As Americans' tastes are becoming more sophisticated, retailers are searching for more ways to make their particular stores stand out from the crowd. Providing specialty, gourmet products under a supermarket's own label is one effective method of rising above the mainstream.
Years ago, American supermarket shoppers wanted a cake mix for convenience. Now, consumers have taken it so many steps further, and any dessert worthy of a fashionable dinner party has to be something unusual with ingredients that can only be purchased in one place.
That is where the new, increasingly popular, gourmet products come into the marketing picture and many supermarkets are finding they can satisfy customers' demands by providing high-quality, unique foods under their own labels.
The days when private label products were bought just because they were less expensive are long gone. Since their introduction decades ago, private label products have improved in quality and packaging to rival national names. But until recently, the goal of store brand products was to duplicate the best brand names. That concept is no longer the only goal.
"Retailers with private label brands are taking the shopping experience to a different level with gourmet products," said Brian Sharoff, president of the Private Label Manufacturers Association, New York City. "Consumers now have a more sophisticated palate and more interest in restaurant style dining, and retailers are responding to that.
"Premium private label products implied that the private label could be as good as the best brand products," he explained. "Gourmet or specialty products have the retailer using ingredients that are of the highest quality, but then they go a step further -- the end product or the ingredients from which it is made are something that cannot be purchased elsewhere."
The trend toward inventing and stocking unique products is yet another way to revitalize sales in the Center Store aisles.
"This is not going to draw people to the store or be a loss leader. Instead it is something that is going to keep your customers happy," Sharoff added.
John Opasinski, senior manager with Andersen Consulting, business and retail consultants based in Chicago, said the potential for gourmet private label products lies not in volume but in building customer loyalty.
"Gourmet products are an excellent opportunity to extend the private label offerings, especially for organic and natural products," Opasinski said. "The smart retailer will take advantage of these items. The challenge is in packaging a limited volume of items and the speed needed to get these things to market.
"More retailers are going to think about doing gourmet products, but some get frustrated when they don't see a high volume," he added. "They have to be willing to look at these products in a different light."
A number of trends are making speciality products more popular. The recently completed United States census confirmed that the American population is diversifying. That diversification is leading to more demands for specialized products.
"The so-called 'melting pot' of the 20th Century has ceased to exist as a concept for the 21st Century," the PLMA concluded in a study entitled Demographics 2010. "Newcomers -- immigrants and first generation citizens -- are folding into the demography in two very different ways." Some are assimilating quickly, but a large segment "are maintaining their ethnic identity and steadfastly holding to much of the culture they brought with them."
This trend not only makes specialty gourmet products of interest to the particular ethnic group in question, but makes those same products familiar to other segments of the population and increases the demand, consultants said.
"There is a contradiction here of sorts. People have less time to cook and many do not want to cook on a daily basis," said Neil Stern, a partner with McMillan/Doolittle in Chicago, a retail strategy consulting firm. "But there is also an explosion of cooking shows, gourmet ingredients, gourmet cookware and recipe books and celebrity chefs because when people DO cook, they want it to be fun and exciting.
"People have more money to spend and they are willing to spend it on special dining experiences. Gourmet cooking becomes a hobby. If they can get the ingredients they need in their regular supermarket, so much the better," he added.
However, supermarket retailers should not anticipate gourmet products being a large share of their profit margin.
"This is not the bread and butter of a store," Stern cautioned. "A retailer cannot expect this to be 25% of sales like the traditional private label products are in some cases. Retailers get into gourmet private label products to create an image and to differentiate themselves from the competition. This keeps customers satisfied and keeps them in your store so they do not go elsewhere."
Sharoff agreed that private label gourmet products -- which can range from unique grades of olive oil, to salad dressings with ingredients from the South Pacific, to a turkey breast smoked in spices from the Orient -- are being used as a way to distinguish supermarkets from each other.
"This is another way for supermarkets to define themselves for this decade," Sharoff said. "People are moving around the country and they are coming into new areas with more expectations. Retailers are becoming more inventive to meet those expectations."
Another way they do this is to make sure their gourmet products don't look like any national brand that is on the shelf.
"Retailers are starting from scratch with these products. The jars cannot be round or square, they have to be unique to stand out, and cans or packages have to be shorter or taller than the national brands to differentiate them," Sharoff explained. "No one is going to say, 'You cannot do a particular package because no one will recognize it'."
Retailers frequently enter the gourmet market with special chips and dips, pastas and sauces, or olive oils and salad dressings and branch out from there.
"It could be Macadamian nut salad dressing or five different flavors of potato chips or four kinds of mushroom spaghetti sauces, but none of it will be a plain dressing or chip," Sharoff added.
Loblaw's in Canada paved the way for gourmet private label foods and Albertson's, Harris Teeter, Trader Joe's, Kroger and other chains followed suit with gourmet items in a wide range of categories, the consultants said.
But, gourmet items under private labels are not the sole province of large chains.
"The little supermarket retailers have the ability to bring in gourmet lines under their own labels, particularly for foods that originate in a particular region," Sharoff said. "Each of them knows there is something special happening out there in the private label market, and they want to be part of it and they have that ability."
According to Information Resources Inc., Chicago, private label sales have held a steady 15% or better share of the food market for the past five years. Although specific numbers are not available, an increasing amount of that may be due to the introduction of more gourmet products.
"It's a circular situation," said Marcia Mogelonsky, a senior research analyst with the Mintel International Group, Chicago. "Gourmet products are more popular because they are more accessible and they are more accessible because they are more popular. It is not just in Manhattan that gourmet products are available now. It is everywhere." However, the market for particular gourmet foods is constantly shifting and retailers have to be able to move with the times.
"There is a never ending search for better meal ingredients, and once someone has experienced better products he or she does not want to go back to ordinary," Sharoff said. "The exclusivity of the product is what is important. Retailers have people out there trading in the South Pacific to come back with that special spice or ingredient that no one else will have."
Stern agreed, "We are beginning to push the boundaries of what can constitute private label products. It is a different mentality for the supermarket retailer; instead of being a seller of other people's products, he is creating and marketing his own products," he added. "Private brand is a better description of the products now, rather than calling them private label."
Mogelonsky said the line between premium private label products and ones that are considered gourmet is blurring.
"Private label now can be just as beautifully packaged and just as impressive as the national brands. The cachet associated with specialty private label products is something many retailers can do well. They have the ability to find the special ingredients and they have loyal customers. Gourmet products puts the two together."
The altered image of all private label products has helped in that promotion.
"What is happening to the gourmet lines now is the same thing that happened to premium private label a few years ago. All of the major chains are working on it and new products will appear in all of the stores in the next 18 to 24 months," he predicted.