NEW YORK -- The tender life span of fresh-cut produce has made the private labeling of such items a tender issue. Industry insiders have called it a fantastic opportunity to reinforce the quality of a store brand, but also concede it could be a quick road to failure if quality and consistency are not meticulously monitored and scrutinized.
Nonetheless, private labels are slowly emerging in this category. Retailers are forging ahead, doing the research, investing the time and money and dedicating themselves to allowing only the freshest cut produce to wear their label, retailers and industry observers told SN.
"Private labeling of fresh-cut produce really started to take off in the mid-90s," said Edith Garrett, president of the International Fresh-cut Produce Association, Alexandria, Va. "Branded products had become very popular and wide spread, but processors wanted to develop new products and get them onto the shelves. Private labeling was a good way to appeal to the retailers."
Craig Espelien, corporate director for store brands at Supervalu, Minneapolis, had a different take on the growth of private labeling here.
"Research we've looked at shows there is still very little brand recognition in the produce department," he said. "Because of that, a lot of manufacturers are willing to work with stores and put the store label on their products."
Nevertheless, supermarket operators have quickly discovered that private-label fresh items can play a crucial role in setting one retailer apart from competitors, perhaps more than any other departments, because of the importance today's consumers place on freshness. Evidence of successful implementation can be found in consumer spending habits and store loyalty.
"[Fresh-cut produce] is an excellent private-label opportunity and another positive way to really leverage a store brand," said Jerry Lyons, a partner at MarCom Communications, Greer, S.C. "But you have to be careful, especially here, because a label ties into the customer's total image of the store. Fresh items play a large part in establishing that image."
One aspect agreed upon by those interviewed by SN is there must be a high level of trust between retailer and supplier.
"It doesn't make sense for a retailer to put their name on something if they can't guarantee consistent quality," said Dane Twining, director of public relations for the Private Label Marketing Association, New York. "But the retailers aren't letting that stop them. They're doing the research, finding partners they can trust and moving ahead."
One retailer that has found success in this category is Harp's Food Stores, Inc., Springdale, Ark. Harp's has been carrying private-label produce for about two years, and produce director Vince Terry said the category continues to enjoy strong growth.
"Our brand competes very well against the national brands," he said. "Of course, if one brand is on sale, you'll see sales rise for that time period, but generally speaking our brand sells very well. The customers have faith in us and it's reflected in the sales."
While he didn't have figures broken down into whole and fresh-cut, Terry reported 17% of all produce sales coming from their private-label goods.
The private label here reads Harp's Signature of Quality and features a picture of the company president along with the store's mission statement. Also printed on the bag are an unconditional freshness guarantee, an open-date and an 800 number for customers to call with any questions. Those inquiries are directed to J-M Farms/Foods, Inc., a grower/shipper of mushrooms in Miami, Okla. J-M developed the Harp's program, under the guidance of the farm's marketing director, Steve Phipps. As the program has expanded, J-M partnered with other suppliers to source items ranging from tomatoes to potatoes, all of which are merchandised under the Harp's Signature of Quality program.
"We believe these guarantees, along with our name being right on the package, denote quality and trust and reassure the customer they can be confident in our products," Terry said.
The first item they tested at Harp's was successful, prompting the retailer to roll out new products. Terry said several items were introduced to produce managers the following September, the beginning of their fiscal year.
Harp's currently carries a mix of whole and cut products including one-pound bags each of cole slaw and salad mix; baby and regular portabella mushrooms; oyster and shiitake mushrooms; sliced and whole mushrooms; four- and six-pack tomatoes; cherry tomato pints; extra-large vine-ripened tomatoes; five- and 10-pound bags of Idaho potatoes; five- and 10-bags of Colorado potatoes; and three-packs of extra fancy Idaho bakers, according to Phipps. As the rollout continues, Harp's is looking to add items like apples and citrus, he said.
IFPA's Garrett said this product mix is typical, listing the bagged salads, cut fruit, cole slaw, baby carrots and spinach as the most frequent candidates for fresh-cut private labeling. Terry said the recently added sliced portabella and baby portabella mushrooms appeal to more gourmet shoppers.
Harp's has continued to stock additional brands of cut salad, which Terry said is simply because they like to provide their customers with as many options as possible. In addition to the Harp's label they carry Salad Time, Dole and Fresh Express.
MarCom's Lyons agreed with Garrett that the mixed salads are the most common candidate for fresh-cut private labeling, adding this is a big area of experimentation for the national brands as well.
"There are so many brands and varieties of cut salads right now that the customer has really come to expect them to be there," he said. "Whereas, just a few years ago, the whole idea was quite a novelty."
There were a number of considerations that prompted Harp's to make the move into private-label whole and fresh-cut produce.
"Our largest competitor, Wal-Mart, had stuck with brands," Terry said. "But we weren't always happy with them and decided we could have tighter control over both quality and consistency if we were controlling the product ourselves."
However, along with the benefits of tighter control, the Harp's/J-M partnership requires an unprecedented level of cooperation and communication between supplier and trade customer. Phipps said that the arrangement goes so far as to include food safety: An experienced food-safety technician is part of the regular J-M staff, and is responsible for regular testing and quality assurance of all products. Similarly, Harp's 800 customer-service line is staffed from J-M's offices. Customer response to the Harp's label has in fact been very positive, said Terry.
"The customers just keep coming back," he said. "The residual sales are excellent." "The consumer expects a product to be better tasting if there is a brand attached to it, and that can carry over to a private label as well," said Mona Doyle, president of The Consumer Network, Philadelphia. "Private labeling can communicate the same positive aspects as a brand if it is handled well."
While Harp's is ready to expand their line, many other retailers are just getting started. Espelien told SN Supervalu is in "serious discussion" about developing a private label for whole and fresh-cut produce as another way of tying the company's name with an image of quality in the minds of their customers.
"We have an array of items we're considering to start the program with and will probably introduce several at once, not just one as a test," said Espelien. "We're trying to really work on a brand image that will be recognizable."
Espelien said Supervalu has been very label-focused in the past, sometimes putting out several labels within one category.
"That was okay five or even 10 years ago, but now we want to establish an overall brand focus and bring it into the peri department," he said. "If we went about it the old way, we would end up with 10 to 15 different labels. With the high freshness factor, that's just too much to monitor. We need one solid brand name for all perishables."
The chain plans to approach the produce department in two parts. First, there will be an array of core items like potatoes, onions, and tomatoes. Espelien said these were chosen because it is easier to find multiple sources that will supply consistent product in these items.
"We'll also look very seriously at prepackaged salads and baby carrots," he said. "But with the bagged salads you're dealing with a much higher rate of perishability, so you need to really rely on the consistency of the supplier. We're being very careful. We don't want to go into anything new without all the facts."
The issue has received a strong focus at Supervalu, according to Espelien, primarily because produce in general is such a quality-driven category.
"A private label sends a very strong message to the consumer," he said. "Marginal quality is not an option here. If a product registers as superior, however, we will raise the bar to that level. We are simply not willing to waiver on the quality of our products."
Though progress in opening up private label in the produce department has been slow, Garrett said that growth potential in the category remains optimistic. Still, more and more retailers continue to establish their own private labels for fresh-cut items, and those with successful programs look to grow further.
While nothing has been finalized, Terry said he is hoping to expand the private-label line at Harp's.