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No horrible boss

Meal kit ticket

American Nutrition up close July 2019 | www.storebrands.com

IN THE

BOXED SEAT How Boxed.com’s new model for private brands can thrive in the era of online retail

Jeffrey Gamsey, Senior Vice President of Private Brands, Boxed


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Volume 42 No. 7 July 2019

DEPARTMENTS 6

Editor’s Take

9

Around the Industry

12

Getting Social

39

End Cap

CONTENTS

39 CATEGORY INTELLIGENCE 28

Pasta

31

Italian Sauce

34

Nuts and Trail Mix

37

Oils and Vinegar

14

COVER STORY

In the Boxed seat

Boxed.com has a new model for how private brands can thrive in the online era

FEATURES 19 Trending

32

Meal kit momentum Food retailers have an exciting growth opportunity in private brand meal kits

22 Company Profile A pet food manufacturer’s life For American Nutrition, the emphasis has always been on quality, food safety and service

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, $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 2019 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 / July 2019 / www.storebrands.com


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EDITOR’S TAKE Business Intelligence for an Evolving Market

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

Group Brand Director

THE ANTI HORRIBLE BOSS

John Schrei

248-613-8672

jschrei@ensembleiq.com

EDITORIAL Editor-in-Chief

Lawrence Aylward

(330) 635-2586

laylward@ensembleIQ.com

Managing Editor

Gina Acosta

(813) 417-4149

gacosta@ensembleIQ.com

Digital Editor

Louisa Hallett

(904) 294-6764

lhallett@ensembleiq.com

Contributing Writers

Rich Mitchell, Dana Cvetan, Nevenka Jevtic

ADVERTISING & SALES Associate Brand Director (708) 565-5350

Don Santa is the flip side of the get-in-your-face boss who thinks he can get the best out of his employees by getting them to despise him. “I can’t think of one of them that I don’t love,” Santa, the founder and CEO of Woodlands Market, told me recently when discussing the Kentfield, Calif.-based independent grocer’s more than 300 employees. “That’s a good sign, right?” Let’s put it this way: Santa could never be cast as one of the big cheeses in the next “Horrible Bosses” film. Woodlands Market operates three specialty stores in northern California, including one in downtown San Francisco. I visited Santa recently at that location to talk about the independent grocer’s private brands, which Santa says are vital to the business, even though he operates only a few stores. “Our commitment to private label has differentiated us,” Santa says, noting that Woodlands Market’s store brand market share is in the high single digits and growing. “We source through vendors that are typically local and of the highest quality.” In addition to the San Francisco store, which opened in 2017, Woodlands Market operates two larger stores in Kentfield and Tiburon, Calif., which are staples in those communities. Santa and I talked about many things prevalent to the grocer’s endurance. He began his business 32 years ago. Interestingly, his grandparents, who were Italian immigrants, opened an independent grocery store in 1910 in San Francisco and operated it for 65 years. “I guess I recreated something that was apparently in my blood,” Santa says. A willingness to believe in the abilities of others is also in Santa’s blood, and he thinks it has everything to do with the grocer’s fruition. After speaking to Santa for a few hours, I realized the key to Woodlands Market’s success has been Santa’s handsoff management style, which in turn affects everything the retailer does. Santa lets his culinary-talented employees — from the resourceful chefs who create the prepared foods of which Woodlands Market is known to those in charge of finding the best private label suppliers — do their own things. “My management style is to give [employees] a great deal of liberty and creative freedom,” Santa says. We talk about differentiation in the private brands industry about as often as a meteorologist talks about the weather. It is the crucial element for private label distinction. But products will never differentiate without the people behind them. Santa gets that, which is why he stays out of his people’s way and gives them the freedom to excel in their jobs. “We are only as good as our people, and I’d say we have some of the best people in the business,” he says. “It’s as much about our people as our food.”

Maggie Kaeppel

mkaeppel@ensembleIQ.com

Senior Sales Manager

Judy Hayes

(925) 785-9665

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Senior Sales Manager

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

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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 Operating Officer - Joel Hughes Chief Commercial Officer and President Retail - Jennifer Litterick Chief Innovation Officer - Tanner Van Dusen Chief Human Resources Officer - Ann Jadown

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

Executive Vice President, Events & Conferences – Ed Several

6

Store Brands / July 2019 / www.storebrands.com


VIEWPOINT

Product tiers and category roles are just so 1990 In the past, the retailer focus was all about category management. Today, it’s shopper marketing we’re all talking about. This evolution suggests that many of the time-honored category management precepts we held near and dear may no longer have the relevance they once did. Two of these notions — product tiers and category roles — are ready for some rethinking. THE TRACKS OF MY TIERS Private brand strategy used to be a matter of simply developing good-better-best options in relation to the leading brand. “Good” implied opening price point items that offered functional value at a somewhat lesser quality. “Better” was simply code for national brand equivalent (NBE). And “best” was mostly optional. Little by little, however, consumers are coming to regard “good” as national brand equivalent with everything else needing to be of superior or differentiated quality. Value brands are declining in share and value merchants (i.e., ALDI) have significantly raised their quality profile to meet and even exceed NBE levels. Some retailers, with Costco Wholesale as a leading example, offer only a single tier that provides both superior quality and value relative to other alternatives. Others are driving new growth with attribute-focused brands (i.e., Kroger’s Simple Truth) that defy traditional tier thinking. It is with these brands that retailers (including online players such as Boxed) are moving consumers away from thinking that all private brands are “pretty much the same.” Our research says about half of consumers feel this way. WHO WANTS TO BE ROUTINE? The concept of category roles has become an anachronism in today’s marketplace. To effectively execute shopper marketing principles, retailers really need to think about having a destination component in every category, a concept we call “dynamic

differences.” It is retailer brands that assume the roles, not the categories themselves. Traditional category management practices assigned most categories to a “routine” role defined as offering a consistent and competitive shopping experience. In reality, it was no more than a base expectation that the shopper held for every competing retailer. Being routine is not enough today — “Hey, our goal is to be no better or worse than anyone else in this category” hardly seems to be a flag to rally around. This concept was designed to support the age of dominant national brands, where it can maximize performance of a brand across an entire channel without providing any meaningful points of differentiation for the individual retailer. It is a Trojan horse. Convenience categories, too, have lost their conceptual importance. With most consumer packaged good (CPG) products available in multiple channels and online, shoppers can conveniently choose a destination source for most every item. In fact, trips have become highly fragmented and most shoppers routinely spread their CPG purchases across many channels and online sources. Retailers need to assess every category and ask how their brands can make a difference — either by making it not worth the shopper’s time to go elsewhere or by creating true destination status. It is a well-used example, but Trader Joe’s does not meet the traditional definition of a destination category for wine — it simply lacks the available range — but it has created a destination status with its Charles Shaw brand along with a focus on a highly curated selection of value-priced choices. Destination categories can be created with single retailer brand items. So, what should we do? 1. Create new brands with clearly defined attributes and expectations that appeal to specific groups of shoppers. A national brand target is far less important than before. 2. Recognize that NBE still has a place, but rethink products to create a differentiated value either through packaging, new flavor profiles, information or merchandising that offers more than a simple alternative to the national brand. 3. Never be “routine” with your private brands. You get to choose whether your brand is a destination, or just a pit stop along the way. SB

By Jim Wisner

Jim Wisner is president of Libertyville, Ill.based Wisner Marketing Group, a firm that assists manufacturers, retailers and trade associations in developing and implementing solutions to complex marketing, merchandising and product development issues.

www.storebrands.com / July 2019 / Store Brands

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NEW HORIZON BY SARAH ALTER

NEW HORIZON

Sarah Alter is president and CEO of the Network of Executive Women (NEW), a learning and leadership community representing 12,500 members, 900 companies and 22 regional groups in the United States and Canada. Learn more at newonline.org.

THE INVISIBLE WOMAN With the growing realization that flexible work arrangements — a shift in work hours, working remotely or job sharing — are key to attracting, keeping and advancing talented women at all points in their careers, discussion around the relative importance of face time in the office versus results is heating up. Many managers are hanging on to outdated views about face time as a full measure of an employee’s value to an organization and are losing outstanding employees as a result. Still, one type of face time is key to advancing a career — face time with senior leaders. Employees who interact regularly with their companies’ senior leaders are more likely to ask for and receive promotions, according to McKinsey & Co.’s Women in the Workplace 2018 report. They’re also more likely to stay with their companies and aim to be leaders themselves. Makes sense. The problem is 33% of the women surveyed for Women in the Workplace said they had never had a significant discussion with a senior leader about their work (compared to 27% of men surveyed). For some women of color, access is even more limited. Forty percent of black women reported never having a substantive work-related conversation with a senior leader. Women are also less likely than men to socialize with their managers or other executives outside the workplace. Nearly half of women surveyed said they have never had an informal interaction with a senior leader, compared to 40% of men. Again, many women of color have

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even less face time with the men and women who create opportunities and open doors. Fifty-four percent of Latinas and nearly 60% of black women said they’ve never had an informal interaction with a senior leader. At all points in their careers, women have fewer opportunities to demonstrate their skills, show off their work results or make strategic connections with their companies’ career-opportunity gatekeepers. The result: When managers are considering candidates for stretch assignments, leadership development or promotions, they’re more likely to choose a man, because it’s more likely a man is on their radar. A known employee always has an advantage over an unknown employee. One way to level the playing field is to encourage senior leaders to sponsor women. A full 70% of the 70 organizations named 2019 Top Companies for Executive Women by the National Association for Female Executives have sponsorship initiatives. Companies can support more sponsorship with these five actions put forth by Working Mother magazine: • Expose senior leaders to high-potential talents from different groups, especially underrepresented populations. • Link sponsorship to senior executives’ goals, performance reviews and compensation. • Have clear objectives for sponsorship and communicate to everyone involved.

• Use employee resource groups to find high-potential women worthy of sponsorship. • Measure promotion and retention rates of those who are sponsored versus people not sponsored in similar roles. The Network of Executive Women (NEW) Blueprint for Gender Equality, which NEW is sharing now with its corporate partners, lays out best practices for companies that are working to create a gender-diverse and inclusive workplace. While developing this action plan, we found a number of forward-thinking companies that are disrupting the status quo with other practices that promote women’s visibility with senior leaders. One of our corporate partners, for example, is piloting a program that pairs individuals who are ready to move up to the next role with members of its leadership team for development discussion. J.P. Morgan’s Women on the Move initiative’s 30-5-1 campaign brings women and men together for 36 minutes each week to support women’s growth and development. Participants commit to spending 30 minutes having coffee with a talented up-andcoming woman, five minutes congratulating a female colleague on a win or success and one minute talking up the woman who had that win with other colleagues. “At JPMorgan Chase, we have a truly amazing group of female colleagues,” J.P. Morgan’s Asset and Wealth Management CEO Mary Erdoes, co-sponsor of Women on the Move, said. “It’s up to each one of us — men and women alike — to ensure they have the support mechanisms they need to succeed, and this campaign is one of the most important ways we can do that.” Formal, structured development programs that support face time with senior leaders benefit talented women and men, but especially those who may otherwise be unseen — or overlooked. SB

Editor’s note: This is the third of six columns that Store Brands is running in 2019 from the Network of Executive Women (NEW).


