NEW YORK -- Supermarkets are finding that the level of success they attain in their various fresh departments can be traced directly to the amount of differentiation they strive for in each area, whether it's produce, meat, seafood or deli, industry experts told SN.
And there are plenty of cost-effective, maximum-impact opportunities available these days, they said.
The emerging Internet connection could play a key role in helping retailers swim out of a sea of sameness, as well as putting a simple proprietary spin on some products, said consultants and other industry veterans, who discussed the opportunities and the challenges that go along with the quest for uniqueness.
Private-label products made to the retailer's specifications and packaged by a manufacturer, or signature products concocted from components or developed in-store, a central commissary, or in partnership with suppliers, could seal customer loyalty.
But the process shouldn't stop with the product itself, the experts warned. Well-calculated merchandising and marketing support programs are necessary ingredients. So is educating the consumer about what you're offering, they said.
In Toronto, Canada, Loblaw's President's Choice was cited by more than one of the consultants as an example of a top-quality private-label line that encompasses fresh products as well as frozen and shelf stable, and is also managed and marketed well.
"Loblaw has even developed cookbooks and videos utilizing their private-label products in recipes to assist customers in preparing quick, easy meals. And the quality of the products is so exceptional [Loblaw] has been able to sell them outside their market area," said Marcia Schurer, president of Culinary Connections, a Chicago consulting firm.
Schurer added that opportunities for fresh entrees prepared using pastas and sauces are the most obvious because such products, as well as pasta alone and sauces alone, have already done well under private label. She pointed out that since they've been around for a decade, it's easy to find a manufacturer of these products. With a retailer's own spin, such a product could become a unique item.
Another consultant, who, like Schurer, specializes in prepared foods and meals programs, said he thinks regionalizing the flavor profile of fresh prepared foods is the missing link.
"Regional or local sets you apart, certainly from a competitive standpoint," said Mark Garcia, principal, The Retail Food Group, San Antonio. "That's where the opportunity lies. It's been my experience that consumers tend to gravitate toward things that have that special or regional flair rather than to a can of soup or something else they can find anywhere in America. There are huge opportunities that nobody's taking advantage of. They're not even touching it."
Addressing the logistics of creating such products, Garcia said retailers are realizing they don't need to make everything from scratch. They're buying entrees in food service-size packs and are also sourcing components they merely assemble in-store at an action station.
"They've found there are manufacturers who have high-quality components. The retailers can put their own spin on them," Garcia said.
But he faulted manufacturers for missing the mark on flavor profile, especially when it comes to regional tastes.
"Retailers get excited about the possibility of using a product and then they're disappointed when they taste it. It doesn't meet their expectations. Manufacturers are too generic in their approach to recipes or they're just not authentic enough," Garcia said. "When I want to work on a specific product, it's a pretty short list of manufacturers I know can give me what I want, who can give me the flavor profile I'm looking for, at the right price, in the right quantities."
Schurer concurred, noting that a true partnership needs to be forged, with the manufacturer taking some risks, too.
"The manufacturer needs to be flexible in the beginning when smaller batch sizes are usually required. The first challenge is to find manufacturers -- and that number is still limited -- who can produce private-label products to the retailer's specifications and quality expectations. The second is finding manufacturers to produce the products in the quantities needed," she said.
Another consultant, Brian Salus, president, Salus & Associates, a Richmond, Va.-based consulting firm, pointed out that regionality can be a good differentiating factor in other fresh departments, too.
"Produce, particularly during prime local grower season, offers the best opportunity for brand assumption," he said. "Regional and local products provide a local connection and identity. In Virginia, people swear by the locally grown Hanover Tomatoes. I'm sure every area has its own 'best tomatoes' and people love to debate the superiority of theirs."
Two produce experts -- Ed Odron, partner in Heintz & Odron 2000, a consulting firm with offices in Stockton, Calif., and Dick Spezzano, president of Spezzano Consulting Service, Monrovia, Calif., said they believe produce lends itself to being a differentiator. Regionality, freshness and variety can give the department its own identity.
"Produce presents one of the biggest opportunities. The area I'd look at that could easily be converted to private label is the cut-and-ready salad mixes, the bagged products. Because of the convenience factor, that's an area that's grown rapidly over the last five years. It's a place you could make a statement with private label," Odron said.
Odron went on to say that the groundwork has been laid for private label in the perishables departments. It now represents quality and value in other parts of the store, he pointed out. Customer confidence was won because manufacturers and retailers have worked together to produce high-quality products for private label, Odron said.
"Years ago private label was more a 'value' label, but now it represents top quality that's a driving force," Odron said.
Spezzano agreed, but noted there are exclusive challenges in maintaining a unique program or private-label product in the produce department.
