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THE PULSE OF PRIVATE LABEL

APRIL 2020 www.storebrands.com

SPECIAL REPORT

How retailers and suppliers are managing the coronavirus crisis

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VOLUME 43 NO.3

28 DEPARTMENTS

COVER STORY

04

Editor’s Note

06

Industry News

33

Viewpoint with Symphony RetailAI’s Shaina Finch

34

Dispatches: Store Brands in the Wild

Staying in Stock How retailers and suppliers have kept shelves stocked throughout the pandemic

FEATURES

24

Accept Some Substitutions

28

Keeping Things Pinteresting

Plant-based meats are in high-growth mode and private label is leading the way

Retailers are turning to the social media site to promote private brands via recipes, and turning endcaps into resources

30

Before and After A look at how consumer behavior has changed in response to COVID-19

24

Store Brands (ISSN-0190-9851; USPS # 0488-370) is published 8x a year by EnsembleIQ, 8550 W. Bryn Mawr, Suite 200, Chicago, IL 60631. Subscriptions: One year, $125; two years, $146. One year, Canada $190; One year, foreign $275. Payable in advance with a bank draft drawn on a US bank in US funds.Single copies $20. Foreign, $85. 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 3200 Northbrook, IL 60065-3200. Copyright 2020 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. www.storebrands.com

April 2020

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EDITOR’SNOTE An EnsembleIQ Publication

OUR FINEST MOMENT PRIVATE BRAND MANUFACTURERS, RETAILERS STEPPED UP TO THE CORONAVIRUS PANDEMIC Trying times, indeed. But when we look back on the second quarter of 2020, there is a good chance that many in the mass retail world will say that this was the industry’s finest moment. And, private label played a big role in helping consumers through these difficult times. There is no doubt that the coronavirus threw a curve ball at the retail industry in March and April. Consumers rushed stores, seeking everything from the now-famous toilet paper to canned goods to survive the pandemic. While retailers were stretched thin, it is now clear that they did not break, especially Seth Mendelson during the early days of the crisis. Publisher/ Instead, over the first two weeks of the crisis, they began to Editor in Chief develop strategies that would ensure products were on store shelves and that their stores were as clean and as safe as possible for their customers and their employees. Store hours were shortened so shelves could be re-stocked and units cleaned. Limits were put on some of the most desired products. The number of shoppers in the store at any one time was also limited. Overall, these programs worked quite well. Consumer confidence in the supply chain increased, and stores were able to stop the panic and convince shoppers Suppliers must keep doing their that there was plenty of product to part and make sure that products go around — yes, even toilet paper. Private label and store brands get to store shelves at fair price played a huge role in this. Retailers points. Retailers must make sure turned to their own private label that demand is met. and store brand suppliers for help to replenish supplies in many key categories. Those suppliers, for the most part, did their part, stepping up their own manufacturing process and making sure that the merchandise got to their retail partners as quickly and efficiently as possible. Some may even say that private label and store brands could be a big winner in all of this. Consumers who would not normally purchase these items are now forced to consider them in certain categories. Trial could very easily lead to conversion in many cases. Of course, it is not over yet. The supply chain, including private label and store brand items, must continue to work. Suppliers must keep doing their part and make sure that products get to store shelves at fair price points. Retailers must keep everyone safe and make sure that demand is met. Tough times. But we have this one covered. 4

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April 2020

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8550 W. Bryn Mawr Ave, Suite 200, Chicago, IL 60631

Publisher/Editor-in-Chief Seth Mendelson (973) 650-0263, smendelson@ensembleiq.com

EDITORIAL Managing Editor David Salazar (212) 756-5114, dsalazar@ensembleiq.com Executive Editor Dan Ochwat (773) 992-4416, dochwat@ensembleiq.com

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CORPORATE OFFICERS Chief Executive Officer Jennifer Litterick Chief Financial Officer Jane Volland Chief Innovation Officer & Managing Director of Path to Purchase Institute Tanner Van Dusen Chief Human Resources Officer Ann Jadown Executive Vice President, Events & Conferences Ed Several Senior Vice President, Content Joe Territo

The contents of this publication may not be reproduced in whole or in part without the consent of the publisher. The publisher is not responsible for product claims and representations.


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INDUSTRYNEWS

PLMA Sizes up Impact of COVID-19

demonstrated sensitivity to senior citizens, disabled and others who are the targets of coronavirus. They can rally community spirit and demonstrate how working together, whether locally or regionally, is the best protection against such pandemics.

SB: What role can private label/ store brands play in this process? What do retailers need to do here? BS: Private label can be very effective in sending messages to consumers since it carries the name or logo of the retailer, which, as has been confirmed before, is trusted and respected.

In his nearly 40 years as the president of the Private Label Manufacturers Association, Brian Sharoff and the private brand industry has not seen anything as tumultuous as the coronavirus pandemic — let alone on a global scale. In fact, the industry association, which has tremendous global outreach, even had to move its 2020 World of Private Label event scheduled for May 26-27 in Amsterdam to Dec. 2-3. Store Brands asked Sharoff just what he’s seeing with the coronavirus pandemic and its impact on the private label industry.

Store Brands: With the coronavirus crisis continuing to impact society, what role do you see mass retailers and private label suppliers playing? Brian Sharoff: Lockdown makes it very difficult for any business or organization to be helpful. This is a public health crisis first and foremost. Once the public gets past the severe contagion, then retailers can be helpful in providing relevant information to their customers. Many retailers have already 6

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SB: As the situation improves, what advice do you have for the private label industry? BS: Staying ahead of the curve is very important. Identifying which problems, such as international supply chain issues, community relations, store management policies, etc., are in need of review and repair would be most important. It is evident that we were not as prepared as possible for a pandemic. Understanding why will be crucial. SB: Tell us about your upcoming events in the fall and how they can help the industry rebuild. BS: PLMA’s next program will be the Washington Conference which will take place Oct. 5-6. We will hold several introspective sessions to discuss how the private label industry can prepare for natural disasters and pandemics. After that will be the Chicago trade show which will help retailers and manufacturers start the road back to normalcy. PLMA’s international show, originally scheduled for May, has been postponed to Dec. 2-3 due to government restrictions on large gatherings. The international show will permit buyers and sellers from over a hundred countries to reaffirm relationships and solve lingering supply chain issues.

www.storebrands.com

Perrigo Addresses COVID-19

Early on during the coronavirus crisis, Murray Kessler, president and CEO at Perrigo, wrote a letter addressing the company’s commitment to keeping production lines moving and its employees safe. The leader in private brand products under its consumer health care Americas business echoed that under the coronavirus guidelines issued by the Department of Homeland Security that healthcare companies that manufacture pharmaceutical and food supplies are “critical” and must maintain a normal work schedule. “We are restricting entry to our facilities to essential personnel only and requiring a pre-screening for possible COVID-19 exposure,” he said. “We also launched online forums for keeping employees up-to-date and understanding their questions and concerns. These measures are supporting productivity, helping reduce the risk of exposure for all employees and helping our operations and supply chain employees focus on their jobs. • Keeping employees informed and safe: He said the company is executing a social distancing policy, prohibiting non-essential business travel and using technology to harness collaboration; • Keeping production lines running: Deep sanitation protocols are being put in place and the manufacturing facilities are following regulatory protocols. “These combined efforts to protect the health and safety of employees, while allowing our facilities to continue operating, have enabled us to maintain a high level of output to meet demand for Perrigo’s products,” he said; and • Staying in tune with community needs: “People throughout the company are collaborating in new ways and thinking resourcefully, which is leading to creative solutions, such as utilizing capacity to manufacture sanitizer that can be donated to hospitals,” he wrote, noting that the company’s charitable arm and its employees were working on ways to support communities in need.