AroundtheIndustry SHORT TAKES Target kicks off back-toschool with new private brand Target has developed a new private brand collection for tween girls that aims to woo with glitter, sequins and lots of unicorns. The new lifestyle brand, called More Than Magic, features more than 500 items designed for girls ages 8-12 who are starting to experiment with their personal sense of style. The collection is the Minneapolis-based retailer’s first full lifestyle brand, spanning everything from apparel and stationery to tech and beauty — all in bold colors, affordable prices (starting with $0.99 Back to School supplies and topping out at $29.99 bomber jackets) and what the retailer calls “inclusive designs.” “I’ve been part of so many incredible brands we’ve introduced at Target, but More Than Magic might top my list for being the most fun to develop,” says Jill Sando, senior vice president and general merchandise manager of Target’s Apparel and Accessories and Home. “Bringing girls together from across the country to hear what they did — and did not — want and how Target can fill those needs, from the products we create to the experiences we offer, was really energizing for our team.”

Sprouts Farmers Market names new CEO Phoenix-based Sprouts Farmers Market, which offers an array of private brands under its Sprouts brand, appointed Jack L. Sinclair as the company’s CEO and a member of its board of directors. Sinclair brings more than 35 years of experience in retail and grocery to Sprouts. He had been CEO of 99 Cents Only Stores, a discount retailer with over 350 locations in the United States, since 2018 and prior to that was its chief merchandising officer from 2015 to 2018. From 2007 to 2015, Sinclair was the executive vice president of the U.S. grocery division of Walmart, where he led all aspects of Walmart’s U.S. grocery business at its more than 4,000 stores. He also spent 14 years at Safeway in London where he was responsible for operations, merchandising and marketing for more than 450 Safeway supermarkets and convenience stores in the United Kingdom. Sprouts also announced that Brad Lukow, interim co-CEO and chief financial officer, has resigned to pursue other opportunities.

Walmart aims to innovate … and disrupt At Fancy Food Show, executives talk about keeping up with — and ahead of — the retailer’s customers By Lawrence Aylward

Walmart’s Laura Rush and Kevin Head talk about innovation and disruption at the Fancy Food Show. It’s OK for suppliers to go to Walmart with a half-baked product idea. In fact, Walmart is all about collaborating with suppliers — private branded and branded — to turn a halfbaked idea into a fully baked idea. “We leverage a lot of industry experts,” Kevin Head, Walmart’s vice president and divisional merchandise manager for breakfast and bread, told food manufacturers and suppliers during a panel discussion at the Fancy Food Show in June at the Jacob Javits Center in New York. “We would rather co-create with you along the way. Whenever we are invested in it, it’s truly a partnership.” The session, titled “Disrupt or be Disrupted,” was moderated by Phil Kafarakis, president of the Specialty Food Association, the association that stages the show. The discussion also featured Laura Rush, vice president

and divisional merchandise manager of frozen foods for Walmart. Kafarakis admitted that some of his peers believed that two people from Bentonville, Ark.-based Walmart shouldn’t be part of a panel discussion on disruption. But Kafarakis begged to differ. So did Rush, who said that Walmart aims to be a leader in innovation to disrupt. “If we don’t change, our customers will will hold us accountable,” she said. Just who is that customer? “Everyone,” Rush said. “The Walmart customer is all of America. We owe our customers all the change that is happening in the industry.” So Walmart is on a mission to innovate and disrupt, which is why Rush and Head were speaking to suppliers at the Fancy Food Show to Continued on page 10 www.storebrands.com / July 2019 / Store Brands

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AroundtheIndustry possibly form partnerships with them. Rush and Head stressed that suppliers don’t have to be big enough to sell their products at every Walmart. Sometimes, they only need to manufacture enough product to sell at 10 or 20 stores. “We don’t have a private brand strategy and a national brand strategy, we have a customer strategy,” Head said. “[Customers’] tastes are changing. Their expectations are changing. And ultimately we will change with them.” While Walmart is all about innovation, Head stressed that the retailer doesn’t force innovation. It’s about stepping back and learning about a challenge and then trying to solve it, he said. That’s when innovation occurs. “We don’t say, ‘We have to go innovate,’” Head said. “We know that when we just set out to innovate, we

don’t ever really love the result. When innovation is being created, [we’re] not talking about innovation. We’re talking about the customer.” Convenience is a crucial component of innovation, and Walmart has already proven to be a disruptor by upping the game in online delivery and grocery pickup, of which Head said the retailer continues to invest. For instance, Walmart is testing a program in three cities to deliver groceries inside shoppers’ homes. No other retailer is doing that. “We are going to provide customers the opportunity for how they want to shop, when they want to shop and where they want to shop,” Head said. “It’s all about convenience,” Rush added, “and that’s what we want to drive.” SB

Is Costco’s Kirkland Signature brand losing exclusivity? Consumers can easily shop private brand on Amazon without a Costco membership

Dozens of Kirkland Signature products are being sold on Amazon’s website, according to a new report from online business news outlet Quartz. Amazon has a storefront for Kirkland Signature, which is Issaquah, Wash.-based Costco Wholesale’s private brand famous for quality and value. Amazon shoppers can browse Kirkland Signature slippers, underwear, plastic wrap, coffee, quinoa and even hair-growth pills. Many of these products are available with Amazon’s Prime two-day delivery option. Some of the products appear to have a markup over their prices on Costco’s website. A 2-liter bottle

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By Gina Acosta

of Kirkland-brand olive oil costs $22.99 on Amazon, but on Costco it’s priced at $16.99, according to Quartz. Similarly, Kirkland adult dog food retails for $43.99 on Costco’s site, but costs $56.29 on Amazon. Ironically, in both cases, Seattlebased Amazon prominently displays near the purchase button that it sells its own brands — Solimo dog food and AmazonFresh olive oil — for much less. Costco and Amazon weren’t available to comment on the Kirkland products on Amazon, and whether it was an official partnership between the two retailers. SB

SHORT TAKES Private brand sales growing online Market researcher Nielsen reports that private brands of consumer packaged goods (CPG) now account for 3% of online dollar sales, up from 1.3% two years ago. “Many are quick to associate private label with bricks-and-mortar sales, which isn’t surprising, given the fact that store brands account for 17% of CPG dollar sales in physical retail stores,” according to Nielsen. “Private label sales have also increased by $7.9 billion across bricks-andmortar stores in the past three years. But there’s much more to the private label story than just what you see in physical stores.” Nielsen cited Amazon’s new skin care line and Chewy.com’s new private label pet food as two product lines making headway as online private brands. Private label has emerged as the new challenger brand in e-commerce, Nielsen stated. From aluminum foil to disposable diapers, private label options are generating a significant portion of the e-commerce sales within certain categories.

These stores are spic and span As consumers, we’ve all been there. To a dirty grocery store … where the floors are filthy, it smells musty and the atmosphere is just plain putrid. If your grocery store literally stinks, do you think anybody is going to buy your private brands? So if your stores need a little polish and perfume, you might want to emulate the stores that made Consumer Reports’ recent list of the cleanest grocery stores in America. The six grocers that landed in Consumer Reports’ top rating tier for overall satisfaction got high marks for cleanliness. They include Texas-based Central Market; the mid-Atlantic’s Wegmans; Heinen’s in Ohio and the Chicago area; Southern Californiabased Gelson’s Markets; the Northeast’s Market Basket; and Trader Joe’s, Consumer Reports’ highest-rated national chain. “Cleanliness has a large impact on your overall opinion of your grocery store, our results show,” said Jane Manweiler, a Consumer Reports survey research associate.


AroundtheIndustry SHORT TAKES

Just beautiful

Mauro to keynote Total Meal Solutions Summit

As younger consumers seek to keep up with influencers, private brand beauty is becoming a big opportunity for retailers

Jeff Mauro will be the keynote speaker for Progressive Grocer’s Total Meal Solutions Summit, set for Sept. 9-10 in Austin, Texas. The interactive summit will equip the nation’s top retailers with proven tactics for developing a robust meal solutions program that will increase basket size and resonate with shoppers. Mauro gained fame as the winner of Season 7 of Food Network Star. His prize was his first show, the Emmy-nominated “Sandwich King,” which ran for five successful seasons. He also co-hosted the Food Network’s Saturday afternoon juggernaut “The Kitchen,” which is now in its 22nd season. He currently is partner and executive chef of Pork and Mindy’s, a fast-casual barbecue restaurant specializing in sandwiches. Pork and Mindy’s has recently expanded into Mariano’s Fresh Market grocery stores in the Chicago area, bringing its signature sandwiches as well as special menus and grab-and-go items exclusive to Mariano’s stores. Other highlights of the Total Meal Solutions Summit include a food tour of Austin-area establishments excelling at meal solutions; the Progressive Grocer Chef Challenge, a live cooking competition with surprise ingredients; and critical research on foodservice trends from Datassential, the Food Marketing Institute and Progressive Grocer. Registration is now open and complimentary for approved retailers. Visit www.totalmealsolutions.com to learn more about the event.

ShopRite rebrands as ‘locally grown’ grocer A new ShopRite campaign to sell locally grown produce is putting farmers and dietitians at the forefront of the Keasbey, N.J.-based retailer. According to a report, the campaign, called “Locally Grown,” features expanded partnerships with local farmers, and a dietitian-driven focus on the health and wellness benefits of fresh produce. ShopRite stores will feature “Locally Grown” displays offering the names and addresses of farms where the produce was sourced.

