Safeway Unveils Rollout Plan for Private Labels

ELLIOT ZWIEBACH

PLEASANTON, Calif. — Safeway said last week it expects its O Organics and Eating Right lines to begin popping up on other supermarkets' shelves this fall, supported by a full-scale advertising campaign.

The chain is marketing the two brands to other companies through Lucerne Foods, a wholly owned subsidiary. Lucerne in turn is a member of the Better Living Brands Alliance, a newly formed consortium of manufacturing, marketing and distribution companies led by James D. White.

White also heads Safeway's Lucerne operation.

O Organics, an organic food line, and Eating Right, a health and wellness line, were originally developed by Safeway's consumer brands group, and both proved to be exceedingly successful, White said, with O Organics, introduced in late 2005, accounting for sales of $160 million in 2006 and $300 million in 2007, with projected sales of $400 million this year; and Eating Right, introduced in the spring of 2007, doing $100 million last year and expected to do more than $200 million in its second year.

Since beginning the marketing process about two months ago, BLB has already made the two brands available to foodservice operators, include Google's in-house cafeterias in Northern California, and several universities, including Arizona State and San Jose State, White noted.

White declined to reveal what chains have signed up to sell the two brands. He said the products are being offered to both competing and non-competing retailers.

Katy Saeger, a spokeswoman for Neighbor Agency, the Los Angeles-based integrated marketing firm that's a member of the BLB Alliance, told SN the rollout of the two brands will be supported by “huge national advertising” scheduled to kick off in October, with a larger campaign scheduled to start in 2009. However, she declined to discuss details.

Lucerne is licensing the brands to its alliance partners, which include Ready Pac Produce, Irwindale, Calif., for produce; Schreiber Foods, Green Bay, Wis., for dairy products; Overhill Farms, Vernon, Calif., frozen foods; Crossmark, a sales agency based in Plano, Texas; and Neighbor Agency.

White said other members are likely to be added to the BLB Alliance. The alliance has also set up a supply chain network for distribution of the products, he added.

White said Safeway will be treated as a customer of the alliance, just like any other customer. “Lucerne has been doing business with other retailers for years, though this variation is a bit different.”

Safeway, as the owner of Lucerne, will share profits with its alliance partners, White told SN, “so as the brands get bigger, Safeway will benefit at the end of the day.”

However, he said the financial arrangements are different than those for Blackhawk, the gift-card business developed by Safeway, which gets a percentage of each card sold.

As the alliance has talked with potential retail customers, their reactions have been “very positive,” White said.

With over 300 O Organic items and more than 200 Eating Right items, both brands are available across a wide variety of in-store categories, “which simplifies the shopping experience for a consumer who likes one item in the line and can find other items throughout the store,” White said. “This is really an explosive growth opportunity for the two brands.”