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INDUSTRYNEWS

Kroger Store Brands Have ‘Best Year Ever’ Kroger’s store brands exceeded $23.1 billion in sales in 2019, the best year for the offerings to date. The retailer had a lot of good to share about its Our Brands strategy on its conference call discussing its fourth-quarter results. Here are the highlights: • Private Selection surpassed $2 billion in sales for the first time, becoming Kroger’s third private brand to earn over $2 billion; • The Our Brands group introduced 758 new products in 2019, 39 of which were plant-based store brand products; • Under plant-based meats, Kroger launched Emerge and in less than a month the products ranked third in the category; • Simple Truth exceeded $2.5 billion to become the leading natural organic brand in the United States; and • The Kroger brand earned $13.7 billion in sales, capitalizing on global and regional flavors. Rodney McMullen, Kroger chairman 3 Kroger store and CEO, presented the results and said the company’s “Restock Kroger” initiabrands earn tive, which launched in 2017, is what’s paying off for its private brands. “Restock Kroger is the right strategic framework to position the company for sustainable growth in the future, continue to improve the core business, and deliver strong total shareholder return,” he said. “This transformational foundation supports our competitive moats today — Fresh, Our Brands and Personalization — as well as building a a year. seamless ecosystem of the future.” Restock Kroger began in 2017 with updates along the way, and it keys in on four areas, according to McMullen back when it launched: redefine the grocery customer experience, partner for customer value, develop talent and live the Kroger purpose. Gary Millerchip, senior vice president and CFO, shared a similar sentiment to McMullen, noting that Kroger would continue to invest in its store brands. “This includes ongoing investments in talent, price, digital, and store experience, with an even greater emphasis on our competitive moats, fresh, Our Brands and personalization,” he said. As for fourth quarter sales, the Cincinnati-based company reported earnings of $28.9 billion, up from $28.3 billion a year ago. Taking away fuel and dispositions, sales grew by 2.3% in the quarter. Total sales in 2019 reached $122.3 billion.

billion+

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Global Cannabinoids Unveils CBD-, CBG-infused Hand Sanitizer With COVID-19 officially declared a pandemic by the World Health Organization, hand sanitizer has become a hot commodity in recent days. Global Cannabinoids, maker of white label and private label cannabinoids and cannabinoid-infused products is bringing to market a hand sanitizer that contains another hot commodity: CBD, as well as cannabigerol, or CBG. Global Cannabinoids said its cannabinoidinfused hand sanitizer is now available for white and private label customers in bulk and wholesale. The product contains 65% ethanol, as well as vitamin E, CBD and CBG. The company noted that a 2008 study published in the Journal of Natural Products found that CBD and CBG demonstrated “potent activity against a variety of MRSA strains,” noting that the use of cannabinoids to reduce skin colonization “seems promising.” The hand sanitizer is available in 2-, 4- and 8-oz. bottles at a 1:1 CBD:CBG ratio in 100-, 200- and 400-mg potencies. It is manufactured in the company’s Food and Drug Administration-registered OTC facility and comes with third-party lab testing to guarantee potency.


Store Brand Magazine Ad 2020.pdf

1

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8:08 AM

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INDUSTRYNEWS

March 2020 sales jumped

from last year, with food and beverage up a

jaw-dropping

50%. 20_0313_AD_H_Store Brands Mag.pdf

1

3/20/20

4:12 PM

Target Downshifts to Focus on COVID-19 Despite withdrawing its prior first-quarter and full-year guidance for its fiscal 2020, Target said in late March that it is experiencing unusually high sales growth as shoppers react to the coronavirus pandemic. The Minneapolis-based retailer said it is “experiencing unusually strong traffic and sales” in stores and with sameday pickup and delivery services. The month has seen sales increase by more than 20% from last year, with food and beverage up a jaw-dropping 50% from last year. “We are prioritizing the work that’s in front of us to support our team, store operations and supply chain as families across the country rely on Target for everything they need in this challenging environment. I want to thank our entire team for their efforts, which have been nothing short of heroic,” said Brian Cornell, chairman and CEO. “Over the past few weeks, we’ve experienced an unprecedented surge in traffic and sales, as guests rely on our stores and same-day services. Ensuring we can take care of our team and deliver for the millions of guests who are counting on us remains our top priority.” Target said it would adjust expectations around how many stores it plans to remodel and new ones to open in the year ahead, stepping back a bit on the growth. 10

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INDUSTRYNEWS

Instacart Produces Own Hand Sanitizer Due to shortages of hand sanitizer supply during the coronavirus pandemic, Instacart has teamed up with a third-party company to manufacture its own hand sanitizer spray product just for its full-service Instacart shoppers. The move is part of an expanded list of safety measures that the online grocery delivery service has enacted to serve its workers. Instacart has been collaborating with retailers to provide disinfecting supplies and sanitation stations for its Instacart shoppers during the pandemic but the move is to ensure there’s enough available. The company also sent health kits to shoppers with masks, sanitizers and thermometers.

Instacart announced the sanitizer and new initiatives on March 29, just ahead of a proposed strike by some Instacart shoppers, called upon by groups of Instacart shoppers and a nonprofit group called Gig Workers Collective, that claim the company hasn’t been doing enough to protect them. Throughout the COVID-19 pandemic, the San Franciscobased company has been very busy, as online grocery delivery has seen a spike. Instacart said they’ve seen order volume grow by more than 150% year over year, with average customer basket sizes growing by 15%. For Instacart shoppers, they’re seeing earnings grow too, by as much as 40% month over month, according to Instacart. The company added 50,000 new full-service shoppers recently and it’s looking to hire 300,000 full-service shoppers over the next three months to help serve its retailer partners in the United States and Canada.

Dollar General Preps for Private Brand Expansion Coming off of another straight year of same-store sales growth — its 30th — Dollar General also saw the biggest increase in private brand sales in six years. COO Jeff Owen said the retailer’s hair, skin and beauty brand Studio Selection, as well as its baby line Gentle Steps lines were the big standouts and that both lines are expected to get an expansion in 2020. But the company isn’t content with two breakout brands. “We also believe there is significant opportunity with other brands as well,” Owen said. “In fact, our plans this year include the rebranding of several additional product lines, including stationery, laundry, hardware, automotive, pet food and party.” Another brand set for a redesign, per Owen, is Clover Valley, its highest-selling private label that garnered more than $1 billion in sales in 2019. The food-and-beverage line has been upping its healthy options to fit in with the retailer’s better-for-you initiative, which includes a focus on more fresh grocery and healthy foods. “This product line consists of a variety of better-for-you options at low prices, and approximately 5,600 stores with plans to expand to more than 8,000 stores by the end of the year,” he said. The company’s expanded private label portfolio also will be getting a bigger audience, as the retailer plans to open 1,000 stores in 2020, alongside plans to relocate 80 existing stores. “Our value-and-convenience proposition continues to resonate with both new and existing customers, and our unique real estate 12

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Our plans this year include the rebranding of several additional product lines, including stationery, laundry, hardware, automotive, pet food and party. — Jeff Owen, COO, Dollar General

footprint remains a competitive advantage,” Dollar General CEO Todd Vasos said. “As we enter 2020 from a position of strength, we will continue to keep our core customer at the center of all we do, while remaining steadfast in our efforts to deliver long-term shareholder value.”