By Louisa Hallett

Beauty might just be one of the private label industry’s most important categories. Although private label beauty products are still not as popular as private label food products, there is still massive growth potential in the category. There is such demand for private label beauty products that even hard discounters such as ALDI have developed their own store brand beauty collections. The private label beauty industry has quickly turned into a multimilliondollar segment, with eye cosmetics alone reaching a value of $25.2 million in 2018, according to market researcher Statista. Private label beauty has become quite popular among younger generations, such as Generation Z, or consumers who are “balling on a budget,” as they say. As a millennial myself, I grew up in the age of YouTube with makeup tutorials and had to explore beauty trends with private label substitutes because they were cheaper than their name brand counterparts. Demand for these cheaper private brand beauty products has escalated so considerably that millionaire YouTube beauty gurus such as Jeffree Star, who

currently has more than 15 million followers, have created videos testing out and reviewing private brand beauty products, such as the Simply Me Beauty line from Dallas-based convenience store chain 7-Eleven. I love a good private label beauty “dupe,” a popular term within the beauty community used to reference a cheaper counterpart to a more expensive name brand product. If a retailer such as 7-Eleven or ALDI has a beauty product that is cheaper and just as good or better than name brands, that is enough incentive for me and probably millions of beauty product fanatics to walk into bricks-and-mortar stores and purchase the product. With YouTube and social media influencers testing out and promoting private label beauty products as good as or even better than the more expensive name brand products, it’s easier than ever for retailers to attract shoppers to their private brand programs by rolling out robust beauty collections geared toward younger makeup fans. SB Hallett is the digital editor of Store Brands.

www.storebrands.com / July 2019 / Store Brands

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GETTING SOCIAL

Q A with Clay Dockery Division Vice President, Corporate Brands Massimo Zanetti Beverage USA

How did you come into the world of private brands? I was in the pasta business and grocery retailer H-E-B was my largest private brand account. I recognized the attention H-E-B took in managing their brand and the connectivity they had with us as their supplier. The strategic relationship was powerful, and I realized I never wanted to sell anything but private brands. Describe the private brands industry in one word. Dynamic. What do you like most about the industry? The commonality of objectives that exists between suppliers and retailers, and the shared focus of delivery of those objectives. Clay Dockery, sporting a toucan on his shoulder, is a big Jimmy Buffett fan.

What do you dislike most about the industry? If there is something to dislike, I haven’t found it yet! What one great thing does the industry have going for it? The recognition that a retailer’s own brand is one of the most significant competitive advantages it has. What is the industry’s biggest challenge? As the industry is using words such as partnership and collaboration with increasing frequency, those aspirational elements can only exist if there is trust. Building trust is our industry’s biggest challenge.

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Who is your hero and why? I learned so much about adversity from my mother. She was diagnosed with a brain tumor at a very young age and did all that was asked of her and more to recover to the best of circumstances. As her health declined, I can’t recall one single moment where she complained about her situation. What trait in yourself do you attribute most to your success? I keep a sign on my desk that simply states, “Can Do.” Not shying away from any task has certainly helped me in my career. What is the biggest obstacle you have ever overcome? I was in a horrible car accident when I was a child. I was unable to walk for about 10 months. Having to learn to walk again, something that becomes second nature as a toddler, was quite a challenge. What’s the best advice someone ever gave you? Know where you want to go before you start your journey, but don’t be afraid to take the occasional detour. You have a week off. Where do you go and why? I have been to so many wonderful places and look forward to visiting many places I have yet to see. However, it is less about the where and more about who I am with. When my wife and I can arrange to have all three of our sons and their families together at one time, that is what really matters. If you were born 100 years ago, what would you do for a living? I would be protecting this great country of ours in the military during World War II. SB


Solving Big Problems, Inspiring Bold Ideas EnsembleIQ is a premier business intelligence resource that believes in Solving Big Problems and Inspiring Bold Ideas. Our brands work in harmony to inform, connect, and provide predictive analysis for retailers, consumer goods manufacturers, technology vendors, marketing agencies and service providers. EnsembleIQ’s integrated suite of solutions-based, total-market resources give you all the tools you need to achieve a strategic market advantage, giving you the insights, positioning, focus, and access, along with a team of dedicated strategic consultants to help you bring it all to life.

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IN THE

SEAT How Boxed.com’s new model for private brands can thrive in the era of online retail BY GINA ACOSTA In a leafy suburb about 15 miles outside of New York City, there’s a roundabout near where the Garden State Parkway meets Interstate 78. Down the street, a nearly 145,000-square-foot building emblazoned with the word “Boxed” in blue sits on a hill, towering above residential homes and commercial buildings. If you’ve never heard of Boxed.com, you might drive right past the property, oblivious to the fact that the warehouse is home to one of the most efficient and advanced private brand retail operations in the world. On a recent Thursday, the New York City-based company’s Union, N.J., fulfillment center was a whirlwind of activity, with workers loading trucks full of private brand toilet paper and sparkling water destined for homes across the country. Since its founding in 2013, Boxed, which sells bulk private-branded and branded groceries online without charging a membership fee, has grown into a $600 million company by creating a new pathway for the future of grocery retail. At a time when established food retailers are struggling to figure out what consumers want 10 years from now or even today, Boxed has seemingly cracked the code with its customized warehouse technology and nimble digital prowess that has attracted the attention not just of consumers but also of retailers. “We always thought it was a race — could technology folks like us figure out retail before retail figures out technology?” said Boxed CEO Chieh 14

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ABOUT Founded: 2013 CEO: Chieh Huang Headquarters: New York City Annual sales: $100 million Valuation: $600 million Total assortment: 1,600 SKUs and growing Private brand: Prince & Spring Private brand percentage of annual sales: 15% PHOTOS BY CHRISTINE KEELEY

Boxed Senior Vice President of Private Brands Jeffrey Gamsey says package design is instrumental in creating a lasting impression on private label customers.

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Huang, who created and started running the company out of his parents’ garage in suburban New Jersey. “We’re running our own race. There’s a lot of folks out there trying to be Amazon. If we try to run the race like them, you are just competing for fourth, fifth or sixth place. And that’s not where we want to be.” Boxed has made such a big splash in the industry that retailers such as Seattle-based Amazon and Cincinnati-based The Kroger Co. tried to acquire it last year; Kroger reportedly made a $400 million bid, according to Bloomberg, that failed. But while Boxed owes much of its growth to its technological chops and e-commerce expertise, its most impressive feat lies in creating a private brand strategy tailor-made for millennials and Generation Z.

TRUE BRAND STRATEGY

Six years after its founding, what sets Boxed apart today from the Costcos and the Sam’s Clubs is its private brand value proposition rooted in innovation and technology. Boxed has managed to successfully yet quietly create a private brand in its Prince & Spring line of bulk products that speaks to younger consumers — all available at the click of an app button, with no membership fee and with free two-day shipping on all orders over $49. The company’s private label strategy, or True Brand Strategy, has four parts: product development, design, marketing and promotions. And the man behind an attractive assortment of private-branded emoji-shaped fruit snacks, organic coconut oil and other products is Boxed Senior Vice President of Private Brands Jeffrey Gamsey. “I think a lot of the folks that I’ve talked to that have been in the private label business a lot longer than I have are very intrigued at the new approach that we’ve been taking in incorporating Prince & Spring,” Gamsey said in an interview at the Boxed warehouse in Union, N.J. Gamsey, an attorney by training and gamer at heart (as is CEO Huang), joined the company five years ago as general counsel and director of business development. He practiced 16

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corporate law for Boxed while laying the groundwork for Prince & Spring, which is named after streets near the company’s first headquarters in New York City. “Because we built Prince & Spring from scratch, without any legacy processes learned from other retailers, we had a tremendous advantage,” Gamsey says. “We could build our processes to work for our business. We had a very ambitious goal of trying to do private label better than it had ever been done before.” Gamsey says Boxed set about creating its private label program by looking at a lot of retailers with the strongest private brands, including Issaquah, Wash.-based Costco Wholesale and Monrovia, Calif.-based Trader Joe’s. “We wanted to build something that could become a defining part of why customers choose to shop at Boxed,” Gamsey says. “We rejected the me-too, look-alike approach. We rejected the value brand approach. We felt like our customers would appreciate higher quality products still sold at great value. So we looked at Costco’s Kirkland Signature as the leading private label in the club channel and we felt like we could do better.” Gamsey says Boxed’s Prince & Spring line is similar to Kirkland Signature in terms of quality and value, but the similarities end at packaging design and other innovative attributes. Design does seem to be one of Prince & Spring’s strengths: The brand has won more than 13 awards for package design in private label (Vertex and Graphic Design USA). Gamsey says package design is instrumental in creating a lasting impression on private label customers. “When we first launched Prince & Spring we were actually mobile only. So we thought through the design and how it


Boxed intends to stick to just one marquee private brand. The retailer currently has 100 Prince & Spring SKUs (or about 5% of the retailer’s overall SKUs), and about 15% of the company’s sales come from its Prince & Spring products. Four of the five top-selling products on Boxed.com are Prince & Spring products.

would appear on our app, and we needed designs that worked at very small scale,” he says. The result of that work is part of Boxed’s True Brand Strategy, “the goal of which is to do product development so cohesively together with the design and marketing and promoting of items so that Prince & Spring products all have their own names, their own identities and their own personalities. They still fit within the Prince & Spring portfolio but they are unique enough that they still can compete against brands on shelf,” Gamsey says. “We always say that our goal is to create products that we and our customers can be proud to display in our homes. And there’s a lot of things that go into that quality.” An example of the company’s True Brand Strategy is its launch of Prince & Spring Stellar Seltzer in April. The fourSKU line of naturally flavored, zero-calorie sparkling waters has become the company’s best-selling product in the crowded $558 million private label sparkling water category, which grew 9% last year according to Information Resources Inc. Gamsey says Boxed intends to stick to just one marquee private brand: Prince & Spring (launched in 2015). He says having a single brand and putting all of the focus and attention into building that brand has worked wonders so far. The retailer currently has 100 Prince & Spring SKUs (or about 5% of the retailer’s overall SKUs), and about 15% of the company’s sales come from its Prince & Spring products. Four of the five top-selling products on Boxed.com are Prince & Spring products. The Prince & Spring assortment runs the gamut from toilet paper to garbage bags to trail mix. Boxed’s Prince & Spring toilet paper has won the Good Housekeeping Seal of Approval since 2017. “We’ve got a bunch of products in the pipeline, includ-

