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Fresh flavor trends

Private Label Trade Show coverage

Trend Watch Manual December 2018 | www.storebrands.com

IMPACT PLAYERS FIVE RETAILERS MAKING A DIFFERENCE IN PRIVATE BRANDS


Meet this year’s retail PLMA congratulates the winners of this year’s Salute to Excellence Awards. Each year, PLMA gives recognition to outstanding store brands products introduced on the shelves of supermarkets, drug chains, mass merchandisers, wholesale clubs and specialty retailers from coast to coast.

PLMA 2018

More than 500 products were submitted for consideration, including food and beverages, kitchen and household, and health and beauty categories. Entries were then evaluated by a panel of professional and consumer judges for taste, performance, packaging, presentation, and value for money. Winning products once again demonstrated the creativity and innovation of today’s store brands. PLMA is proud to salute this year’s winning retailers and wholesalers, whose products reflect their evergrowing commitment to excellence in quality and consumer satisfaction.

The Winners

o t e t u l a S cellen x E AWA RD

The Rules

The Process

www.plmawinn


winners

FOOD FOR THE FAMILY

BEVERAGES

MEAL PREPARATION

Appetizers & Hors d’Oeuvres Lidl Italiamo Seafood Cocktail with Marinade & Basil

Juices, Energy & Flavored Drinks 7-Eleven 7-Select® Go! Smart Clean & Green Cold Pressed Organic Juice

Ingredients Wegmans Wegmans Food You Feel Good About® Pasilla Pepper Adobo Bold Roasted Chili Paste

Main Dishes Aldi Parkview® Select/Cuts Three Cheese Uncured Cooked Chicken Sausage

Hot Beverages Jet.com Uniquely J Single Serve Diner Blend Coffee

Dressings/Marinades & Oils The Kroger Co. HemisFares™ Cornicabra Extra Virgin Olive Oil

Side Dishes Sobeys Compliments Super Green Blend Frozen Vegetables

Soda & Flavored Waters (tie) H-E-B Central Market® Organic Lemon Italian Soda

Deli/Prepared Foods Lidl No Name Pulled Chicken with BBQ Sauce

to e c n

Healthy & Natural Wakefern Wholesome Pantry™ Organic Beet Hummus

Walmart Great Value™ 2 Ciabatta Pizza Crusts

Organic Albertsons O Organics® Japanese Inspired Salad with Yuzu Vinaigrette Dressing

Ahold Delhaize USA Store Brand Logo Chicken & Chorizo Sausage Gumbo Breakfast Foods Sobeys Compliments Naturally Simple Ancient Grain Steel Cut Oatmeal BAKERY & DESSERTS Cakes & Pies BJ’s Wholesale Club Wellsley Farms® White Chocolate Twist Cake Breads, Rolls & Muffins Wakefern ShopRite Trading Company™ Garlic Tandoori Naan

S

Ice Cream & Frozen Novelties Metro Irresistibles Green Tea & White Chocolaty Coating Ice Cream Bars Cookies Costco Wholesale Kirkland Signature™ European Pastries Breakfast Cereal Metro Irresistibles Naturalia Coconut Flakes & Hemp Seeds Granola SNACKS Chips & Crisps Earth Fare Earth Fare® Himalayan Pink Salt Kettle Chips Nibbles & Noshes Hy-Vee Peaceful Piranha™ Sweet BBQ Peanut Poppers

Judges

Consumers

ners .com © 2018 Private Label Manufacturers Association

HEALTHY EATING

Pizza (tie) Metro Irresistibles Canadian Mega Pizza

Soup (tie) Thrive Market Thrive Market Organic Bone Broth

Trader Joe’s Trader Joe’s® Rhubarb & Strawberry Soda

Candy & Chocolate Trader Joe’s Trader Joe’s® Dark Chocolate Toasted Sesame Caramels Spreads & Dips Wakefern Wholesome Pantry™ Organic Raspberry Preserves Children’s Foods Southeastern Grocers SE Grocers Apple Sauce Pouches Variety Pack

Vegetarian/Vegan Aldi Earth Grown™ Quinoa Crunch Veggie Burger Special Dietary Foods Wegmans Wegmans Organic CauliCrème Infants & Toddlers Topco Tippy Toes Organic® Organic Baby Food Apple Zucchini Spinach Strawberry DAIRY Cheese Lidl Preferred Selection British Vintage Cheddar Cheese Dairy & Non-Dairy Milk Walmart Great Value™ Lactose Free Chocolate Reduced Fat Milk Yogurt Walmart Great Value™ On The Go Lowfat Yogurt Tubes PERSONAL CARE & WELLNESS Body Care & Hair Care Trader Joe’s Trader Joe’s® Cucumber Avocado Body Butter Beauty Care & Cosmetics Walgreens C.Y.O Eyeshadow Palette Rainbow Warrior Colors Baby Target Cloud Island™ Diaper Bags Men’s Grooming Costco Wholesale Kirkland Signature™ Triple Blade Razor & Cartridges Bath & Shower Walmart Equate™ Beauty Rainfall Bath Gel

Pasta & Pasta Dishes Earth Fare Earth Fare® Organic Spirali Organic Macaroni Pasta Sauces & Cooking Sauces Target Simply balanced™ Portabella Mushroom Pasta Sauce Asian Food Aldi Season’s Choice® Steamed Asian Seasoned Medley Mexican/Latin American Foods Wakefern ShopRite Trading Company™ Imported Artichoke Hearts from Peru Condiments Albertsons Signature Select™ Chipotle Craft Beer BBQ Sauce HEALTH CARE OTC Albertsons Signature Care™ Emoji Adhesive Bandages Health Care CVS CVS Health™ Pro Strength Kinesiology Tape Sun Care & Toiletries Thrive Market Thrive Market Coconut Sunscreen Lip Balm Children Walgreens Walgreens Suncare Family Pack HOME & HOUSEHOLD Kitchen & Cooking Trader Joe’s Trader Joe’s® Lavender Tea Tree Scent Liquid Dish Soap Home & Garden BJ’s Wholesale Club Berkley Jensen® Folding Wagon with Tray Laundry & Cleaning Thrive Market Thrive Market Liquid Lavender Laundry Detergent Paper & Plastic Thrive Market Thrive Market Bamboo + Recycled Bath Tissue Pet Food & Pet Care (tie) BJ’s Wholesale Club Berkley & Jensen® Puppy Chicken & Rice Holistic Recipe Food Metro Irresistibles Apple & Chicken Dog Treats


Volume 40 No. 12 December 2018

DEPARTMENTS 6

Editor’s Take

8

Around the Industry

47

CONTENTS

End Cap

10

COVER STORY

IMPACT PLAYERS

25 TREND WATCH MANUAL

Five retailers making a difference in private brands

26 Ketchup and barbecue sauce 28 Logistics and transportation 30 Salty snacks 32 Frozen fruit 34 Cheese and cheese dips 36 Deli meats 38 Baked goods 40 Honey 42 Coffee 44 Olive oil

FEATURES 16 PRIVATE LABEL TRADE SHOW COVERAGE ‘Show’ business If there’s one thing that came out of the Private Label Trade Show, it’s that the store brands industry continues to prosper

22 FOCUS ON FRESH Favored flavors Exotic fruits and vegetables, ethnic street food and plant-based protein will continue to be popular in 2019

32 26

30

42 38

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 / December 2018 / www.storebrands.com


WELCOME TO OUR FAMILY OF PRODUCTS all From The Hearth!

Expanding our assortment and our capabilities

www.fromthehearth.com


EDITOR’S TAKE Business Intelligence for an Evolving Market

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

Vice President/Brand Director

‘TURBULENT’ TIMES

Eric Savitch

856-489-3336

esavitch@ensembleiq.com

EDITORIAL Editor-in-Chief

Brian Sharoff describes the current state of the private brands industry as “turbulent.” Not “turbulent” like a bumpy airplane ride, but “turbulent” as in a state of uncertainty. And “turbulent” in this case doesn’t necessarily mean good or bad, stresses Sharoff, president of the Private Label Manufacturers Association (PLMA). “Turbulence is simply the reverse of things that are placid,” he says. Let’s just say the industry has a lot of balls in the air. Where they land is anybody’s guess. “The reason it is turbulent is because many different factors are at work at the same time, and it’s not clear to anybody how it’s all going to be resolved,” Sharoff told me recently. That includes Sharoff. Even though he has led the PLMA for several decades — and seen a lot of things — he humbly admits that he hasn’t seen everything. Sharoff says most everyone in the industry is asking, “What’s going to happen?” Here’s why. For starters, there is the Amazon.com factor. A year ago, after Amazon.com acquired Whole Foods Market, many industry pundits predicted the online retail giant would have a gigantic impact on the grocery world, including private brands. “Gigantic impact” hasn’t happened yet. “And it’s not absolutely clear that it will happen,” Sharoff says. But if it does happen, Sharoff adds, just how will it change the industry? There is also what Sharoff calls the “one-two punch” administered by deep-discount chains Aldi and Lidl, the two Germany-based retailers that sell predominantly private brands. Lidl, which has more than 10,000 stores in 28 European countries, planned to open 100 U.S. stores by mid-2018. That didn’t come close to happening, and Lidl’s growth stalled. But Lidl grew its footprint by nearly 50 percent when it announced in November that it was acquiring 27 Best Market stores in New York and New Jersey. Meanwhile, Aldi, Lidl’s biggest competitor, has been on a growth rampage with plans to expand from 1,600 to 2,500 stores nationwide by the end of 2022. As Sharoff points out, Lidl’s arrival spurred Aldi to dramatically increase its U.S. footprint, which created more turbulence. Changing demographics have also led to the “T” word, Sharoff says. Millennials, now the largest-living generation, are garnering more buying power by the day. Oh yeah, they also have less affinity for branded products than other generations. So it’s up to retailers and manufacturers to discover just what their millennial customers want and where their private brands fit in the equation. Considering all these dynamics, you can see where Sharoff is coming from when he talks about turbulence in the industry. A lot of people might not like it, for obvious reasons. We are more comfortable with being certain, not uncertain. That’s just human nature. That said, Sharoff views turbulence as something entirely different. “From a long-range historical point of view, turbulence is what often proceeds revolutionary change,” he says. Buckle up. The private brands industry could be in for the ride of a lifetime.

