Blueprint for Success

CAROL ANGRISANI

Every bag of Kroger's private-label Fresh Selections packaged salad carries a 16-digit code shoppers can use to learn the salad's origin, packing location, ingredients, date and time the product was packed.

As part of its “Quality You Can Trace” program, Kroger teamed with the HarvestMark food traceability system to give customers an easy way to learn more about where the produce used in Kroger salads was grown.

Shoppers simply enter the code on the HarvestMark website to get information about the product's journey through the supply chain.

It's this kind of effort that demonstrates the future of private label as a market leader.

Indeed, private-label suppliers are creating trends, not just following with “me-too” products.

“We have seen store brands step it up from an innovation standpoint,” Kristen Walker, a senior analyst at Mintel Research, told SN.

Retailers are launching new products that cater to many types of consumer needs, Walker said. Reacting to the economic downturn and the fact that people are saving money by forgoing trips to restaurants and spas, retailers are launching products that can provide similar experiences at home.

“Retailers are introducing much more interesting products,” Walker said.

Take CVS, which last year introduced CVS Pharmacy-brand Mineral Bath Salts in stress- and headache-relief and other varieties. Priced at $10, the salts have a designer positioning without the designer price tag.

“It's a product that allows someone to create a spa experience at home,” Walker said.

Introductions like these are making an impression on shoppers. Nearly 60% of respondents to a recent Mintel study believe “private-label oral care products are just as good as brand names.” Further, 38% of respondents said they “always or usually” buy store brands for food to make at home, and more than one-quarter (27%) said they “always or usually buy” store brands for personal care purchases.

Private-label dollar sales jumped 3.9% to $86.6 billion in U.S. supermarkets with more than $2 million in sales, drug chains with more than $1 million in sales, and mass merchandisers, including Wal-Mart Stores, based on the 52 weeks ending Nov. 28, 2009, compared with the same period in 2008, according to Nielsen. During the same period, unit sales rose 5.1% to 40.3 billion across these channels.

Dollar sales in supermarkets grew 3.6% to $55.6 billion.

Such performance is the result of retailer efforts in both product development and merchandising and marketing, said Todd Hale, Nielsen's senior vice president of consumer and shopper insights.

“They're doing much more in terms of value messaging and differentiation,” he said. “They realize it can't just be price alone.”

Retailers are now thinking about private label as a critical initiative, added Sean Seitzinger, senior vice president, Innovation & Consulting, Information Resources Inc.

In doing so, many retailers are also doubling budgets at a time when national brands are cutting back, he said. This has helped them make advancements in packaging, ingredients, technology and quality.

“Retailers are starting to think more about quality standards,” he said.

The economic downturn certainly encouraged more people to try private label. What happened is that once they did, they liked it, he said.

“They have been pleasantly surprised by it and developed a relationship with retailers that offer it,” Seitzinger said.

In some cases, retailers are even leapfrogging national brands in terms of innovation by introducing items commonly found only in foodservice.

Mintel's Walker is especially impressed with items like Target's Archer Farms Mushroom and Swiss Cheese Mini Angus Beef Burgers because it taps into a popular trend in foodservice. The same goes for Supervalu's Culinary Circle Chocolate Chip Lava cookies. Walker said the cookies hold special appeal because Supervalu was the first to market.

“We haven't seen lava cookies even from the national brands,” Walker explained.

Retailers have also made it a priority to address the latest health and wellness food trends. Target, for instance, recently introduced Archer Farms Simply Balanced, a line of pasta, cereal, bread, granola bars and dozens of other products that meet a set of criteria that includes guidelines for calories, fat, saturated fat and sugar.

For instance, items contain no more than 30% of calories from fat; 10% saturated fat; and 25% added sugar. And each product is free of artificial flavorings, synthetic colors and has zero grams trans fats. Prices range from $1.48 to $5.49 for chicken skewers.