that consumer awareness of sustainability is growing dramatically — in 2008, 56 percent of consumers said they were familiar with the term “sustainability”; in 2017, 83 percent of consumers said they were familiar with it. In the report, The Hartman Group states that “packaging is integral to sustainability in terms of both materials and packaging’s role in communicating sustainability practices and product information to the consumer.” According to a recent Nielsen study, “Fad or Fundamental,” 68 percent of Americans said it’s important that companies implement programs to improve the environment, and 67 percent of Americans said they will prioritize healthy or socially conscious food purchases in 2018. Forty-eight percent said they will change their consumption habits to reduce their impact on the environment. According to the the 2017 Packaging Machinery Manufacturers Institute's (PMMI) state of the industry report, growing attention to depletion of natural resources has driven demand for environmentally friendly solutions from leading companies, which has increased the focus on optimizing machinery. “There has been an increased use of recycled materials over the last decade. Recently, the trend has strengthened as the balance in importance between lowest cost and sustainability has shifted slightly back to sustainability,” the report says. Lakeland, Fla.-based Publix Super Markets says it is making sustainability work in its financial favor. On its website, Publix said it eliminated 35 million separate date, price and product description labels by consolidating this information onto a single-scale label that acts

Store Brands /April 2018 / www.storebrands.com

Sustainability Takes Education Alpha Packaging is committed to sustainability. The St. Louis-based company manufactures a variety of high-quality plastic bottles made of polyethylene terephthalate (PET), which can be recycled. Alpha Packaging can also incorporate post-consumer PET into the fabrication process. Marny Bielefeldt, Alpha Packaging’s vice president of marketing, says the company keeps consumer products companies educated about the sustainability options available to them, including the pros and cons of each option. “You may want to use a corn-based bioresin, but that bottle is not going to be recyclable in the existing PET and HDPE recycling streams,” she explains. “You have the positive aspect of choosing a renewable resource, but the negative aspect of a bottle that can’t be recycled in most curbside recycling programs.” When Alpha Packaging first started working with brands that wanted sustainable packaging solutions about 10 years ago, there was an expectation that recycled packaging would be less expensive than virgin plastic since it had already been turned into plastic once, Bielefeldt says. And while consumers wanted to be eco-friendly with their purchases, they didn’t want to pay more for products that supported that philosophy. “Now we see that both brand owners and consumers understand that eco-friendly packaging is a commitment to a certain lifestyle, and they seem willing to invest a small bit more to stand behind their philosophy,” Bielefeldt says. Retailers can also help educate consumers about the different eco-friendly attributes of sustainable packaging in their stores, Bielefeldt says. “They can help consumers understand the difference between ‘recycled,’ ‘recyclable,’ ‘compostable’ and ‘biodegradable.’ Each word means something different, and when consumers understand which choice they are making with their dollars, they will become even more supportive and willing to invest in sustainable packaging initiatives,” she notes. S P O N S O R E D CO N T E N T


INTRODUCING THE

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TRENDING as a security seal on the packaging, which reduces the chance of product spillage. “We worked with our film supplier to identify a more sustainable sealing material for our deli salads, and we implemented a new film made from 30 percent post-consumer recycled material,” Publix states on its website. As a result of the change, Publix said it saved 92,000 labor hours, allowing its deli employees more time for what’s really important: its customers. Publix also said it is reducing resource usage. In one case, by working with its supplier, Publix reduced 19,000 pounds of plastic by converting from a 2.5-gallon container of cleaning solution to a 1.5-gallon container of ultra-concentrated core cleaning and sanitation chemicals. Cincinnati-based The Kroger Co. announced late last year that it had joined the Sustainable Packaging Coalition (SPC), a membership-based collaborative of like-minded companies striving to advance sustainable packaging. As part of its 2020 Sustainability Goals, Kroger has committed to optimizing 100 percent of Our Brands private-branded products packaging by increasing recyclability, reducing excess packaging and increasing certified virgin fiber sourcing, among other things, during the next three years.

Mason Jar Cookie Company can help retailers differentiate through product, packaging The Mason Jar Cookie Company is helping retailers to differentiate, which is what private brands is all about these days. The Wellington, Fla-based artisan baking mix company offers hand-packed mixes of cookies, brownies, pancakes, scones and other products in iconic Mason jars. Each jar is layered with all the dry ingredients exactly measured. The company also offers its products in patented jar-shaped plastic pouches, giving the retro look of a vintage Mason jar. Both glass and pouch packages command attention. “Retailers come to us to differentiate what’s already on the shelf and look to us for the visual difference we make in both glass and pouch,” says Bruce Renick, president of the company. “Our product is artisanal in its manufacturing. With the more than 200,000 custom flavors that we offer, we can help retailers customize their own products to differentiate. We are the most visually exciting product in the category.” Renick notes that the Mason jar is a symbol of Americana, and wholesomeness is the best branding vehicle the company could have chosen to layer its baking mixes. S P O N S O R E D CO N T E N T 30

Store Brands /April 2018 / www.storebrands.com

Market research agency Mintel recently announced several trends that will impact the global packaging industry this year. Not only will packaging play a pivotal role in reducing global food and product waste, according to Mintel, but also brands that adopt clear and succinct sustainable package messaging will be rewarded as consumers prefer brands that embrace minimalism.

ALDI MEANS BUSINESS Lidl was supposed to be a major industry disruptor when the Germany-based deep discounter opened its first stores in the U.S. last June. But Lidl’s landing may have provoked its German counterpart, Aldi, to disrupt even more. There’s no doubt that Lidl has disrupted in the areas where it has opened its nearly 50 stores, especially when it comes to pricing. But Lidl has experienced some growing pains and its growth has slowed. But Batavia, Ill.-based Aldi is another story. Owned by German retailer Aldi South, the chain “coincidentally” announced the week of Lidl’s initial store openings that it would invest $3.4 billion to expand from 1,600 to 2,500 stores nationwide by the end of 2022. Clearly, Aldi didn’t want Lidl to get all the attention, which says a lot about the fierce competition going on in grocery these days. And Aldi seems to be in sheer attack mode. Months before announcing the expansion, Aldi announced a $1.6 billion program to remodel 1,300 stores by 2020. And then there’s the tenacity and

Aldi, which offers a 90 percent assortment of private brands, seems to be in sheer attack mode.


TRENDING confidence that Aldi displays. In the press release announcing the expansion, CEO Jason Hart said, “We pioneered a grocery model built around value, convenience, quality and selection and now ALDI is one of America’s favorite and fastest-growing retailers. We’re growing at a time when other retailers are struggling.” By 2022, if all goes well, Aldi will become the nation’s third-largest grocery retailer behind Walmart and Kroger, and will serve 100 million customers per month. “Aldi has been in the U.S. for more than 40 years and was already starting to make changes, but Lidl’s launch provided the additional impetus to radically reinvent,” says Nicole Peranick, Daymon’s director of global thought leadership/ culinary, in Daymon’s recent “Private Brand Intelligence Report 2018.” “In turn, Aldi has made a very aggressive investment and is capitalizing on the momentum it already has by elevating the shopping experience.” According to market researcher IRI, “Aldi’s focus on value and convenience, as well as its increasing emphasis on organic and healthier products, has enabled it to capture more share of wallet from millennial shoppers than any other shopper segment, making its entrance into new markets particularly formidable.” IRI also reports that once a shopper buys at Aldi, customer satisfaction and repeat buying rates are high, with 80 percent of shoppers saying they are extremely or very satisfied with their experience, and 84 percent claiming they will definitely shop at Aldi again. In March, Aldi unveiled the remodeling of 11 Cincinnati stores that cost more than $14 billion. The new stores focus more on fresh items such as produce, dairy and bakery and also feature “Dietitian’s Picks,” an array of healthy products handpicked by nutrition experts. Aldi is clearly rolling with the changes, which call for retailers to differentiate by offering fresher and healthier products. But it’s more than that. Aldi, which offers a 90 percent assortment of private brands, has improved the selection and quality of its products but has kept prices low. Its smaller stores are also much easier to navigate, a plus for convenience. In short, Aldi is offering tremendous value. In some ways, it feels like Aldi is just getting started, even though it has been in the U.S. since 1976. Anchored by its private brands, Aldi will continue to disrupt for the next several years … and after that. 32