Lawrence Aylward

(330) 635-2586

laylward@ensembleIQ.com

Managing Editor

Gina Acosta

(813) 417-4149

gacosta@ensembleIQ.com

Contributing Writers

Rich Mitchell, Dana Cvetan, Nevenka Jevtic

ADVERTISING & SALES Associate Brand Director

Suzanne Caputo

(201) 855-7628

scaputo@ensembleIQ.com

Regional Sales Manager

Kari Mills

(773) 992-4420

kmills@ensembleiq.com

CUSTOM MEDIA Director of Client Services, Enterprise Solutions Kaeli Elisco (224) 632-8221

kelisco@ensembleIQ.com

AUDIENCE ENGAGEMENT Director of Audience Engagement

Gail Reboletti

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Audience Engagemnet Manager (215) 301-0593

Shelly Patton spatton@ensembleIQ.com

List Rental

MeritDirect

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Elizabeth Jackson ejackson@meritdirect.com

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

EnsembleIQ.com@e-circ.net

PROJECT MANAGEMENT/PRODUCTION/ART Vice President Production

Derek Estey

(877)687-7321 x 1004

destey@ensembleIQ.com

Creative Director

Colette Magliaro cmagliaro@ensembleIQ.com

Advertising/Production Manager (973) 607-1322

Pat Wisser pwisser@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 Shanker Chief Financial Officer - Dan McCarthy Chief Digital Officer - Joel Hughes Chief Innovation Officer - Tanner Van Dusen Executive Vice President, Events & Conferences – Ed Several

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

2015

6

Store Brands / December 2018 / www.storebrands.com


AroundtheIndustry

Here’s the secret to Target’s success Target’s private brand strategy is helping the retailer achieve impressive growth in a challenging retail environment By Gina Acosta

Target has launched 20 private brands in the last two years.

sales in the digital channel grew 49 percent during the third quarter. “We introduced three new innovative owned and exclusive brands in the quarter: Quip and Native in personal care; and our new essentials-owned brand Smartly, which is designed for the younger budget-conscious guest who lives in smaller spaces,” Tritton said. “In food and beverage, comp sales grew about 4 percent in the third quarter, consistent with our second-quarter performance. Within the category, we saw strong encouraging results in our owned brand assortment, along with double-digit comps again in adult beverage.”

“We continually focus on maintaining a sense of balance in our approach between value and inspiration, satisfying wants and needs between unique owned brands and quality national brands, and offering compelling deals while being priced right daily.” MARK TRITTON, CHIEF MERCHANDISING OFFICER, TARGET

Target says its strong increase in thirdquarter comparable sales is proof that its “owned brand strategy” is paying off. The retailer reported same-store sales growth of 5.1 percent and comparable traffic growth of 5.3 percent for the third quarter ended Nov. 3. But Target’s impressive Q3 report is just a continuation of Target’s momentum from the second quarter, when it posted its best growth on this measure in 13 years (a 6.5 percent increase). Target attributes all of this momentum to the retailer’s “owned brand strategy,” which has produced 20 private brand launches over the last two years, mostly in apparel and home goods. “We continually focus on maintaining a sense of balance in our approach between value and inspiration, satisfying 8

wants and needs between unique owned brands and quality national brands, and offering compelling deals while being priced right daily,” Target Chief Merchandising Officer Mark Tritton said in a recent earnings call with analysts. “Our third-quarter performance reinforces our confidence that we are successfully maintaining that sense of balance.” Tritton came to Target from Nordstrom about two years ago and has hit the ground running, overhauling Target’s private brand business and overseeing several new private brand launches this year, including the Smartly and Heyday brands. Tritton appears to be leveraging many of these private brands to generate customer traffic both in-store and online. The company reported that comparable

Store Brands / December 2018 / www.storebrands.com

For the quarter, Target said adjusted earnings came in at $1.09 per share. Total revenue of $17.8 billion increased 5.6 percent from $16.9 billion last year, reflecting sales growth of 5.7 percent and other revenue growth of 1.6 percent. Operating income was $819 million in the third quarter 2018, down 3.3 percent from $847 million in 2017. Target blamed the decrease on higher supply chain costs driven by growth in digital fulfillment costs and other expenses. For the fourth quarter, Target said it expects comparable sales growth of approximately 5 percent, consistent with the company’s year-to-date performance. Minneapolis-based Target Corp. operates more than 1,800 stores and Target.com. SB


AroundtheIndustry Report

Private brands will reach 25% market share in next decade

Lidl on verge of ‘recordbreaking food retail success,’ analyst says By Bridget Goldschmidt

A new report from Cadent Consulting Group says private bands are growing at three times the rate of national brands Wilton, Conn.-based Cadent Consulting Group’s 2018 Private Label Industry Study reveals the drivers behind the dramatic growth and transformation of private brands from generic to true brand status. “Private label has historically followed the booms and busts of the broader economy, but that mold is beginning to crack,” stated Don Stuart, managing director at Cadent Consulting Group. “Private label is growing at three times the rate of national brands, and we project its share to hit 25 percent in the next decade.” Millennials, long considered the shoppers of the future, are heavy shoppers of private brands, according to Cadent Consulting Group. One-third of millennials’ shopping carts are already filled with private brand products, and virtually all millennials state they will buy at least as much private brands in the future, with half saying they will buy even more, according to the report. Store brands are driving store choice, with 54 percent of millennials saying their store choice is driven by their retailers’ private brands, the report stated. And retailers are leveraging this opportunity by building portfolios with their private brands — offering the three key factors of the private brand success pyramid: quality, selection and price. Consumers are shopping store brands as brands, and retailers are marketing store brands as brands, according to the report. With shoppers buying for more than just price, retailers are building portfolios of store brands with low-priced options for the value shopper, as well as premium offerings such as organic. SB

Lidl now operates nearly 60 U.S. stores.

Lidl’s acquisition of 27 Best Market stores in New York and New Jersey positions the German retailer for “record-breaking food retail success.” According to Burt P. Flickinger III, managing director of New Yorkbased Strategic Retail Group, “Lidl’s purchase of Best Markets will revolutionize U.S. retail and put formidable financial pressures on food retailers, while shoppers benefit from unprecedented price wars.” In Flickinger’s opinion, the German deep-discounter is “initiating a major European invasion of U.S. retail,” first through its audacious plans to enter the country in a big way in 2017 with a string of stores along the East Coast — plans that hit a snag when the initial locations underperformed, forcing Lidl to slow its pace of expansion — and now with the Best Market acquisition, which brings it squarely into the strategic New York metro area, along with its conversion of former Pathmark and A&P stores in greater Philadelphia. Lidl “is the worst competitive nightmare for all U.S. food retailers,” Flickinger said, citing the “competitive complacency of big chains and [their] major strategic mistakes” as reasons that rival grocers should be concerned about this latest turn of events. “With the notable exceptions of Ahold Delhaize’s USA’s Stop & Shop and Albertsons’ Acme, the major supermarket chains [in the region] have been very competitively complacent, allowing a significant vacuum for Lidl to completely capitalize on — at the expense of the major chains for the next 15-plus years,” he contended. Goldschmidt is managing editor of Progressive Grocer, Store Brands’ sister publication.

www.storebrands.com / December 2018 / Store Brands

9


COVER STORY

FIVE RETAILERS MAKING A DIFFERENCE IN PRIVATE BRANDS

IMPACT PLAYERS B Y L A W R E N C E AY LW A R D

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Store Brands / December 2018 / www.storebrands.com


COVER STORY The proof is in the pudding — make that a box of Walmart private brand Great Value instant pudding. The retailers succeeding in private brands are the ones embracing private brands to differentiate with innovative and exclusive products that offer consumers a value — all while growing their profits. These retailers also realize the relevance of intangible store brands and offer services that help define their banners, further creating loyal customers. The following five retailers are impact players of private brands in grocery. They aren’t the only retailers making an impact, but they are surely leaving their mark:

1

WALMART

Its biggest impact may be yet to come

Who would have thought that Walmart would become the place to go for authentic Italian food? Not long ago, that kind of destination was reserved for some exclusive restaurant. But last year, Walmart announced it was partnering with the Italian Trade Agency to introduce a line of authentic Italian cuisine, Sam’s Choice Italia, featuring 40 products including bagged pastas, pesto and pasta

sauces, canned tomatoes, balsamic vinegar and frozen pizzas. It was the first time the Italian Trade Agency worked with a U.S. retailer on a full line of private brand products that are produced by Italian suppliers. Walmart’s agreement with the Italian Trade Agency proved how serious the Bentonville, Ark.-based retailer is about enhancing its private brands program, especially from a premium perspective. Other Walmart store brands are Great Value and Equate. “[We] continue to make great strides in private label,” Brett Biggs, Walmart’s chief financial officer and executive vice president, said at the Raymond James Institutional Investors Conference earlier this year. “One of the things that has hit me the last two years is the amount of work that’s going on around private label. The packaging is better, the pricing is sharp … really good products [and] good feedback from customers. We’re going to continue to be a house of brands, we always have been [and] always will. But private label in the future is going to play a really important part of what we’re doing.” Walmart’s private brands are already well-recognized among its customers. According to a recent survey by Field Agent, a retail solutions firm headquartered in Fayetteville, Ark., Walmart was the most popular retailer among consumers for purchasing store brands. A whopping 84 percent of Walmart customers said they buy store brands at least occasionally when shopping at Walmart. In addition, Walmart’s Great Value was the most trusted private brand in Field Agent’s survey, which asked consumers to pick one from a list of 13 store brands. Last year, in a speech at the Bank of America Merrill Lynch Consumer & Retail Technology Conference, Walmart CEO Douglas McMillon said Walmart has “more talent there (professionals in its private brand department) than we’ve ever had before.” Sounds like Walmart’s biggest impact on private brands is yet to come.

Walmart’s Sam’s Choice brand features products with on-trend flavors.

www.storebrands.com / December 2018 / Store Brands

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COVER STORY COVER STORY Trader Joe’s has been a pied piper of private brands.

2

TRADER JOE’S

A continued model for private brands

In October, there was vegan banana bread, pepita salsa, soft honey nougat with almonds, horseradish aioli, sparkling coconut water with yuzu and carrot cake spread. In September, there was birthday cake popcorn, caramel appleflavored granola, almond butter cocoa bars and spiced pumpkin madeleine cookies. In August, there was organic yellow lentil and brown rice spaghetti, organic Kansas City-style barbecue sauce, organic hemp seed bars and barbecue-seasoned spatchcocked chicken. And in every month prior there were many other product introductions at Trader Joe’s that characterize what private brands have become, thanks in huge part to the Monrovia, Calif.-based retailer. While Trader Joe’s, which operates 475 stores in 43 states, isn’t growing so fast that there is a location on every street corner, its impact on private brands has been and continues to be dramatic. That’s because of the product selection above. Trader Joe’s offers innovative and quality products at a value. “There’s so much variety in terms of what goes into our products, but there is a very consistent thing that has hit, we hope, product to product to product — it tastes great, and it’s enjoyable to eat [and] drink. That’s really important,” Matt Sloan, Trader Joe’s vice president of marketing product, said in a company-produced podcast earlier this year. Sloan emphasized in the podcast that Trader Joe’s products “really are about what they are.” By that, he means they are free from a list of undesirable ingredients, including artificial dyes, GMOs and synthetic preservatives. “And while customers expect those attributes from our products, products live and die by whether or not they taste good,” Sloan noted. Because so many of Trader Joe’s products do taste good, among their other attributes, consumers’ trust in private brands overall is growing. Trader Joe’s has been a pied piper for private brands. And Trader Joe’s, which has been around longer than most people realize (1967), will continue to lead and impact the industry.

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Store Brands / December 2018 / www.storebrands.com

Earth Fare isn’t afraid to take a bold approach to market its message and its products.