INDUSTRYNEWS

In addition to the hand sanitizer, Instacart also announced a new default tip setting that could benefit its shoppers. Previously, Instacart had in place a default 5% tip setting on orders, but the new setting will default to whatever the Instacart user last tipped. So, if the Instacart user tipped a shopper 15% because of good service, for their next order the tip default will be 15%. The new setting also has eliminated the option for a user to click a 0% tip option, instead forcing a user to apply a 0% tip manually. In cases, where a shopper gets a less than 5% tip, the default is still set at 5%. While testing the new setting, Instacart said they’ve seen a 30% increase in earnings for Instacart shoppers.

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April 2020

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COVER COVER STORY STORY

SPECIAL REPORT

How retailers and suppliers are managing the coronavirus crisis By Dan Ochwat

E

veryone, from the consumer looking for muchneeded products, to the president of the United States, wants to give a big shout out to the hundreds of thousands of men and women stocking shelves, running registers, cleaning stores, working distribution centers, driving trucks and much more during the coronavirus pandemic that has swept the country over the last six weeks. The bottom line is that without their efforts, and sacrifices, there was no way the supply chains could keep stores stocked with product during this pandemic. “We are deeply grateful to our store associates for their 14

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tireless dedication during this critical time. I appreciate you highlighting them,” said Andrew Whelan, a spokesperson for Albertsons. “They are working long hours under difficult circumstances to make sure their neighbors have the food, medicine and essential goods they need. We couldn’t be more proud of them.” Doug Baker, vice president at FMI - The Food Industry Association, also felt compelled to recognize those working tirelessly in retail these past two months. “We’re humbled by the way this industry comes together in a time of crisis, and we applaud everybody that is getting up every day and going to their jobs to support citizens in their communities.”


COVER STORY

Keeping Stores Safe At storebrands.com, see a running “retailer roundup” of what measures retailers are taking and what they’re doing to help keep the retail environment safe and sanitized. Here’s a snapshot of tactics nearly all of the retailers listed in the roundup are deploying: FLOOR MARKINGS/DECALS: As part of a social distancing

policy, decals or taped markings on the floor are placed at checkout, deli and service stations that tell shoppers where they should stand, keeping them at least 6 ft. apart;

PLEXIGLAS SHIELDS: Cashiers are protected behind shields or

wear protective masks and gloves;

DEDICATED CLEANERS: Some stores have one employee

solely there to clean and sanitize checkout conveyors, shelves, displays or high-touch areas;

NEW STORE HOURS, SENIOR HOUR: Stores closed earlier to

provide additional time for employees to stock shelves and clean stores. Additionally, many dedicated one hour at the start of the day to senior shoppers and those high-risk of the disease;

ADDITIONAL STAFF: Hundreds of thousands of temporary employees were sought after by nearly every retailer (some working with those furloughed from service industries); CONTACTLESS DELIVERY: With “stay at home” in place, many shoppers ordered online for the first time and delivery was being left at doorsteps with no signing of orders, no contact; CROWD CONTROL: Retailers limited how many shoppers could

enter a store and also instituted one-way walking down aisles to properly social distance; and

PAY BUMPS: Frontline workers earned hourly wage increases,

generally around $2 an hour, as well as lump sum bonuses from $250 to $1,000, and extended paid sick leave if quarantined or contracting COVID-19.

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Indeed, it is this brave manpower that is keeping product moving through warehouses and into stores, cranking through shortages, delivering online orders, running plants 24/7. But how? The following pages will address just how store brand suppliers, retail partners and fulfillment companies are doing it. What strategies did they execute? How have they been working together through a global crisis the industry’s never seen before?

WHAT HAPPENED

COVID-19 stems from a member of the coronavirus family that is similar to SARS and MERS, which have had outbreaks in the past but not at this scale. To combat the virus from spreading, the government and health experts have been telling consumers to regularly wash their hands, use alcohol-based sanitizer, stay indoors, avoid large gatherings and routinely wear masks. The country has seen stay-at-home measures put in place in many major cities, with restaurants, movie theaters, hotels, arenas and social businesses forced to close. As families braced for life inside, “panic buying” in grocery stores, big box retail, c-stores, drug stores, dollar stores, hardware stores — anywhere deemed essential — blitzed the retail supply chain. The peak periods were early and mid-March. Nielsen reported astronomical sales lifts: hand sanitizer sales were up 313% for the year through February, up 127% year over year for that four-week period. By the end of March, hand sanitizer was still up 238.5% for that four-week period. Disinfectants, face masks, canned food — oat milk! — several categories were seeing double- and triple-digit lifts. And toilet paper became gold. Retailers were forced to put limits on purchases as shelves were flat-out emptied across the country. Through March and into April, shoppers have continued to apply pressure to the supply chain. Toilet paper is still gold. Retailers have new challenges to enforce “social distancing” in stores, getting shoppers to stand six-feet from one another, sanitize stores and hire more workers (see the sidebar on this page). Then there’s paying workers extra money and awarding extended sick pay. But as more and more challenges continue to steamroll the retail industry, the greater the industry has been responding — all to keep the supply chain moving.


COVER STORY SUPPLY CHAIN STRATEGIES

As FMI’s Baker said, “the machines are running,” and at a round-the-clock clip, so it is not necessarily a supply chain issue but a demand issue. “It becomes a supply chain issue if you start having equipment issues, if you start having ingredient issues, if you start having labor issues,” he said. Within that supply chain, private brand manufacturers and retailers are working together to execute the most efficient strategies to keep up with demand. Baker said strategies include suspending slower-moving items and pack sizes to focus on fast-moving ones. “They’re doing us favors by simplifying their selections,” said Mark Singleton, vice president of Rudolph Foods, the world’s largest producer of pork rinds, including private label for several retailers. “Instead of eight SKUs, it’s asking for five SKUS,” he said, noting that it saves the company time on the line to not have to stop and change out film and bags. Singleton is not in a category like toilet paper or poultry where the challenges have been exceptional, but snacking is a category that saw a big boost, and he said like everyone else they’re learning as they go on how to adapt. Officials at Good Plant Foods, a plant-based cheese company, have been working in private label for the last two years and also see a tremendous need for product, even as a smaller niche brand. “Due to ingredient lead time, imported products and other challenges, it can be difficult to meet

our partners’ current levels of product needs at the speed at which they ask for them,” said David Israel, the company’s CEO. “To help solve that problem for one of our private label partners, we’ve actually air freighted product from Greece so they have something to have on-shelf.” Israel said the company will absorb that cost. “Not because it necessarily benefits us, but because we want to be a good partner, and we want them to do well.” It is important to note that suppliers and retailers have stepped up to work together. “Of course, we can mince our words and soften our conversations with our private label partners, but we try to minimize surprises and instead communicate support,” Israel said. Good Planet, specifically, is seeing its category growing at a rate of three or four times faster than expected, and they’ve needed to seek additional partners to help keep up with demand, so it’s trust, communication and transparency that helps get both companies by. Baker said retailers grasped the need to get product on shelves, not worrying about differentiation, having certain scents and flavors. “And it’s pleasing to hear that those conversations are actually going on,” Baker said. “That’s the only way we’re going to keep the supply chain flowing and keep key product hitting the shelf.” Whelan said that across Albertsons’ substantial footprint, stockers are refilling high-demand products as quickly as they can through its robust supply chain, and in an effort