ing our first private brand pet product,” Gamsey says. Prince & Spring products in development include dog treats, puppy pads, more flavors of seltzer water, organic granola bars, organic brown rice crispy treats, spices and personal care products. “We pay a lot of attention to ingredients,” Gamsey says. “We use the free-from lists from Kroger’s Simple Truth store brand, Brandless and Whole Foods Market, and we run our entire ingredient list against those lists to highlight any potentially problematic ingredients. And then we research them and determine if it’s something that we want to have in our products. We have a lot of non-GMO products. We have a lot of organic products. We are the first private label in the world that we know of to be at market having eliminated palm oil from our entire line.” Boxed says it wants to offer more fresh food to its customers because those items encourage loyalty and sales traffic. The company offers a service called Boxed Express that delivers items such as produce, eggs, milk and other perishables to shoppers in five markets: Atlanta, Dallas, New Jersey, the New York/New Jersey metro area and Boston. Sales to office buildings and other businesses, which make up between 20% and 30% of Boxed’s revenue, Huang said, are another growth opportunity. Boxed announced in May that it will partner with Lidl to offer online delivery at two stores. The six-month pilot will include the full assortment of Lidl products, including fresh produce, snacks and beverages. Customers who live near each store can visit Boxed.com to browse Lidl products and get same-day delivery. Boxed is also growing its brand penetration by spending millions of dollars on search engine marketing, social media and TV. Boxed is aggressively focused on making Prince & Spring the first grocery private brand in which social media plays a pivotal role in marketing. The company recently launched the brand’s first Instagram account. Gamsey says the company plans to roll out more Prince & Spring-specific digital marketing initiatives. “The tech team is always coming up with new ways to engage with customers. We survey them. We’ve been working on a Prince & Spring brand page that will help with storytelling, help discoverability,” he says. Another part of the company’s branding strategy, especially when it comes to attracting younger consumers, involves social responsibility marketing: The company discounts the sales tax amount from the list price on items that are subject to the “pink tax,” and has made price cuts on women’s products where the price is shown to be greater than the male equivalent. Of course, this move would seem to appeal to the target shopper at Boxed. The average shopper on Boxed.com is a woman with children between the ages of 25 and 45. Most Boxed customers don’t live in cities, Gamsey says. They live in suburban and rural areas where the closest Costco or Sam’s Club can be 20 miles or more away. The average Boxed customer spends about $100 on around 10 items per order. That allows the company to keep costs low by splitting shipping costs over a wide range of products, instead of just a few. Another way www.storebrands.com / July 2019 / Store Brands

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Boxed has managed to successfully yet quietly create a private brand in its Prince & Spring line of bulk products that speaks to younger consumers — all available at the click of an app button, with no membership fee, and with free shipping on orders over $49.

Boxed keeps costs low is by offering a smaller, highly curated assortment. Gamsey says the company creates touchpoints that cater to customers’ desires. One of the most innovative and customer-centric programs at Boxed is its sampling program: Boxed has found a way to replicate the sampling experience found at most club retailers. “We know that samples are something that customers truly love about the bricks-and-mortar club experience, and so we thought, how can we bring this online?” Gamsey says. “So we created what we call a Global Sampling Program.” Every time customers check out on Boxed.com, they have an assortment of as many as seven different samplesize items they can choose to try for free. “Our policy is that there is always at least one Prince & Spring item in the samples to choose from. Occasionally we’ll have two or three Prince & Spring items,” Gamsey says. In terms of merchandising Prince & Spring online, Gamsey says Boxed experiments with adjacencies. For example, putting Prince & Spring paper towels right next to Bounty on the paper products page. “We look at, what is the penetration between those two items or in that category if the products are adjacent, or if the products are not adjacent? We do very little messaging on price. We feel like in some ways that it’s hard to talk about value and savings without cheapening the brand, and we’re very much trying to build Prince & Spring as a very premium brand,” he says. Boxed’s core competency of innovation also extends to human capital. At Boxed, the organizational structure of the private brand team is separate from the branded buying team. “Our decisions are made fairly independently from each other and in the history of the company, I don’t think I’ve ever heard of a CPG coming to us and saying, ‘Oh we’re not happy with what you’re doing in private label in this category,’ ” Gamsey says.

THE AUTOMATED FUTURE

Back at the warehouse in Union, N.J., Rick Zumpano, Boxed’s vice president of distribution, takes me on a tour of stacks, robots and conveyor belts. Zumpano used to run distribution centers for Lowe’s and Family Dollar before Boxed asked him 18

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to help launch and operate three warehouses — in Dallas, Las Vegas and Union, N.J. — that allow the company to deliver everything from bulk paper products to fresh oranges. The New Jersey warehouse is fully automated, with nearly three miles of conveyor belts, driverless carts and a special camera that takes a “selfie” of each order and e-mails it to the customer. Even the machine that seals each box uses tape with the name “Prince & Spring” on it. Boxed has built all of this technology from the ground up, including order management systems, mobile technology, software that monitors and lists product expiration dates, and all of the warehouse robots. Boxed has a hardware division that builds and manufactures all the robotics that operate the fulfillment centers. By using high-tech software and machine learning, Zumpano says, Boxed can provide an online platform for retailers or suppliers, especially smaller companies that do not have a lot of resources. But right now, Zumpano says he’s focused on getting Boxed ramped up to six distribution centers across the United States. “What we’re doing now is measuring where the customer growth the greatest,” Zumpano says. “Is it in the Midwest? I envision not only a fourth distribution center but possibly one more in the Southeast, which would get us to five, and maybe eventually have a sixth.” Of course, the digitally advanced wholesaler that started in a garage faces all of the challenges that traditional retailers face: changing consumer food preferences, last-mile limitations, and creating an omnichannel platform to serve customers with anything, anytime, anywhere. These challenges may loom over Boxed, but Gamsey says there’s plenty of room for companies like his. He doesn’t see impediments to growth because Boxed occupies a niche in large part due to its innovative private label program. “The way that I think about it is, the brand is closing in on four years old and we’re at 50% penetration. It took Costco 25 years to get to 25% penetration of Kirkland Signature, and they got private label right with their initial strategy,” Gamsey says. “And so I think that based on the rate of growth in our private brand, we can eclipse 25% a lot quicker than Costco or other retailers have.” SB


TRENDING

MEAL KIT MOMENTUM

BY G I N A AC O S TA

Food retailers have an exciting growth opportunity in private brand meal kits It’s 4:30 on a Tuesday afternoon in the American home. The kids have just returned from soccer practice, the parents are getting ready to leave work, and everyone is about to gather together at home for the first time since breakfast. But neither mom nor dad has had time to buy groceries in days. The answer to the question “What’s for dinner?” is still up in the air. In 2019, the golden age of food and grocery delivery, you might think it’s easier than ever for consumers to answer that question. But the research shows the opposite. According to data from market researcher NPD Group, more than 60% of Americans (still) don’t know what’s for dinner at 4:30 p.m. This is one reason why meal kits have become a convenient solution for consumers looking to solve this daily problem. Meal kits are hitting a mark with shoppers by giving time back to busy households and delivering on key health and lifestyle trends. Research shows demand for meal kits continues to grow despite all the doom-and-gloom headlines surrounding companies such as Blue Apron, which has been losing customers and hasn’t made a profit since its 2017 IPO. According to market research firm Nielsen, meal kit

users increased 36% in 2018 over 2017. In the last six months of 2018, 14.3 million Americans bought meal kits, a 3.8 million increase over the same period one year prior. Retailers such as Seattle-based Amazon, Cincinnatibased The Kroger Co., Boise, Idaho-based Albertsons Companies, Greensboro, N.C.-based The Fresh Market and even Dallas-based 7-Eleven have rushed to cash in on that continued momentum. Both Kroger and Albertsons acquired subscription meal kit companies, buying Home Chef (Kroger) and Plated (Albertsons) in 2018. And both grocers were quick to offer the branded kits in stores. (In May, Albertsons confirmed it has temporarily pulled Plated meal kits from some stores as it revamps its meal kit strategy.) Germany-based HelloFresh, the U.S. meal kit market leader, started selling kits at Stop & Shop and Giant grocery stores last year. And struggling Blue Apron has teamed up with Walmart to offer same-day meal kit delivery in New York. But the bigger growth opportunity in the space might be in food retailers developing their own brand meal kits. Sales of meal kits in grocery stores and other retail outlets rang up $93 million in sales in 2018, according to a March 2019 Nielsen report, up 51% from 2017. Retail stores accounted for 60% of all meal kit user growth in 2018, according to Nielsen, helped by the introduction of

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TRENDING private-branded and branded meal kits by retailers. As the current meal kit business model evolves, grocery stores and other food retailers have a multimillion dollar opportunity to improve on the meal kit model and offer a private-branded meal solution that better answers the question, “What’s for dinner?” “The meal kit space is evolving very quickly,” says Jim Wisner, owner and president of the Wisner Marketing Group. “We’re seeing an evolution from the online subscription model to an in-store model. I think the growth on the subscription models is going to be flat. Retention with those is very low. Marketing costs are very high. The economics of the in-store model are much better. And the in-store meal kits are way more convenient for the consumer.” WHAT’S A MEAL KIT, ANYWAY? The majority of what are known as “meal kits” are still being sold through subscription-based providers such as Blue Apron, HelloFresh, Sun Basket, Purple Carrot and others. According to market research

firm Packaged Facts, subscriptionbased meal kit providers still have 81% of the meal kit market share in the United States. The total estimated size of the meal kit market in the United States is now $3.1 billion. In the U.S., one in four adults has purchased a meal kit via subscription delivery or in-store in the last year, and 70% keep buying them after making their first purchase, according to Nielsen. In addition to saving time from shopping, preparation and cooking, many consumers are buying meal kits because they offer new, fresh and what are perceived as healthier meals. But what is a meal kit in 2019, anyway? Since meal kits took off in 2016, the definition of a meal kit has evolved just as much as the business model. It used to be that a meal kit was a product with ingredients that needed to be cooked to create a meal. Now there are meal kits that require some cooking, no cooking, some warming and other various stages of preparation. “Savvy retailers and manufacturers have kept the definition of a ‘meal kit’ fluid,” says Andrew Moberly,

