Officials at Brookshire Bros. weren't happy with the 8% to 10% margins it was getting in the salad dressing category. So they turned to the company's private-label sales and marketing firm for help in creating a line that would reap higher profits.
Federated Group tackled the request in its state-of-the-art, in-house quality-assurance lab and test kitchen. The result: Seven Farms, a distinctive, 24-stockkeeping unit private label that's expected to generate 25% to 35% margins.
Rolling out now to Brookshire's 72 stores, the line includes marinades and salad dressings in unconventional flavors like jalapeno ranch.
"We could not have done this without Federated," said Mike Due, grocery director for Brookshire, based in Lufkin, Texas. "Federated has been a tremendous support system for us."
Brookshire's dressing line exemplifies how Federated acts more as a retail partner than a supplier.
Seven Farms is one of several new "mega-brands" to come out of Federated's quality-assurance lab and test kitchen. The company defines a mega-brand as a product that's positioned as a national-brand equivalent and is available to all its retailer clients, not just those in a specific region.
Along with Seven Farms, others include Caged Bird, a table wine also rolling out now; and Companion's Best pet food, introduced last month. Both of these follow the highly successful launch of Prima Brite laundry detergent last December. Others on the way include a natural and organics line and beer.
"Mega-brands aren't seen as a private label," Dave LaPlante, Federated's newly appointed president and chief executive officer, told SN during a recent visit to the company's Arlington Heights, Ill., headquarters, where its QA lab and test kitchen are located. "People look at them as any other national brand."
Along with mega-brands, Federated has three flagship brands -- Red & White, Hy-Top and Parade -- and several other lines, including Better Valu, a value line. To keep up with national brands, Federated conducts frequent category reviews, in which it compares its products to similar ones on the market. During SN's visit, lab technicians were checking Federated's Hy-Top macaroni and cheese for weight accuracy and workmanship of the pasta and cheese components.
"We constantly monitor what the national brands are doing," stressed Ed Dudley, Federated's director of quality assurance.
To develop a new product, Federated relies on its quality-assurance team, which includes Dudley, two managers with degrees in food science, two technologists, and two label and regulatory experts.
In the case of Seven Farms, the quality-assurance lab developed the formulations and made sure the new flavors met their specifications. That meant, for instance, that the jalapeno ranch needed to be hot, but not too hot.
Federated teams with a "sponsor" retailer that acts as a partner in each mega-brand's development, offering suggestions and participating in negotiations with potential manufacturers.
While products are developed specifically for the sponsor retailer, they are offered to all 50 of Federated's retail customers.
With retailers increasingly looking to private label to differentiate themselves from competitors, mega-brands are designed to offer Federated's retail customers products not available at Wal-Mart Stores or other food sellers.
"Due to competition, any growth that I get in the Center Store will come from private-label brands," Brookshire's Due said.
Brookshire has high hopes for Seven Farms, which it is carrying in-line and plans to cross merchandise in the produce and meat departments. Each bottle sells for $1.49, or 99 cents on promotion.
Along with Brookshire Bros., Federated teamed with Brookshire Grocery in Tyler, Texas, for the development of Caged Bird; and United Supermarkets in Lubbock, Texas, for Prima Brite. Officials from Brookshire Grocery and United were unavailable for comment.
The just-introduced Caged Bird was modeled after Yellow Tail, the No. 1 most influential table wine brand, according to Information Resources Inc. Selling for $7 to $10, Caged Bird is sourced nationally and is available in merlot, cabernet, shiraz, pinot grigio and chardonnay.
Like Yellow Tail, Caged Bird carries a catchy name. During SN's visit, LaPlante showed a reporter several different versions of labels that were considered, such as a winding road and an abstract of a bird's eye, before Federated ultimately found what it wanted: a bold graphic of a bird on the label.
"We wanted a label that would jump off the shelf," LaPlante said.
Each mega-brand is positioned against a national brand. So just as Caged Bird targets Yellow Tail, Prima Brite eyes Gain, and Prima Value, Purex.
Prima Brite is an enzyme formula that retails for $2.99 to $3.49 for 100 ounces. Its sister brand is Prima Value, a non-enzyme detergent that sells for $1.99 to $2.49.
"Yes, there are consumers who will buy Tide no matter what the price is. But there are also plenty of consumers who only want to spend $2," LaPlante said.
Prima Brite was developed in response to slow sales of Federated's Hy-Top detergent. Even though the quality was there, Hy-Top never performed well, he said.
"It seemed that customers were hesitant to put $500 worth of clothes in the laundry machine and trust that a $3 or $4 [private-label] detergent was going to work," LaPlante said.
That changed after Federated did research suggesting that if it came out with a new brand -- one that didn't look or sound like a private label -- consumers would react differently.
Before Prima Brite was introduced, it went through vigorous quality-assurance tests in Federated's tergotometer, which analyzes the cleaning capabilities of detergents.
Federated showed SN how it uses the tergotometer to test its detergent on pre-soiled fabrics. Once the fabric is washed, a "Brightness Meter" determines how much of the soil was removed.
Having an in-house tergotometer, which typically is only available at large third-party labs, helps the small brokerage stand out, Dudley said.
Along with the tergotometer, the lab uses a turbidimeter, which analyzes the color of products like juices; a viscometer, which tests the viscosity of salad dressings, puddings and gelatins; and spectrophotometer, which measures the color and clarity of products. Such equipment lets Federated do 95% of its work in-house. The only tests outsourced are those requiring certain atmospheric conditions.
The Prima Brite move was a success. Whereas United Supermarkets sold two to three truckloads of Hy-Top detergent in 2004, it moved 40 truckloads of Prima Brite in the first six months of 2005 alone, according to LaPlante.
"All of a sudden, everyone, including the retailer, was proud to be selling this detergent," LaPlante said.
Federated's 30-Minute Meal Solution
Federated Group supplies retailers not only with product, but marketing programs to help move it off the retail shelf.
The most recent example is Hy-Top Half-Hour Helpers, a meal solution featuring recipes for three or four Hy-Top items that can be turned into an appetizer, entree or dessert in half an hour. About 30 recipes have been developed, including Popcorn Delight, Easy Sausage Gumbo and Easy Chocolate Raspberry Mousse. Some of the recipes call for perishables in addition to Hy-Top brands.
Retailers are encouraged to bundle all the featured ingredients, except perishables, on an endcap.
With meal solutions like these common with national brands, Federated recommends that retailers do more in the area with private labels.
"All the promotions that the branded items do, private label can do, too," said Ed Dudley, Federated's director of quality assurance.