"The biggest challenge is consistency from week to week and from store to store. Operators will want to keep the program simple but not so simple it can be easily duplicated," he said.
"Often times private label in perishables is labor intensive and good labor is hard to get, train and hold, but I feel anything that is produced in a retailer's store or commissary has the most potential. These are unique items that usually can't be easily copied. If the customer likes the product they will have to return to the store they bought the item at. However, a common upscale private label should cut across all divisional lines," Spezzano added.
But what products in each perishables department should the retailer focus on?
Bill Pizzico, president and chief executive officer of Prizm Marketing, Blue Bell, Pa., had some advice and predictions for what's going to happen in the meat case.
"Retailers with case-ready packaging and technology now on their side can virtually create a wish list for what they want, and then find a supplier to sell it to them. The optimum words here, however, are 'wish list for what they want' because retailers are not always sure what they want, and with shrink, there's not much room for margin of error," Pizzico said.
"But manufacturers have the biggest dilemma. Their own brand, the retailers brand? And quality is a premiere issue. If both come from the same supplier, which brand or label carries the premiere quality image? You may see genetic engineering becoming the point of differentiation."
Genetic engineering may serve retailers and manufacturers alike when it comes to creating differentiation in the meat department, but a seafood expert told SN other recent technology could particularly benefit that department, where freshness could be the single most important differentiator. "Maybe it's seafood that will receive the most benefits from latching onto the dot-com sales force. The seafood industry is worldwide, and so is the Internet. It can connect retailers to the harvest in lightning speed," said Evie Hansen, director of marketing for National Seafood Educators, Richmond Beach, Wash.
She said, too, that the source of seafood must fit the retailer's profile and that retailer's would do well to educate their customers about what they're doing for them.
"Words like 'sustainable fisheries,' 'organic,' 'environmentally friendly' and 'wild' must be defined and discussed with the consumer in order to gain and keep credibility. For instance, Central Market in Shoreline, Washington, has determined they will sell only wild salmon, and part of their educational campaign consists of instructing [customers] on their reason for not selling farmed salmon," Hansen said.
"When you advertise that your product represents quality or wild or organic or sustainable product, prove it," she added.
Suppliers can help with the education process by providing the proof that backs up the standards the retailer has set, Hansen added.
Jerry Lyons, a partner in MarCom Communications, a Greer, S.C., consulting firm, said MarCom believes decisions about differentiating product offerings and private label or store branding should begin with a sharp focus on what the customers' needs are.
"Supermarkets more than ever are reaching out to their customer base, listening to their needs, and responding with targeted store brand-building programs that reflect their total commitment to the customer. This, of course translates into a total store perception that bonds the customer to the retailer," Lyons said.
"They're tapping into the desire of the consumer to shop at stores that reflect an understanding of real customer needs. The supermarket today is defined by the quality, freshness and variety of its perishable departments. Knowing that, good operators have leveraged that knowledge into comprehensive store-brand strategies that strengthen the bond with their customers," he added.
Marketing and merchandising are a big piece of the picture when companies set about creating a difference in their perishable departments, the experts agreed.
Even the dairy category, where private-label product has been a bastion for years, is met with new merchandising and marketing challenges with the advent of glitzy national brands and value-added products packaged so attractively and conveniently that they're ending up in a vast number of new venues such as gas stations, convenience stores, vending machines, and laundromats, said Jerry Dryer, president, J/D/G Consulting, Chicago.
"There's a whole new dynamic in the dairy case that's going to complicate its management: the arrival of national brands of value-added milk. The longer-life products, with more and more flavors, targeting particular audiences.The turns are fewer but the margins are high on those products. The retailer's challenge is how to make private-label milk, which is always big volume, work alongside these national brand products, for the best bottom line," Dryer said.
"Private label has always been a good business for grocery stores, but it has been price driven, typically a loss leader to get people in the store. There will always be huge volume there," he said.
But the big challenge is juggling the Chugs and Lactaids with those products in a finite amount of case space, Dryer added.
And Pizzico at Prizm Marketing also stressed the merchandising equation when it comes to the meat case.
"Buying product is a foregone inherent talent, but knowing how to merchandise it, even before they buy it -- this is what's expected of the new meat director. Opportunities for retailers and manufacturers alike lie in creating a harmonious relationship within the case," Pizzico said.
All the industry experts that SN talked to agreed on the importance of merchandising and of marketing in differentiation strategies. The process doesn't stop with the development of a unique product, they said.
Indeed, Brian Salus said it's a given that perishables should be the differentiator between stores -- in variety, assortment, quality and freshness. And the management of those products is the real differentiator, he pointed out.
"Managing the supply of fresh perishables sets the differential standard between stores. Differentiation of products, managing freshness and giving customers access to knowledgeable associates are the keys to building a loyal customer base," Salus said.