MEAL KIT MARKET SHARE, 2018 Hello Fresh

Other

28%

19% Sun Basket

8% Plated

10% Blue Apron

22%

*ESTIMATED SOURCE: PACKAGED FACTS

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Home Chef TOTAL MARKET

$3.1 BILLION*

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13%

director of category solutions at Daymon. “But a simplified equation for ‘meal kits’ is easy: meal planning plus simple shopping equals a fresh fast dinner on the table.” Consumers seem to like all of the versions of meal kits, but there have been complaints. In the subscription meal kit space, lag times between order and delivery have annoyed shoppers. The fish sitting in that box on the front porch may have spoiled in transit. And there’s all of those boxes and plastic bags for the customer to discard. Consumer complaints about in-store meal kits have ranged from driving to the store to pick up a kit is a chore, and prepping and cooking the meals often takes more time than advertised. Meal kits today need to deliver on fast, easy, flexible, healthy and fun meal solutions while clearly communicating the value proposition that shoppers are looking for, Moberly says. According to Nielsen, almost half (46%) of U.S. consumers say they would be more likely to purchase a meal kit if it were less expensive and 36% would like to be able to buy and order kits ahead of time in their local grocery store. This is where own brand meal kits at a grocery store offer tremendous advantages for retailers. They allow consumers to see and purchase the meals in person, they boost customer traffic, and they extend the private brand program into another premium category. “In-store meal kits are what’s driving growth in the segment because they represent a much more flexible opportunity for consumers,” Moberly says. “Smart private brands will offer programs that leverage all their existing meal solutions across the store — such as marinated meats, packaged salads, cut vegetables — in planned menus that make meal planning, shopping and preparation as simple as possible.” WHO’S BUYING MEAL KITS? While consumers across the shopper spectrum purchase meal kits, certain groups are more interested in


them. For example, men are 40% more likely to purchase kits than their female counterparts across all generations, while millennials and Generation X consumers are 321% more likely to purchase them than older generations, according to Nielsen. In its “Foodways of the Younger Generations” study, The Hartman Group found that 71% of millennials would prefer a home-cooked meal over any other option. And an NPD Group study found that 83% of millennial consumers are cooking more at home and making fewer restaurant visits. But it’s not just specific age groups that are attracted to meal kits. Consumers looking to stay on certain diets are flocking to meal kits to help them stick to their eating plans. Some subscription meal kits are specializing in niche diets, such as keto, vegan etc. Purple Carrot, for example, serves vegans and targets athletes through its partnership with Tom Brady. “The goal is to offer customers options,” says Brittain Ladd, founder and CEO of Six-Page Consulting. “Private label meal kits generate the highest margins for retailers so there is an incentive to try and offer a high-quality meal kit that is differentiated in the marketplace.” THE FRONT OF THE STORE In many ways, private brand meal kits could be the ultimate test of the meal kit model because many barriers along the path to purchase have been removed: Shoppers won’t have subscription commitments, don’t have to deal with shipping delays or packaging, and they can see, touch and purchase the meal kits in person. Meal kits can also add critical differentiation to grocers’ prepared foods departments. There is ample opportunity for both retailers and suppliers to capitalize on the meal kit trend by focusing on innovation and merchandising.

Whole Foods Market shoppers can now find Amazon’s private brand meal kits in Nevada, Illinois, Ohio and other states. “The meal kit market in retail stores has wonderful potential,” says JanBenedict Steenkamp, the C. Knox Massey distinguished professor of marketing and chairman of marketing at the Kenan-Flagler Business School, University of North Carolina. “Retailers can construct meal kits from product they have already in-store, and suppliers can work together with retailers to make their products part of the meal kit value proposition.” But a grocery store’s meal kit innovation has to come from more than just putting a private brand kit in a refrigerated case at the front of the store. Retailers will need to take a few components from the subscription meal kit business model (such as catering to on-trend eating styles), add more features and personalization (online ordering via app), and perhaps staff a curbside pickup station at the front of physical stores for meal kits to fly off the shelves. Moberly does believe that the front of the store is the best place to merchandise private brand meal kits. There, retailers can capital-

ize on impulse-driven appeal and present a dinner solution before shoppers have a chance to stock up on other ingredients. “Front of store displays do a great job of creating awareness of meal solution products, but they also need to be part of in-store deli or restaurant displays and in meat and seafood — areas of the store where shoppers who need a last-minute dinner option will be looking,” Moberly says. “Demos are also absolutely critical.” Adding a curbside pickup option could introduce a whole new level of convenience for grocery meal kit shoppers. Clearly, the convenience trend in food retail is here to stay. Providing a private brand meal kit solution would meet a need for a lot of consumers. Retailers have a chance to seize this opportunity if they embrace meal kit innovation and speed up their grocery infrastructure. SB Gina Acosta, managing editor of Store Brands, can be reached at gacosta@ensembleiq.com.

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COMPANY PROFILE

A pet food manufacturer’s life For American Nutrition, the emphasis has always been on quality, food safety and service By Lawrence Aylward

descript for pet food was “brown and Steve Mills remembers the days round,” he says. While the company has when pet food supplier American always held itself to a high standard of Nutrition Inc. was just a pup. manufacturing, its products back then That was in 1984 when Mills, the were fairly basic, as they were for most company’s senior vice president of all pet food manufacturers. customer brand and co-manufacturer “It was just a brown natural-colored sales, joined the Ogden, Utah-based kibble, and there was one shape and one color manufacturer of dog and cat food, including of kibble in the bag,” he adds. products for private brands. At that time, Steve Mills has spent The ingredients were elementary: corn, American Nutrition Inc. had small plants in 35 years at American meat and bone meal, and soybean meal, Ogden and Phoenix. Nutrition Inc., where he among other elements. The products were “I remember hitting $10 million in sales, is senior vice president mainstream and value-oriented. and we had a big celebration,” Mills says. of customer brand and “But our business has evolved to where This year, American Nutrition Inc. will co-manufacturer sales. we do very little of that type of product approach more than $400 million in sales. today, ” Mills says. “Most of what we do and It now has five manufacturing plants across what our plants are designed to produce is very highthe country and serves all of North America and many end and high-value food for very specialized pet diets.” countries around the world. The term “exotic,” once reserved to describe a That pup has grown into a healthy hound. fancy Mediterranean restaurant’s cuisine, has been In his 35 years at American Nutrition Inc., Mills has incorporated into pet food. American Nutrition Inc. watched the company’s offerings evolve from basic fare imports duck from France, rabbit from Italy, and greento high-end fare. It has also added biscuit and canned lipped mussels, lamb and venison from Australia and food operations during that time. New Zealand to use as exotic ingredients in pet food to provide more taste and nutrition. “We have house formulas that we can offer retailers as private brands, which run the spectrum from value all the way up to premium and super-premium formulations,” Mills says. “We also work with customers who have enough volume to warrant a custom formula. We have a full research and development department that can help develop those formulas.” American Nutrition Inc. is also looking at different — STEVE MILLS ways to produce formulas with a higher meat inclusion percentage. Its grain-free dog biscuits, for example, are American Nutrition Inc., founded in 1972 by now made with high percentages of real meat. Jack Behnken, touts it can custom manufacture pet Bags are also smaller, and pet food is no longer only consumables with formulation expertise, market available in paper sacks. Bags are now made of myriad intelligence and turnkey production for retailers seeking high-end materials and come in different finishes and private brands. closures, Mills notes. “The complexities of pet food manufacturing “The trend is smaller production runs of high-end facilities today are way different than they were even 10 formulas into smaller bags,” he adds. “All of that is to 15 years ago,” Mills says. different from 30 years ago when it was long runs and When Mills started at American Nutrition Inc., the easy-to-make formulas into very big bags. We have

“The complexities of pet food manufacturing facilities today are way different than they were even 10 to 15 years ago.”

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COMPANY PROFILE

American Nutrition Inc. operates five manufacturing plants, including in Ogden, Utah, where the company is based. This year the company will approach more than $400 million in sales.

added a lot of small-bag packaging capability with new equipment in each one of our plants in the last year.” A SIMPLE PHILOSOPHY Most everybody knows Nike’s “Just Do It” slogan. When American Nutrition Inc. began, Behnken implemented the slogan, “Doing It Better,” a straightforward philosophy that has become top of mind for employees throughout the company. “Doing It Better” is about being more innovative through nutritional science and production, among other segments. This year an additional slogan was introduced called the “ANI (American Nutrition Inc.) edge.” The philosophy behind this slogan is to get employees to collectively believe that what they do is not just about the company making pet food for a profit, Mills says. “We enjoy our pets, we love our pets … they are part of our families,” Mills says. “Our purpose is to nourish and enrich a lifelong connection between people and their pets. Our employees understand that what we’re doing is providing foods and treats for loved family members.” Mills talks about a recent conversation an American Nutrition Inc. vice president had with a plant manager that best illustrates the nuances of “the ANI Edge.” “He was talking about how much he liked working for American Nutrition Inc. because of the good things we’re doing here,” Mills says of the plant manager. “He said we’re creating foods that are nutritious for pets and allowing those pets to have great and long lives with their pet parents.” That mindset filters down from the top, says Mills, who calls Bill Behnken, Jack’s son and CEO, “a very involved leader who is focused on customer service, quality and food safety.” The company’s culture is entrenched in Behnken’s ambitious approach. “GREAT FUTURE” FOR PRIVATE BRANDS More pet owners are giving the same attention to their

pets’ diets as they do to their own — and higher-quality pet food selections with more healthful ingredients are increasing because of it. Pet food revenue rose 12% between 2012 and 2017 to about $24.6 billion, reports market research firm Mintel. Dog and cat food sales account for more than 75% of the category, while treats are the strongest performing segment, Mintel notes, adding that revenues are forecast to rise 13% to $27 billion between 2017 and 2022. Mills, who owns a dog and a cat, is one of those pet owners who feeds his animals top-notch fare. And he says grocery retailers have an opportunity to differentiate in the pet food sector with their high-end own brands. “When you go into grocery stores today, you’re seeing some very big super-premium brands that never used to be there,” he says. “So there’s an opportunity for retailers to have a private label formula or other pet food products that emulate those super-premium brands and provide an alternative to the mainstream offerings most retailers have today. I see a great future in pet food for private label, especially with consumers upscaling to better formulas.” The pet food market is flooded with many different products that contain raw products, and raw products mixed with kibble, Mills says. Higher-end canned products are also making a comeback. As it has in the more than four decades that American Nutrition Inc. has been in business, the pet food market will continue to evolve, and rapidly, Mills says. “The challenge for us and our senior team is [determining] what pet food is going to look like five years from now and 10 years from now,” he says. For American Nutrition Inc., the emphasis will always be on quality, food safety and service, Mills says. “We’re still doing business with customers that we had when I started 35 years ago,” he notes. And nearly a half-billion dollars in sales equates to a lot of well-fed canines and felines. SB

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SPONSORED CONTENT

‘I’LL HAVE A PREMIUM CUP OF COFFEE’ Consumers desire higher-quality and crafted products in the category and private brands that offer differentiation and value

“I’ll have a cup of coffee” is a phrase voiced countless times a day across America. But the phrase has taken on a new meaning. In many cases, the people uttering it are articulating that they want a premium cup of coffee, in terms of taste and how the coffee is produced. Overall, Americans are drinking more coffee. Packaged Facts estimates coffee consumption hit 8.8 billion gallons in 2018. Per capita U.S. coffee consumption rose an average of 2.6% annually over the 10-year span, well over U.S. population growth of 0.8% in the same period, Packaged Facts says. More Americans are regularly drinking gourmet coffees, cold brew and other specialized beverages compared to nongourmet coffee, according to the 2019 National Coffee Data Trends report from the National Coffee Association (NCA). “New consumer values have changed the game for coffee. But the industry is adapting — and thriving — by embracing innovation and transparency,” NCA President and CEO William “Bill” Murray said in a news release for the report. Private label roast/ground coffee has always had to fight to stand out in a “Creating an crowded field of branded choices. But the best private brands continue to stand out intimate story by offering value, says April Camarena behind the associate business development manager product and for corporate brands at Portsmouth, Va.based Massimo Zanetti Beverage USA, its origin is an which manufactures coffee for private added value for brands. Camarena notes there’s a sustainconsumers.” ing trend toward higher-quality, premium and crafted products in the category. — April Camarena, Massimo “Shoppers want premium items at a great Zanetti Beverage USA

