Trial Keys Private Brands: K-VA-T

MARK HAMSTRA

DALLAS — Getting customers to try store-brand product is key element of K-VA-T Food Stores' private-label growth strategy, according to Ron Bonacci, vice president of marketing at the Abingdon, Va.-based company.

“Anywhere there's an endcap, we do a ribbon of private label,” he said during a presentation at Food Marketing Institute's Future Connect conference here. “We try to encourage trial as much as possible.”

K-VA-T is parent of the Food City chain in Kentucky, Virginia and Tennessee. Its private labels, sourced through private-label cooperative Topco Associates, include Food Club, which accounts for 54.9% of private-label sales; the low-priced Valu Time, which accounts for about 14%; plus Full Circle, Top Care, World Classics and others.

Bonacci said about 98% of K-VA-T shoppers buy private label, and 27.6% of total store sales come from private-label items.

The average basket with private label included totals 21 items — vs. 12 items for a basket without private labels, he noted. That amounts to an extra $14 of spending per basket.

In addition to featuring private brands in its displays, Food City also seeks to encourage trial with coupons, and through discounts earned through the Valu Card loyalty program and gasoline discount program. Other methods of promotion include contests staged throughout the year compelling customers to try private brands, such as “treasure hunts” in which the company drops in on customers and awards $100 for every Food City private label in the home.

The chain conducts tie-in with anniversary celebrations, back-to-school promotions and its club programs, such as the Kids Club and Pet Club.

“Those clubs are all driven by private label,” Bonacci said.

In that same presentation, Thom Blischok, president of global innovation and strategy at SymphonyIRI Group, Chicago, said he believes private brands will grow to 35% of retail sales by 2015, driven by innovation in the product lines.

He also outlined a relatively dim outlook for the economy, noting that 64% of Americans now live paycheck to paycheck, up from 40% who did so five years ago.

“Consumers believe the economy will pick up, but they don't know when,” Blischok said.

He also described a bifurcation of consumers in which households making less than $55,000 a year are “making changes to survive,” and those making more than that are “making changes to save money.”

Among the lower-income tier, weekly stock-ups are down, he said. In addition, pantry sizes have shrunk to an average of about 350 items, down from 400 items previously.