Store Brands /April 2018 / www.storebrands.com

AUTHENTIC PRODUCTS CAN MAKE ‘REAL’ NOISE Retailers are being urged on several fronts to take their store brands to another level. Name brand equivalent products aren’t just enough anymore. One reason is that well-traveled consumers want something more. Another reason is that authentic products provide a retailer the chance to differentiate — and disrupt. Sam's Club The Kroger Co., Sam’s Club and has introduced Trader Joe’s are three fine examples new authentic of retailers embracing authentic preprivate brands. mium private brands. “These brands can be pre-emptive in many ways, and consumers view them in an entirely different light than they traditionally have viewed store brands,” says Jim Wisner, a private brand consultant and president of Libertyville, Ill.-based Wisner Marketing. Wisner calls Cincinnati-based Kroger’s HemisFares private brand a “watershed” private brand for its authenticity. Created by Kroger’s Vice President of Our Brands Gil Phipps and introduced in 2015, HemisFares is billed as “a journey of epicurean proportions.” The brand offers “a guided tour of the best tastes on Earth” and features regionally authentic finds from Spain, Italy, Jamaica and Japan. Hemisfares currently has only 40 SKUs but is growing. One of Phipps’ finds came from Japan — a double-brewed soy sauce made by the same family using the same method for more than 1,500 years. Last year, Bentonville, Ark.-based Sam’s Club announced the revamping of its Member’s Mark private brand line, which includes several authentic products. Members of Sam’s Club private brand team literally combed the globe — from visiting olive and tomato farms in Italy to wine orchards in France and to a smokehouse in East Texas — to procure the best ingredients and processing methods to create new products and improve existing ones for the line. Monrovia, Calif.-based Trader Joe’s is also making a name for itself behind its authentic private brands by sourcing products and ingredients from countries where they originate. As these three retailers will probably attest, their


authentic private brands are not only helping them to differentiate, they are helping them gain loyal customers because these customers can’t find such authentic products anywhere else. For example, Kroger offers Spanish Cornicabra Extra Virgin Olive Oil in its HemisFares line. Phipps points out there are

two places around the world where consumers can get the olive oil. “There is a woman in Spain who owns all of the cornicabra olive trees. You can knock on her door and maybe she will give you some,” Phipps says. “Or you can get it at our stores.”

PLAYING THE PRICE GAME

stores near Lidl’s stores lowered their prices for private brand staple products an average of 9.3 percent lower in those markets compared to their stores in markets that do not have Lidl stores. The study, led by Katrijn Gielens, an associate professor of marketing at the University of North Wegmans lowered prices on many of its store brands Carolina Kenan-Flagner Business School, evalulast month. The Rochester, N.Y.-based Wegmans reated the competitive price effect of Lidl’s entry into tailer also lowered prices on private brands in 2016 and the U.S. grocery market and the reaction of key most of those prices remain unchanged. competitors including Aldi, Food Lion, Kroger, Wegmans lowered prices on its store brands because Publix and Walmart. Gielens analyzed prices in six that is where it has the most leverage to reduce prices. markets where Lidl operates and six control markets Simply put, Wegmans lowered its private brand prices without a Lidl store — in Virginia, North Carolina to stay competitive in a grocery retail market that and South Carolina. The study looked at 48 grocery remains ultra-competitive. products, which were collected on store visits. Lowering prices to stay competitive “The level of competitive pressure in grocery is not new, but is reaching Lidl is exerting on leading retailers to unprecedented levels. Just ask the drop their prices in these markets major grocery chains that have seen is unprecedented,” Gielens said. revenues grow but profits dwindle. As Lidl continues to grow — The price game is a disruptor that and it will, even if slower than may not be going away anytime planned — it will continue to soon, especially as deep-discount impact prices. chains Aldi and Lidl continue to According to Daymon’s reexpand in the United States and cent “Private Brand Intelligence their competition continues to react Report 2018,” shoppers will come to stay competitive. It’s a great time to to expect “high-quality private be a consumer. brand items at super-low prices no “For a large majority and still growmatter where they are.” Dave Harvey, ing number of Americans, value grocery Daymon’s vice president of global thought The value retailers are where it’s at when it comes to leadership, says this could be good and bad grocery industry for private brands. grocery shopping,” according to Packaged is turning Facts’ recent report, “The Future of Food “But I would say it’s more about opportuinto a hot Retailing: Value Grocery Shopping in the nities [for retailers] than challenges,” he adds. contest among U.S.” “The value grocery industry is heating Because consumers are more open retailers. up for what may be the hottest contest since to buying private brands, high-quality the advent of Walmart supercenters.” private brand items at low prices could While Lidl’s growth has slowed since it debuted lead to more innovation and new product offerin the U.S. last summer, the deep-discount chain, ings in categories that might have been traditionwhich touts a 90 percent assortment of private ally dominated by more expensive national brands, brands, is impacting prices in the markets it serves. Harvey explains, which would allow private brands Lidl, which will open only 20 stores in 2018 to give to capture more momentum. it 68 U.S. stores (Lidl originally planned 100 stores “Of course the danger is retailers offering by mid-2018), commissioned an independent study products at lower prices but without delivering the early this year reporting that grocery chains with quality,” he adds. SB www.storebrands.com /April 2018 / Store Brands

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TOTAL STORE

GROCERANTS GALORE

Retailers of all sizes are winning over customers with their fresh-prepared offerings

By Carolyn Schierhorn

Last year the Busch’s Fresh Food Market store in Canton, Mich., added a restaurant designed by Studio H2G, J.B.’s Smokehouse, which is already drawing rave reviews on Yelp.com. (Photo by Don Kurek courtesy of H2G)

Quick-service and sit-down restaurants across the country are taking notice of their formidable competition: supermarket grocerants. For example, Hy-Vee’s 36,000-square-foot smallerformat store in downtown Des Moines, Iowa, is driving some nearby eateries out of business by offering an abundance of fresh-prepared offerings through its expanded deli and made-to-order stations and by having plenty of tables so customers can eat in the store. “We didn’t realize the Hy-Vee would be half food court and one-fourth groceries,” the owner of a struggling restaurant across the street from the store told the 34

Store Brands / April 2018 / www.storebrands.com

Des Moines Register in late February. Des Moines restaurateurs shouldn’t have been surprised, however. West Des Moines-based Hy-Vee has long been strong in retail foodservice, with its sit-down Market Grille restaurant, fast-casual Market Grille Express and its more recent amping up of food hall-style stations integrated into fresh-food departments along the perimeter of its newest stores. San Antonio, Texas-based H-E-B has also made a deep dive into the foodservice realm with its growing number of True Texas BBQ quick-service restaurants, while Rochester, N.Y.-headquartered Wegmans will