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price,” she says. “An unceasing effort to differentiate products and drive consumer loyalty will continue to increase the importance of private label selection. Finding the perfect balance between price and value is key.” It’s not enough for retailers of store brands to solely compete on price, Camarena says. Retailers are also expanding customizable offerings and are also offering seasonal flavors to consumers. “Private label can compete with national brands in terms of quality and innovation, which are highly observed by shoppers,” Camarena says. “As we explore origin-based coffees, we unlock those exploratory tastings that consumers may want to try. As a manufacturer, it’s important to stay on trend and produce the perfect cup of coffee.” Coffee is more than a commodity, it’s an experience, Camarena contends. “Consumers seek high-quality coffee and consider it an artisanal craft like wine or beer,” she adds. More consumers also want coffee that is sustainably produced and packaged. Massimo Zanetti Beverage USA touts that its private-branded coffee can be packaged in steel cans, which are 100 percent recyclable and have the highest recycling rate of all beverage packages in the U.S. “The steel can also provide the best barrier for freshness, which preserves product quality and offers protection against spoilage,” she adds. “You can count on the steel can to bring farm-fresh quality long after harvesting.” Steel cans can tell a good story. “More than ever, consumers want additional information on the products they are interested in,” Camarena says. “Transparency allows consumers to better understand a company’s safety standards and products origin.” With sustainability and transparency continuing to gain momentum, Camarena says its Massimo Zanetti’s responsibility to create alternative way to package and source products. “A continuous effort is being made to incorporate sustainability claims on our products,” she adds. A coffee’s origin can offer a compelling story that attracts consumers’ attention, she says. “Shoppers will most likely pay more for an item that includes ethical and sustainable call outs,” Camarena adds. Camarena says it’s important for Massimo Zanetti to focus on differentiation to gain notice. “Coffee products should reflect purposeful characters like quality and emotional benefits for shoppers,” she says. “Creating an intimate story behind the product and its origin is an added value for consumers.” SB


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SUSTAINABILITY

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Store Brands /July 2019 / www.storebrands.com

American packaging, says the PlantCarton™ technology offers a solution for retailers to meet their sustainability goals almost immediately. “When they switch from plastic to refrigerated cartons such as ours, they can still support recycling but also reduce plastic use by about 80%,” Clark says, noting the statistic is based on an analysis of using 32- to 64-ounce packages compared to comparably sized plastic packages. “This plastic reduction is possible because more than 70% of every PlantCarton™ package is made with a renewable resource — paper — from trees where responsible practices are used,” Clark says. “And that percentage can be even higher depending on the package size, board type and coating, and with use of a polyethylene coating made from sugarcane.” Retailers are realizing that private-branded products can no longer just be premium and exclusive to differentiate. They must also be sustainable and eco-friendly to appease consumers, especially millennials. Clark says Evergreen Packaging’s PlantCarton™ solution is a natural fit for clean-label products, especially products that consumers purchase for health and wellness reasons. And with such packaging, Clark says retailers can tell a positive story about private label products to differentiate. “One of the reasons we introduced the PlantCarton™ brand is to give our customers a pre-packaged, easy-to-tell, compelling sustainability story that would resonate with consumers,” Clark notes. “We are hoping more retailers and brands will leverage this information right on their cartons.” Clark adds, “Retailers will find it interesting that the national 2018 EcoFocus Trend survey of 4,000 U.S. consumers showed that 61% of grocery shoppers base their opinions of whether a retailer is eco-friendly by the type of packaging on the shelf. Relatedly, 56% say it is extremely or very important to change the brands they buy to make a more eco-friendly choice — up from 49% in 2014.” Evergreen Packaging is focused on multiple sustainability goals, Clark notes, including increases in energy efficiency, reducing greenhouse gas emissions, and expanding carton recycling access and education. He notes that all of Evergreen Packaging’s wood sourcing, mill operations and multiple converting facilities in the U.S. also offer transportation efficiencies to its North American customer base. “And, of course, being a paper company, sustainable forestry is always a major initiative for us,” Clark says. SB


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CATEGORY INTELLIGENCE PASTA

PUT A PREMIUM ON To spur private-branded sales, retailers should offer pasta made in Italy, organic products, and frozen products made with innovative flavors and ingredients

DO offer authentic products sourced from reputable producers.

If retailers want to find to their way to the hearts of pasta-eating Americans, they should think premium private-branded products, which could include pasta made in Italy and organic products as well as frozen products made with innovative flavors and ingredients. “The premium and organic pasta segments offer retailers the opportunity for higher margin, and there is still a lot of market share to be taken from the national brands,” says Pasquale Laudiero, president of Manassas, Va.-based GHIGI Food Industries, which was founded in 1870 in Italy and offers Italian-produced pasta made with 100% Italian ingredients. Donna Bush, president of Totowa, N.J.-based Agrusa Inc., which offers authentic Italian food products for private brands, says the premium tier allows market players to offer consumers a high-end pasta with qualifying attributes such as artisanship, Italian grains, refined packaging and a story behind the product. “We’ve been seeing that the mainstream offer is losing ground to the advantage of segments connected to healthier proposals and the rediscovery of products’ roots — features which have very little in common with a simple commodity,” Bush says. “Therefore, the category is moving towards specialty pastas with high added value.” Laudiero says retailers that offer a well-sourced quality pasta at a competitive price in a nicely designed private label package that is merchandised correctly gives retailers a great opportunity to compete against the national brands in the premium and organic pasta segments.

DON’T forget the importance of upscale packaging for premium products and to tell the story behind a product, such as its origin.

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By Lawrence

Aylward Paul Vertullo, chief operating officer for Garden City, N.Y.-based Seviroli Foods, which offers a variety of frozen ravioli and other stuffed frozen pastas for private brands, agrees that the trend in the category is high-quality, innovative and premium products. “The commoditization of this category has not worked and, quite frankly, I don’t see it working,” Vertullo says. According to data from market researcher Information Services Inc. (IRI), private label sales of pasta (spaghetti/macaroni/pasta) are down 0.6% for the latest 52 weeks ending April 21 when compared to the previous period. Sales of national brands are down 0.9%. But Laudiero notes that premium and organic pasta is growing on average 10-20% annually. He says private brands, which own only 27.8% market share in the category (a slight uptick from the previous year, according to IRI), can capture more market share if retailers introduce more premium products. In the frozen pasta segment (ravioli, stuffed shells, etc.), private label sales increased 3.1% for the 52 weeks ending April 21 when compared to the previous period, according to IRI, while sales of national brands decreased 3.7%. Sales of private label tortellini/tortelloni were up 12.8% while sales of branded products in the category declined 12.5%.

TELLING A STORY TO DIFFERENTIATE Laudiero says the “best retailers” of private-branded pasta are not only listing the country of origin on their private brands but they are also telling a story of the quality behind the product. “Using the country of origin as a story to help differentiate products has been a big help to private brand sales in general,” he adds. “The best retailers in the space are placing a strong focus on sourcing products from reputable producers, getting to know their producers, the quality of the pasta product and how they can differentiate against the national brand equivalents.” Bush says that being able to state on the product label that a specific reference of pasta is made in Italy communicates to consumers that it conveys hundreds of years of experience and expertise of talented pasta makers “who have brilliantly created and refined over the centuries” the art of producing pasta. “This is an incredible added value for a private label product, a connotation of traditionality and


CATEGORY INTELLIGENCE PASTA authenticity within the product itself, which inspires trust and deserves to be fully valued on the label,” Bush adds. In the frozen pasta segment, added value correlates with innovation, which Vertullo says Seviroli Foods has embraced to stay on-trend. Consider the company’s Ravioli Portobello Mushroom, which it manufactures as a private brand for a leading retailer. “You have to take some culinary risk, and the key to this product line is innovation and collaboration between our research and development department, product development department and [a retailer’s] category managers,” Vertullo says. Because Seviroli Foods does most of its business in foodservice, the company is able to keep abreast of flavor trends in the restaurant industry, which it brings to its retail business, Vertullo notes. “I believe that the next trend [in frozen pasta] will be combinations of filled pasta and sauce in one package as a complete meal,” he adds. PACKAGING AND MERCHANDISING One trend that Laudiero says he has seen building over the last five years is that retailers are spending more time and money on private brand packaging de-

Pasta Private Brands

All Brands

Dollar Sales (in millions)

$594,730

$2.135

Change vs. Year Ago

-0.6%

0.8%

Dollar Share

27.9%

100%

Unit Sales (in millions)

491,907

1.536

Change vs. Year Ago

2.2%

-1.1%

Avg. Price Per Unit

$1.21

$1.39

Private Brands

All Brands

Dollar Sales (in millions)

$88,172

$351,738

Change vs. Year Ago

3.1%

-2.1%

Dollar Share

25%

100%

Unit Sales (in millions)

25,567

105,432

Change vs. Year Ago

1.9%

-3.8%

Avg. Price Per Unit

$3.45

$4.34

Frozen Pasta

Source: Market Advantage, IRI Liquid Data, IRI, a Chicago-based market research firm. Total U.S. multi-outlet (grocery, drug, mass market, military and select club and dollar retailers) for the 52 weeks ending April 21, 2019.