YEAR-OVER-YEAR GROWTH BY PRODUCT CATEGORY ONLINE Hand Sanitizer and Wipes

2019

+5678%

2020

Household Cleaning Products

+344%

Liquid Hand Soap

+170%

Toilet Paper

+207%

Canned Food

+96%

Paper Towel

+122%

Vitamins and Supplements

+88%

Bottled Water

+103%

Frozen Dinners

+71% 0K

10K

20K

30K

40K

50K

TOTAL ITEM SALES Source: Mercatus, March 2020

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60K

70K

80K

90K


COVER STORY

Suppliers Share From Front Lines Private brand suppliers have been sharing their stories to be featured on Store Brands’ website. Here are quick quotes from a few: Nick Galante, CEO, Select Product Holdings, Huntington, N.Y. “Select is running all production lines above full capacity and taking the best care we can of our customers who are all ordering huge amounts above their prior year’s needs. We have additional capacity that is on order that will be up and running in the fall, and we only wish we could get it here faster.”

Allen Benz, chief executive, Snack Innovations, Piscataway, NJ. “We are busy at work; running our three shifts per day, 24 hours a day as usual, and in fact actually turning on more production lines than normally. We’ve put in place precautionary measures as directed by the CDC and are enforcing strict hygiene protocols as well as monitoring the health of all our employees.

Raquel Lopez, Castellon Coffee Group, Nicaragua “Here in Nicaragua, this is just beginning, we have two cases reported with COVID-19. We are all in quarantine, I am writing this email from home. All our staff is doing the same, we only go out if necessary. Our staff in production have been implementing all the procedures established by the WHO. We plan on keeping a steady production and riding this crisis as well as possible.”

Matt Sheriff, senior vice president, Matt’s Cookies, Wheeling, Ill. “Like all other brands, we are seeing the responsible cancellations of faceto-face meetings. However with technology, many of our customers and potential customers are moving forward, and I believe we should be better for it. Next, we are focused on the health and safety of our customers and that starts with the health and safety of our amazing and dedicated family at Matt’s Cookies. We have always had extremely high standards of cleaning/hygiene protocols, over the past 40 years. We have just increased many of them and are taking additional steps to ensure everyone is keeping health and safety top of mind during this time. We have added a few employees to ensure the additional protocols do not disturb or disrupt our day-to-day baking operations.”

Christopher Ratliff, vice president of sales and marketing, Seattle Gourmet Goods, Tukwila, Wash. “On the private brands product we manufacture, we’ve seen large upswings in confection along with the obvious items like dried mushrooms and dried soups that we produce. Our focus right now is on what additional measures we can continue taking to reduce the risk of exposure for our team members, and doing everything we can to accommodate the increased/rush demand. Stay healthy out there!” Paolo Sozzi, marketing and development, SoGeCo Advertising, Italy “Even though the government is trying to preserve the food industry, it’s really hard to get in touch with our contacts and prospects, as most of them are just trying to keep the supply chain up and running.” 20

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Erik Juch, vice president of sales, Fine Foods International, New York “Our business is firing on all cylinders. Our production lines are still open and working overtime to fill all orders from our customers. We have been implementing additional hygiene measurements in all parts of our facilities. Once the daily routine has settled in — your refrigerator can only hold so many frozen pizzas — we suspect that the buying will go back to normal.”

Francesco Tran Van Lieng, president and chairman, Vinacacao Group, Vietnam

Stephen Trachtenberg, president of Chasing Our Tails, Jefferson, Minn.

“Mentality-wise, fear factors are overwhelming across the country, and consumers are tightening their purchasing wallets. COVID-19 has hit retail businesses hard, as well as modern trade distribution like supermarkets, of which lots of suppliers are tremendously losing size and scales of sales.”

“We have sourced locally raised Feeder Cattle to provide critically needed fresh meat locally. We are processing in my own USDA slaughter facility to provide these items locally. This is not our normal production, but rather what is needed currently by our communities.”


COVER STORY CORONAVIRUS IMPACT ON ONLINE GROVERY ORDERS compared to other major annual events in U.S.

Source: Chicory, March 2020

to focus on the most essential, stores might have a reduced variety. “For example, if we don’t have your favorite specialty pasta sauce on the shelf, there’s a good chance we have an alternative variety available. The streamlining of goods ensures we can provide the most essential goods to as many customers as possible.” Singleton said first and foremost Rudolph Foods’ goal is to support the retailer’s base volume. “And then we have to discuss their incremental needs because of shelf emptying, refilling pipelines, and that just takes a lot of communication with our customers.” Marisa Brown, senior principal research lead of supply chain management at the American Productivity and Quality Center, an organization focused on best practices, said private brand suppliers can keep up with demand by continuing to communicate with its key customers about anticipated demand. She also said to consider demand shaping. “Can you shift customers’ demand away from products where you may be in a sole source or backorder scenario to products that you can more reliably manufacture or distribute?” she said. Jason Adlam, vice president of new business development at supply chain company CHEP, said while certain products are flying off shelves, “manufacturers have flexed to extend production to additional shifts and/or locations to meet demand.” Brown said private brand suppliers should strive for an integrated view of the company’s total inventory, across channels and locations, and to subscribe to a digital alert system to keep constant updates on any global changes. She noted that private brands also have an advantage, not only in that they can be a lower cost option which serves well in a time of uncertainty, but that they can take advantage of the retail partner’s analytics and customer insights. “The private label organization can then use that information on customer preferences to make fast adjustments to products.”

LEVERAGING TECHNOLOGY

Singleton said real-time analytics and technology has been critical to how Rudolph 22

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Foods operates. “Powerful, forwardlooking data systems just play a vital role in this, and our customers have them and some of them even let us have access to them so I can see what they’re seeing right now,” he said Tech company Crisp applies machine learning and artificial intelligence to generate food-demand forecasts, bringing together sales, inventory, third-party marketing sources and promotions, and has been modeling for retailers during COVID-19. Are Traasdahl, co-founder and CEO of Crisp said retailers use the technology to consolidate data, sync vast amounts of data throughout the supply chain into a single set during a time of crisis, as opposed to having data sit in isolated silos. From there, real-time insights trickle in and report to retailers, and then it’s up to retailers to share it with suppliers in the supply chain. “Retailers need to be able to prioritize items in order to replenish the supply of high-demand items, which becomes more important when specific items are in unusually high demand,” Traasdahl said. “There is also a finite amount of truck space available at any given moment, so being able to calculate what and how much of each item to fit into each truck to bring supply to the retailer is paramount.” Greg Buzek, founder and president of IHLGroup, a forecaster and supply chain analyst, said for peak categories like a toilet paper or cleaner company, he’s not sure predictive modeling is a system that can be of help. “The biggest challenge for everybody in peak categories, you can put the orders in and forecast for it, but you’re not getting the orders,” he said. “How do you ration that stuff during a panic buy?” J.J. Lewis, vice president of national sales at GlobalTranz, a thirdparty logistics provider agrees. “The challenge is not communication; it is fulfillment and replenishment. Some suppliers are bypassing their own warehouses and shipping truckloads of pasta, cereal, rice,


bread and other staples straight to stores’ warehouses to accelerate distribution,” he said. Lewis noted that because of this, there’s been more flexibility in shipping. “Some suppliers ran out of product last week, resulting in what in the logistics industry is known as TONUs (truck ordered, not used),” he said. “Usually, there are fees associated with TONUs, but now they are being waived in many cases. Some shippers have waived fines associated with on-time delivery and have indicated their priority is to support the needs of consumers rather than penalizing their logistics partner.” This sort of understanding and communication has played a critical role in how companies manage the crisis across the supply chain, according to CHEP’s Adlam, who said communication has increased among manufacturers, retailers and transporters. “We hear retailers are more frequently sharing demand forecasts while manufacturers are open about their production capabilities. This may sound cliché, but everyone in the supply chain has rallied together and are collaborating to keep America moving with food and everyday essentials on store shelves.”