3

Earth Fare

A rallying cry for wellness with private brands

Earth Fare may just be hitting its stride. Founded in 1975 in Asheville, N.C., Earth Fare offers natural and organic foods at its 40 locations in the Southeast, mid-Atlantic and Midwest. The retailer’s motto is, “Live longer with Earth Fare,” which is a registered trademark. Earth Fare, which heavily emphasizes its private brands, may just be hitting its stride because it finds itself in the midst of a food revolution of sorts — that being consumers’ increasing penchant for organic and free-from foods. Earth Fare has been offering such fare for years. Under its Earth Fare brand, the retailer has grown its private brand offerings to more than 1,000 products. Last May, Earth Fare introduced its Hand Picked, Discovered by Earth Fare brand, featuring premium products with contemporary flavor profiles while adhering to Earth Fare’s food philosophy, meaning the products are free from added hormones, artificial fats and trans-fats, artificial sweeteners, bleached or


COVER STORY DeCA aims to grow its private brand portfolio to between 3,000 and 4,000 products in the next three years.

bromated flour, antibiotics, high-fructose corn syrup, artificial preservatives, and artificial colors or flavors. Many consumers believe that free-from foods may lack flavor. Earth Fare introduced Hand Picked, Discovered by Earth Fare to dispute that notion. With the line, Earth Fare President and CEO Frank Scorpiniti emphasized that shoppers don’t have to sacrifice more adventurous food choices to make the best choices for their health. Some of the products include frozen vegetarian Thai entrees sourced from Thailand; hand-topped, wood-fired pizzas imported from Modena, Italy; and brie sourced from a creamery in Vermont. Earth Fare is also not afraid to take a bold approach to market its message and its products. Last year, Earth Fare released a press release saying that “Americans are eating their way to an early grave,” noting that life expectancy for Americans in 2015 declined for the first time in more than two decades. That’s when Earth Fare debuted its motto, “Live longer with Earth Fare,” which the retailer says “is the rallying cry for Americans to choose only the cleanest, healthiest foods.” With its products and its approach, something tells us that Earth Fare will only continue to impact the organic and free-from food movement, with its private brands at center stage.

4

DeCA continues deployment of private brands

The Defense Commissary Agency (DeCA) learned from a 2016 survey of its customers that they wanted private brands because they were purchasing them from competing retailers. So DeCA, the 19th-largest grocery retailer in the U.S., went to work on a program and introduced private brands to its stores in mid-2017 for the first time in its 25-year history. In the next three years, DeCA, which serves current and retired military personnel and their families, aims to increase its store brand inventory to between 3,000 and 4,000 items. DeCA also realizes it must differentiate its private brand offerings to be competitive. Since mid-2017, Arlington, Va.-based DeCA, which operates 180 commissaries in the U.S. (mostly located on military bases), has been steadily building its program, which began with only a few products — bottled water under its Freedom’s Choice (food products) line and kitchen and trash bags under its HomeBase (non-food items) line. DeCA is partnering with Grand Rapids, Mich.-based SpartanNash, which supplies products for Freedom’s Choice and HomeBase. The commissaries also offer TopCare www.storebrands.com / December 2018 / Store Brands

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COVER COVER STORY STORY products, including first aid supplies, vitamins, over-thecounter medications and beauty care items. TopCare is a store brand supplied by Elk Grove Village, Ill.-based Topco Associates. After the modest initial offering, DeCA rolled out a slew of additional products under Freedom’s Choice and HomeBase in late 2017, including cheese, rice and dry beans, foam and plastic plates, shelf-stable juices, water enhancers, powdered soft drinks, paper towels and bath tissue. DeCA is also introducing baking goods, pie fillings, dry soup mixes, honey, pourable dressings, mustard

5

ShopRite

Impacting at all angles

ShopRite is not only emphasizing store brands with its products, the Keasbey, N.J.-based retailer is also underscoring its own brand image through its services. Last May, ShopRite introduced ShopRite Trading Company, a line of premium, artisanal foods inspired by myriad world cuisines. The line includes imported and domestically sourced foods and is available exclusively at all of the more than 270 ShopRite stores located in New Jersey, New York, Connecticut, Maryland, Delaware and Pennsylvania. In late 2016, ShopRite unveiled Wholesome Pantry, its line of organic and free-from products, of which the retailer continues to add product. ShopRite, which operates under the retailer-owned cooperative Wakefern Food Corp., always seems to be on the cusp of offering new services and programs, reaffirming it as a retailer that cares about its clientele. For instance, last September ShopRite unveiled Family Meals Month, a campaign educating shoppers about the benefits of sharing family meals while suggesting ideas for families to enjoy more meals together. The campaign leveraged the company’s team of corporate and in-store dietitians, who serve over 140 stores, to inspire and educate customers about ways to create nutritious and delicious family meals. The dietitians hosted free food demonstrations, classes and events, and distributed free recipe cookbooks. As part of Family Meals Month, ShopRite offered four limited-edition meal kits under its ShopRite Kitchen brand. This year ShopRite continued to expand its Free Fruit for Kids program, which encourages healthy eating habits for children. The program, which debuted in 2016, is now in place at more than 125 stores. As part of the Free Fruit for Kids program, kids 12 and under receive a free banana, clementine or other seasonal fruit while shopping with a parent or guardian. Last August, ShopRite Pharmacy introduced an educational initiative to New Jersey high schools to

14

mayonnaise, peanut butter, broth and other products under Freedom’s Choice. Under HomeBase, DeCA added 39-gallon disposable clear trash bags in addition to aluminum foil. Last February, DeCA said its private brands portfolio had grown to nearly 500 store brand products. Last spring, DeCA added two new Topco store brands — TippyToes organic baby food and organic vegetables, and Full Circle Market organic beans and chick peas. DeCA’s continued expansion will certainly impact the private brands industry’s overall growth.

Store Brands / December 2018 / www.storebrands.com

ShopRite’s dietitians. who serve over 140 stores, assist customers on how to create nutritious and delicious family meals. help students make safe and healthy decisions about prescription medications and understand the dangers of misusing these drugs. The digital program was made available to 30 schools at no cost to them. ShopRite is advancing its store brands program from all angles and making an impact by doing so. SB Aylward, editor-in-chief of Store Brands, can be reached at laylward@ensembleiq.com.


SP ONS OR E D C ON TE N T

Q&A

Talking with…

Mike Kagan Sales Manager, Giraffe Foods Inc.

Ellen Powell Director of Marketing, Giraffe Foods Inc.

Store Brands: Meal kits seem to be taking off as private brands. Why should retailers get on the meal kit bandwagon? What are the keys to growth? Although the meal kit market has taken off, few of the home delivery companies are actually making money at it. In fact, while sales are through the roof, we are now seeing significant market consolidation as these companies struggle to turn a profit.  The high cost of fulfillment and assembly of the kits with fresh ingredients is where the retailers have an excellent advantage over the delivery companies that struggle with the costs and logistics of obtaining and repacking the perishable items. The retailer has immediate access to these items and staff on-hand to assemble, whereas the delivery company needs to stretch their resources to do the same tasks.  The key to growth in this area is to utilize the ingredients already in the store that are relatively easy to assemble and have a decent shelf life on them. This keeps the cost down while moving the items out of the store and increasing the receipt size. The advantage the retailer has is that the shopper is already in the store to pick up their staples, so grabbing their attention while they are there with a convenient item is the key to capturing their portion of the market.  It’s important to note that consumers are generally risk averse when trying new tastes and combinations. So a taste of a new flavor or ethnic variety, like a Korean Gochujang, is more approachable in a single meal kit over a full-size bottle of sauce that may linger in their fridge or pantry for a while. SB: What are the keys to differentiation in the category? Grocers in the meal kit space are able to bridge the digital and physical. There is added incentive for retailers to invest in meal kits as there is an opportunity to drive consumers to their store. They could market their meal kits online to compete with the established players, however when customers are in the ‘checkout’ they can offer a pickup in-store promotion which would be a great traffic driver.  This would mirror the requirement for pantry ingredients and complementary revenue. A retailer can also offer a “build-your-own-option” where for efficiency and online retailer cannot.  This way the consumer can pick a protein, vegetable, starch, and sauce with the four components sold aÌ la carte. The biggest advantage retailers have over purely online meal kit companies is freedom of choice. With exclusive online retailers you have to pick from a ‘menu’ days or sometimes even a week in advance.  The consumer could look at the menu and be really interested in something on Monday, but when Thursday rolls around they may not want the salmon that was delivered the previous Monday.  The aÌ la carte meal kit option gives competitive advantage to brick and mortar grocery because they can easily accommodate the picky eater.

SB: If I’m a retailer looking to implement a store brand meal kit program, how can you help me decide what to implement? My suggestion would be to review your center store categories that are performing well. Choose your branded or private label sauce that has the best reception from the market and build a few kits around this flavor profile to rotate throughout the year.  This gives your consumers a sense of assurance that they will enjoy the product as they already know they like the core flavor component, once they have this confidence they will buy into the program.  Additionally, those seeking meal kits specifically could try the sauce and be hooked, driving sales to the core brand at the center of the store.  I also suggest looking at the frozen category to see what is selling there regarding prepared meals and duplicate in the fresh meal kits. SB: Are there any pitfalls that retailers need to avoid in terms of meal kits in regard to price, flavor, merchandising, etc.? Today’s consumer is savvy with pricing and flavors, so the key is to respond to this with a challenge and not underestimate their intelligence. So we warn against any kind of line pricing for meal kits, where they are all treated as equal costs, as the consumer is fully aware that a vegetarian pasta meal is significantly less than a seafood or beef meal. We also recommend introducing new flavors often to keep the interest peaked at all times. Offering a variety of global flavors is also necessary, as today’s consumer will not be satisfied with the former mainstream tastes. Consequently, during our on-site “Culinary Ideation” sessions with Retail Buyers and their kitchen teams, we are seeing significant interest in global flavors like Korean Gochujang or Argentinian Chimichurri, over the former choices of Teriyaki or Sweet & Sour type sauces. A meal kit is a perfect opportunity to give the consumer a taste of something new to set the stage for new grocery items that could add incremental to sales on future visits.  Other comments: Everyone dreads the daily, “What’s for dinner?” question, so offering a meal kit relieves the stress and burden of needing to think too much about it. We suggest advertising that this is even an option and placing it front and center at the store so that it can be seen as soon as the shopper enters. Take advantage of the fact that most shoppers don’t know the answer to that question walking into the store, so as soon as they seen the offering, their stress is reduced. If placement is not possible, we suggest using large, bright signage to advertise the offering. The key is capturing their attention and piquing their interest immediately upon entering the store before they start the process. Shoppers will thank you and you will see your sales soar by taking the approach that you are helping them rather than trying to boost your sales. You are providing a much-needed service, not capitalizing on their vulnerability at that moment.  For help launching or maintaining your existing Meal Kit program, Giraffe Foods offers free on-site Culinary Ideation Sessions. Call to book yours today at 800-661-5788 or visit giraffefoods.com to learn more.


PRIVATE LABEL TRADE SHOW COVERAGE The Private Label Trade Show featured more than 2,800 exhibit booths.

