Private label goes premium - Food Merchandising

Discount Store News, Nov 4, 1996 by Laura Liebeck

Store brands are the new brands in food retailing today. Consumers have shown more than a willingness to buy. They are proving loyal to retailers' store brands as never before--the result of premium private label lines that have spread across the market and impressed shoppers.

The move toward premium private label programs--content and packaging--has given retailers the ammunition they need to create stronger store identifies in a crowded marketplace and to return more dollars to the bottom line.

Today, PL products like Sam's American Choice, President's Choice, Master's Choice, Select, American Fare and others account for 19.5% of all units sold in supermarkets, 9.8% in drugstores and 9.9% in discount stores, according to the Private Label Manufacturers Association. For supermarkets, the unit volume of PL goods has been stable, but for drugstores and discounters, it has been rising: up 2.3% from a year ago at drug chains and up 14.1% at discounters.

"It makes perfect sense for a company like Wal-Mart or Kmart to separate themselves in the consumer's mind with a strong private label program. You need to define yourself. This is a way to define yourself," said Brian Sharoff, president of the PLMA.

"We believe private label brings a great deal to the price/value relationship for the consumer," said Nick White, executive vice president, Wal-Mart Supercenters.

Wal-Mart offers two brands in private label, Sam's American Choice, a premium private label brand, and Great Value, a traditional PL brand. Sam's Choice is available at Wal-Mart discount stores and at Wal-Mart Supercenters, primarily. Great Value is found in the supercenters. Originally, Great Value was available at Sam's Club, but Wal-Mart has pulled back on that program, preferring instead to make a bigger brand statement there for the chain's wholesale customers.

Kmart recently realigned its PL program around the American Fare label, and is phasing out the remains of its Nature's Classic snack line. American Fare, with hundred of skus across a range of food categories, also affixed to non-food products throughout the store.

SuperTarget offers PL commodity dairy goods under its Archer Farms label. The products include milk, ice cream, frozen yogurt and eggs, as well as packaged bread. In Omaha, SuperTarget has pursued a strategy of taking a brand under its wing. The Sterling Silver beef line is promoted with upscale signage and a banner proclaiming that SuperTarget provides Sterling Silver steaks to the University of Nebraska football team.

Early inroads in the premium food business were made by Loblaw's of Canada with its President's Choice label. since then, supermarkets, and now supercenters, discount stores and drugstores, have signed on with extensive PL programs in a host of categories. The focus seems to be on expanding private label beyond today's parameters of premium PL food and into creative new premium food products, prepared meals, sub-labels within the line and and into health & beauty care items, the first crossover category from food.

Particularly significant to the growth of PL, said Sharoff, is the influence Ahold and Sainsbury will have along the Atlantic corridor with the purchase of Stop & shop (Ahold) and Giant (Sainsbury, which also owns Shaw's). "Those are strategically very significant steps and bring with them an increase in private label sales down the road. From Massachusetts--where Shaw's and Stop & Shop are based--to Washington D.C.--home of Giant Food--the two retailers are playing a strong set of cards, and they have two very strong private label retailers."

The place where premium will make a dent is in H&BC, Sharoff said, because it stretches the use of premium across the store. "That's a big statement that will bounce back and increase upscale food in a year or two."

Sharoff also feels that prepared or chilled meals, a developing area for food retailers, is "a natural for private label." He noted that with concrete experience from Sainsbury, as well as Marks & Spencer and others--mostly European firms--U.S.-based retailers will be able to duplicate the successes of their European cousins with chilled products that best suit local tastes.

For Peter Berlinski, editor of Private Label Magazine, the biggest trend in PL is premium products with a move into sub-lines, offshoots of the premium label. For example, Wegman's offers Italian Classics, part of its FYFGA (Food You Feel Good About) program; and Safeway has Verde and Indulgence, spin-offs of the Select label.

Exactly how big private label can become for a retailer is still unknown. According to Private Label Magazine, Kroger and Safeway do approximately 20% of their sales in private label; A&P, 23%; Shaw's, 28% (and that percentage may be as high as 40% now); Pathmark 35%; Trader Joe's 80%; and Aldi, which owns Trader Joe's near 100%. "I don't see a barrier to private label," Berlinski said.

The PLMA stated in its report "Inside Today's Stores" that 91% of consumers are familiar with private label or store brands; 63% purchase PL products either frequently (35%) or sometimes (28%). One-fifth said they purchased premium products frequently, 35% sometimes; and 76% said product quality of premium goods is equal to national brands, while 10% said quality is better.