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sign. He notes that The Kroger Co.’s Private Selection Italian Spaghetti, which sports a sleek black label and tells a story of the product’s origin, is a fine example of a product that will attract and retain customers. “We’re seeing retailers focusing on premium cellophane and paper packaging for their pasta offerings,” he adds. “Retailers need to spend time developing a uniform strategy for their private brands across the store.” Bush says the packaging can be considered “as the ID” of a food product, which she describes as “the first factor that should attract the attention of consumers and encourage them to take that product off the shelf and find out more about it.” Premium packaging is pivotal for a private label pasta program if that pasta has a certain feature that is, or could be, emphasized by a high-end wrapping, she adds. “So it should be designed to reflect the attributes of the product it holds and according to the price range in which the product falls into,” she adds. Retailers need to have a clear store brand management strategy, Laudiero stresses. For instance, they need to give more thought to merchandising and promotion to help support the store brand and convert customers from national brand equivalent products. “Some retailers are all over the place with their private brands across different categories,” he adds. “They should set a clear vision and strategy for the brand first and then execute that strategy uniformly across the different categories. Retailers should start with a focus on the best-selling pasta items and then think of expanding to lower-volume cuts.” Bush says a phenomenon that is constantly evolving is the use by many retailers of social media to show to consumers how a specific product is made. Social media, such as Facebook and Instagram, has become “a window on the production plants to discover the secrets of food production,” she adds. “What was once only seen on television is now available to everyone, both satisfying the curiosity of consumers about the products they buy and increasing the loyalty to a specific retailer or private label brand because [retailers] are willing to openly demonstrate that they have nothing to hide about their products,” Bush says. “These contemporary ideas are usually complemented by more classic experiences, such as of in-store demos.” Laudiero says if a retailer has done a good job sourcing product, designing packaging and telling a story, an aggressive promotion strategy several times a year can help draw new customers to a private brand. “And, hopefully, keep them coming back to the private brand,” he adds. SB


CATEGORY INTELLIGENCE ITALIAN SAUCE

MORE SAUCE, PLEASE Private brand sales are up year over year and have the chance to increase even more The glass jar of pasta sauce is symbolic of where innovation is taking private brands. The product, sold by Boise, Idaho-based Albertsons Companies under its Signature RESERVE store brand, is enticing. Its premiumness spans a spectrum of elements contributing to the qualities that make it so. Let’s start with the product itself: “Tomato, Porcini & Black Truffle Pasta Sauce.” From an ingredient and flavor standpoint, it differentiates and is probably exclusive. Not many retailers offer this version of a pasta sauce. The packaging also flaunts the sleekness and content of an exceptional product, of which the Signature RESERVE line is known. Set against a black marble-colored label, there are photographs of porcini and black truffle mushrooms below the well-crafted Signature RESERVE logo. On the left side of the tall 21.2-ounce jar, there’s a story about the product’s origin under the heading, “Simmered to Perfection.” The story tells of the cooking process — “made by layering ingredients and traditional slow-stirring, which brings out a luscious texture and complex flavors” — which originated in the 18th century. There are other label highlights that will catch consumers’ attention, but none other than that the sauce is a “product of Italy,” specifically Torino, Piedmont, Italy. But the product itself is not covered up by the label. There’s plenty to see, and the product is rich and red in color and hearty with mushrooms. Lastly, the product itself lives up to the hype created by the packaging and label. It’s a top-shelf pasta sauce. The product does exactly what a retailer wants it to: It stands out on the shelf; invites consumers to pick it up, read the label and study its contents; and then it delivers on taste and quality. According to recent data from market researcher Information Resources Inc. (IRI), sales of private label Italian sauces are up nearly 4% and slightly down for national brands. With products like Albertsons Companies’ Signature RESERVE Italian sauce, it’s no wonder. “Store brands have continued to progress into a more recognizable and trusted household brand,” says Lou DeMent, president and CEO of Baldwinsville, N.Y.based Giovanni Foods. “Consumers have never been more interested in trying new items that their local store provides with their name on it.” Retailers are merchandising their own brand pasta sauce more often, sometimes all year, DeMent adds. “Retailers know that pasta and sauce still make a great easy family meal,” he notes.

By Lawrence

Aylward Laura Pergolizzi, product manager for Fairport, N.Y.-based LiDestri Food and Drink, which offers Italian sauces for private brands, says private label products in general are gaining more consumer trust and building loyalty by offering both value and innovation. “Some consumers are shifting from branded items to store brand products across all categories in the store, including in sauces,” she says.

WHAT’S TRENDING “We have seen a trend toward healthier versions of the best traditional recipes, and conversely we have seen more interest in sauces with added dairy ingredients,” DeMent says. In addition, consumers seem willing to try new varieties of the private brands they’ve become accustomed to, but traditional flavors still make up the largest segment of the category, DeMent adds. Pergolizzi says LiDestri has seen store brand growth in premium red sauces, alfredo sauce and organic products. While alfredo sauce is outpacing red sauce growth, many retailers are under-indexed on the space dedicated to alfredo products, Pergolizzi says, noting that retailers should make sure they have the three top flavors of alfredo — creamy, roasted garlic and four cheese — in distribution for private brands because they account for over 90% of sales. Pergolizzi says LiDestri is the first U.S.-based manufacturer to offer a lineup of private label organic alfredo sauces, using real Parmesan and Romano cheeses and fresh cream sourced from American farms. “This is a small but rapidly growing segment upon which retailers can capitalize,” she adds. As consumers look to improve their overall health and wellness, organic products continue to stay ontrend, Pergolizzi says. “Many retailers are building upon their relationship with LiDestri by adding a tier of organic private label sauces to their portfolios,” she adds. The premium segment is the fastest-growing segment in private brands, according to recent research from Nielsen. So premium may be the key to selling more private label Italian sauces. However, premium means different things to different retailers, DeMent says. “Each retailer has its own definition of premium, so working with a retailer directly is the key to increasing its market share,” he points out. “For

DO offer products that focus on innovation and value. DON’T just rely on price as a differentiator. Develop promotional events and merchandising strategies to differentiate.

www.storebrands.com / July 2019 / Store Brands

31


CATEGORY INTELLIGENCE ITALIAN SAUCES instance, premium can mean clean label in terms of ingredients or possibly providing an organic line to offer a distinction that helps elevate [a retailer’s overall] brand acceptance. Some retailers are also taking advantage of the opportunity to call out premium ingredients on the principle display panel, such as Italian tomatoes and premium oils. While premium is one of the biggest opportunities in the Italian sauce category, having multiple tiers of sauces within a retailer’s private brand strategy is important for success, Pergolizzi adds.

Italian Sauce Private Brands

All Brands

Dollar Sales (in millions)

$245,520

$2.417

Change vs. Year Ago

3.8%

0.1%

Dollar Share

10.2%

100%

Unit Sales (in millions)

144,401

1.047

Change vs. Year Ago

7.1%

-0.6%

Avg. Price Per Unit

$1.70

$2.31

Source: Market Advantage, IRI Liquid Data, IRI, a Chicago-based market research firm. Total U.S. multi-outlet (grocery, drug, mass market, military and select club and dollar retailers) for the 52 weeks ending April 21, 2019.

ON MERCHANDISING To better distinguish their private label offerings through merchandising, retailers should look to be more flexible, DeMent says. “For instance, a retailer could provide on-trend and/or seasonal-related items, which are creative and easy ways to differentiate an offering,” he adds. “There are several relevant yearly trends that offer opportunities to enhance their brand with seasonal flavors. Retailers also have the unique advantage to position their sauces in several different areas of the store for cross merchandising, as well as providing menu solutions via displays or recipes in their circulars or magazines or on store websites.” Pergolizzi says LiDestri encourages its retail customers of private brands to develop promotional events and merchandising strategies that focus on red sauce and alfredo sauce simultaneously. She notes there also may be opportunities for retailers to build events within the sauce aisle or partner with other departments to drive sales. “For example, we’ve seen retailers develop events that feature private label pasta sauce, pasta and meatballs,” she states. Retailers can also differentiate their private brands through packaging. “Great design always gets the customers attention and doesn’t have to be expensive,” DeMent says. SB


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CATEGORY INTELLIGENCE NUTS AND TRAIL MIX

POSSIBILITIES ABOUND

Widespread love of protein-packed, nutritious, plant-based snacks opens the door for major private label gains in nuts and trail mix categories

DO consider combining consumer-friendly pricing, product innovation and increasing shelf space of store brand nuts.

If retailers combine consumer-friendly pricing, product innovation and increase shelf space dedicated to it in-store, their store brands could take a leading role in the nuts and trail mix category, asserts Scott Reindel, vice president of business development and retail strategy for Trophy Nut Co. in Tipp City, Ohio. “The top-tier retailers are owning [this] space in private label. They get it,” Reindel says. “They are placing more emphasis on quality now than ever before, and they realize that products with their names attached must exceed expectations. But a major shift we are now beginning to see is how mid-tier retailers are starting to really embrace this category. They are also looking for higher-quality items and not just focusing on price. “They are realizing they can meet minimums, capture volume, and they are creating additional loyalty with their shoppers with a higher-quality program,” Reindel continues. “They know there’s additional opportunity to grow their own brands in this category and recognize it’s not that difficult to establish a dominating presence in nuts and trail mix.” The other dynamic pushing growth is millennials, naturally. “Simply put, they like to snack and they are willing to go to the store brand,” Reindel says. “They are less brand loyal and truly understand the healthy perception in nuts and trail mixes as a snack. About 55% of

DON’T underestimate the value that premium trail mixes can bring as store brands.

the population snacks two to three times a day and 15%, considered super snackers, do so four to five times a day.” Consolidation in both retail bricks-andmortar and the supply chain means there are fewer sourcing options, so the only way for retailers to truly differentiate is to develop their private brand programs, Reindel says. “It’s very easy to hit 40% private label penetration in this category, but you have to dedicate the space,” he adds. Major retailers, such as The Kroger Co., Target, Ahold Delhaize USA, Meijer, CVS, Walgreens and Walmart understand the importance of the nuts and trail mix category, Reindel says. “They have very well-developed programs because they understand where this category is going to go — from $9 billion to $10 billion within the next few years,” he adds. When making purchase decisions about nuts, seeds or trail mix, 65% of consumers responding to an online Lightspeed/Mintel survey of 1,757 adults said price is the most important consideration. That was followed by “favorite flavor” at 42%, “health” at 41% and “natural ingredients” at 38%. In another online survey of 1,789 trail mix, nuts and seeds consumers, Mintel found that 74% eat them as a snack, 47% eat them in the afternoon, 38% in the evening and 20% in the morning. Questioned about their perceptions, 88% said they found nuts, seeds and trail mix to be a good source of protein, and 86% agreed they are healthier than other snacks. Asked if they were interested in purchasing allergen-free nuts and seeds, 41% of people who were parents of children younger than 18 years said yes, while 25% of those who were not parents of minors agreed. The results of both surveys were published in Mintel’s August report, “Nuts, Seeds and Trail Mix US.” Retailers can boost sales if they encourage more frequent and unique usages for nuts, seeds and trail mix by effectively communicating the versatility and convenience of these foodstuffs, according to Mintel. TOP-SHELF TRAIL MIX Reindel estimates that nuts account for about three-fourths of the category’s volume, but there is potential for the trail mix segment to grow. Because leading retailers have been offering a

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CATEGORY INTELLIGENCE NUTS AND TRAIL MIX rather wide variety of trail mixes for a while now, the greatest opportunity lies in premium tier development, Reindel believes. Setton Pistachio of Terra Bella Inc., one of the country’s largest pistachio growers and processors, developed a line of premium quality blends under its Setton Farms brand (also available in private label) in response to demand for high-end fruit and nut mixes, says Vice President of Sales Joseph Setton. The family-owned and operated company in California’s San Joaquin Valley produces three premium blends: Pistachio Berry Blend (pistachios, tart cherries, cranberries, roasted almonds, cashews and white baking-type chips), Pistachio Power Blend (pistachios, berries, almonds and pumpkin seeds) and Pistachio Nut Blend (pistachios, almonds, walnuts, sunflower seeds, pumpkin seeds, edamame and soy nuts.) The premium blends are unique and feature top tier ingredients, Setton says. “They’ve been successful because they’re premium but not too expensive. People recognize the difference [between these and cheaper, peanut/raisin-dominated mixes.] They are not just on a higher level, but they are much more nutritious, with more protein.”