TOTAL STORE Though its stores are too tiny for seating, San Francisco-based Bi-Rite has made a name for itself with its extensive chefprepared offerings, from signature sandwiches and salads to poke bowls. (Photo courtesy of Bi-Rite)

“When guests are in our stores in the morning to pick up coffee and a pastry or a breakfast sandwich, they will often also buy one of our fresh-prepared bowls, which is a beautifully sourced, nutrient-dense lunch solution,” says Bi-Rite’s Jason Rose (right). soon open its first full-service Mexican restaurant and tequila bar, Blue Dalia, in its new Natick, Mass., store. But these regional powerhouses aren’t the only food retailers taking the grocerant plunge. Some independent grocers and very small stores also differentiate themselves with culinarily cutting-edge fresh-prepared food. San Francisco-based Bi-Rite, which has tiny stores by grocery retailing standards, has made a name for itself with its chef-prepared sandwiches, ethnic bowls and sushi and ice cream made in the company’s creamery. “Our stores are really small, so we have nowhere to eat inside the store. Yet we have a lot of guests who will grab a sandwich after it’s made and tear right into it while waiting in line,” notes Jason Rose, Bi-Rite’s culinary director. “That’s pretty awesome. We love that they can’t wait to get at it.” Many of Bi-Rite’s customers at its 1,400-squarefoot Mission District store will sit on the sidewalk outside to eat or walk to a nearby park with the fresh-made grab-and-go food. At the retailer’s store in San Francisco’s Financial District, customers will often pick up a ready meal for lunch while they’re buying a breakfast pastry or sandwich, which they may eat while walking to the office.

Artisan food consumed on the go fits foodie San Franciscans’ vibrant, busy lifestyles, according to Rose. Because Boulder, Colo.-based Lucky’s Market was founded by married chefs Trish and Bo Sharon, it’s not surprising that the chain emphasizes fresh-prepared food. The retailer also strives to make the shopping experience more enjoyable by allowing customers to “sip and stroll” $2 draft beers beer and $3 glasses of wine purchased from the kiosk-style bar (without seating) that’s in each store. The shopping carts even have a cup holder designed to accommodate a pint of beer. The hub of meal preparation at each Lucky’s location is known as The Kitchen. “We pride ourselves on how much of our menu is actually made in-house and from scratch,” says Paul White, the retailer’s vice president of fresh merchandise. “We make most of our deli products in our kitchens, including all of our roasted meats, salads, grilled vegetables, pizzas and meals to go. We are very excited about a recent line of “Meals for 2” we launched this year that has been doing quite well.” While Lucky’s has in-store seating in its café areas, the retailer has also added dine-in Ramen Bars to a few of its new stores. “Based on their success, we’ve been expanding the program to existing stores,” White says. www.storebrands.com /April 2018 / Store Brands

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TOTAL STORE Retail foodservice evolves Long gone are the days when a grocery market could have a salad bar and a basic hot bar and consider itself innovative and on-trend. “What’s really evolved is the concept of ‘grocerant,’ ” notes Jill Tomeny, senior manager for fresh category solutions at Daymon. “It’s no longer just about offering fresh food in-store and a physical place to eat it — grocerants are growing into stand-alone formats. And while these grocerants may be connected to stores, it may not be necessary to enter the store to enter the restaurant. Many grocerants are offering some form of table service, whether it’s just the delivery of food ordered at the counter or full service.” In addition, it has become more common for grocerants to offer wine as well as “extensively curated selections” of local craft beers, she says. Julie Dugas, principal and partner with Studio H2G, a Birmingham, Mich.-based retail design firm, has helped two recent clients add restaurants to their grocery markets. One, Cantoro Italian Market in Plymouth, Mich., opened a white-tablecloth Italian restaurant that adjoins the store — in a neighborhood that previously didn’t have a lot of dining choices. “The restaurant is very popular and has had a big impact on the community,” Dugas says. Patrons can enter Cantoro’s Trattoria directly or through the market. The restaurant uses many of the products sold in the Italian grocery store, so there is a cultural synergism between the two settings, providing customers an immersive total brand experience, according to Dugas. “There is this wonderful connection between all of these things we love about food,” she states. “Many of us love the idea of cooking good food for ourselves. But we also like eating good food that someone else has cooked for us. And sometimes, we’re in a hurry, so we want to take it away and eat it somewhere else. It’s really interesting for us to look at how to capture that in one space and under one brand.” Studio H2G also recently designed a more casual restaurant inside a Busch’s Fresh Food Market store in Canton, Mich. Named after the initials of the owner’s father, J.B.’s Smokehouse is a roughly 3,000-square-foot eatery carved out of a nearly 50,000-square-foot traditional grocery store. “There is a ton of under-utilized space in most markets,” observes Dugas, who helps retailers make better use of their center store and perimeter “real estate.” J.B.’s Smokehouse is a destination restaurant with a more intimate atmosphere and more subdued lighting than one would normally find in a supermarket grocerant. “Why do some retailers think they can excite shoppers if they just place a small smattering of tables and chairs — using the most inexpensive 36

Store Brands / April 2018 / www.storebrands.com

furniture they can find — off in a little-used corner of the market?” Dugas questions. “That’s not very welcoming or user-friendly, and it doesn’t create the kind of environment that would draw customers in to try the food.” J.B.’s Smokehouse, in contrast, has already drawn dozens of mostly rave reviews on Yelp.com.

Trendsetters Grocery retailers are not just following restaurant trends with their kitchen creations. As Rose points out, Bi-Rite is a trendsetter that even attracts tourists. The retailer currently stands at the forefront of three contemporary food developments: transparency, the serving of prepared food in bowls, and the focus on customer convenience by offering portioncontrolled proteins and salads that customers can mix and match. “Our guests want to know where their food comes from — not only that, how it was raised, how it was grown, and how the workers were treated who raise and grow the products that we use,” Rose says. Bi-Rite, which emphasizes organic, non-GMO and locally produced food, tells its transparency story primarily by having staff members who are well-educated about the products on the shelves, including the fresh-prepared items. “We’re leading classes constantly for staff so the folks who are out on the floor can carry out our vision of service,” Rose notes. The grab-and-go meals that are especially popular for lunch at Bi-Rite include poke bowls, Moroccan or South African chicken bowls, and various vegan offerings. “In our Financial District store, we have a huge focus on nutrient-dense meals,” Rose says. “Customers have 30 to 45 minutes on a lunch break and want to cram themselves full with as much protein, vegetables and whole grain as humanly possible.” At Lucky’s, the menu is always evolving with new fresh offerings that change seasonally, White says. “We have some new favorites like our Triple Citrus Salmon and our Blood Orange Beet Salad,” he notes. “And we love our new Thai Kelp Noodle Salad, which is a delicious vegan option.” Lucky’s launched a hot bar breakfast program at its new store in Clermont, Fla., and plans to roll it out chain-wide because of its success. As White explains, “We’re always looking for new flavors, answering emerging trends and meeting our customers where their palates and diets take us.” SB Schierhorn, the managing editor of Store Brands, can be reached at cschierhorn@ensembleiq.com.