NOT YOUR AVERAGE CRISIS

Tornados, hurricanes, floods and other natural disasters that may occur and rock a region of the country are situations the retail supply systems are very much attuned to; they have contingency plans for those situations. For example, a hurricane is readying for a coastal town and trucks get rerouted to stock staples in stores as consumers stockpile for the event. But the global magnitude of COVID-19 is something else. “I don’t think anybody has a contingency plan for when everything just stops completely nationwide or worldwide,” said IHLGroup’s Buzek, adding that on the other side of that, no company has a plan for when sales triple nationwide and worldwide overnight. “You have contingency plans for the Internet going down, a power outage. You generally don’t have contingency plans for something this widespread, this quick, where in four or five days the world completely changed.” What makes the COVID-19 pandemic unique is the disparity between demand in some industries compared with others. Hotels, airlines, fashion and dining are shut down, but retail — and certain categories at retail — is seeing unexpected sales volume. And the problem isn’t just domestic. “This crisis is unprecedented, due to its global scale,” said Lewis of GlobalTranz. “When the coronavirus struck China, the outbreak hurt Chinese exports to the United States. That meant fewer shipping containers were arriving at ports in California. The lack of outbound freight from California drives up inbound rates to California because carriers typically establish dedicated ‘lanes,’ or routes for more efficient shipping.” He noted that this causes a ripple effect — a shortage of containers in the United States because China accounts for most of the inbound container traffic, which then puts more

trucks on the road, which is more expensive than rail transport. Lewis said GlobalTranz has a cross-functional coronavirus task force to meet and manage this domino effect to help minimize the impact of the virus on the supply chain. Despite some of the logistical hurdles on the backend — and hoarding on the front end — in some respect, the retail supply chain has been able to keep its cool when shoppers couldn’t. “There is no shortage of food in the supply chain,” said Whelan of Albertsons. “Suppliers have plenty of the essential food, medicines and goods that all our communities need.”

LOOKING FORWARD, AN E-COMMERCE MOMENT

Kroger reported that sales in March were up 30%, year over year. And that’s not calculating in fuel. The supermarket is booming, and with stay-at-home being enforced, ecommerce is having a moment. “It’s very possible that, during this crisis, we’ve now reached the percentage of the population projected to use online commerce by 2025,” according to Sylvain Perrier, president and CEO of Mercatus. “Looking forward, we believe there will be a defining line in digital commerce for grocery before COVID-19 and after COVID-19.” Consultancy Brick Meets Click, along with e-commerce platform ShopperKit, surveyed more than 1,600 shoppers on their shopping habits between March 23-25, finding 31% used e-commerce to purchase groceries this past month compared with only 13% in August 2019. The study also found that for those 60 years old or older, 40% used e-commerce to buy groceries online for the first time. Tech firm Chicory studied online grocery patterns during the coronavirus pandemic compared to shopping seasons like Christmas or back to school. The online ordering has already exceeded that of back to school and Independence Day, and while sales aren’t as high as a season like the holidays, the difference is there’s “sustained ongoing hoarding behavior,” as opposed to a big one-week boost, the firm said. Perrier said the growing demand for retailers to do lastmile fulfillment has retailers all competing to hire extra people from the same worker pool, making it tough. “Retailers should throttle orders by availability, streamline demand to stores and geographic locations that can handle, and weather the storm.” But does it have staying power? “How long is this going to take where you have these peaks in demand for all of these products that just went to Pluto, and at what point can you start to forecast things back to normal for the rest of your store?” Budzek said. He said looking down the road, it will also be interesting to see what happens with the companies that did well. “The guys who have been doing well and growing and expanding, those guys just got rocket fuel,” Buzek said. “And the guys who were not doing well, and those sectors there, they got blown up, literally ran into a complete wall.” www.storebrands.com

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STORE BRANDS l PLANT-BASED MEATS

WHERE’S THE BEEF?

WITH RISE IN DEMAND, RETAILERS INVEST IN PRIVATE LABEL PLANT-BASED MEAT ALTERNATIVES By Michael Applebaum

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f the past 12 months are any indication, plant-based meats are here to stay. It has been less than a year since Beyond Meat went public and the Impossible Burger appeared on Burger King menus nationwide. Yet the U.S. plant-based meat industry, which is the third-fastest-growing category of plant-based foods behind milk and other dairy substitutes, is on track to surpass $1 billion in 2020. To put that number in perspective, sales of Greek yogurt, which have been rising for the past decade, registered approximately $6 billion in the United States last year. “The plant-based meat category today is reminiscent of the plant-based milk category when it was in its early stages of rapid growth,” said Emma Ignaszewski, corporate engagement strategist at the Good Food Institute. She noted that plant-based meat accounts for 2% of all U.S. dollar sales for retail packaged meat and approximately 1% of all dollar sales for total retail meat. And today, plant-based milk

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accounts for 13% of all dollar sales for retail milk. “If plantbased meat follows the same path as plant-based milk,” she said, “that’s a $10 billion opportunity.” According to the Plant Based Foods Association, which currently is running a program with Kroger to measure the impact of changing plant-based meat placement on sales and customer engagement across 60 stores (results are expected later this spring), total plant-based food sales in the United States grew 11.4% to $5 billion in the past year. Sales of plant-based meats were up 18%, to $939 million, with refrigerated plant-based meat driving the growth, up 63%. “Plant-based foods offer consumers a great tasting, healthy and sustainable alternative to animal products,” said Julie Emmett, senior director of retail partnerships at the Plant Based Foods Association. “Consumers are voting for plantbased foods with their wallets, and they’re choosing from the wide variety of plant-based alternatives across the meat and dairy spectrum.”


STORE BRANDS LEAD THE WAY

Retailers are driving many of the new product introductions in the plant-based meat category. That includes a recent wave of new private label products from Kroger, Albertsons, Wegmans, Aldi, Whole Foods and Trader Joe’s. Earlier this year, Kroger launched Simple Truth Emerge, a new line of pea protein-based alternative meat products, as part of a broader initiative to introduce 50 new Simple Truth Plant Based products in 2020. Also this year, Aldi U.S. has introduced nine new plant-based meat products under its Earth Grown line, many of which are now being featured as part of the retailer’s weekly specials program, Aldi Finds. “Our Earth Grown products, which started as a test in our stores a few years ago, consistently fly off the shelves as one of our top-selling product lines,” said Scott Patton, vice president of corporate buying at Aldi U.S. “We’re seeing a growing trend of shoppers choosing to add more plant-based foods into their diets, regardless of their dietary restrictions or choices. We’re continuing to expand and refine our plantbased offerings as we get more feedback from Aldi shoppers.” Jim Wisner, president of Lake Forest, Ill.-based Wisner Marketing Group and an expert in private brands, said that retailers have a unique opportunity to leverage store own brands in plant-based meats, given the credibility that some have already established in other categories, such as organic food and beverages.