Snack Nuts Private Brands

All Brands

Dollar Sales (in millions)

$1.5

$4.4

Change vs. Year Ago

4.75%

0%

Dollar Share

34.1%

65.8%

Unit Sales (in millions)

287

1.02

Change vs. Year Ago

5.8%

0%

Avg. Price Per Unit

$5.23

$4.30

Private Brands

All Brands

Dollar Sales (in millions)

$531

$950

Change vs. Year Ago

4.7%

1.2%

Dollar Share

44.0%

55.9%

Unit Sales (in millions)

108

220

Change vs. Year Ago

0.3%

2.5%

Avg. Price Per Unit

$4.88

$4.31

Trail Mixes

Source: IRI, a Chicago-based market research firm. Total U.S. multi-outlet (grocery, drug, mass market, military and select club and dollar retailers) for the 52 weeks ending Dec. 2, 2018.

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ALL ABOUT THE FLAVORING Setton introduced its new seasoned pistachio kernels last month at the Specialty Food Association’s Summer Fancy Food Show in New York City. Flavors include chipotle BBQ, chili-limon, garlic-onion, jalapeno and salt and pepper. These flavors are also available in Setton’s packaged pistachios in the shell, which are available for private label. “I think it’s the nut of now and of the future,” Setton says. “The demand for pistachios has really grown and [the nut has] established itself as a great and healthy snack option.” While consumers are incorporating the relatively low-calorie nut into their diets as a heart-healthy snack that packs the protein, Omega 3 fatty acids and fiber to tide them over between meals, they are increasingly also using them as an ingredient, Setton adds. “Pistachios (work) in salads, as a garnish and in other dishes. They are very versatile.” Almonds remain extremely popular and cashews are gaining ground in the category, Reindel says. One reason is they carry flavorings well, he notes. “Cashews are more buttery and have a different mouth feel. But both cashews and almonds are good carriers for savory and sweet flavors, and almonds in particular are a good host for flavors like cinnamon,” he adds, noting that sweet flavorings are also becoming more popular in the nuts category. “Peanuts are a great carrier for bold, savory flavors, and they are relatively inexpensive compared to almonds and cashews,” Reindel points out. Strong regional retailers are introducing flavored nuts and trail mixes that are prevalent within their marketing geographies, the Southwest (Texas and Louisiana) in particular, Reindel adds. Trophy Nut has been introducing many new flavors, Reindel says. “The premium tier is where you can really bring in some of the indulgent items like sweet glazed almonds and glazed pecans,” he adds. “[Trends] like the desire for small indulgences are leaning a little bit more toward the confectionery area than the savory [flavors.]” But in savory, “a lot of what you’ll see in flavors for nuts will mirror what you see in salty snacks. There’s definitely some compatibility.” In the premium tier, it pays to consider macadamia nuts, Reindel adds. “It’s always been a premier nut because of the cost,” he says. “We concentrate primarily on a super-premium variety, and sales for those items are much better than anticipated. Our stand-alone macadamia and our tropical trail mix with macadamia nuts are exceeding expectations.” SB Cvetan is a contributor to Store Brands.


CATEGORY INTELLIGENCE OILS AND VINEGAR

OVER AND ABOVE Consumers are drawn to an array of types, flavors and varieties of oils and vinegars Once regarded as simple, utilitarian kitchen staples, oils and vinegars are getting, well, fancy. And abundant. John M. Mesrobian, partner of The Mill at Kings River LLC in Sanger, Calif., sees the olive oil industry developing along the lines of the wine industry, offering up an increasing array of varieties, taste profiles and characteristics from mild to robust. “As consumers become more sophisticated, they are going to follow that model and ask for more specific flavorings and varieties,” Mesrobian says. “I believe private label is forward-thinking in this category, more sensitive to offering something unique and outside the norm — otherwise, what’s the point of offering private label?” Retailers are looking for product differentiation that is above what is and has been available. They are focused on developing additional profiles and flavors, whether via infusions or by co-crushing, Mesrobian says. Retailers are also looking for, and demanding, higher quality in their oils, especially olive oils, says Mark Coleman, senior vice president of the retail division for Ayer, Mass.-based Catania Oils. “The movement here in the U.S. is geared to freshness and flavor and that is waking up the American consumer. People are demanding healthy-for-you oils, and olive oil delivers just that, but especially when it is fresh. That means recently pressed.” Olive oil’s flavor starts to fade in as little as three to five months, Coleman points out. Private label claims a third to nearly a half of market share in the oil and vinegar categories, according to market researcher Information Resources Inc. (IRI). Store brand olive oil sold well over the past year, with dollar sales up 2.8% and unit sales up 5.3% for the 52 weeks ending April 21, according to IRI. ‘FRESH’ TECHNOLOGIES Mesrobian’s company, which mills California olives into extra virgin olive oil and specializes in private label, flavors its oil by “co-crushing” — milling the olives together with whichever fruits, vegetables and/or herbs are used to flavor the finished product. Meyer lemons, blood oranges, jalapeño peppers, garlic and delicate herbs such as basil are among the flavorings The Mills co-crushes with olives. Co-crushing gives the oil a more intense flavor, though the intensity can vary depending on the recipe used. Ingredient freshness is of paramount importance in this process because some of the produce has such a short shelf life it must be crushed right away, usually within two or three days, Mesrobian explains.

Catania’s “Bag in Box” technology shields its olive oil from light and air, the two biggest detractors from oil quality, Coleman says. The company also packs olive oil in green-tinted bottles to shield the oil from light. Catania produces olive, avocado, tropical, specialty and blended oils for private label. Additionally, the company sources product from the Northern Hemisphere half the year and the Southern Hemisphere the other half of the year to keep the oil fresh, Coleman adds. Authenticity is a big issue right now, Mesrobian says.Authenticity is recognizable from the involvement a manufacturer has in governing bodies and membership in the organizations that hold a manufacturer to higher standards, Coleman adss. Catania is a member of the North American Olive Oil Association, American Institute of Oil Seed Products and American Fats and Oils Association and holds organic and non-GMO certifications. In the future, Mesrobian says, if polyphenols can be extracted from olive oil milling byproducts such as pomace and vegetation water they have the potential to be used in the manufacture of nutritional supplements and beauty care products. In merchandising, oils should be showcased throughout the store, as they can be considered an impulse item, Coleman adds. Position “olive oil and infused oils in the bakery section, olive oil and vegetable oils in the produce section, portion-pack olive oil in the salad bar area, and olive oil in the canned tuna fish section,” Coleman advises.

DO offer authentic oils that are fresh and flavorful. DON’T forget to point out to consumers that vinegar has many uses other than for foods, such as for a household cleaner and as an insect repellent.

www.storebrands.com / July 2019 / Store Brands

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CATEGORY INTELLIGENCE OILS AND VINEGAR Olive Oil Private Brands

All Brands

Dollar Sales (in millions)

$390.7

$1,227

Change vs. Year Ago

2.8%

1.0%

Dollar Share

31.8%

100%

Unit Sales (in millions)

56.1

152.9

Change vs. Year Ago

5.3%

0.0%

Avg. Price Per Unit

$6.97

$8.03

Private Brands

All Brands

Dollar Sales (in millions)

$276.8

$646.5

Change vs. Year Ago

-1.1%

-4.2%

Dollar Share

42.8%

100%

Unit Sales (in millions)

123.7

226.8

Change vs. Year Ago

-3.2%

-4.2%

Avg. Price Per Unit

$2.24

$2.85

Vinegar

Source: Market Advantage, IRI Liquid Data, IRI, a Chicago-based market research firm. Total U.S. multi-outlet (grocery, drug, mass market, military and select club and dollar retailers) for the 52 weeks ending April 21, 2019.

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Store Brands / July 2019 / www.storebrands.com

EVOLUTION OF VINEGAR There are many versions of vinegar, and they are all growing, says Steve Spatzier, sales and business development manager for Modena Fine Foods in Clifton, N.J. The availability of organic vinegar is growing. The number of functional vinegar beverages is increasing. More fruit-flavored vinegars are available and more are being sold at retail in larger sizes. Retailers can boost vinegar sales by educating consumers about their products and how to use them, especially by providing recipes featuring vinegar products, Spatzier says. Capitalize on the potential uses of Balsamic vinegar by cross merchandising it in prepared foods sections with vegetables, fruits and even desserts, Spatzier advises. Also, secondary placement using baskets or other merchandising vehicles while explaining the various uses for the vinegar, as well as sampling using balsamic vinegars in innovated recipes are other ways to give consumers a reason to make a purchase, he adds. Additionally, don’t forget to point out to consumers that vinegar has many uses other than for foods. For instance, white vinegar is an effective household cleaner and is useful for personal hygiene and as an insect repellent, Spatzier says. SB Cvetan is a contributor to Store Brands.


CATEGORY CLOSEUP

2044

The year that the United States will become a majority multicultural nation. Source: U.S. Census Bureau

44%

The percentage of the 75 million millennials in the U.S who currently identify as multicultural. Source: Brookings Institution

$3.2

TRILLION The collective spending power of multicultural consumers. Source: Nielsen

Ethnic Foods

23% 20%

The percentage of new private brand product launches with an ethnic flavor profile in 2018. Source: Innova Market Insights

“We are laser-focused on innovation and staying at the forefront of culinary trends. Customers should expect to see trends first at our stores … from seasonal and holiday items to ethnic and even plant-based offerings.” Albertsons Companies President of Own Brands Geoff White on the relaunch of the company’s Signature SELECT private brand line

The growth rate of ethnic-flavored products such as sauces, seasonings and snacks between 2013 and 2017. Source: Innova Market Insights

$12.5 BILLION

Retail sales of ethnic foods in 2018 (from $10.9 billion five years earlier). Source: Statista

87%

The percentage of consumers who buy ethnic groceries or foods with ethnic flavors. Source: Technomic

www.storebrands.com / July 2019 / Store Brands

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Profile for ensembleiq

Store Brands - July 2019  

Store Brands - July 2019