FOCUS ON FRESH: Organic/All-Natural

F resh and

Organic —

A DYNAMIC DUO

The time is ripe for retailers to strengthen their own-brand fresh organic and all-natural selections By Nevenka Jevtic Fresh and organic. What a perfect pairing. Encompassing meats, salads, produce and the like, the fresh category has always had top billing as the healthiest section in the grocery store. And, of course, the health benefits of all-natural and organic products are universally acknowledged. Put the two together and the result is the very best that a supermarket has to offer. But the retail landscape continues to evolve, making it imperative that retailers keep up with changes in consumer shopping habits. In particular, migration toward online platforms for packaged goods continues. As a result, retailers are focusing hard on drawing consumers into the store through fresh offerings, including organics.

sons Cos.’ Own Brands. “That’s why we offer such a wide assortment of O Organics products, from fresh fruits and vegetables to wholesome dairy and meats, cereals, snacks and more.” Organic’s contribution to the total fresh department continues to grow, confirms a December 2017 report from market research firm Nielsen. In fact, organic produce remains a key factor that helps top-performing retailers stay on top. Recently, Cincinnati-based The Kroger Co. announced its organic produce business achieved $1 billion in annual sales. Kroger’s senior vice president of merchandising, Robert Clark, credits the recent success to the company’s commitment to making this category more mainstream, accessible and affordable.

Big business organic

Put a label on it

Once a niche category, organics have exploded into a bona fide integral part of a retailer’s overall privatebranded products. Recently, Albertsons Companies announced that its O Organics private brand has become a $1 billion brand. “Everyone should have the opportunity to go organic — whether you are selectively choosing a few organic products or you have fully embraced eating organics,” says Geoff White, president of Albert-

Retailers like Aldi are focusing hard on drawing consumers into the store through fresh, organic offerings.

Branding in the produce department has not always been prevalent, according to Nielsen. However, branding is on the rise over the past five years or so as consumers have grown to trust the quality of those brands. For retailers, taking advantage of private brand organic/all-natural products in the fresh category starts with knowing your customers. Amy Simeri McClellan, senior vice president of retail for South Bend, Ind.-based Martin’s Super Markets, suggests letting consumer demand dictate the priority www.storebrands.com /April 2018 / Store Brands

37


FOCUS ON FRESH: Organic/All-Natural items for private brand fresh organics. “As a supermarket we have to listen to our customers,” she says. “Depending on your store format and competitive differentiators, organic value-added products in meat, deli and produce can make you unique and a destination for fresh.” Jason Adlam, vice president of new business development for Alpharetta, Ga.-based CHEP USA, agrees. “Ultimately, retailers need to consider what will draw customers in to purchase the product, and ensure produce is perfectly ripe for consumption,” he explains. “CHEP partners with many customers in the produce industry to provide sustainable solutions to get products to the store as freshly and quickly as possible.” CHEP established a program where it stores readyto-issue pallets on-site at its customers’ locations. So when peak harvest occurs, the pallets are readily available and help expedite getting the produce from the field to the store floor and then to the consumer.

Getting to know you

Organics shoppers are a loyal and well-informed group. But how well informed are shoppers about store brand organic/all-natural products in the fresh department? Retailers have a few avenues at their disposal to make sure they are reaching shoppers. “In-store signage, in-ad features and blog posts from credible sources (dietitians, organic farmers, and other food experts) are all ways in which we educate our customers on the benefits of organic,” McClellan says. “In addition, in-store demos executed by our chef interacting directly with customers has been effective.”

Pack it up

When it comes to packaging and merchandising private brand fresh organics, retailers should call on the power of their own brand, especially if they are known for fresh. “Packaging should be clean and easy to read,” McClellan advises. “Let the produce shine while making sure shoppers can identify it as something exclusive to your store.” The role that packaging and display plays in this segment is incredibly important. “Packaging and display can influence the customer’s decision whether or not to buy a product,” Adlam says, “especially if they’re already looking for something and deciding between one brand or grower over another.” CHEP recently partnered with customers on its half-pallet solution as an effective display option. In comparison to the 48x40 pallet, the half pallet is used more in store displays, reducing store touches and improving store efficiency. “This allows retailers to take store product and 38

Store Brands / April 2018 / www.storebrands.com

display it at the end of aisles or as aisle displays,” Adlam explains. And the result is produce that provides better visual representation in the store with focal products.

Owning it

Retailers can sometimes struggle to have their fresh organic offerings regarded as private brands. The solution is to promote what is in season and what is fresh. “If organic peaches are in-season, create freshmade, value-added, deli-prepared options using fresh peaches or other in-season organic produce to offer something unique,” McClellan says. “Additionally, retailers can seek partnerships with local organic farmers to offer farm-to-market private label options when the season is right.” For example, Lucky’s Market has made its partnerships with local producers a cornerstone of its company philosophy. Keeping close to home supports its communities but also makes it possible to bring organic and locally grown produce to its stores at a value price point. “Using local organic growers is one way for retailers to differentiate and give their own brands a powerful personality,” McClellan explains. “When local is not in season, spotlight organic farmers from around the world.”

Fresh destination

According to the 2017 Nielsen “Category Shopping Fundamentals” report, a majority of consumers do not have a specific brand in mind before they purchase fresh produce. Label claims on packaging and marketing can communicate exactly how products meet shoppers’ changing needs. The United Fresh Produce Association’s Q3 2017 edition of “FreshFacts on Retail” highlights how innovation in the produce department is driving consumer demand for alternatives to pasta and rice. “Health and convenience are both key factors in the rise of new products in the produce department,” says Jeff Oberman, United Fresh’s vice president of trade relations and liaison to its RetailFoodservice Board. “From kits to veggie noodles, we expect continued growth and expansion of fresh-cut and value-added products, both in private label and branded products.” Own-brand organic produce can be a powerful part of a retailer’s overall fresh offerings. But pricing will still be a focus to all but the most loyal organics shopper. “Offering organic in an ad at the same price as conventional is a great way to gain trial among the nonorganic customer,” McClellan says. “Food always has a story, and shoppers are eager to be informed.” SB Jevtic is a freelance writer from Schaumburg, Ill.


CATEGORY INTELLIGENCE CHEESE

SAY CHEESE! Its protein and calcium content make cheese a popular choice for healthy eating, but it is taste that keeps consumers coming back for more, according to global market research firm Mintel. Taste is by far the No. 1 reason consumers eat cheese, according to an online survey of 1,955 adults conducted for Mintel by Warren, N.J.-based digital data collection specialist Lightspeed. Seventy-nine percent of those surveyed said they eat cheese because they like the taste. The second mostcited reason, given by 54 percent, was that it makes an easy snack. The third most popular reason, cited by 48 percent, was that cheese pairs well with a wide variety of other foods. Cheese sales reached $23.6 billion as a result of 10 percent growth between 2012 and 2017 — impressive for such a large, mature food category with nearly universal penetration, Mintel reports in “Cheese U.S., October 2017.” The natural cheese segment is the main reason for the growth, according to Mintel, noting that it comprises 70 percent of category sales and benefits from increasing interest in more healthful eating and snacking. Mintel forecasts continued steady category growth of eight percent by 2022.