★★★

★★★★★★★★★★★★★★★★★★★★★★★★★★★★

'SHOW' BUSINESS IF THERE’S ONE THING THAT CAME OUT OF THE PRIVATE LABEL TRADE SHOW, IT’S THAT THE STORE BRANDS INDUSTRY CONTINUES TO PROSPER

★★★★ BY LAWRENCE AYLWARD AND GINA ACOSTA

Lisa Manzoline began her speech at the opening breakfast of the Private Label Trade Show on Nov. 12 in Chicago by saying there has never been a more exciting time to be in the store brand industry. Manzoline, chairman of the board for the Private Label Manufacturers Association (PLMA), is spot on. The industry is in its hey-day. There is disruption, indeed, but disruption presents opportunity.

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“The theme of this year’s show — ‘You ain’t seen nothin’ yet!’ — speaks not only to the innovation displayed by store brands suppliers and retailers, but also to the rapidly changing needs of the retail consumer,” said Manzoline, director of sales for Reynolds Consumer Products. The first Private Label Trade Show was held in 1982. This year’s show, held Nov. 11-13, filled three huge


halls at the Donald E. Stephens Convention Center, including more than 2,800 exhibit booths with over 1,500 companies representing representing virtually all known consumer products categories in grocery as well as nonfoods. “You ain’t seen nothing yet!” was echoed in the seminars of several speakers, who all touted the unprecedented growth of private brands during the show. Store Brands was on hand to cover many of those seminars. Here’s what we heard: NIELSEN’S CHAU: Private brands could double market share in next 10 years Store brand growth is soaring, with more retailers stocking more products on more shelves in more stores Garett Chau had plenty of good things to say about the state of private brands during his seminar on Nov. 11. It’s not the first time this year that the the current success of the private brands industry has been gloated over. But some of the things Chau said during his presentation further cement that private brands are growing, if not booming, in consumer packaged goods (CPGs). “The growth trends we see are not cyclical,” said Chau, Nielsen’s senior vice president of professional services. “They are real and will continue.” During the Great Recession of the late 2000s, Chau noted that many consumers turned to store brands to save money. But when the economy healed and expanded, consumers continued to seek them out for value and quality. And that includes consumers across all income brackets, Chau said. While the current market share of private brands is only about 15 percent across total U.S. retail stores, Chau expects that number to soar. “Within the next decade, we will see private brands market share grow to 25 to 30 percent in the U.S. For national brands that means a distribution loss of 10 to 12 points [of market share],” he added. According to Nielsen statistics, private brands market share grew 4.3 percent in the last year, an acceleration from the previous period. Food and beverage market share in private brands is up a whopping 17.5 percent, Chau said, noting that growth isn’t limited to only a few categories and is systematic across the entire store. Increased distribution of store brand products is behind most of the gains. “There are more private label items on more shelves in more stores,” Chau stated. Retailers have done a “phenomenal job” of improving the quality and perception of their own brand offerings, he added. They have also excelled at tapping into burgeoning trends and innovating quickly. “They are true differentiators,” Chau added. While sales of premium private brands grew nearly 10

percent in the last year, they account for only 8 percent of all private brand CPG sales, which tells Chau there is more room for growth. “Premium products account for about 20 percent of branded sales, which is more than double [that of private brands]. So there’s a real opportunity for premium products in store brands,” Chau said.

"THE GROWTH TRENDS WE SEE ARE NOT CYCLICAL. THEY ARE REAL AND WILL CONTINUE." — GARETT CHAU

HHHH NODDLE: “Only private brands offer exclusivity” Allan Noddle describes the current state of retail grocery as “the age of chaos and disruption.” But all the turmoil could be a wonderful thing for the private brand industry, said Noddle, the former president of Ahold USA and Daymon Worldwide, who was the keynote speaker at PLMA’s third-annual CEO-Only Seminar, held Nov. 13 during the Private Label Trade Show. Like many pundits, Noddle said he expects a “huge gain in market share in private brands” in the near future. With bricks-and-mortar stores getting smaller, Noddle said retailers must respond with differentiation, meaning branded products are out and private branded products are in. “If I’m going to be a bricks-and-mortar store, how do I get you into my store when you can sit at home at your computer and order something and have it delivered within two hours?” Noddle asked. “Only private brands provide exclusivity, differentiation and profit growth for retailers. This is where the future lies if you are a bricksand-mortar retailer.” Noddle said bricks-and-mortar stores will also become fewer as alternative ways of shopping become more popular. He noted that consolidation will also prevail in the next few years because retailers will have to continue leveraging their low margins against higher sales.

www.storebrands.com / December 2018 / Store Brands

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PRIVATE LABEL TRADE SHOW COVERAGE

Allan Noddle said during the CEO-Only Seminar that he expects a "huge" market share gain for private brands.

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"ONLY PRIVATE BRANDS PROVIDE EXCLUSIVITY, DIFFERENTIATION AND PROFIT GROWTH." — ALLAN NODDLE

HHHH

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“There will be few global players left in the next five years,” Noddle predicted, adding that Aldi, Walmart, Amazon, Costco and China’s Alibaba Group will be some of them. “Those five global players are going to put tremendous pricing pressure on [suppliers]. They will squeeze [suppliers] because they are going to have tremendous purchasing power,” he said. Noddle is aware of consumers’ increasing penchant for healthier foods, including organic and freefrom offerings. He predicts this penchant will grow into a full-blown “healthy food revolution.” But there is a problem. “Most suppliers are ill-prepared for it,” he said. STERN: China’s “new retail” may be coming to U.S. A decade ago, global retailers looking for inspiration on how to market to the next generation of consumers used to look to European or U.S. stores for best-in-class innovation and creativity.


But a lot has changed in the past decade, according to Neil Stern, a senior partner with McMillanDoolittle, who gave a riveting breakfast presentation at the show on Nov. 12 about the next big trends in the retail industry. And a lot of that change is happening in China. “Ten years ago large retail and other retail infrastructure in China almost didn't exist. You had a huge amount of immature trade and mom and pop retail,” Stern said. “There were no shopping centers, no big box stores. So in China you literally have this blank canvas. And if you take a blank canvas, a lot of technology and a lot of infrastructure and you say, ‘Well, what might retail look like?’ That's what's happening in China. You really have this phenomenon of what's called new retail. And what new retail is is kind of merging together the old and the new. Taking new retail formats and new business models and making it work with the infrastructure and the online shopping environment.” Stern said Chinese retailers excel at bridging the gap between e-commerce and physical retail. He used a term for their success that isn’t “omnichannel”; he says it’s more about “online-to-offline” commerce, which blurs the lines between online shopping and bricks-and-mortar. And it is this new kind of retail that looks the most like where things might be headed in the U.S. market. “What does online-to-offline mean? It’s the link between online discovery and actual commerce that happens in the physical world,” Stern said “How do you link together in a seamless way all the things that are available today from an online perspective and all the advantages and tangible assets that we have in retail stores?

HHHHHHHHHHHHHH Neil Stern said Chinese retailers excel at bridging the gap between e-commerce and physical retail.

That's really the key to thinking about what retail is now.” The proof of the success of the online-to-offline model is in China’s e-commerce market, which is growing at a scale “never seen before,” Stern said, adding that China has an online sales penetration of 23.1 percent compared to 9 percent in the U.S. “China’s overall retail market is now larger than the U.S., but China is growing at a faster pace. And of course a lot of this is being driven by e-commerce,” Stern said. When you break down China’s e-commerce growth by category, 8 percent of its grocery sales are transacted online; in the U.S. it’s 2 percent. But in China that online grocery number is expected to grow to 15 percent. And Chinese consumers also have higher expectations when it comes to delivery. While most Americans are satisfied with two-day delivery, 29 percent of Chinese consumers expect same-day delivery, compared to 6 percent in the U.S. Stern detailed several examples of Chinese retailers leading with their online-to-offline business models: Alibaba, JD.com and others. Alibaba specifically runs physical stores called Hema (pronounced Hoo-ma) that have small physical footprints (around 10,000 square feet) but also act like fulfillment centers. So Hema customers can shop Hema.com, shop the physical Hema store, and can also shop the Hema store but also have groceries delivered. The Hema banner has about 65 stores with an army of employees on scooters who deliver groceries to a customer’s door within 30 minutes. Hema stores also leverage technology such as digital self-checkout, mobile checkout and facial recognition. “What Alibaba did was build a store that has an emphasis and focus on fresh products,” Stern said. “And they put a lot of technology behind the fresh products so every product that’s on the shelf can be scanned with a QR code. And every store has a distribution center. An employee can scan products and they go into a bag on a conveyor belt and go directly to the back of the store. So the store has the excitement of a supermarket along with the efficiencies of a distribution center. Hema brings the online and offline elements together in a seamless way.” So what are the implications of all this Chinese innovation for the U.S. retail industry? Stern offered several predictions: Amazon Go will be expanding its cashierless technology to its 365 and Whole Foods Market banners. Walmart will launch cashierless technology to all its Sam’s Club stores. Aldi will launch stores that are most similar to China’s Hema, an online-to-offline model. One of the big Chinese players is shopping for retail real estate in the U.S. and will likely be opening a high-tech store such as Hema.

www.storebrands.com / December 2018 / Store Brands

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PRIVATE LABEL TRADE SHOW COVERAGE WISNER: Great opportunity and great risk in e-commerce If there was any uncertainty about the changes in retail, one need only look at what The Kroger Co. is doing in Arizona. The Cincinnati-based retailer is in the early stages of testing grocery delivery via autonomous vehicles in the Scottsdale area. Fry’s Food Stores, a Kroger banner that serves Arizona, will build the orders for Scottsdale residents, who can shop for their groceries via the banner’s website or its mobile app and have them delivered to their homes.

