There is no shortage of advice for retailers considering adding a specialty, or "gourmet," line under their own label, and no shortage of companies launching such products.
Although well regarded private brands like President's Choice and Master Choice are positioned as premium, there is a higher level. "While premium private label products are very good, they are still not necessarily the best," explained Jay M. Rosengarten, president of The Rosengarten Group, a consultancy in Rye, N.Y. , and one of the founders of Food Emporium, now headquartered in the Bronx, N.Y., and owned by A&P, Montvale, N.J.
"Specialty food can be organic, or ethnic, artisan, regional -- and some of it is in the packaging," said Rosengarten. It is essentially the same issue with private label. Most private label products today are positioned against some national brand. These are called "first label" goods, and the next step up would be to exceed the national brand quality, according to Fred Arnal, director of category development and brand management with Topco Associates, a private brand cooperative in Skokie, Ill.
Wegmans, the retailer based in Rochester, N.Y., tends to formulate products toward very high end quality, Rosengarten said, "and I think they go above and beyond, but that's consistent with their stores' positioning, as it is with Harris Teeter [a regional chain based in Matthews, N.C.]. Premium private label is limited to just a few categories, like chocolate chip cookies, or coffee. Master Choice does olive oils and vinegars, but they're also mainstream," he said.
Can a product be specialty and still be mass produced, as it would have to be for a food retailer the size of Fred Meyer or Kroger? Rosengarten came up with the example of Twining's Tea as a product that is specialty, and yet mass produced. "Everyone has done their version of Lipton for years; maybe now is the time for a private label herbal tea, since it's a hot category, responsive to what is happening in the marketplace," he said.
For a mainstream retailer, it takes a large group effort to create a line of private label gourmet products.
Retail companies have no interest in sourcing from overseas, according to Steve Dawson, president of Food From Britain, North America, Greenwich, Conn. "They like the product to come to them already priced, in dollars, and cleared of customs. For the most part, they hire brokers to do the sourcing, companies such as Federated, Daymon, and MMI -- in-house brokerage firms. They are buying agents for the supermarket; they represent all the suppliers of private label to the supermarket," he explained.
Except for Safeway and Wal-Mart, industry sources said, retailers create specialty private label lines with the help of these brokers. A small percentage of products are imported, mostly olive oils and, lately, pasta; but also canned goods like tuna and pineapple. When goods are imported, these same brokers work through importers such as American Roland Food Corp., New York, or Liberty Richter, Saddle Brook, N.J.
"It looks as though the bigger companies are growing a whole department for sourcing," said A.G. Manoian, an expert in private label who now works in marketing for Chudleigh's, a frozen apple pie maker in Milton, Ontario. "They travel the world. They are starting to have teams whose sole job it is to find out what the new trends in food are, and bring them to the grocery store, and find some manufacturers that can do some innovative stuff. It's really an extra resource for the buyer."
Great numbers of Stamford, Conn.-based Daymon Associates employees work with retailers, on the retailers' premises. Daymon reportedly has 18 people working at H.E.B., in Texas; 10 to 15 at Kroger, about the same at Harris Teeter and 40 to 60 or even more at Fred Meyer in the Pacific Northwest, according to industry insiders.
Daymon just picked up Ahold USA, Chantilly, Va., according to several sources contacted for this story, but Daymon would not confirm any of its activities with SN.
Several studies point to the specialty food customer as most desirable, because they look for high ring items.
"These are the folks who made Whole Foods successful, the true foodies, who have money, are educated, and travel," said Topco's Arnal.
Whole Foods [Austin, Texas], he noted, has more and more imports, such as an organic cracker from Great Britain, maybe by Carr's or Palmer. "Trader Joe's is doing a bang-up job in frozen food from Europe. Those are some of the bright spots, and we're getting a lot of attention on Full Circle," he said, which is Topco's organic brand.
The manufacturer of an upscale, all-natural product who produces for both Wegmans and HT Traders said that most of his supermarket customers found him at food shows, the same venue that EatZi's and others say they use most.
"Five to seven years ago, many retailers realized they wanted to put their own equity name on the package rather than the corporate brands like Master Choice, America's Choice, President's Choice, Sensational, or World Classics at Topco, but everybody realized 'I need to put my own name on it'," said Arnal.
Once the retailer's name is on it, the retailer must figure out how to distinguish between the first label products and the higher end product. "The classic ones don't do that; they just let the brand flex, and let the graphics and the positioning communicate," said Arnal. Shaw's Supermarkets, West Bridgewater, Mass., is making a real effort to create a premium value-added band, made to their specifications as the Europeans do, he added. If now in the U.S., five supermarket chains control 40% of the sales, in five years the same five chains will control 60% of the business, Dawson predicted. "Once you get to that degree of concentration, the buying power is huge," he added.
"I'm not saying 'copy Europe,' but all American retailers have to do is open their doors. Food From Britain can act as a filter. A chain can come to us and say, 'We need an upscale boxed chocolate, in eight-ounce boxes, to retail at $2.99, and we need to make a margin of X.' We can recommend someone who can do that," Dawson said.
Marcia Mogelonsky, senior research analyst for Mintel International Group, Chicago, but based in Ithaca, N.Y., said "I think that the consumer wants this stuff and wants to be sophisticated, but also needs help. That's where the private label comes in. If [consumers] trust the store, they'll trust a private label gourmet item."
Wegmans' imported olive oils from various regions of Italy are packaged in tall, squared, elegant long-necked bottles with a foil label, displayed near a tasting setup, with bread for dipping, to attract customers, she said after a recent visit to the Ithaca store.
Brian Sharoff, president of the New York-based PLMA, said "We discovered in the 1990s that a lot of companies could produce premium items, but the retailer had to find small and medium-sized companies who perhaps had their own lines of product under their own brands. Being able to sell their product through the retailer was better than trying to get on the shelf, which was expensive," he said.