AMERICAN STORES TESTS 'PREMIER' LABEL LINE

RICHARD TURCSIK

SALT LAKE CITY -- American Stores Co. here is testing a new line of premium private label products under the American Premier moniker in its Osco and Sav-on drug stores.

For the moment, American Premier consists only of chocolate chip cookies and soft drinks. Industry observers, however, told SN the line may be expanded and used to supplement -- or even replace -- the President's Choice upscale line of products American carries in its supermarket divisions.

Meredith Anderson, an American Stores spokesperson, told SN American Premier began appearing within the last six months in the company's drug stores not already carrying President's Choice products.

"We carry the President's Choice line in most of our food stores, and this is the drug store alternative to that," she said.

Bill Spencer, president of the consulting division of Gage Management, Minneapolis, said American Premier would likely be expanded to include a wide range of products.

"Soft drinks and cookies are just about where everybody starts with a premium private label, so this is probably the start of a bigger line that will come in sequential waves," he said.

Anderson would only say that American is "looking at opportunities" in expanding American Premier to cover other items.

President's Choice, which is sourced by Loblaw Cos., Toronto, is licensed on a market-exclusive basis. It cannot be carried in most of the Osco and Sav-on stores because they are located across broad regions of the country. However, some Osco stores do carry President's Choice, such as

those in Chicago where American also operates Jewel Cos.

Anderson said American has no current plans to put American Premier in its supermarkets although she noted, "We learned a lot about premium private label products from President's Choice and we're learning a lot now about managing it on our own as we are doing this. But we have not made any further decisions."

However, industry observers said if the line is successful and expanded, it may be used to replace President's Choice.

"It wouldn't surprise me if they carried American Premier over to the supermarkets. It would give them economies of scale in purchasing, packaging and distribution," said Chuck Cerankosky, a securities analyst with Tucker Anthony, Cleveland.

Mark Husson, an analyst with J.P. Morgan & Co., New York, said American took on President's Choice as a "stop-gap measure" to compete with other chains that had developed their own private label. He said the drug store division is "firing on all cylinders" and that is why American is rolling out American Premier in those units.

"One of the problems with President's Choice always has been that if you are promoting it, you are promoting someone else's brand and not your own. I don't think there is any alternative for American Stores over the longer term but to develop strong and differentiated brands for each of the different formats that they have," he said.

Husson said American Premier soda is made by Cott Corp., which also developed the President's Choice line.

President's Choice has had mixed results at American's supermarkets, Husson added. High-profile items like cookies have done well, but other items have not, he said.

"I don't think the store managers and regional people feel like they own the President's Choice program; but if it was their own brand they would promote it more aggressively," he said.

Gary Giblen, managing director, Smith Barney, New York, was another who said American may be testing the waters to see if American Premier can replace President's Choice. The line may also serve as a replacement for American's various store banner brands, much like A&P has done with America's Choice, he said.

"Why should American have Lady Lee, Lucky, Acme and all these other private labels?" he asked.

Edward Comeau, a securities analyst with Lehman Bros., New York, said American Premier would probably be used to supplement President's Choice.

"American Premier is consistent with American Stores' strategy of coordinating and enhancing their store brands," he said.