"ONLINE, STORE BRANDS ARE REALLY THE ONLY WAY TO MAKE MONEY BECAUSE CONSUMERS CAN SHOP ANYWHERE THEY WANT." — JIM WISNER

HHHH This pace of disruption in retail has become so relentless, said Jim Wisner, president of Wisner Marketing Group, that retail companies and their suppliers really only have three choices today. “You can watch things happen, you can make things happen, or you can be left saying, ‘What happened?’, Wisner said during his seminar on Nov. 11. “As Bill Gates says, ‘We always overestimate the change that will occur in the next two years and underestimate the change in the next 10 years.’ Don’t let yourselves be lulled into inaction. What we’re finding with e-commerce is, don’t overestimate the next two days or underestimate the next two months.” Wisner, along with Heidi Reale, president of the marketing and communications firm SparkShoppe!, led a detailed discussion of the myriad challenges and opportunities for retailers and their store brand suppliers over the next several years. Wisner discussed not only Kroger’s partnership with Nuro’s autonomous vehicles but

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also innovations at Walmart, Walgreens and Sam’s Club that threaten to upend the retail game entirely. “Walmart has surpassed Amazon as the largest online food retailer,” Wisner said. “At the end of the day, I believe there is an opportunity for bricks-and-mortar retailers to win this battle in the end. People are finding a way to compete. You look at the regional retailers [that] are starting to crack the code and starting to do this as well or better than Amazon because they have physical locations where a customer can go and solve a problem. They are truly omnichannel in terms of how they relate to their customers.” Wisner said there will continue to be consolidation in retail, but the remaining retailers need to start thinking differently — and fast — about what it means to be “bricks-and-mortar.” Reale offered several key recommendations for retailers looking to leverage the opportunity in digital marketing, and it all starts with creating an emotional connection with the consumer. She stressed that retailers should focus their digital marketing efforts on emotional connection, not price. “The price elasticity of demand doesn’t play in if you can create an emotional connection with the people you do business with, your customers. So if you can create that emotional connection, it's worth a lot more than trying to get to the bottom of the barrel with price,” Reale said. And when it comes to digital retail and store brands, Wisner said store brands are the only way for retailers and manufacturers to make money going forward. “Online, store brands are really the only real way to make money because consumers can shop anywhere they want,” Wisner said. “It really is a race to the bottom with items that the consumer can purchase anywhere. The only way you can be successful is by figuring out a way to get customers to buy products that are unique to you.” With retailers and store brands speeding up their innovations and shoppers being offered an endless aisle online, the most successful companies are going to be those that understand the consumer’s path to purchase and all the different (online and offline) touch points. What does this all mean for the private brand universe? "This could be the greatest risk the industry has ever seen. At the same time this is probably the greatest opportunity the private brand industry has ever seen,” Wisner said. “The center store is shrinking and there’s more space being devoted to perishables, but those generate a higher percentage of store brand penetration. Also SKU rationalization means store brands are losing competitors. If you really look at the numbers, that’s where you really make your money — with products that turn faster and generate higher margins. There’s going to be a lot more store brands than ever before.” SB


FOCUS ON FRESH

Exotic fruits and vegetables, ethnic street food and plant-based protein will continue to be popular in 2019

FAVORED FLAVORS BY C AR O LY N S CH I E RH O RN

What do a food truck and a kumquat have in common? They both represent the blend of trends influencing flavors in retailers’ fresh-prepared and fresh food departments. “We’re seeing an accumulation and a combination of multiple trends happening together,” notes flavor and fragrance consultant Amy Marks-McGee, owner of New York City-based Trendincite. Interest in multicultural cuisine delivered in a convenient format, a penchant for personalized better-for-you products, and cross-category as well as seasonal inspirations for new offerings count among the developments that gained momentum this year and will further ascend in 2019. Grocery retailers should survey the landscape of specialty quick-service restaurants for ideas as to what to embrace next year, Marks-McGee suggests, noting that Indian street food has taken off in a number of urban markets, Hawaiian poke bowls are particularly popular right now, and Filipino cuisine is an emerging passion among foodies. “Supermarket and grocery trends lag somewhat behind restaurant trends but typically follow what’s happening

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in restaurants,” agrees food industry consultant Maeve Webster, the president of Arlington, Vt.-based Menu Matters. Her predictions for growth opportunities in 2019 include vegan fare and ever more exotic flavors from the Middle East, Africa and Asia. “The biggest trend is plant-forward or plant-based innovations, which are pushing a variety of fruits and vegetables to the forefront,” Webster says. “Part of this is the innovative use of preparation techniques typically reserved for meat.” Applied to produce such as jackfruit, which mimics the texture of pulled pork, these techniques expand the appeal of plant-based dishes, “moving them out of the vegetarian or vegan realms and into the mass market,” she adds. Spice blends will continue to be a huge trend in 2019, Webster emphasizes. She expects to see rising interest in dukkah, an Egyptian condiment made of nuts, herbs and spices and used as a dip; za’atar, a Middle Eastern blend of sumac, sesame seeds and herbs that is mixed with olive oil for a dip or sprinkled on various dishes as a garnish; and berbere, an Ethiopian spice mixture that commonly includes chili peppers, garlic, ginger, basil, korarima, radhuni, nigella and fenugreek. Ha-


FOCUS ON FRESH rissa, a hot chili pepper paste used in Tunisian cuisine, will also gain traction, as will ras el hanout, a North African spice blend; Chinese five spice powder; and togarashi, a Japanese spice mixture containing seven ingredients. “These blends are flexible and broadly applicable,” Webster explains. According to market researcher Mintel’s “International Food Trends U.S.” report issued in 2018, demand for Middle Eastern flavors and ingredients, in particular, continues to rise rapidly. For example, dates as an ingredient grew 19 percent between 2015 and 2017, while pistachios as an ingredient increased 15 percent during that period. Mint, moreover, climbed 48 percent as a non-alcoholic beverage ingredient. Furthermore, chefs in recent years have been showcasing lesser-known fresh fruits and vegetables, from prickly pear cactus fruit to Calabrian chili peppers, which means that these items are starting to command attention in supermarket produce departments. Often color, as well as flavor and nutrient density, drives the selection of exotic produce. A citrus fruit native to South Asia, kumquats are having a moment on U.S. restaurant menus, with a four-year growth rate of 65 percent in the casual dining sector, according to market research firm Datassential. Bright orange in color and approximately the size of a large olive, kumquats are tarter than oranges and sweeter than lemons or limes, points out the United Fresh Produce Association in the Summer 2018 issue of “Fresh Insights for Foodservice.” Kumquats can be eaten whole, including the seeds and thin skin, which are sweeter than the rest of the fruit. “Kumquats present an opportunity to add a fresh bright flavor and a pop of color to winter menus,” recommends United Fresh in its foodservice newsletter. “Fresh kumquats can be sliced up for salads or used as cocktail garnishes. They can additionally be showcased atop fish or on-trend toasts or featured with yogurt in parfaits or breakfast bowls.” With jackfruit appearing on more and more restaurant menus, whole jackfruits are currently be sold in retail chains as diverse as Austin, Texas-based Whole Foods Market and Bentonville, Ark.-based Walmart. Marks-McGee has noticed that dragon fruit, or pitaya, has also become more mainstream, making its way from Asian specialty grocers to conventional U.S. supermarkets.

WELLNESS, ADVENTURE, NOSTALGIA American consumers have increasingly eclectic tastes, but they also are becoming more discriminating, with millennials leading the way in avoiding artificial flavors, colors and preservatives and choosing lower-sodium and lower-sugar options. Indeed, the use of strongly flavored natural ingredients and spices serves as an alternative to excessive salt and sugar. “Across categories, the top areas of focus continue to be clean label, premiumization, and health and wellness,” observes Julie Laughter, market manager for FONA International, a flavor development company based in Geneva, Ill. “For consumers, clean label means ‘healthy.’ ” As she notes, the clean label movement’s influence on flavor can be measured by the surge of interest in natural, non-GMO and organic products. Besides the rage for better-for-you SKUs, FONA has identified three major trends affecting flavor choices in supermarkets. “The big flavor trends I’m seeing impacting multiple segments are hot and spicy, cross-category influences and bringing back nostalgic flavors,” Laughter says. Consequently, retailers might want to consider offering meatloaf and macaroni and cheese in their grocerant hot bars, while also serving chicken tikka masala and Korean barbecue. At Amherst, N.Y.-based Tops Friendly Markets, newly popular flavors coexist with old favorites and cross-category seasoning trends abound. “Our prepared foods area is seeing growth in multicultural flavors like Spanish, Mexican and Caribbean; however, Buffalo wing is still a staple for us,” shares Karri Zwirlein, the retailer’s director of bakery, deli and prepared foods. In Tops’ deli department, flavored cheese has seen significant growth, with garlic-, Buffalo wing- and onion-seasoned varieties becoming popular choices for sandwiches and burgers. “In prepared foods, we see the popularity of plant-based options being more prominent than any flavor profile,” Zwirlein adds. “A cauliflower pizza crust is being offered, and we continue to offer other ways to satisfy customers with special dietary needs and wants.” In Tops’ dairy department, for example, plant-based beverages, functional beverages and mango flavors are increasingly prevalent.

www.storebrands.com / December 2018 / Store Brands

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FOCUS ON FRESH

HOT STILL HOT

What will be the top flavor trends next year? Food industry analysts forecast the following: l l l

l l

l

Hot & spicy Plant-based protein Middle Eastern ingredients and cuisine Indian street food Natural, organic and non-GMO Asian-inspired bowls

Seasonal flavors are also growing in importance in all of Tops’ fresh departments. “Our bakery department features flavors of the season all throughout the year, [which are promoted] with a variety of theme ads — blueberry, peanut butter, lemon, chocolate fudge, apple, cinnamon, peach and strawberry,” Zwirlein says. Seasonal offerings in Tops’ dairy department include such creamer flavors as peppermint mocha, almond maple, frosted sugar cookie and pumpkin spice. TACOS, BOWLS REMAIN ON-TREND Although American interest in Mexican cuisine is not new, food trucks selling more authentic Latin American fare and the availability of alternative ingredients have greatly bolstered demand. Accordingly, made-to-order tacos with an international and wellness twist have taken hold in an increasing number of grocery chains, points out Marks-McGee. Taquería by Whole Foods Market — a Mexico City-inspired in-store eatery — debuted in late 2017 and has been rolling out to more of the Amazon-owned chain’s locations across the country. As is typical in quick-service restaurants, patrons custom-order their tortillas and fillings, which include sweet potato with red pipian sauce, jackfruit with pineapple al pastor, pork braised in achiote sauce, beef braised with guajillo chili, and chicken marinated in garlic and lime. The toppings range from spicy pickled vegetables to pumpkin seeds. San Antonio, Texas-headquartered H-E-B, meanwhile, opened its first True Texas Tacos quick-service restaurant this past June inside one of the retailers new 9,000-squarefoot convenience stores. The menu focuses on breakfast and specialty Tex-Mex tacos. What’s more, Rochester, N.Y.-based Wegmans Food Markets has been working with restaurateur

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Roberto Santibañez to open made-to-order Mexican cuisine stations at several of its stores, in addition to his serving as culinary director of Wegmans’ Blue Dalia restaurant and tequila bar in Natick, Mass. Another foodservice craze catching on in supermarkets, notes Marks-McGee, is bowl food, whether made to order or available in the refrigerated case in ready-to-eat or heat-and-eat containers. Frequently Asian-inspired, these bowls bring to the forefront many different flavors and ingredients and leverage the contemporary preference for convenience and healthful eating. Parsippany, N.J.-based gourmet retailer Kings Food Markets, for one, introduced self-serve Power Bowl bars to a few of its New Jersey stores early this year. Customers build their own bowls of “power foods,” drawing from nutritious ingredients such as grain blends, greens, roasted vegetables, and various protein sources including chicken, chickpeas and lentils. In addition, bowl recipes and ingredients are increasingly featured in supermarket meal kits, Marks-McGee observes. She notes that West Des Moines, Iowa-based Hy-Vee offers several bowls in its own-brand Mealtime Kits, including Gochujang Glazed Pork Bowls with Brown Rice, Cauliflower & Sweet Potato Curry Bowls with Millet, Chili Garlic Salmon Farro Bowls, and Beef Bulgogi Bowls. Such meal kits provide easy access to less-familiar ingredients and spice blends, while bolstering consumers’ confidence in their ability to prepare exotic dishes at home. Meal kits, according to Marks-McGee, are also the ideal vehicle for cross-merchandising fresh ingredients with dry ingredients found in the center store. SB Schierhorn is a freelance writer from Wheaton, Ill.