PREMIUM AND FULL-FLAVORED

The best opportunities for cheese category growth, according to Rockville, Md.-based market research publisher Packaged Facts, are in premium, specialty, artisanal and ethnic varieties. Trends show that consumers are embracing robust, full-flavored, higher-priced and gourmet-quality specialty and ethnic cheeses, including Hispanic varieties, according to Packaged Facts. Promote cheese by playing up freshness as well as ingredients such as healthier and organic milk, Packaged Facts advises in its February report, “U.S. Food Market Outlook, 2018.” Continue to introduce better-for-you cheeses, including those made from milk that is free of artificial hormones or comes from grass-fed cows, Packaged Facts suggests. In addition, bolster cheese sales by offering new forms such as snack products and sizes and pairings with other foods, Packaged Facts offers. New products that show creativity and innovation will grow the cheese category, says Tim Weidenhamer, sales director for Ridgefield,

N.J.-based Biazzo Dairy Products, a third-generation, family-owned maker of old-world style Italian cheeses using traditional recipes and methods going back generations. Biazzo is a Safe Quality Food (SQF) Level 3-certified manufacturer. Retailers are seeking new products with an appeal and look that will attract consumers at point of sale and that can instantly broadcast a great-tasting, nutritious and healthy positioning, Weidenhamer adds. Consumers are discovering new great-tasting varieties of cheese in restaurants and then seeking them out at retail, says Arturo Nava, marketing director for Chicago-based Nuestro Queso, which specializes in making Hispanic cheese from traditional recipes and recombinant bovine somatotropin (rBST)-free milk.

TELL THE STORY

“Project a most compelling story” by emphasizing the simplicity of ingredients, Weidenhamer suggests. For example, Biazzo calls out that its ricotta cheese is made from just three ingredients: fresh milk, vinegar and salt. Furthermore, it’s important to point out to consumers that cheese has the convenience and nutritional attributes that consumers want, he adds.

DO tell the story about a cheese’s simplicity to win over consumers seeking clean label products.

Don’t ignore the fact that Hispanic varieties of cheese are the fastest-growing cheese segment in the U.S. www.storebrands.com /April 2018 / Store Brands

39


CATEGORY INTELLIGENCE CHEESE Authenticity is important, particularly to millennials, who not only want to know what’s in the food they eat, but also where and how it is made, who makes it and the story behind it all, according to Packaged Facts. Mainstream consumers are demanding a wide assortment of cheeses and are especially intrigued by Hispanic cheeses, Nava says. “Consumers are interested in quality as well as in the cheese’s heritage and role in regional cuisine,” adds Nava,

Natural Cheese Private Brands

All Brands

Dollar Sales (in millions)

$5,718.4

$13,237.1

Change vs. Year Ago

+4.3%

+0.8%

Dollar Share

43.2%

100%

Unit Sales (in millions)

1,847.0

3,876.4

Change vs. Year Ago

+2.8%

+4.6%

Avg. Price Per Unit

$3.10

$3.41

Source: Infoscan Reviews, IRI, a Chicago-based market research firm. Total U.S. supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending Feb. 28, 2018.

who notes that Nuestro Queso has achieved SQF Level 3 certification and has won 15 cheese industry awards for its cheese since 2012. “There is a unique story behind each of the (Hispanic) cheeses. They are exotic, on-trend, tasty in (ethnic) cuisine and also on burgers,” says Nava. The four fastest-growing cheeses in the U.S. are Hispanic varieties: Oaxaca, Mexican, Manchego and Cotija, according to IRI data for the 52 weeks ending July 16, 2017. The continuing popularity of Hispanic cuisine across ethnic groups, coupled with the growing Latino population, will force greater demand for Hispanic cheeses, Nava adds.

POISED FOR PROMINENCE

The natural and specialty cheese market will benefit and grow for two reasons: Americans’ love of cheese and the continued marketing of cheese as a fundamentally nutritious food that is a good source of calcium and protein, Packaged Facts predicts. “Natural cheese is well positioned to further take advantage of the increasing snacking trend, convincing consumers not only that natural cheese is healthier than

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Store Brands / April 2018 / www.storebrands.com


CATEGORY INTELLIGENCE CHEESE processed versions, but a much better snacking option than cookies or chips,” states the Packaged Facts report. “Organic cheese should continue to outperform the market, as will slices that are in thin formats popular for people looking for portion control.” Promote simple and honest ingredients and emphasize the absence of artificial ingredients in cheese, Weidenhamer says. “This projects care for the farm, for farm animals and the environment. Have more transparency in all labeling and attributes,” Weidenhamer states. Millennials and Gen X-ers are interested in healthy eating, exercising and taking good care of themselves. “They are also reading the blogs, books and magazines that are preaching this good story to them — and many others are following,” Weidenhamer adds. Exclusivity is a great way to get started with a new product, Weidenhamer says. “The more the product is innovative, the more chance it will get the customers’ attention and be picked up.” Promote and sample to help a new product succeed, Weidenhamer advises.

EASY DOES IT

An inherent attribute that sells cheese is its convenience

– both as a snack that requires no fuss and as an ingredient that requires very little fuss. It’s ready to eat right from the container, and can be easily incorporated into interesting appetizers, entrees and desserts, Weidenhamer points out. “Today, most young people do not have the time and are not too interested in preparing food at home. They are just too busy with their lives, social media, games and more.” A Lightspeed/Mintel online survey of 1,905 adults revealed that, depending on age group, 69 to 79 percent eat cheese in sandwiches; 49 to 61 percent as a snack by itself; 48 to 63 percent as a snack with crackers or bread; 43 to 61 percent in a salad; and 26 to 35 percent at breakfast. Frequent cheese consumers might be the best targets for efforts to increase sales. Introduce new varieties and flavors and inspire consumers with new recipes and usage ideas, Mintel advises. The same survey found that 64 percent of those who consume cheese two to three times a week or more say they consider it worth paying more for the convenience of shredded or sliced cheese. SB Cvetan is a freelance writer from Barrington, Ill.

FOR THE GROWING SNACK CHEESE MARKET

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www.storebrands.com /April 2018 / Store Brands

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CATEGORY INTELLIGENCE SALTY SNACKS

THE WELLNESS FACTOR

DO offer salty snacks with healthier and premium ingredients, which will likely result in higher revenues.

Don’t discount the importance of using nontraditional ingredients such as taro root and butternut squash. 42

With the snack food sector booming as more consumers evolve from eating three main meals to consuming smaller portions throughout the day, salty snacks are becoming increasingly popular. Category sales rose 30 percent to an estimated $11.2 billion from 2011 to 2016, with meat snacks and popcorn primarily driving growth, reports market research firm Mintel. Meat product revenues totaled an estimated $3.3 billion, a 51 percent gain from 2011, while popcorn sales grew 39 percent to $2.4 billion. Ninety percent of shoppers in a Mintel survey note that they bought a salty snack for themselves or their households in the previous three months, and such activity will likely remain strong as Mintel forecasts category revenues to reach $13.6 billion by 2021. Yet, while sales are rising in a variety of salty snack categories, including the cheese and corn snack sectors, some segments such as pretzels and pork rinds remain flat. To generate greater revenues, merchandisers should introduce options that meet specific customer interests, including being healthier, Mintel states in its April 2017 “Salty Snacks — U.S.” report. “Understanding which needs a product satisfies can help a brand identify factors to focus on in marketing and potential areas of improvement,” Mintel states. “Consumers who look at ingredient lists before buying a salty snack show very different preferences than those who put flavor ahead of health.” Purchase triggers also differ among demographic groups. Younger shoppers are more likely to try a new snack because of the packaging, while in-store samples motivate baby boomers, Mintel reports. In addition, such factors as product innovation, understanding what needs a snack satisfies, and identifying white spaces in the market will contribute to further salty snack growth, Mintel states, adding that brands must “work at standing out in the crowded category.”

