Quality and a strong commitment from retailers can make all the difference in the success of private-label cookie and cracker lines, industry insiders told SN. For store-brand salty snacks, however, the playing field is a little different, dominated largely by the Frito-Lay brand, making price a much more powerful weapon in the competitive environment.
"With cookies and crackers, retailers are looking for quality and value," said Craig Espelin, corporate director of store brands at wholesaler Supervalu, Minneapolis. "With salty snacks, there are plenty of regional players who offer cheap price points. The retailer is looking for a strong direct-store delivery to compare against Frito [Lay]," he said.
Other sources that spoke to SN said the DSD environment surrounding the private-label snacks market makes merchandising strategies, including creative displays, crucial.
"We're competing in a DSD warehouse, with off-the-shelf merchandise. We have to work on bringing solutions to the customer. It means the difference between an average display and a great display," said Jerry Gilbert, vice president of sales and marketing, Bake-Line Products, Des Plains, Ill. "Mixed pallets for special display, shippers, permanent displays -- those are the things that make sense. The key is merchandising -- there's no question about it." Bake-Line, a manufacturer of private-label cookies and crackers, working with 30 of the leading supermarket and mass chains, was acquired by snack giant Keebler in 1992, which is now owned by Kellogg's.
Indeed, proper merchandising of private-label goods can be viewed as a key strategy and, according to Donna Smith, private-brand manager at Food Lion, Salisbury, N.C., the chain currently features its store-brand chips and cookies as part of a block set. Occasionally, these items are also featured on displays, she said.
DSD promotions abound at Supervalu, and Espelin said the wholesaler is offering free product cases to retail members with large orders and providing weekender displays. Supervalu also offers a 104-week promotional plan so retailers can see what's lined up in terms of marketing. And, the wholesaler offers cross-merchandising tie-ins between private-label items and major national vendors, such as promoting Coke and Pepsi beverages with nacho chips, Campbell's soup with saltines and Oscar Mayer luncheon meats with snack crackers.
However, data from market research firm ACNielsen, Schaumburg, Ill., suggests that the door is wide open for grocers to improve upon their promotion and marketing plans for private-label snacks. For the 52-week period ended March 24, 2001, private-label cookies generated combined sales of $590 million in supermarkets, mass merchants and drug stores, an increase of 0.8% from the prior year. National brands fared much better, showing a 4.5% increase to $4.7 billion in sales across all channels.
In supermarkets that generate more than $2 million annually, sales of store-brand cookies rose 0.4% to $499 million, while national brands grew 4.4% to $4.1 billion.
Private-label cookie sales showed the highest growth rate in the mass-merchant channel, growing 6.1% to $65.6 million, while the national brand sales rose 3.1% to $440 million for the period.
The vast snack-cracker market contains several subcategories, but in terms of standard cheese crackers, the private-label category has taken a nosedive recently. Sales in all channels fell 8% to $14.1 million and dropped 6.4% to $12.2 million in supermarkets generating $2 million or more annually.
Rather than try to compete with the national brand category leaders, Espelin said Supervalu works at developing products that complement national brands.
To that end, the wholesaler offers 10 stockkeeping units of cookies that are in direct competition with Nabisco. However, Espelin said the company is looking at creating an entry-level, price-point cookie product, which would retail for 99 cents. Also, "There is only one level of quality for saltines, so we can either compete with Nabisco or create an entry-level, price-point item," Espelin said. He would like to see a future that includes two levels of private-label items, while two to three regional brands get cleared out to avoid the clogged shelves of today that offer the consumer no clear definition of products, he added.
As evidenced by the diligent effort that goes into producing many private-label lines, many retailers consider their store brands to be value-added items for their consumers.
On the heels of its acquisition by Safeway, Genuardi's Family Markets, Norristown, Pa., recently introduced the Safeway Select private-label line into its stores. Among the stockkeeping units are Select cookies and crackers, in addition to soda, ice cream, frozen entrees and side dishes.
Although he was not available to speak directly with SN at press time, Bill Wolfe, Genuardi's group director of marketing, said in a prepared statement: "We're certain our customers will be delighted with Select products. These food and grocery items have been carefully crafted to offer better-than-national-brand quality at a substantial savings.
"There's more pure chocolate and sweet cream butter in Select Chocolate Chip cookies than national brands."
Food Lion also holds its private-label snacks in high regard.
"Food Lion has a fairly mature private-label program in snacks. It is our goal to provide national brand-equivalent products and we have focused our efforts on quality," Smith said.
"Food Lion's major emphasis is on the quality of our Food Lion Brand. We currently conduct annual QA [quality assurance] audits to ensure that our brand keeps quality standards. Annual plant inspections are also conducted with each of our Food Lion Brand vendors," Smith added.
Once retailers determine how they want their store-brand snacks to figure into their bottom line and once they decide to commit resources to these products, there are a few things to consider, Mel Korn, president and chief executive officer of Saatchi & Saatchi Collaborative Marketing, New York, told SN.
Retailers need to determine "what's the go-to-market strategy and how will this be challenged and changed," Korn said.
"Pricing is one of the ingredients in the formula, and value is an issue. Retailers need to decide the use to which they're going to use it [private-label line]. If they're going to put out quality snacks, they certainly can't price them in the basements. It's the differentiation formula -- where does the brand come in and to what point does that carry the retailer," he added.
Gilbert agrees that a strong retailer commitment can offset the meager marketing funds typically available for store-brand products. If grocers set up a penetration goal for their store-brand lines, they give themselves a greater chance at success, he said.
"The commitment of the retailer is key in the private-label world," Gilbert said, while noting that he believes the collaborative environment between retailers and vendors is opening up. He sees more and more retailers approaching vendors for strategic suggestions on how they can sell more product.
This collaboration is yet another component that is critical to success, according to Korn.
"I don't care if it's Kroger or Safeway -- as a manufacturer, you have to sit down with them [retailers] and discuss where they want to be in a particular category in a few years. There is no more 'build it and they will come.' Each channel has a culture; these products have to fit into this. It's what they each bring to the party," Korn said.