TREND WATCH

MANUAL

A LOOK AT CURRENT AND EMERGING CATEGORY TRENDS CREATING STORE BRAND OPPORTUNITIES


TRENDWATCH KETCHUP & BARBECUE SAUCE BY DANA CVETAN

A DOSE OF VERSATILITY Natural ingredients and new possibilities combine to boost flavor-enhancing sauces As a mature category with almost universal purchase, it’s challenging to nudge condiment sales upward. However, innovations into unique, bold flavors and premium and international varieties, plus the promotion of new usage occasions, have refreshed the sauces part of the category, according to market research firm Mintel’s December 2017 report, “Condiments U.S.” The key strengths of ketchup and barbeque sauce are their versatility, affordability and excitement, Mintel notes. Such attributes give retailers a strong foundation from which to persuade consumers to upgrade to products that offer enhanced usability, the opportunity to explore new flavors and indulge in premium versions. More than two-thirds of condiment consumers are interested in exciting flavor

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combinations, Mintel reports. A Lightspeed/Mintel online survey of 1,919 adults found that 40 percent would like to see more sweet and spicy flavors; 38 percent creamier and spicy flavors; 33 percent more smoky flavors; and 31 percent more sweet and sour flavors. The survey also found that 71 percent of respondents believe condiments have many uses, and 60 percent agreed condiments are affordable options for adding flavor to foods. Thirty-one percent said they were willing to pay more for premium varieties. In ketchup and barbeque sauces, natural sugar and organic formulations continue to be essential to category growth, says Renee Hicks, director of private brands for The Fremont Company in Fremont, Ohio. The leading sugar-based national brand continues to grow, and is helping to push up demand for natural sugar formulations in private brands, Hicks says. “We have seen more retailers going to all-natural formulations versus the traditional high fructose formulations,” she adds. Organic product sales continue to grow each year by double digits over the prior year for both private brands and branded ketchups and barbeque sauces, Hicks reports. The price savings consumers enjoy for private brand ketchup and barbeque sauce bodes well for its potential to grow sales, Hicks adds. Brands are reverting back to iconic formulations and marketing

Store Brands / December 2018 / www.storebrands.com

to match those iconic brands, Hicks notes. “I think we will see retailers do the same with their established private brands and promote their traditions in store brands,” she says. FLEXIBLE USAGES A Lightspeed/Mintel survey of 2,000 adult internet users revealed that 82 percent had purchased ketchup in the past six months, more than any other condiment. Twenty percent reported purchasing flavored ketchup. Based on Information Resources Inc. InfoScan Reviews data, Mintel reports that barbeque sauce sales increased 3.7 percent between 2015 and 2017. (Sales figures for 2017 were estimated.) More than half of those surveyed said they consider any sauce to be a condiment. This demonstrates that consumers are likely using products interchangeably, according to Mintel. This overlap gives retailers an opportunity to position products for use not only as condiments but also as dips, marinades or cooking sauces, the report notes. In regards to exclusivity and innovation, Hicks says there is no question that every retailer wants both exclusivity and innovation within their private brands, but many times their consumers are not willing to pay for those product features. This is especially true in the ketchup segment, Hicks says, where brand competition is stronger than in years past. Fremont, says Hicks, works with retailers to create high-quality formulations for its private brands that work for both retailers and consumers. SB

Cvetan is a freelance writer from Barrington, Ill.


THE KETCHUP

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TRENDWATCH LOGISTICS AND TRANSPORTATION BY LAWRENCE AYLWARD

CONSTANT CHALLENGES How manufacturers and retailers can keep pace with an evolving supply chain

CaseStack’s Colby Beland says retailers and suppliers of private brand products were challenged throughout 2018 in logistics and transportation with two key factors. One, trucking capacity was extremely tight, making it difficult for retailers and suppliers to manage their businesses and control their costs. And, two, most retailers continued to ratchet up their expectations on supplier delivery metrics. “The more stringent demands imposed by the retailers coupled with the very tight transportation capacity made it very challenging for suppliers trying to meet the new performance metrics,” says Beland, vice president of sales and marketing for CaseStack, a Santa Monica, Calif.based provider of integrated logistics solutions, including collaborative retail freight consolidation. Intensifying competition in the grocery business has made cost control more important than ever for retailers. Improving efficiencies

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in the supply chain has never been more critical. But Beland points out that CaseStack has been up to the challenges, noting that private brands suppliers in the company’s programs were able to exceed the largest retailers’ on-time delivery expectations while reducing lost or damaged claims and ensuring their purchase order fill-rate metrics were achieved. Suppliers were also able to achieve significant cost savings, he adds. But looking forward, Beland says there are more challenges, including the continued “Amazon effect.” “The Amazon effect has changed consumers’ expectations regarding delivery times and costs — shoppers want their stuff delivered today or tomorrow and for free,” he says. “This is a source of consternation for most private label manufacturers that have grown accustomed to shipping in full truckload quantities to retailers.”

Store Brands / December 2018 / www.storebrands.com

Suddenly, these same suppliers are having to adjust to fulfilling small orders to customers using retailers’ web stores, such as Walmart.com, and they don’t have the supply chain infrastructure in place today to effectively fulfill and ship these orders, Beland says. “Private label suppliers are trying to adapt to the volatility of such retail platforms, but it is very challenging for them to be able to respond to a weekly geographic shift in order volumes,” he adds, noting that CaseStack is actively developing solutions for all facets of e-commerce, including application programming interfaces and algorithms. There are other emerging challenges and trends in logistics and transportation impacting private brands. “Consumers continue to demand greater variety and value from retailers, while retailers continue to struggle with the omnichannel distribution network that is necessary to compete with Amazon and other online retailers,” Beland says. Also, retailers are still learning how to leverage their bricks-andmortar stores to service and fulfill e-commerce orders direct to the consumer, he adds. “Private label manufacturers will have to evolve their supply chain and/or supply chain partners in order to meet or exceed the retailer requirements while keeping their costs in check,” Beland notes. Suppliers will also have to strive to differentiate themselves. But if suppliers invest in modern packaging and the right supply chain partner, they will likely be able to grow their businesses and meet the everchanging demands of consumers and retailers, Beland says. SB Aylward, editor-in-chief of Store Brands, can be reached at aylward@ensembleiq.com.


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TRENDWATCH SALTY SNACKS BY LAWRENCE AYLWARD

ONE HOT CATEGORY Private brands gaining market share, with spicy, bold flavors leading the way

Hot. That’s the best word to describe the salty snacks category. The category’s growth is sizzling, especially regarding private brands. And what’s driving that growth? Even more heat, as in taste profiles. “Bland is out, and bold is in,” says Joe Papiri, vice president of sales and marketing for Snak King, a snack food manufacturer based in Industry, Calif. “The hotter the better. We are seeing strong, double-digit unit growth in the category against hot and spicy flavors.” According to market researcher Nielsen, salty snacks “reign supreme among Americans looking to satisfy their snack cravings.” Salty snacks generated more than $27 billion in sales across Nielsen-measured U.S. retail stores for the year ending April 1, 2017. Market researcher Packaged Facts expects consumers will continue to indulge their salty snack cravings, estimating U.S. annual growth of 3.4 percent through 2022. Private brands are making gains

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in the category. According to market researcher Information Services Inc., dollar sales of private brand potato chips were up 9.2 percent for the 52 weeks ending May 20. Sales of store brand tortilla and tostada chips were up 2.3 percent, and store brand ready-to-eat popcorn and caramel corn sales increased nearly 17 percent. In the overall salty snack category, Papiri says dollar sales of private brands grew 6.4 percent and dollar share of private brands in the category increased to 9.4 percent for the 52 weeks ending July 14, according to Nielsen. Citing research from market researcher Mintel, Papiri adds that 94 percent of Americans are snacking at least once per day. Study after study has shown that millennials are more open to purchasing private brands than other age groups. Millennials’ spending power is also increasing. And considering millennials’ penchant for hot and spicy foods, they are a good

Store Brands / December 2018 / www.storebrands.com

match for store brand salty snacks. In addition, 77 percent of millennials say they can’t get through the day without eating a snack, Papiri says, citing Mintel research. Papiri says Snak King is seeing interest from retailers for private brand products across a variety of snack categories. “Our top-tier manufacturing facilities produce snacks with a wide range of flavor profiles that run the gamut from savory to sweet,” he says, noting that Snak King’s product offerings include tortilla chips, potato chips, extruded snacks (baked, fried, puffed and curled), pellet snacks (veggie-flavored chips), popcorn, pork rinds, pork cracklins, popped crisps, trail mixes, nut butter snacks, kettle corn, caramel corn and nut clusters (tree nut and peanut). “Our retailers want to differentiate with flavors and with products that can have certain claims, such as nonGMO, organic and gluten-free.” Papiri says Snak King’s research and development team of food scientists and culinary experts develop new snack concepts, tweak recipe formulations and design unique packaging for its retail customers. “Our team not only invents new snacks based on the latest consumer trends, but also actively thinks outside the box about ways to leverage existing manufacturing technology to create novel products,” Papiri says. “This keeps us at the forefront of the industry.” Papiri adds that Snak King is seeing a strong commitment from retailers to develop private brand programs in the category. “It’s a prime opportunity for retailers to take advantage of the growing consumer trends and differentiate through their own brands,” he adds. SB Aylward, editor-in-chief of Store Brands, can be reached at aylward@ensembleiq.com.


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TRENDWATCH FROZEN FRUIT BY RICHARD MITCHELL

FROZEN FRUIT GETS A WARM WELCOME A sharper shopper focus on health and convenience is making frozen fruit an increasingly attractive snack and meal ingredient

It is a juicy time for the frozen fruit sector. With health and convenience becoming increasingly important to shoppers, frozen fruit demand is ripe for expansion as consumers incorporate more fruit in their diets, reports market research firm IBISWorld, noting that growing product demand “is leading manufacturers to focus on promoting the benefits of frozen fruit as an indispensable part of a healthy diet.” In addition to rising health consciousness, the frozen fruit segment is benefitting from new product development and expanding shelf space in freezer aisles, IBISWorld states in its November 2018 “Fruit & Juice Production in the US” report. “Furthermore, the rapidly growing popularity of ready-to-blend smoothie kits has helped drive demand for frozen berries and

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Store Brands /December 2018 / www.storebrands.com

tropical fruit varieties from the household market,” IBISWorld reports, adding that frozen fruit also can easily be added to smoothies, breakfast yogurt, oatmeal and other ready-to-eat snacks to boost their nutritional value. Also triggering greater interest in the category is processors’ promotion of the health benefits of frozen foods relative to their fresh, refrigerated or canned counterparts, and the move by niche operators to offer organic and locally sourced selections, IBISWorld states. “People’s schedules have become busier, making frozen fruit more attractive in some instances than fresh fruit, which typically requires washing, peeling, cutting and other time-intensive preparation,” IBISWorld notes. Offering convenience-oriented options also is important as many time-strapped consumers are

struggling to fit enough fruit into their diet and are seeking simple solutions, says Alex McIntosh, vice president of sales for Wake Forest, N.C.-based Imperial Frozen Foods. It is resulting in stronger interest from frozen fruit buyers in purchasing frozen fruit and veggie blends for smoothies as an easy way to also increase veggie consumption, he notes, with younger consumers also gravitating toward smoothie bowls. “Smoothie bowls have exploded in the foodservice space and consumers are now looking for those options at home,” he says. “It presents retailers with a unique opportunity to drive new growth within the category.” More retailers, meanwhile, are starting to merge their frozen fruit and frozen vegetable categories, which enables operators to more easily market fruit to a wider range of consumers and to capitalize on the segments’ similar marketing messages, McIntosh states. “This makes a lot of sense as sometimes fruit can be alienated on a different aisle and you potentially miss out on that frozen vegetable shopper,” he notes. Merchandisers also will benefit by offering unique blends and fruits that cater to consumers’ desire for exploration, such as dragon fruit, acai and jackfruit, along with premium offerings, McIntosh says. “Go beyond the scope of basic fruit blends, such as strawberry and banana,” he states. “Offer mixes that might include such items as spinach and kale to bring more creativity and widen usage occasions. “Use specific varieties of fruits or growing regions to intrigue consumers and reinforce premium.” SB

Mitchell is a freelance writer from Wilmette, Ill.