It seems like every grocery store is calling us, wanting us to do private label for them. — Rody Hawkins, CEO of Improved Nature “Organics are more disproportionately moving toward store brands and the penetrations are significantly higher than in other categories or groups of goods,” Wisner said. “Part of the reason is that there aren’t long established brands in organics, so it’s a shorter runway. A lot of retailers will be able to get into and out of the plant-based meat category very quickly, rather than wait for someone to develop the market and enter three years later and siphon off some of the business.” Wisner added that store brands that have achieved a high rate of consumer acceptance, such as Kroger Simple Truth,

may have an edge over national brand manufacturers who have only recently gotten into the space. “If you take something like the Simple Truth brand, it is very easy to enter the plant-based market at a dramatically better position and price, with the consumer believing the product quality will be just as good,” he said. “For store brands, in many ways the opportunity in this category may be a little greater than in other areas.”

INGREDIENT MANUFACTURERS IN HIGH DEMAND

The food manufacturing industry is awash in demand for new ways to source and produce alternative meat products that retain the best properties of meat. The vast majority of plant-based meats are targeted to the roughly 26 million flexitarian or “reducetarian” consumers in the U.S. who are committed to lowering the animal fat content of their diets without going all-in on a vegan lifestyle. Such trends are a boon for ingredient manufacturers like Sacramento, Calif.-based Better Meat, which produces an original plant-based protein formula for blending purposes; and Garner, N.C.-based Improved Nature, whose nonGMO protein is used in products like chickenless nuggets and strips. “It seems like every grocery store is calling us, wanting us to do private label for them,” said Rody Hawkins, CEO of Improved Nature. “Everyone is looking for something a little different, but they all know they need something in this market because the consumer is demanding it now.” Improved Nature uses heat pressure and steam to produce fibers that are formed into units like nuggets and strips, which, according to Hawkins, have a comparable taste and texture to the traditional chicken products. “Most companies use some version of textured vegetable protein to create smaller units that they combine with binders or fillers. We’re producing the finished product with just one ingredient and no fillers,” Hawkins said. “The one similar approach is a high-moisture extrusion process where you mix soy protein with water and heat, and set it through an www.storebrands.com

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STORE BRANDS l PLANT-BASED MEATS

extruder — but that is very expensive to do. We’re taking the powder and adding steam heat and pressure to turn it into fibers, and while they’re still hot, cross linking them and building it into bigger units. It’s more economical.” Meanwhile, Better Meat has developed an alternative plant-based protein formula to the typical mushroombased enhancers on the market. According to CEO Paul Shapiro, the formula has similar properties when cooked but is far more cost effective than using mushrooms alone — or, say, pea protein, which is the main ingredient in Beyond Meat burgers. “We combine plant-based proteins, fibers, fats and flavors to create a product that, even at a high-inclusion rate, is indistinguishable from a solely meat product,” Shapiro said. “Most people can’t tell the difference or have an active preference for the blended version. It has a better mouthfeel because we’re using functional fibers that retain the moisture within the meat itself.”

THE PUSH TOWARD CLEAN LABEL

For the growing numbers of consumers who are making the switch to plant-based meats, the desire to eat “clean” while also preserving the environment is a key factor in their purchase decisions. Thus, manufacturers are increasingly pushing clean-label products as a way to drive incremental sales. According to a new study from Glanbia Nutritionals, two out of every three consumers say they are willing to spend 5% more for a plant-based meat alternative with clean label attributes. While there is currently no industry standard for what constitutes “clean label,” Glanbia’s research uncovered the top five attributes that shoppers most closely associate with the term: No artificial colors/flavors; limited number of ingredients; Non-GMO; “I know what the ingredients are;” and preservative-free. “Consumers are spending more time looking at the back of nutritional labels, and if they see a product with 26

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only four or five ingredients, versus one with 20 or more, they tend to go with the cleaner label products,” said Tim Greene, senior director of sales (Midwest and Canada) at Glanbia. The company has just introduced a new clean-label solution, called Simpleat, which uses a patented process to remove unwanted ingredients while preserving the taste and texture of a range of meat substitute products. Aside from labeling, various merchandising tactics may help boost sales of plant-based meats. GFI recommends placing the products adjacent to or integrated with the corresponding animal-based products, rather than segregated in the refrigerated vegan/vegetarian case or in the produce section. In this way, consumers who are new to plant-based products can easily find them in a section of the store where they already shop, and can more easily do ingredient or price comparisons. Additionally, the Good Food Institute’s research found that packaging with high-contrast colors, or that employs boxes or pouches, has the strongest associations with “tastiness” and “deliciousness.” Ignaszewski noted, “Interestingly, we found that dark packaging — namely brown — was ranked highest for tastiness as well as health and nutrition. Green had divided opinions; it scores well on indulgence and excitement in organic but in a counterintuitive way is seen as the least healthy color in packaging. Red should generally be avoided, as it scores poorly on all attributes.” Going forward, it appears that the sky is the limit for the global alternative-meat market, which UBS predicts will grow to a whopping $85 billion by 2030. To be sure, store brands will face stiff competition from the likes of Perdue, Nestle and Hormel. But Wisner believes retailers’ overall price advantage may be a deciding factor. “The market right now is very fragmented,” he said. “Before anyone creates a dominant position, for store brands to come in and say, ‘I can give you something that’s as good as anything else,’ and if I can save $2 on a hamburger, that’s a really big deal.” SB


SOCIAL MARKETING

PINTEREST PROGRAMS RETAILERS LIKE ALBERTSONS ARE PROMOTING THEIR PRIVATE BRANDS BY USING WHAT THEY’RE LEARNING FROM A PINTEREST INSIGHTS TOOL CALLED PINTEREST TRENDS By Dan Ochwat

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n recent months both Albertsons and H-E-B have leveraged discovery platform Pinterest to learn about food trends that they then infused into lively, themed store brand programs. Albertsons leveraged the Pinterest Trends Tool to get insights into holiday food trends, which helped them develop a program and recipe campaign for shoppers to use its own brands to make a pumpkin-inspired alcoholic drink, buy store brand products for a “Friendsgiving” party, create Christmas desserts and develop spooky treats for Halloween. Products like Lucerne Eggnog, Open Nature Pecans and many different items under its Signature Reserve line were promoted through the Albertsons Pinterest activity. The chain measured in-store sales lift against the campaigns, and the results were so good that they’ve come back for seconds, said Arthur Sevilla, head of CPG strategy for Pin28

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terest. Albertsons will run a similar holiday campaign in 2020. In some cases, the retailer also placed endcaps in stores with signage calling out to their recipes and products on Pinterest. Similarly, H-E-B used Pinterest Trends to garner insights from what Pinterest users are searching for and interested in, and then developed inspirations for the season around them — dedicating a web page on the platform around inspirational ideas like a “Christmas brunch,” “Instant Pot cider,” “oven-baked beer brisket” and “winter salads.” More than 320 million people globally use Pinterest, saving more than 200 billion ideas to four billion boards created on the site, the company said. Retailers and even private brand manufacturers can use Pinterest Trends to discover what users are searching for on Pinterest to develop ideas.