WELLNESS IS THE WAY

Offering store brands that meet the

Store Brands / April 2018 / www.storebrands.com

growing consumer interest in health and wellness, meanwhile, can help retailers differentiate their products from select national brands. “Better-for-you snacking is here to stay and will continue to be a focus in the industry,” says Barbara Moreno, director of marketing for Snak King, a City of Industry, Calif.-based snacks supplier. “Consumers are looking for alternative-style snacks that are delicious and deliver important health benefits and claims. Millennials and Gen Z consumers are driving a shift from foods that are absent of ‘bads’ to those that have added positives.” Becoming more popular are snacks containing ancient grains, seaweed, protein (soy and pea), pulses and beans, fruits, omega 3s and olive oil, she states. “Snack foods with health benefits are in high demand,” agrees Allen Benz, CEO of Piscataway, N.J.based Snack Innovations. “Consumers are more adept than ever in dissecting their foods’ nutritional labels and are seeking the nutrients that are good for them and avoiding the bad ones.” While plant-based proteins, especially pea protein, are a “major trendsetter,” Benz says shoppers also want snacks that are low in fat, calories and added sugar; high in protein, fiber, and whole grains; have organic ingredients; and are gluten-free and non-GMO. “Consumers now more than ever are aware of these options, perceive them as better choices, and are willing to pay the extra cost to have them,” Benz states. He says retailers can differentiate their store brands by offering better-for-you lines that include healthy “indulgent” selections. “Consumers are drawn to indulgent snacks so the products that have real nutritional benefits and contain some indulgent benefit will always win,” Benz states. Snack food merchandisers, meanwhile, will likely add more nutritious selections to existing snack lines, market researcher IBISWorld states in its February 2017 “Snack Food Production in the U.S.” report. “A large portion of industry growth can be attributed to the introduction of new products, particularly in response to public concerns about healthy eating,” IBISWorld notes. “Salty and oily snacks including chips, pretzels and popcorn still constitute the majority of industry revenue, but demand for regular varieties of these products has declined.” Consumers are increasingly opting for healthier variants that are made with less salt and fat, and


CATEGORY INTELLIGENCE SALTY SNACKS Potato Chips Private Brands

All Brands

Dollar Sales (in millions)

$492.9

$5,779.2

Change vs. Year Ago

9.4%

0.4%

Dollar Share

8.5%

100%

Unit Sales (in millions)

292.7

2,570.9

Change vs. Year Ago

16.1%

-0.4%

Avg. Price Per Unit

$1.68

$2.25

Tortilla/Tostada Chips

44

Private Brands

All Brands

Dollar Sales (in millions)

$262.1

$4,191.9

Change vs. Year Ago

0.7%

1.8%

Dollar Share

6.3%

100%

Unit Sales (in millions)

132.5

1,610.9

Change vs. Year Ago

5.2%

1.2%

Avg. Price Per Unit

$1.98

$2.60

Store Brands / April 2018 / www.storebrands.com

snacks that contain protein such as nuts, seeds and soy are climbing in relevance as consumers become more aware of the benefits, IBISWorld states.

SHINE THE SPOTLIGHT

In addition to healthier options, new launches will include worldly, ethnic and spicy flavors that millennials favor, as “bland is out, bold is in,” Moreno says. Retailers can better attract shoppers to such store brands by having secondary placements outside of the standard snack food aisle, including in the heavy-traffic produce or deli sections, she notes, while also incorporating packaging with appealing structures and designs. ”Packaging is private label’s number one advertising vehicle,” Moreno says. “Standout packaging is an important investment.” Future salty snack activity, meanwhile, will likely remain strong as improving economic conditions will provide shoppers with the resources to purchase a range of selections, IBISWorld notes. “Projected increases in per-capita disposable income will enable more consumers to trade up to premium brands, helping to drive revenue growth,” IBISWorld


CATEGORY INTELLIGENCE SALTY SNACKS Cheese Snacks Private Brands

All Brands

Dollar Sales (in millions)

$55.9

$1,566.3

Change vs. Year Ago

+10.4%

+7.8%

Dollar Share

3.6%

100%

Unit Sales (in millions)

31.1

722.7

Change vs. Year Ago

+17.5%

+3.2%

Avg. Price Per Unit

$1.79

$2.17

Ready-to-Eat Popcorn/Caramel Corn Private Brands

All Brands

Dollar Sales (in millions)

$84.7

$1,114.6

Change vs. Year Ago

+36.7%

+6.6%

Dollar Share

7.6%

100%

Unit Sales (in millions)

42.5

410.8

Change vs. Year Ago

+39.6%

+8.1%

Avg. Price Per Unit

$1.99

$2.71

Source: InfoScan Reviews, IRI, a Chicago-based market research firm. Total U.S. supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending Jan. 28, 2018.

states. “As consumers demand healthier versions of existing snacks, operators are expected to introduce a wider variety of products. The array of nontraditional ingredients currently used for snack production such as taro root and butternut squash indicates creativity will also be a key factor in future success.” In addition, the greater interest by consumers in salty snacks with healthier and premium ingredients will likely result in higher revenues for retailers, Mintel reports, noting, for instance, that 20 percent of consumers agree that such products are worth an extra cost. “Healthy options such as baked chips and vegetable chips tend to cost more to produce and, accordingly, are more expensive on store shelves,” IBISWorld states. “Growing concerns about eating foods high in sodium, fat and sugar have made some consumers wary of consuming traditional snacks. In response, producers have introduced new varieties of existing products such as reduced-fat and reduced-sodium brands. Americans now have a choice between more brands and varieties than ever before.” SB Mitchell is a freelance writer from Wilmette, Ill.

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Job # / Name: PS-022 Enemble IQ_Half Page Ad ME01 Store Brands / April 2018 / www.storebrands.com Size: 7.25 x 4.875 in

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CATEGORY INTELLIGENCE JUICES/WATER/SELTZER

INFLUENCED BY INGREDIENTS

DO offer bottled water with product features — premium selections that match consumers’ taste and wellness expectations.

Don’t forget to offer more exotic offerings, tropical flavors such as mango and pineapple, to appease millennials. 48

The bottled water and juice sectors are awash in activity. Despite being mature categories, revenues are forecast to remain steady as many health-conscious consumers seek out alternatives to highly sugared sodas. Sales of bottled water were up 35 percent from 2013 to 2017 to an estimated $17.7 billion and revenues will grow to $23.4 billion by 2022, predicts market researcher Mintel. Juice revenues, meanwhile, will increase at a 0.2 percent annual rate to $12.1 billion by 2022, notes market researcher IBISWorld. The bottled water market is a major beneficiary of shopper interest in better-for-you drinks, but category growth still will likely slow as competition increases from other beverage segments that launch products with new flavors and greater functionality, Mintel notes in its February “Bottled Water — U.S.” report. To remain vibrant, bottled water merchandisers must offer products with similar enhancements. Indeed, because bottled water buyers tend to have more interest in product features than price, premium selections that match consumers’ taste and wellness expectations will be increasingly popular, Mintel reports, noting that sparkling water already is registering annual doubledigit sales increases. “Big and small brands are tapping into the sparkling water success, helping the category find new occasions and giving consumers options that benefit their desire for healthier beverages,” Mintel states. Sandy Gott, executive vice president of Ice River Springs Water Co., a Shelburne, Ontario-based bottled water supplier, notes that sparkling water is the company’s fastest-growing category. “Shoppers are getting away from soda pops but still want the texture of bubbles and creative, unique flavors,” she states. “Sparkling waters and organic flavors meet the needs of contemporary customers and retailers should integrate these different added-value products in their planograms.”