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TRENDWATCH CHEESE AND CHEESE DIPS BY DANA CVETAN

BUILD TO SUIT Be aware of changing demographics and regional tastes to refine product development and grow sales Good quality national brand equivalent (NBE) or better-thanNBE products will likely continue to be the basis for growth in the cheese and cheese dip category. However, in order to drive growth to new levels, retailers must look to the changing demographics of their customers and seek to develop and offer new, innovative flavor profiles, says James C. Jordan, director of sales and marketing for Old Fashioned Foods Inc. in Mayville, Wis. Private brand cheese brands are a major market driver, accounting for more than 40 percent of cheese category dollar sales in 2017, according to Rockville, Md.-based market research firm Packaged Facts’ February report, “U.S. Food Market Outlook, 2018.” Consumers are clamoring for bolder flavors derived from spices, peppers, smokiness and heat, the report notes. New product introductions geared toward snacking and increased consumer interest in flavor diversification are important trends

impacting the market, according to Packaged Facts’ May report, “Cheese: U.S. Market Trends and Opportunities.” FLAVOR PROFILING Creative tweaking will continue to drive innovations for retailers’ own brand programs, Jordan believes. “Many innovations are centered around some minor variation of the target brand on their shelves,” he says. “These variations offer a better flavor-profiled product that will build stronger consumer loyalty to an own brand program.” For example, instead of a standard onion flavor, a retailer can take a product to a new level with a superior tasting caramelized onion flavor in a dip product. “Basically, [this functions as] a ‘better-thanbrand’ strategy,” Jordan adds. Demand for salsa con queso should also grow over the next few years, Jordan believes. “We see a trend toward development of more products utilizing unique types of flavorings and

peppers,” he says. “Consumers today are developing the taste for more heat and will seek [it] out. Even though mild and medium salsa con queso items drive sales within the category, a hotter product offers the retailer an opportunity to bring in new users to their own brand program.” Regional flavors will also play a more important role in the future, Jordan believes. “Different geographic regions have different demands for flavors and product profiles,” he says. “Therefore, it’s important to recognize these geographic consumer differences and to offer products that meet the geographic demands of each consumer group. Currently, national brands offer products that [comprise] a one-size-fits-all approach. Therefore, retailers will be looking for products that will be targeted regionally for their own brand shopper.” To support innovation efforts, Old Fashioned Foods has expanded its product development, research and development and pilot lab facilities, Jordan says. In the near future, innovative packaging will give retailers opportunities to grow their own brand share of the category and strengthen shopper loyalty, Jordan believes. “To date, technology has not been able to offer manufacturers a plastic jar that will hold up during retort shelf-stable cheese dip processing; however, we believe this will soon be coming,” Jordan states. The ability to offer shelf-stable cheese dip in plastic would give retailers a great opportunity to reduce shipping, handling and breakage costs, which will become an even more important factor as more shoppers purchase products online, he points out. SB Cvetan is a freelance writer from Barrington, Ill.

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TRENDWATCH DELI MEATS BY GINA ACOSTA

‘MEATING’ CONSUMER DEMANDS Retailers can accelerate growth in this category with the right products and marketing strategy

Digital disruption may get most of the headlines when it comes to the future of food retail, but there’s one area of the industry where change is happening at a quieter pace: the deli counter. Many food retailers are moving away from having traditional deli counters, and this $9 billion industry in the United States is showing signs of struggle, as both dollar and volume sales for the category overall have declined year-over-year, according to a 2018 “Lunch Meat” report from market research firm Nielsen. At the same time, shoppers are looking for an ever-more tantalizing assortment of convenient protein options. Today’s consumers are increasingly focused on fresh, protein-packed foods in a convenient package. To wit, in the lunch meat category, grab-and-go is on the rise, driving 11 percent of total deli meat dollar sales, according to Nielsen. The popularity of portable protein and the growth in pre-packaged deli meats presents an opportunity for retailers and suppliers to reinvigorate the category by understanding the

shopper at a deeper level, including their preference for deli or packaged meats, according to Ron Godshall, chief operating officer of Telford, Pa.based Godshall’s Quality Meats. “There’s some fantastic opportunity — and it’s happening for a variety of reasons, from labor and liability concerns, to significantly longer open hours,” Godshall says. “The opportunity is ours to show consumers that pre-packaged deli slices can be fresh and flavorful, minimally processed and even uncured.” Godshall’s manufactures a variety of turkey and meat products, including smoked bacon, snack sticks and more. All of Godshall’s products are available for private brands. “We took everything we’ve learned over decades of deli meat production with an eye toward healthier recipes, and we leveraged some of the most sophisticated technology available,” Godshall says. “The result is a line of really delicious, conveniently sized and packaged deli slices that often surpass taste expectations of fresh sliced.” For retailers and suppliers,

connecting lunch meats to other growing parts of the store, specifically fresh departments, could be a key opportunity to generate more sales. According to Nielsen, more than half of all lunch meat shoppers (52 percent) are “package-heavy” buyers, meaning they spend at least 70 percent of their category dollars on packaged lunch meats. Comparatively, 29 percent are “deli-heavy” buyers, spending at least the same share of their dollars at the deli counter, Nielsen says. Private brands have a much bigger presence in deli lunch meat but are gaining share among packaged meats as well, Nielsen reports. Understanding what’s driving shoppers to buy both deli and packaged meats can help manufacturers and retailers navigate trends in the category. “Trends we anticipate are convenience, clean label and diverse flavors. While there’s always going to be a market for bulk purchasing, we see consumers looking for more lifestyle-oriented packaging, features like a half-pound resealable,” Godshall says. “It’s also a smaller world, with more consumers experiencing more diverse tastes, and looking for more spice and flavor. Proteins are steady, but consumers are generally drawn to leaner options, even when they choose a ham. We’ve always done well with turkey, but a lot of that may be that we have considerable experience working to bring out the best with its unique flavor profile.” By understanding what motivates lunch meat buyers — whether they prefer deli or packaged — retailers have the opportunity to tailor their marketing programs. Combining that marketing with changes to the total category based on evolving consumer preferences could put sales of the category back on the fast track. SB Acosta, managing editor of Store Brands, can be reached at gacosta@ensembleiq.com.

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Store Brands /December 2018 / www.storebrands.com


TRENDWATCH BAKED GOODS BY DANA CVETAN

BANISH BORING Full flavors, health-giving ingredients and processes heat up baked goods category

Interesting new ingredients and flavors are finding their way into the baked goods category as consumers are becoming more adventurous in their tastes, observes Don Trouba Sr., director of go-to-market for The Annex by Ardent Mills in Denver. They are seeking out grains and other ingredients they’ve never tried before, and are curious about nutraceuticals and activated ingredients, Trouba adds. “In the baked goods category, you can see this trend at work in slowly fermented doughs, sprouted grains [and consumer interest in] the role of fiber on the microbiome.” Whole grains and seeds in combinations that create unique flavors and textures are attracting considerable consumer interest, says Jerome Davis, technical solutions analyst for Innovative Bakery Resources (IBR), a Tualatin, Ore.-based division of Ardent Mills dedicated to the art and science of artisanal bread making at scale. These ingredients can also create a more rustic, artisan aesthetic when used to enrobe breads, Davis adds. “Consumers are also more

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Store Brands /December 2018 / www.storebrands.com

educated now on the health benefits of whole grains and seeds and are choosing baked products that contain higher concentrations of [these ingredients]. Some of the varieties we have developed contain more inclusions by weight than [even] flour.” Rockville, Md.-based market research firm Packaged Facts outlines key opportunities for fresh bread category growth in its report, “U.S. Food Market Outlook, 2018.” These include: clean label, better-for-you breads; breads that incorporate fruits and vegetables as a way to deliver more nutritional content; and artisan-quality breads that showcase a diversity of grains from local producers. In the past five or so years, consumers have shown a strong preference for foods from trusted sources that are simple, fresh, free from additives, have local origins and are safe to eat. These attributes are propelling double-digit sales growth in the marketplace, Trouba says. Hand-made, hand-milled and handcrafted are all techniques that speak to the demand for “the

less processed, the better” types of products right now, Trouba explains. “Ingredients that show natural texture, whole seeds [and] whole grains have great appeal.” Ardent Mills’ proprietary research revealed that the terms “farm to table” and “ancient grains” on labeling appeal to consumers, as do terms that speak to good farming practices, like “organic,” “non-GMO” and “sustainably farmed,” Trouba reports. “From a product development perspective, [what sells] is definitely clean label and organic,” Davis says. “Consumers want to see labels with ingredients that they are familiar with and may even have in their own kitchens. We also believe consumers would prefer organic over conventional if the products are economically comparable.” In the future, the category will become more influenced by restaurant and food truck trends, says Zachery Sanders, marketing director for Ardent Mills. “Consumers are interested in global sandwich carriers, from (steamed Asian) bao buns to Indian flatbreads such as unleavened roti and leavened naan. Mexican tortas and empanadas are also popular,” Sanders adds. “Also, a Jewish deli revival is underway, as a new generation of operators reinvents old-school classics like pastrami and corned beef piled high on rye. Gluten-free breads and plant-based fillings add some modern touches.” There will always be a place for high-speed, traditional white and wheat breads, buns and rolls, “but when you want to make an impact and differentiate your bakery and branded breads, you need to excite taste buds with unique sweet or savory bread products,” says Ken Ruud, IBR business development leader. SB Cvetan is a freelance writer from Barrington, Ill.