It’s all in an effort to create a meaningful shopping experience for shoppers in both a physical and digital world, according to Sevilla. “You see this evolution in the in-store environment, notable in grocery, which has recently experienced an upgrade to convey greater freshness, localization and inspiration,” he said. “The same desire for a more visually engaging environment is critical for brands who are reaching consumers digitally.” Nearly 90% of consumers posting Pins on Pinterest weekly are using the platform for inspiration during their path to purchase, and as of data from November 2018, 57% of weekly “Pinners” have used Pinterest while shopping in-store, the company said. Sevilla said the platform is ideal for private brands seeking to drive trial of their products. “Ninety-seven percent of the top 1,000 searches are unbranded, meaning people generally start with a search with a few keywords like ‘peanut butter recipes’ or a visual search instead of a specific brand name.” He also said 72% of consumers engaging with Pinterest to seek food and beverage inspiration are making a purchase based on a Pin they’ve seen from a brand. “Private label brands are reaching consumers that are seeking food inspiration.” Chad Coester, senior vice president of Own Brands at Albertsons, said in a press release on Albertsons Pinterest holiday programs that Albertsons shoppers want to stay ahead of the curve on trends. “Using Pinterest Trends online and in-store enables Own Brands to be top-of-mind in a truly innovative way,” he said.

Sevilla’s advice for a retailer seeking to connect with consumers over Pinterest is to have high-quality creative. “The most effective Pins have visual intrigue, tell a good story and capture consumers’ interest, regardless of format.” The posts that Albertsons put on Pinterest included not just high-level photography of foods but short videos of foods being decorated like brownies getting iced with a spider web design. For the Halloween-inspired treats using their private brand product, the Pinterest activity saw a 65% gain in search on the platform. The retailer’s Pins on pumpkin and eggnog alcoholic drinks saw an increase in search that was more than 150% and Pin programs around “Holiday grazing tables” saw an increase of 500% in search activity. In addition to Pinterest Trends, other ways for private brand manufacturers or retailers to use the platform to promote is through Pinterest ads and video ads. “Retailers like Albertsons are in constant dialogue with our teams to find the most effective ways to inspire and reach consumers,” Sevilla said. “Together, we identified Pinterest trends that aligned to seasonal moments that Albertsons wanted to amplify. From there, they built Pins highlighting private label brands and promoted to audiences that engaged with relevant moments.” He said with each retailer it starts with identifying what’s the business objective and what are the audience needs. “Is it to drive awareness, optimize video views or increase traffic? From there, brands and services like Pinterest can find creative ways to inspire action for consumers.”

Arthur Sevilla, head of CPG strategy, Pinterest www.storebrands.com

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CONSUMER BEHAVIOR INSIGHTS

BEFORE AND AFTER DESPITE PANDEMIC, SHOPPERS STILL LOOK FOR DEALS AND PREFERRED BRANDS By Peter Breen

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etailers and brands — including private label brands — should think twice before abandoning all promotional activity in the midst of the COVID-19 pandemic, because many shoppers are still looking for deals as they stock up for an uncertain future, according to a survey conducted in midMarch by Path to Purchase Institute. News reports and social media conversations have focused on a retail climate that has veered toward near chaos at times, with throngs of shoppers emptying store shelves in response to increasingly dire developments surrounding the pandemic. The institute’s survey identifies more thoughtful, deliberate shoppers still relying on preferred brands and retailers, and still hoping to find good prices before changing their typical behavior to buy the products they need when necessary. As expected, those behavioral changes include a significant number of shoppers moving toward online

ordering and out-of-store pickup options. Fielded March 13 to 15, the survey was conducted among 1,001 primary household grocery shoppers in the United States, almost half of whom (44%) said they are stocking up on cleaning supplies, medications, personal care items and food to keep themselves healthy and prepared for whatever may come next. Taken as a whole, the survey uncovered three key takeaways about the state of shopping behavior right now: 1. Shoppers are still “shopping”; 2. Online shopping is growing; and 3. Shoppers are ready to stay loyal. 1. Shoppers are still “shopping” Although the near national run on both emergency health and grocery staples seemed to suggest that consumers are blindly grabbing necessary items without any consideration, the survey suggested that there’s more trip planning

Channels shopped for groceries before vs. during COVID-19 pandemic 19%

16%

20%

41%

71%

70%

27%

21%

21%

21%

38%

39%

27%

26%

55%

57%

60%

Drug Store

Online Retailer

Specialty/ Natural Store

47%

Discount Supermarket

Wholesale/ Club Store

66%

17%

17% Supercenter/ Mass Store

Supercenter/ Grocery Store

Dollar Store

Don’t shop here

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15%

16%

47%

42%

15%

18%

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Typically shop here

Shopping here now as a result of the coronavirus

Convenience Store


Due to the COVID-19 Pandemic, shoppers are more likely to…

44%

24%

31%

22%

taking place than all those bare aisles would imply. In fact, the impact of the pandemic has led even more consumers to undertake the following activities with greater frequency: • Make a shopping list (31%): Since this behavior was more evident among suburban/rural residents and older shoppers, it could be driven by a desire to avoid being forced to make another trip to the store for items that they might otherwise forget; • Look for coupons (24%): Millennials and Gen Xers are leading the charge. Only 12% of respondents said they’re looking for deals less often than they did before; • Review store circulars (23%): This could aid in the aforementioned list making and deal seeking, as well as provide a way for the next item; • Compare prices across stores (22%): The need for bulk buys and concerns over potential gouging likely are driving the change; and • Read product reviews online (18%): This again seems to contradict the wholly understandable perception that shoppers are simply “panic buying.” This shift in behavior could reflect the need to purchase unfamiliar products like face masks, perhaps; find the most effective solutions for staying germ-free; or try out new brands due to out-of-stock situations. Just as significantly, a much smaller percentage of shoppers (13% or less) said they have ceased any of these activities. And while product availability likely has become far more critical to ultimate purchase decisions than almost ever before, 83% of shoppers said they’re looking for low prices and deals, including 27% who said they’re doing

of respondents who have shopped at a different store since the crisis began said they did so to buy their preferred brands. that more often now. Conversely, only 10% said they’re less concerned about price. This greater price sensitivity could be related to the increased level of stock-up trips taking place, or to heightened and justifiable concerns about price gouging. One other behavioral trend that could have a significant impact on shopper engagement is meal planning: 28% of respondents said they’re now planning meals and buying products accordingly, more than they did before the crisis began. That means 79% of shoppers, including those who already did, are heading to the store with specific ingredients in mind. (It’s probably worth noting that these results came before such major cities as New York and Chicago began to prohibit in-restaurant dining.) 2. Online shopping is growing Among the more commonly expected outcomes of the pandemic is a surge in grocery e-commerce, with many industry analysts predicting a true tipping point in relation to brick-and-mortar shopping as consumers discover the relative ease — not to mention physical safety — of online shopping options. EIQ’s survey results support this theory, beginning with the increase in online-conducive pre-shopping behaviors, such as meal planning, price comparing and reading product reviews that was discussed earlier. Yet, it is reflected even more by the substantial increase in online grocery buying among respondents, 21% of whom said they’re now shopping online because of the pandemic — joining the 26% who already were. Assuming the pandemic continues to spread and “shelter in www.storebrands.com

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CONSUMER BEHAVIOR INSIGHTS

Trip types before vs. during COVID-19 pandemic Stock up (15+ items) Fill in (5-15 items)

8%

53%

13%

29%

56%

23%

Quick trip (1-5 items)