MIX AND MATCH

Yet, while more shoppers are seeking newer options, traditional spring water, mineral water and

Store Brands / April 2018 / www.storebrands.com

vitamin-enhanced items still have great appeal, Mintel notes, adding that product familiarity, clear labeling and communication of benefits also are important. “There is an opportunity for brands to combine the new with the familiar to differentiate the product,” Mintel states. Novel packaging also can enable store brands to stand apart from the national selections. An array of sizes, for instance, will appeal to a greater range of shoppers, Gott says, such as 4-gallon bottles for coolers, along with 1- and 1.5-liter and 8- or 10-ounce containers. “Consumers want the portability of small bottles,” she states. “Don’t be a one-trick pony. There is a reason these other size bottles exist.” The attributes that retailers list on bottles also can appeal to a wide swath of consumers, Mintel reports, noting that the messaging should include terms that signify high quality and that most shoppers will comprehend. The juice sector, meanwhile, also is facing greater competition with more merchandisers offering alternatives to the high natural sugar content of juices, reports IBISWorld in its January 2017 “Juice Production in the U.S.” report. Competing products include sports and energy drinks (also known as functional drinks) that are heavily marketed to younger demographics; readyto-drink tea and coffee; and coconut water, which has been registering nearly double-digit annual sales increases since 2004 because of its ability to satiate, IBISWorld notes.

FOCUS ON FRESH

The vegetable juice segment already is expanding as retailers offer more health-oriented items, such as green juices with green vegetables, including spinach, kale, parsley, romaine, cucumber and celery, which are often combined with fruit to sweeten the taste, IBISWorld adds. Retailers that prepare juices in-store using fresh fruits and vegetables can greatly differentiate their private brands from those of national manufacturers, says Diana Sheehan, vice president of retail and shopper insights for Kantar Consulting, a Bostonbased research and consulting firm. Because the fresh products are often single serve and not found in the traditional refrigerated


juice case or in the center store with shelf-stable selections, it is important that retailers spotlight the offerings, she states. Methods can include situating products in the front of stores, at juices bars or in the deli and displaying signage that list the fresh ingredients while noting that the items are fresher than any other available juice. “It is about awareness,” Sheehan says. “Retailers need to inform consumers, and particularly the younger shoppers who are most interested in fresh selections, about the products and make it easier for them to locate the items.” Retailers, meanwhile, can use price and functionality, such as sustainability, to differentiate their store brands from the national offerings in the traditional juice categories, she states. “There is no need to be innovating in all the different spaces,” Sheehan notes. “It is just as important to prioritize the juice categories that make the most sense to a retailer’s particular situation.” The ability of retailers to develop fresh store-made juices as well as a greater capacity for shoppers to pay more for such products is creating stronger income opportunities for private brand merchandisers. SB

Convenience/ Polyethylene Terephthalate Still Water Private Brands All Brands Dollar Sales (in millions)

$971.0

$5,370.4

Change vs. Year Ago

+0.2%

-2.2%

Dollar Share

18.1%

100%

Unit Sales (in millions)

243.4

1,592.5

Change vs. Year Ago

+3.2%

-1.1%

Avg. Price Per Unit

$3.99

$3.37

Seltzer/Sparkling/Mineral Private Brands

All Brands

Dollar Sales (in millions)

$499.7

$2,293.4

Change vs. Year Ago

+10.3%

+14.5%

Dollar Share

21.8%

100%

Unit Sales (in millions)

508.0

1,416.9

Change vs. Year Ago

+2.5%

+5.1%

Avg. Price Per Unit

$0.98

$1.62

Source: InfoScan Reviews, IRI, a Chicago-based market research firm. Total U.S. supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending Jan. 28, 2018.

Put your mind in the Tropics! Subscribe to the iTi Innovation blog for recipes, infographics, and more.

ititropicals.com/blog www.storebrands.com / April 2018 / Store Brands

49


CATEGORY INTELLIGENCE COOKIES AND CRACKERS

FEEL THE CRUNCH More nutritious ingredients, new flavors and portion-control sizing could give category a makeover

DO revitalize this category with more healthful ingredient options. Don’t forget that cookies and crackers must be affordable.

Many small children at one time or another have asked for cookies and been told: “OK, but just one!” Perhaps at times they have even asked for salty crackers and been told to munch on some veggies instead. Health concerns are shaping much of what’s happening in the cookies and crackers categories. Betterfor-you, premium and private brand cookies exhibited significant growth and more vitality in the category than standard cookies, which comprise the largest segment, according to global market research firm Mintel. Another way to encourage more cookie purchasing, Mintel advises, is with portioned packaging. This could appeal not only to consumers who are on the go, but also those who are conscious of controlling their consumption of indulgent treats. Developing new flavors, especially fruit, dessertinfluenced and sweet-and-salty varieties, could excite consumers bored with the old standard flavors, Mintel points out. While the cookies category grew by 1 percent

Cookies Private Brands

All Brands

Dollar Sales (in millions)

$1,280.5

$7,702.4

Change vs. Year Ago

+8.8%

+2.1%

Dollar Share

16.6%

100%

Unit Sales (in millions)

528.0

2,911.0

Change vs. Year Ago

+7.6%

+0.7%

Avg. Price Per Unit

$2.43

$2.65

Private Brands

All Brands

Dollar Sales (in millions)

$504.6

$6,940.0

Change vs. Year Ago

+1.9%

-0.2%

Dollar Share

7.3%

100%

Unit Sales (in millions)

278.9

2,577.5

Change vs. Year Ago

+3.4%

-1.3%

Avg. Price Per Unit

$1.81

$2.69

Crackers

Source: InfoScan Reviews, IRI, a Chicago-based market research firm. Total U.S. supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending Jan. 28, 2018.

50

Store Brands / April 2018 / www.storebrands.com

from 2016 to 2017, to reach $8.7 billion, Mintel forecasts slower growth of 4 percent through 2022. This compares to the 10 percent growth the cookies category experienced from 2012 to 2017, Mintel reports in “Cookies U.S. – August 2017.” In just two years, from 2013 to 2015, obesity has risen from 29 percent to 30.4 percent among adults aged 20 and older, according to the Centers for Disease Control and Prevention (CDC). Nearly two-thirds of Americans – 66 percent – are actively dieting, according to Mintel’s “Diet Trends – U.S.” report from September 2016. Health-focused cookies, Mintel points out, could be just the ticket to revitalize the category by catering to health- and weight-conscious consumers who want to indulge more responsibly. In the crackers category, alternative ingredients are making their presence felt. It’s a trend that’s proven successful in the salty snack category, according to Rockville, Md.-based market research publisher Packaged Facts. Alternative ingredients include vegetables other than white potatoes; pulses such as beans, chickpeas, dried peas and lentils; and specialty grain formulations including multi-grains, whole grains and ancient grains. Sales of snacks made from these alternative ingredients rose 5.2 percent in 2016 to $1.4 billion, reports Norman Deschamps, author of “Snack Food Nutrition Trends: Pulses, Vegetables, and Grains in Salty Snacks & Crackers,” a Packaged Facts report published in January 2017. “The strong growth in sales of alternative vegetable-based snacks, particularly salty snack versions, has been the largest factor contributing to the rise in sales in 2016,” Deschamps writes. Deschamps predicts moderate to strong growth for alternative ingredient snack sales over the next few years, building on the better-for-you trend affecting the overall snack market. A cracker product made from chickpeas and sweet potatoes, Mondelez International’s Good Thins, meanwhile, bolstered the alternative ingredient cracker sector, Deschamps writes.


