ROSEMONT, Ill. (FNS) -- When developing a private-label program for perishables -- produce, deli, bakery or meat -- think premium quality, not value pricing, recommended speakers at the annual convention of the Private Label Manufacturers Association, New York.
Dennis Smith, a panelist who is corporate director, meat and deli, for Roundy's, a wholesaler and cooperative based in Milwaukee, serving 900 retailers in the upper Midwest, noted that when the company decided to develop a private-label deli line, it went with top-of-the-line quality.
Starting with turkey, ham and roast beef, which make up 80% of the deli meat volume, Roundy's interviewed some 35 suppliers and ended up picking a different one for each meat. "We asked for a commitment from our suppliers in merchandising and marketing funds, then gave them a chance to help say how that money should be spent," he said.
Since the wholesaler serves a number of different chains, none with the Roundy's name, it rolled out the line under an umbrella brand name, Main Street Deli.
In the first two months of the program, almost half, or 48%, of the sales increase in deli sales came from the Main Street line, Smith said. The wholesaler plans to expand the brand into other deli products over time.
John Waters, a partner in MarCom Communications, a marketing consulting firm in Greer, S.C., and moderator of the panel, described the fresh aisle as "the next big opportunity" in the private-label arena. Indeed, shoppers select supermarkets on the basis of their fresh departments, particularly produce and meat, he noted.
"Supermarkets are becoming more sophisticated about marketing themselves," Waters noted, "and a store brand can have an impact beyond the perishables department" in building loyalty.
At Roundy's, private-label programs in meat, with more than 75 items, and deli, with 12 items, have generated a 150% increase in volume over the past two years, Smith said.
The house brands provide "a vehicle to help independents compete against the supercenters," he said.
"We only use number-one quality in private label to develop a franchise with the consumer," Smith added, noting that this approach is different from the economy concept that governed private label in the past and, in some cases, from the approach to private label in the dry grocery aisles.
Vince Terry, director of produce, Harps Food Stores, a 42-store chain based in Springdale, Ark., described the produce program his company is starting.
"Private-label perishables is a new thing for us," he noted, developed in response to competitive pressure as units of Albertson's and Kroger enter Harps' territory in Arkansas, Oklahoma and Missouri, and "our neighbor, Wal-Mart, drops in a Neighborhood Market here and there."
The premium-quality produce line carries the name Harps Signature of Quality. Packaging features a photo of the company president and personal message along with a satisfaction guarantee.
Harps has rolled out the Signature of Quality line with "cornerstone products" in categories which, combined, account for about 31% of the produce volume. Those products include 1-lb. salad mix and coleslaw mix, single-slicing tomatoes and four-packs of tomatoes, 8-oz. packages of mushrooms and portabella mushrooms, bagged Idaho and russet potatoes and bagged apples in key varieties.
The private-label line is aimed at "creating incremental sales and not at cannibalizing our national brand partners," said Terry.
The creation of a premium store brand has involved a lot more than just slapping a unique label on the products, he said. Suppliers for the produce were required to implement a strong food-safety program using Hazard Analysis Critical Control Point practices, and provide ongoing assistance with promotions and merchandising, he said.
At Bi-Lo Supermarkets, a 250-store chain based in Malden, S.C., Jim Saufl, vice president, deli, bakery and food service, said that perishables is the fastest-growing segment of their business.
"[It's] the most effective area of the store to show differentiation from the competition, and one of the most rapidly changing areas in the industry, with more space being devoted to it," he said.
Given the importance of the perishables departments, Saufl urged suppliers to work with supermarkets to develop private-label programs, especially with premium-quality products. Bi-Lo has a private-label produce program, Walter's Way; a meat program, Gold Star; and, in deli, a program using the name of Vince Perme, a well-known area restaurateur.
Saufl noted the deli and bakery departments have shown "record sales increases over the past three years because we started a private-label program."
While Bi-Lo does have a value line of private-label deli meats at mid-tier price points, along with the national brands, its emphasis is on the Vince's signature line. Each label carries the signature of Vince Perme as its quality guarantee, and the legendary restaurant operator appears in advertising for the brand.
"The line is only the best-quality product, with a 100% satisfaction, double-your-money back guarantee," Saufl noted. The brand is used on packaged and sliced-to-order meats and cheeses, prepared salads, packaged fresh pasta, and pizza.
Bi-Lo has even conducted taste tests so that the retailer can advertise its Vince's ready-to-cook pizza as preferred over Pizza Hut, Papa John's and other restaurant pizzas.
In private-label perishables, "it's very important suppliers and retailers work together to develop the right product," he said. "The grocery side works on tight margins, but the perishables side must be quality-oriented."
Asked by an audience member whether a private-label meat program might cannibalize other meat sales, Smith noted, "I'm looking to build loyalty. If I can do that with my own brand rather than a generic brand, I would not be upset that I cannibalized those sales."
All of the panelists emphasized they were looking for private-label suppliers with outstanding product, willing to work with the retailer to develop the program.
Smith noted those suppliers are frequently regional companies which "have a passion for their business," rather than national manufacturers. And Saufl said his chain, in some cases, has gone to restaurant suppliers who have not dealt with supermarkets before.