16%

52%

22%

Immediate consumption

15%

54%

19%

Less often

The same amount

More often

place” rules proliferate, it will be interesting to see how many of the 57% of shoppers who still are not buying groceries online will do so. Drilling down to specific e-commerce activities, relatively equal numbers of shoppers said they are buying food online to pick up in the store (19%), to use curbside pickup (18%) or for home delivery (18%). All of those options help them avoid crowded aisles, long checkout or entry lines, and possible contamination to some degree. Adoption levels for online buying were roughly the same for personal care and household supplies, as well as for OTC and prescription medications. One possible check on more widespread adoption might be the fact that only 16% of shoppers said they have a high level of trust in the ability of retailers or delivery personnel to be sanitary and safely handle orders during preparation and delivery. Retailers themselves might very well help fuel greater adoption of home delivery, since a number of chains in recent weeks have dropped the service charges often associated with low-purchase online orders. The level of “shelter in place” guidelines set by municipalities, as well as the length of the COVID-19 outbreak, ultimately could have a major impact as well. 3. Shoppers are ready to stay loyal An additional finding that seems to belie the “gold rush” mentality of recent shopping behavior is the number of shoppers who said they want to continue visiting their preferred stores to buy their favorite brands. The current climate undoubtedly has led many consumers to alter their typical destinations for grocery purchases: Shoppers said they’ve shifted trips from their typical channel, most commonly supermarkets or mass merchants, to a different one in relatively equal measures — between 15% and 21% — across all channels. For the moment at least, drug stores have picked up as many grocery trips as online retailers, presumably because of the established status as a destination for health and wellness needs. However, 56% of respondents said they’re visiting the stores they always shop, while another 39% are only heading to other stores to buy something 32

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specific that they need. Not surprisingly, greater product availability was the reason most often given for the switch, cited by 58%. Other motivations were a more convenient location (34%), which might imply a desire to shorten trip lengths; a lack of the purchase limits that many chains have implemented to fend off hoarding (23%); better prices (20%); and the availability of products they don’t normally buy (18%), which likely reflects unique needs related directly to the outbreak. On the product side, 34% of respondents, who have shopped at a different store since the crisis began, said they did so in order to buy their preferred brands — again suggesting that the “whatever is on the shelf” mentality that has seemingly driven recent purchase behavior might be slightly misleading. Indeed, 22% of shoppers remain steadfast in their desire to “only buy my preferred brands.” While 58% expressed a readiness to buy another brand if their favorite wasn’t available. Only 21% said they would buy “any brand to get the items I need.” Asked which retailer they trusted to provide the products and services they need during the crisis, 18% of shoppers named Walmart. Target and Amazon came in at 6%, and Kroger and Costco at 3%. In total, 67 different retailers were named. On the product side, only three of the 114 brands named as being trusted to provide what respondents need received a significant number of mentions: Lysol (6%), followed by Clorox (3%) and Purell (1%). Collectively, these results suggest that, despite the upheaval in behavior caused by the pandemic, retailers and brands still have an opportunity to retain loyalty if they’re able to stay ahead of changing consumer demand and meet the needs of shoppers confronting an uncertain future — obviously, a task that’s far easier said than done in these exceptionally difficult times. SB This article originally appeared on Path to Purchase IQ’s website on March 20.


VIEWPOINT

KNOWING WHAT’S NEXT

DESIGNING THE SUPPLY CHAIN AROUND DEMAND, BEFORE AND AFTER COVID-19

Shaina Finch, head of supply chain solutions consulting, Symphony RetailAI

T

he retail industry has changed rapidly over the last year, with the last two months leading in volatility. Previous studies have shown that the supply chain was seen as “the next big thing,” but retailers are not effectively meeting everchanging customer attitudes and demands, especially during the COVID-19 pandemic. How can retailers use demand forecasting and product visibility to provide their customers with what they need, when they need it, even in unforeseeable situations? The 2020 RSR Supply Chain Management Report, commissioned by Symphony RetailAI and independently conducted by RSR Research, received detailed survey responses from 74 qualified retail respondents, largely headquartered in the United States. The report examined the challenges, opportunities, internal inhibitors and technology enablers affecting the supply chain. While the research was collected prior to the onset of the COVID-19 outbreak in the United States, the implications of the results could not be timelier as supply chain needs have only been accelerated by this crisis. Here’s a look at three areas of the supply chain, with help from the research.

Demand Forecasting Creates Options for Proactive Retailers Retailers are currently underestimating the opportunities demand forecasting can generate. The survey found that only 28% of under-performers cited “making sure our supply chain can keep up with demand” as a top challenge for supply chain execution, compared with 40% of the best performers. While it is difficult to successfully forecast for an event like this pandemic that the world has never seen before, utilizing purchase behavior during past flu seasons and other outbreaks to understand items that are typically impacted can produce beneficial information on what products to stock. Even as retailers enter “react” mode, they can use AI in forecasting to predict which products the shopper will substitute for items that are out of stock. Will the buyer turn to an alternative option that is cheaper or more expensive? A nationwide name brand or the private label? Or will they buy an entirely different product altogether? Private Labels Face Opportunities, Challenges Retailers with private labels are at an advantage during COVID-19 because they have data-driven insights regarding the status and location of their products in the store. These retailers

know what’s out of stock and have the clarity across their supply chain to realize what products require an increase in production. However, these brands are obviously not immune to disruption. The optimal production of private label products will still rely on the availability of input materials as well as the maintenance of adequate labor forces that might be impacted by layoffs or social distancing measures in warehouses. The question from here on for retailers will be: Do we have the appropriate resources throughout all stages of the supply chain, whether in-house or otherwise, to generate the products customers need? Retailers See Value of Supply Chain Visibility The survey found that 76% of Retail Winners see “real-time visibility across the supply chain” as a focus area for improvement, compared with just 54% of average and under-performers. While inventory management is a challenge for all retailers, those that can easily determine which products are underor over-stocked — and insights into warehouse and store shelf inventory — are going to be more successful. It’s not beneficial for a retailer to know what items are out of stock on the shelf while remaining blind to whether there’s inventory in the warehouse or currently being delivered to fill these gaps. Full visibility into the supply chain allows retailers to better serve their customers, building trust and loyalty during this trying time. A Thank You to Essential Retailers As retailers look to optimize their supply chains and navigate through this unprecedented time, there will be setbacks and delays, but we must remember to be patient and grateful. Without the product manufacturers, truck drivers, warehouse associates, store associates and managers who are working tirelessly to keep their communities safe and looked after, none of us would have access to the products we need.

www.storebrands.com

April 2020

Store Brands

33


DISPATCHES Vol. 3

A Glimpse of Retail Life During COVID-19 While Dispatches is usually a more fun look at the type of merchandising retailers are deploying to tout its own brands, stores are currently focused more on taking care of Americans than they are trying to promote a new flavor of store brand candy. So, taking a slightly different approach, here is a look at what life was like at retail the last few weeks.

First

empty shelves. Panic buying struck at the tipping point of COVID-19 and many stores looked just like this Walgreens in Manhasset, N.Y., completely barren, just a sign remaining that directed shoppers to limit what they bought.

Next, as the coronavirus spread

wilder across the country, more stringent rules took place in communities, including “shelter in place.” This sign outside of The Fresh Market in Miami aptly described the direction Americans needed to take, stay home!

Lastly, as life gets back to normal,

so will store shelves — like this Target in Florida, fully stocked with disinfectant wipes. SB

34

Store Brands

April 2020

www.storebrands.com


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