In that vein, Loves Park, Ill.-based TH Foods recently introduced new products and line extensions in its better-foryou, premium, gluten-free Crunchmaster brand crackers at the 2018 Natural Products Expo West. New products, which are also available for private branding, include Crunchmaster Vegetable Cheese Crisps, made with spinach, kale, carrot, red pepper, pumpkin, beet and onion; and Seasonal Crunchmaster Pumpkin Harvest Crackers featuring flax seeds. And on the sweet side, the company introduced non-GMO Crunchmaster Protein Brownie Thins in Homestyle Milk Chocolate Brownie, Chocolate Cherry Brownie and Dark Chocolate Brownie flavors.

WHOLESOME AND AFFORDABLE

“People are looking at what’s in their food,” says James R. Anderko, vice president of sales and marketing for Venus Wafers in Hingham, Mass. “We make crackers with (very few) ingredients and that’s to our advantage. We also don’t use nuts, dairy or eggs,” which can be problematic for consumers with food sensitivities or allergies. Founded in 1931, Venus Wafers makes organic, nonGMO, vegan crackers and flatbreads made from whole, all natural ingredients in nearly 20 flavors. “Probably our No. 1 request these days is for organics. There has been a big pickup in organics over the past 18 months,” Anderko adds. That said, it’s important to pay close attention to production costs, points out Anderko, who adds, “Consumers aren’t going to pay $6.99 for a box of crackers.” A good balance of price and quality is a top priority in this category, agrees Isaac Almeida, international business manager for Grupo Superior S.A., in Quito, Ecuador. Best sellers, according to Almeida, are chocolate chip and sandwich cookies and round, salty crackers. But up-and-coming are what Almeida calls “fitness” cookies and crackers. “This includes the use of traditional cereals mixed with exotic or local fruits – for example, banana with chia — a good and healthy alternative” to traditional, starchier products with higher sugar content, Almeida says. “The healthier the product is, the better, and this is what is in the minds of consumers.” The call for organic cookies and crackers, Anderko says, “is just the tip of the iceberg. Organics are beginning to become part of the mainstream.” SB Cvetan is a freelance writer from Barringon, Ill.

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51


CATEGORY INTELLIGENCE PERSONAL CARE WET WIPES

SWIPE RIGHT Growth category would benefit from more bundling of wipes with other personal care products

DO explain the significance of any free-from claims on packaging and signage.

The U.S. market for personal care wet wipes has grown from nearly $2.307 billion in 2012 to more than $2.804 billion in 2017 and is projected to climb to almost $3 billion by 2022, according to just-released data from global market researcher Euromonitor International. “Baby wipes still dominate the personal wipes space,” says Svetlana Uduslivaia, head of tissue and hygiene research for Euromonitor. “It is a stable, mature category in developed regions such as the U.S. since it already has a high per-capita consumption.” A key trend in baby wipes is the volume growth of private brands, Uduslivaia notes. Chicago-based market research firm IRI confirms this trend. Private brand baby wipes, which account for approximately 42 percent of retail value share, increased 7.4 percent in unit sales and 6.7 percent in dollar sales during the 52 weeks ending Jan. 28, while the entire baby wipes segment grew just 2 percent in unit sales and less than 1 percent in dollar sales. Other types of personal care wipes, which IRI calls “moist towelettes,” saw stronger gains in dollar sales than unit sales. Private brands, which constitute roughly 45 percent value share in this segment, increased 7.3 percent in dollar sales, slightly behind the figure for

Don’t neglect to merchandise facial wipes alongside other beauty and skincare products. Baby Wipes Private Brands

All Brands

Dollar Sales (in millions)

$527.9

$1,267.1

Change vs. Year Ago

+6.7%

+0.8%

Dollar Share

41.7%

100%

Unit Sales (in millions)

128.8

320.9

Change vs. Year Ago

+7.4%

+2.0%

Avg. Price Per Unit

$4.10

$3.95

Source: Infoscan Reviews, IRI, a Chicago-based market research firm. Total U.S. supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending Jan. 28, 2018. Note: Does not include all personal care wet wipe subcategories.

52

Store Brands / April 2018 / www.storebrands.com

all brands. In unit sales, private brand moist towelettes increased 2.8 percent, almost a full percentage point less than the whole subcategory.

INCREASING SPECIFICITY

In the skin care and facial wipes realm, store brand products are desired and are being developed to address specific needs and complement other personal care items, says Aileen Vitale, manager of sales and marketing for Clifton, N.J.-based Disposable Hygiene. “Consumers are looking for improved solutions that encompass a skin care routine, whether it be anti-aging, detoxifying or anti-pollution,” Vitale notes. Consumers also seek travel-size packs of facial wipes and other beauty products so that they can maintain their skin care and make-up routines while on the go, she adds. Private brands are showing promise in the burgeoning athletic wipes segment as well, points out Eve Yen, founder and CEO of Chino, Calif.-based Diamond Wipes International. “Body wipes, as part of our active lifestyle essentials, are starting to take hold,” she says.

BETTER BUNDLING, MESSAGING

To appeal to millennials and other health-conscious consumers, private brand wipes manufacturers have been removing chemicals that many people consider questionable such as parabens and phthalates. Vitale says that retailers with free-from wipes need to highlight “what makes this special” on their store brand packaging and signage. In the health and beauty section of the store, store brand facial wipes should be grouped with other skin care products “to tell a story,” Vitale says. “Merchandise wipes side by side with jarred moisturizers, bottled cleansers, treatments, etc.,” she advises. “Private label is a brand and needs to mimic the retention merchandising used by major national brands. This helps with customer loyalty and the willingness to try a new addition to existing private label products.” Yen agrees that wipes should be bundled with other personal care essentials. In fact, retailers should create “different bundles for different stages in life,” she suggests, “ranging from the birth of your first baby to caring for aging parents.” SB Schierhorn, the managing editor of Store Brands, can be reached at cschierhorn@ensembleiq.com.


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CATEGORY CLOSEUP

Pet Food

$30 29% Dog food sales (wet and dry) grew 8 percent between 2012-17 to reach $11.8 BILLION while cat food sales (wet and dry) increased 11 percent to reach $6.83 billion during the same time frame. Source: Mintel

BILLION

How large the U.S. pet food market (wet food, dry food, nutrition, etc.) is expected to grow from now until 2022, a compound annual growth rate of 3.36 percent.

How much pet treat sales have increased in the past five years to reach sales of $4.39 billion. 75 percent of pet owners agree that treats are their way of showing their pets love. Source: Mintel

Source: Zion Market Research

40%

of U.S. pet owners say they check the ingredient list when purchasing new pet food or treats, and 64 PERCENT would be interested in treats made with premium ingredients such as all-natural or organic. Source: Mintel

69%

of pet owners say they are interested in giving their pet vitamins and supplements. Source: Mintel

PET FOOD SALES

PET FOOD SHARE OF SEGMENT

52 weeks from October through October

52 weeks from October through October

BY YEAR

BY YEAR

PRIVATE BRANDS IN MILLIONS

BRANDS IN BILLIONS

1.87

12.2

2012-13

12.9

87.1

2013-14

1.71

12.6

2013-14

11.8

88.2

2014-15

1.71

12.8

2014-15

11.7

88.3

2015-16

1.63

12.9

2015-16

11.1

88.9

Source: Nielsen Store Brands / April 2018 / www.storebrands.com

BRANDS IN BILLIONS

2012-13

Source: Nielsen

54

PRIVATE BRANDS IN MILLIONS

Source: Nielsen Source: Nielsen


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Store Brands - April 2018  

Store Brands - April 2018