Private labeling is growing in produce and especially in the category of salad mixes, say industry experts, because retailers are searching for greater control of their departments and better ways to increase their own identity in the department.
Since its inception, the category has been driven by name brands like Dole, Fresh Express and River Ranch. Salad kits made by these companies have been the most successful, using identifiable and uniform packaging, in-store promotion, newspaper and circular exposure, and some TV airtime.
However, the category has been slowing down; sales growth was virtually stable between 1995 and 1996.
As the branded suppliers fight to maintain momentum, supermarket chains are apparently making headway with their own labels.
"There is definitely an increase in private labels," said Don Kerschbaum, national sales and merchandising manager at Tom Lange Co., Springfield, Ill., a firm that works in store with about 20 major retailers in four regions on behalf of branded processors.
Kerschbaum said that none of the retailers he works with carry private-label value-added items. Still, he said, "From a retail angle, it's an advantage. Chains are trying to increase their identification with private labeling in value added."
Kerschbaum named Schnuck Markets, St. Louis; Harris Teeter, Charlotte, N.C.; and Albertson's, Boise, Idaho, as some of the retailers who are heavily into private labeling in their value-added sections.
Schnuck Markets and Harris Teeter declined to comment. At Albertson's, "We have a great brand program," said Jenny Enochson, spokeswoman for the chain.
Albertson's chain has about 1,800 private-label items storewide, which include a wide assortment of produce processed under the Albertson's label. It processes all its value-added produce items, either in store or at processing plants, Enochson said.
"We do [private labeling] primarily with high-velocity items," Enochson said.
Albertson's offers 1- and 2-pound salads in shiny gold and black packaging bearing its name, and carries a host of fresh-cut and value-added fruits and vegetables in clamshell containers, party trays and wrapped in smaller plastic foam trays that are also store branded.
River Ranch processes private-label bagged salads under its own name, as well as the store-brand programs of chains such as Shaw's Supermarkets, East Bridgewater, Mass., and Hy-Vee Food Stores, West Des Moines, Iowa.
In 1996, private-label products in the fresh-cut category grew about 50%, said Kurt Baxter, vice president of marketing for River Ranch, Dallas, during a workshop at the United Fresh Fruit and Vegetable Association convention, held earlier this year in Orlando, Fla.
Baxter said private labels represented 12% of the category at the end of 1996. In 1991, private label value-added items brought in about $25 million in sales, but private labels have since made a dent in the near $1 billion industry, accounting for roughly $100 million in sales at the end of last year. And Baxter said retailers aren't finished.
"Private label will increase," he said. "Private label will have a larger market share than it enjoys right now."
Baxter said that the supermarket industry, in general, is making greater efforts to upgrade private-label products in the minds of consumers, who have thought of them as "lower-priced, lesser-quality" items.
"What they're attempting to do now is heighten the reputation of private label so that it is considered on par with national brands," he said. He added that retailers are also looking to get "premium prices" for their products.
Retailers told SN that they are building more extensive private label programs for value-added salad mixes simply to give shoppers alternatives in the category.
"It's just based on consumer demand," said Enochson of Albertson's. "The quality is just as good. Our store-brand products are made to be as good, if not better than, [national] brands."
In addition, Albertson's goal is to offer a lower-priced alternative. The chain will not sell any of its value-added items "if we cannot offer our shoppers a 10% price break from the major brand," she said.
Officials with Hy-Vee, which began doing value-added produce about two years ago, said the retailer is taking a similar position.
"At Hy-Vee, our private-label produce fits in with our general philosophy about private label," said Ruth Mitchell, director of communications for that chain. While shoppers are paying more money at retail for the characteristics inherent in value-added products, Hy-Vee is trying to take some of the pressure off consumers' wallets with its private-label produce.
"We can give our customers a brand name, our name, a name that they've known for 67 years, and we can produce a quality product that represents significant savings to our shoppers," Mitchell said.
All of Hy-Vee's stores are stocked according to what the store manager wants and needs, so each carries a variety and different amount of private and/or name brands.
"It's based on the amount of space and the demand," Mitchell said.
In addition to the theory that retailers want greater representation of their name on the shelves, Baxter of River Ranch said he believes they are being influenced by a growing European presence in the U.S. supermarket industry.
One example of this is Shaw's Supermarkets, the New England chain owned by London-based J. Sainsbury. In Europe, private label is the norm, Baxter said, and hardly any brand names exist.
"They've integrated that into Shaw's, and they've certainly integrated that into the produce department," he said. "I think they have right now about nine different items that are private label in the fresh-cut category."
Baxter said that retailers are attempting to sell their own brands in one of two ways: by carrying, for instance, a national-brand garden salad priced at the regular price, and their own priced significantly lower; or by not carrying any major names on that garden salad, and filling the shelves with their own product.
The trend seems to be that more retailers are choosing the former path, he added.
"They won't carry a Dole and a Fresh Express," Baxter said. "They have limited shelf space. They want to carry their own label, and then they'll carry one major brand."
Both Hy-Vee's and Albertson's officials said their chains carry their own brands, as well as national brands, although neither specified which brands they stock or the ratio of private label to name brand.
"We're filling a niche; it's nothing more than offering another choice," said Mitchell of Hy-Vee.
Kerschbaum of Tom Lange Co. said the oversaturation of the market with different value-added products is yet another reason why supermarkets are going the way of private label.
With so many products, very few have the capability to stand out from the rest of the bunch, and many have had only fleeting success, he said.
"Because there is such a proliferation of new items, [products] may not be given a fair shot in the marketplace," Kerschbaum said.
Of course, manufacturing companies for the most part are pushing the branded concept, and tend to point to the abundance of successful products that carry a brand to support their case.
But brand growth, as far as new companies or new items popping up are concerned, is most likely over, according to Baxter of River Ranch. Still, he said he hopes more retailers will begin to acknowledge "the value of branding" in the category.
Baxter said he believes retailers have so far been hesitant to accept the value of branded in the category because produce commodities have not typically had brands.
"Produce has come out of a commodity mentality since the day it was born," he said. "That's the point of reference on the retail side."
Companies like River Ranch, meanwhile, have found a way to let retailers keep their name on the package and still retain and build its piece of the value-added category.
"We take a multitactical approach," Baxter said. "We're willing to do private label with the retailer's name on the package, or not."
Kerschbaum said this is an efficient way for retailers and manufacturers to both get a piece of the pie.
"It all boils down to utilization," Kerschbaum said. "If that means that they need to do private-label [products] for chains, then that's what they have to do."
While Kerschbaum lauds manufacturers' advertising efforts, he also admitted processors have not been able or willing to shell out the big bucks for national-TV ads.
"They do freestanding inserts every week," Kerschbaum said of the companies he works with. "They do local television, but they can't afford national spots."