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TRENDWATCH HONEY BY RICHARD MITCHELL

MAKING SURE IT’S THE REAL DEAL Illegal imports can impact U.S. honey sector activity, but efforts are underway to reduce threats

While all is not sweet in the U.S. honey market, True Source Honey LLC is here to help with its True Source Certified program. While domestic production declines are contributing to lower industry revenues, the prospect of illegal honey imports from China and other countries threatens to further impact activity and tarnish the overall image of honey sector merchandisers, analysts note. Because of severe drought in North Dakota and South Dakota during the 2017 growing season, honey production dropped significantly last year, while imports were up almost 32 percent, reports market research firm IBISWorld. While lower-cost honey from Chinese suppliers are often much more attractive to downstream food and beverage producers, the products, which carry high tariffs, also can enter the market via honey dumping, IBISWorld states in its November 2018 “Beekeeping in the US” report. Such activities involve illegally selling undervalued products in the U.S., which lures producers from domestic honey. The exporters often avoid paying anti-dumping duties by labeling Chinese honey as originating from nontaxed sources, IBISWorld notes. “Illegally imported honey also contains antibiotics that are not FDA approved in the United States,” IBISWorld adds. “Smuggling attempts have decreased since the arrests in April 2010 (of Chinese smugglers), but the beekeeping industry is always

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at risk of illegal import competition.” In response to such threats, True Source Honey LLC — a coalition of more than 550 honey industry participants, including foreign exporters and North American importers, honey packers and bee keepers — is seeking to prevent the sale of illegally sourced honey. “Circumvented honey entering the marketplace threatens the North American honey industry by undercutting fair market prices and damaging honey’s reputation for quality and safety,” says Gordon Marks, True Source Honey LLC’s executive director. “Despite federal crackdowns, millions of pounds of illegally sourced honey and honey of questionable quality may still be entering the country.” He notes that while imports account for about 70 percent of the honey used in the U.S. and most is high-quality and honestly sourced, risks remain. By developing the True Source Certified system of traceabil-

Store Brands / December 2018 / www.storebrands.com

ity, True Source Honey LLC is enabling participants to undergo independent third-party audits of their sourcing practices to demonstrate to customers that the companies are in full compliance with U.S. and international trade laws. The system tracks honey from the consumer back through the supply chain to the country of origin and the beekeeper who harvested the honey from the beehive. In addition, the program uses third-party sampling and container shipment oversight to trace honey to its origin and also confirms that True Source Honey LLC packers and exporters maintain a system to analyze honey purity. Each container load of honey that is shipped by certified processors or exporters receives a unique True Source Certified identification number that will appear on all commercial and transportation documents. “When you don’t know where your honey is coming from, it’s impossible to be assured of its quality,” Marks says. “Consumers want to know that the honey and honey products are truthfully labeled.” To publicize its initiatives, True Source Honey LLC is using public relations and social media programs to encourage consumers to look for the True Source Certified logo on honey packages, including store brands, he states. In addition, True Source Honey LLC is encouraging major brands “to take a stand against honey fraud and adulteration” by sourcing honey used in their products from True Source Certified suppliers and to use the “Made with True Source Honey” logo on their packaging, Marks says, adding that “awareness is building as major brands roll out certified products.” SB

Mitchell is a freelance writer from Wilmette, Ill.


Are You Selling Fraudulent Honey? Not all honey is legally and ethically sourced, and that’s a sticky problem. Some brokers and importers circumvent tariffs and quality controls, selling Chinese honey of questionable quality… and there’s no traceability. Now you can be confident in your honey thanks to a third-party True Source Certification program. Ensure that your honey is True Source Certified® and tell your customers by including the certified logo on your store brand honey. Find out more at TrueSourceHoney.com


TRENDWATCH COFFEE BY LAWRENCE AYLWARD

PERKING WITH DIFFERENTIATION The key to standing out in the coffee category isn’t just price — it’s quality, taste, freshness and value

Darron Burke doesn’t just see good growth for the coffee category in private brands. The founder and owner of Miami-based Burke Brands LLC, which offers coffee products for store brands, sees something much better. “Hyper growth,” he says. According to market researcher Information Resources Inc. (IRI), sales of private brand coffee grew 11.1 percent for the 52 weeks ending July 15 when compared to the previous period, pushing dollar sales to nearly $1.5 billion. Unit sales were up 10.2 percent for the period. That’s some serious perk. “The potential is unlimited, as long as suppliers and retailers work together to offer the best possible value across all tiers and price ranges,” Burke says. “It’s not just about cheap. It’s about value at all prices — low, medium and premium. The keys to growth are quality, differentiation, value, pricing and merchandising in-store and online.” Burke notes that single-serve private brand coffee continues to perform well versus the overall category: Sales increased 13.3 percent for the 52 weeks ending July 15 when compared to the previous period, according to IRI. But there’s still room for growth, according to Burke, who says store brand single-serve coffee only represents about 17 percent of the overall category’s sales. For retailers, store brands that offer differentiation are the key to success, Burke says. “If a customer can’t taste the difference between one retailer’s private label and the other’s private label,

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it’s all about price and will not drive loyalty,” he stresses. “But when you can differentiate on quality, price, taste, freshness and value, it will be a winning program.” Burke says retailers that partner with suppliers that can deliver more of these aspects will help build a strong private brand platform. Certifications, including USDA Certified Organic, and health-related labels such as Non-GMO only add to differentiation, Burke notes. So do new and unique packaging designs.

“We’ve seen the packaging of some old standards be radically redesigned over the last couple years to appeal to a new generation that has more options than ever,” he adds. Lately, there has been more of an emphasis on farm to cup, with coffee roasters communicating their direct

relationships with growers and promoting transparency, Burke states, noting that block chain technology is being used, particularly with higherpriced specialty coffees, to control and verify labeling claims. Burke Brands has been growing coffee in Colombia for nearly 30 years, and has produced branded and private branded product for over 15 years. Burke says the company currently has nine coffees ranked in the top 50 out of 8,000 at a leading online retailer. The company’s aim is to help retailers drive overall sales by building a private brand coffee program that delivers a great cup of coffee at a value price, Burke says. Despite the success of private brands, the category isn’t without its challenges, Burke says. “We believe the biggest challenge to the coffee category is the cognitive dissonance the customer experiences due to brands that overpromise and under-deliver,” he says. “If a brand is communicating a unique value proposition that speaks to quality — but this does not directly translate to what the customer experiences — there may be a loss of confidence in the overall program, and some customers may be driven to alternative buying platforms.” Private brands are critically important in today’s marketplace and competition among retailers to win the trip or click is at an all-time high, Burke says. “Getting customers to shop at your store or site is the difference between winning and losing share,” he adds. “Private brands are a partnership between the retailer and supplier community, and done right it includes high-value products that differentiates retailers from others and drives loyalty and trips.” And coffee can play a key role. SB

Aylward, editor-in-chief of Store Brands, can be reached at laylward@ensembleiq.com.


TRENDWATCH OLIVE OIL BY DANA CVETAN

WHAT’S NOT TO LIKE? Olive oil remains popular for its taste, versatility and healthy reputation. But there are ways for private brands to differentiate

Consumers continue to prefer olive oil for its taste, quality, versatility and healthy reputation, according to a March report from market research firm Mintel on spreads and oils. In a Lightspeed-Mintel online survey of 2,000 adults, 57 percent reported using olive oil in the past three months. Trailing behind were: vegetable oil at 43 percent, cooking sprays or pumps at 40 percent, canola oil at 29 percent and “other” oils, such as avocado and coconut oil, at 11 percent. In another Lightspeed-Mintel survey of 1,960 adult internet users, olive oil ranked high for nearly every positive attribute. Respondents chose olive oil over canola or vegetable oil, butter, cooking sprays or pumps, margarine and “other” (avocado and coconut) oils in deeming it healthy, premium and the least processed. Only butter outranked olive oil

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Store Brands /December 2018 / www.storebrands.com

as indulgent, tasty and useful for flavoring food. Twenty-seven percent of respondents tagged olive oil as the most expensive, compared to 25 percent for “other” oils and 15 percent for butter. However, Mintel notes that consumer concerns over price provide opportunities for private brand olive oil, which is better positioned than national brands to offer a winning mix of price and quality. Even though avocado and coconut oils are prized for their differentiated tastes, flavors and health benefits, the higher price points and specialized nature of these oils have relegated them to niche status, the report states. In traditional grocery, PET plastic bottling enables retailers to cut costs of private brand olive oil because plastic is less prone to breakage, as opposed to glass.

Additionally, plastic’s lighter weight compared with glass reduces shipping costs, says Mark Coleman, senior vice president, retail division for Catania Oils in Ayer, Mass. Retailers are continuously looking for ways to cut costs, and plastic offers that advantage, Coleman adds. “As e-commerce and dollar stores continue to gain market share, retailers need every angle they can gain to make a difference in fighting for their share of consumers,” he says. The keys to growth in the olive oil category are offering products that are different in a category that has been relatively flat in terms of innovation over the past few years, Coleman notes. As retail buyers look to drive down the cost of goods to fight their competition, they should also be looking for differentiators in the category that can make a difference in product quality. “Consumers have become much more educated in the olive oil category and are looking for better tasting and healthier oil products,” he says. “Olive oil is the opposite of wine in that it doesn’t age well; in fact, the oil’s flavor profile will flatten out in as little as four or five months after pressing.” Coleman notes that Catania Oils’ bag-in-box olive oil product shields the oil from light and air, the two biggest detractors from oil quality. “What’s also different with this product is that the oil is sourced six months from the Northern Hemisphere and then six months from the Southern Hemisphere,” Coleman says. Because Catania does not blend its oils, it’s always fresh, Coleman adds. SB

Cvetan is a freelance writer from Barrington, Ill.


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CATEGORY CLOSEUP

Retailers know they can differentiate with coconut products. Here’s a sample of coconut-based products that some retailers are offering: Publix Coconut Road Frozen Yogurt Ahold Delhaize USA Toasted Coconut Flakes Albertsons Cos. O Organics Coconut Frozen Fruit Bars The Kroger Co. Simple Truth Organic Unsweetened Coconut Chips Aldi Friendly Farms Coconut Milk Brandless Virgin Coconut Oil Uniquely J Organic Virgin Coconut Oil Metro Irresistibles Naturalia Coconut Flakes & Hemp Seeds Granola Trader Joe’s Coconut Body Butter Walmart Great Value Organic Coconut Sugar Costco Wholesale Kirkland Signature Dark Chocolate Toasted Coconut Cashews ShopRite Wholesome Pantry Organic Coconut Almond Granola

318%

The increase in the number of products launched with coconut from 2010 to 2016 Source: New Nutrition News

THIRSTY FOR COCONUT WATER Coconut water has become a popular product for private brands in the last few years. The chart below shows how much the coconut water market has grown since 2014 and what its growth should be in 2019. 1,978.2

2,000 MARKET SIZE IN MILLION U.S. DOLLARS

A TRENDY TASTE

Coconut

1,572.9 1,500 1,247.2 986.6

1,000 778 612.5 500

2014

2015

2016

2017

2018

2019

Source: Statista

reasons why coconut oil is considered a superfood 1 It contains fatty acids with potent medicinal properties. 2 It increases fat burning. 3 It can reduce hunger, helping people eat less. 4 It can raise good cholesterol Source: Healthline.com

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