Safeway Establishes New Private Label Standards

JULIE GALLAGHER

CHICAGO — Safeway is adhering to a new private-brand innovation model that borrows from national-brand marketers while leveraging assets unique to retailers.

“What we're trying to do is build bigger and better brands faster, and serve our consumers better,” Alex Petrov, Safeway's vice president of consumer brands, told attendees at last week's Private Brand Movement conference here.

In the last 15 months, the Pleasanton, Calif.-based retailer has tested 1,200 products, reformulating or discontinuing hundreds that fell short of new quality standards, he said.

The model's key tenets emphasize shopper insights; real innovation instead of national-brand replication; a shift to quality that is better than levels achieved by national brands; and more collaborative relationships with suppliers.

“It has elements of CPG, but it's not entirely CPG,” Petrov said. “It's not the old retail private label either. It's something new.”

Safeway is attuned to what national-brand developers do well and has adopted the same set of priorities.

“First, they have a laser-sharp focus on consumers and shoppers,” Petrov said. “The quality commitment is definitely there, and, of course, the love and passion for the brands.”

The chain also looks to retailers overseas. There are 18 countries where private-label penetration is higher than in the U.S. Petrov observed that retailers serving these markets have a mentality that private label should lead national brands instead of follow. There's also a consistency across chains that contributes to consumers' overall perception of private labels.

While national brands are more vertically focused, Safeway makes the most of assets that are exclusive to retailers, like ownership of the store environment and the ability to offer solutions that span a number of categories.

“If you're a chip maker, your innovation will likely be a crunchy carb in a bag,” Petrov said. “But Safeway thinks across the store. We see a consumer need and we help solve that problem.”

Last year, for example, the chain launched the Snack Artist brand, a line of salty snacks, cookies and frozen appetizers created to help consumers confidently serve family and friends private labels during the Super Bowl. Sporting a clever package design and resealable bag, the brand is like none other on the retailer's shelves, said Petrov.

“Frito-Lay didn't introduce [the fresh lock bag],” Petrov said. “They could have, but they have a vertically integrated asset base that said that may not be such a good idea.”

The retailer is merchandising other brands in a way that is signature Safeway. Take, for instance, its approach to the soup category. It's implemented an innovative strategy that leverages available space in the front of the store. A dual usage cart caters to the lunch crowd with ready-to-eat hot soup on the front, and refrigerated, ready-to-heat varieties on the back.

“Campbell's would have introduced this very differently since they have different assets,” Petrov said.

Strong corporate-brand programs will not just make for increased competition among rivals, but help raise the overall consumer perception of store brands, Petrov explained.

“A bad private-label experience at one retailer in one category can kill opportunities for other retailers in other categories,” he said.

There is also strength in numbers when it comes to the level of partnership retailers should require of their private-brand suppliers.