BASKET OF PROFITS

CAROL ANGRISANI

Lund Food Holdings is counting on basketfuls of private-label sales. Literally.

That's because store-brand products play a major role in the Edina, Minn., chain's first-ever gift basket department, which opened this past month in its remodeled Byerly's flagship store in St. Louis Park, Minn. Lund Food operates 20 stores under the Byerly's and Lunds banners.

To differentiate itself from competitors, the retailer is selling a line of $10 to $300 baskets containing Byerly's-brand spices, seasonings, mustard, pasta sauce, salsa and other groceries. Shoppers who want a customized selection can also choose store-brand items from any store department.

"The baskets allow us to expose [private label] to a broader customer base," Julie Griffin, culinary director at Lunds and Byerly's, told SN.

Lund Food Holdings is not alone. Wegmans Food Markets, Dorothy Lane Market and other retailers are also capitalizing on the upscale image of gift baskets to build private-label exposure and sales.

Take Stauffers of Kissel Hill, Lititz, Pa. The retailer operates a by-request gift-basket business during the holidays. Along with national brands, the $30 to $60 baskets are filled with the Stauffers' brand of pasta sauce, gourmet coffees, specialty mustard and stuffed olives. Most of these products retail for about $3.59 to $3.99 if sold individually, said Warren Crills, grocery buyer.

"The baskets let people see and taste what our products are all about," Crills said.

While some chains offer baskets only during the holidays, others make it a year-round business by promoting everything from picnic- to baby-themed gifts.

That's the case at Wegmans in Rochester, N.Y. Shoppers can order baskets from Wegmans' Web site that range in price from about $20 to $100. Selections include a $35 "Best of Wegmans" gift box containing the retailer's own basting oil, olive oil, fruit spread, meat marinade, vodka sauce and pasta. There's also a $40 picnic collection that has Wegmans-brand hot dogs, ketchup, mustard, sweet pickle relish and dill spears.

Byerly's also plans to drive seasonal volume with summer baskets containing grill sauces and seasonings.

"We have focused our assortment to meet many needs, from a small hostess gift to a grand gift for a special occasion," Griffin said.

Located in the front of the store near the checkout lanes, Byerly's 1,000-square-foot department features pre-packed baskets merchandised on an island and a wall of hutch-style shelving.

At the rear of the shop is a counter with cabinets and packing materials where gifts can be assembled and wrapped in full view of customers. There's also a back room that's used for packing larger quantities of gifts. Byerly's is promoting the department through in-store signage, print ads and its Web site.

Stew Leonard's popular gift-basket business started 20 years ago when a shopper asked to send holiday baskets to his clients. The service operates year-round, from a production facility near its Danbury, Conn., store, though a whopping 100,000 baskets are distributed in November and December alone. Shoppers can pay as little as $29.99 for a collection of cookies, snacks and candies to $149.99 for the "Holy Cow," that includes all that plus cheeses, meats, coffee and tea.

"The baskets are a big hit with people who have moved away and miss our famous caramel corn, chocolate chip cookies and other fresh food," said Beth Hollis, vice president of the Norwalk, Conn.-based retailer.

Stew Leonard's recently redesigned its online gift center to be more user-friendly, with an order-tracking feature.

Gift baskets make sense for retailers that have a strong, upscale private label, said Edward Salzano, chairman of strategic goals for the Private Label Manufacturers Association. Salzano is also executive vice president and chief operating officer, LiDestri Foods in Fairport, N.Y., a marketer of Francesco Rinaldi pasta sauce and private-label supplier.

Gift baskets connect a store brand with a quality image, and they're associated with upscale products, Salzano said.

"It's a good way to introduce a corporate brand to someone who may not have known about it," he said.

While premium brands should be the focus on the edible side of the business, lower-tier nonfood items can also be included, Salzano said. A picnic-themed basket, for example, could include economy paper plates or related products.

Gift basket merchandise should match the needs of the local market, said Frank Dell, president of Dellmart & Co., Stamford, Conn., a management consulting company.

"You can't just throw a basket together," Dell said. "You have to know your customers and what they want in a basket."

Dorothy Lane in Dayton, Ohio, does just that with a new private-label assortment it just added to its 8-year-old gift-basket business, said Brenda Sanders, gift basket manager. The basket will join eight other pre-packed selections.

The $40 snack-themed basket has Dorothy Lane's house-brand pretzels, mustard, mixed nuts, chocolate and other munchies that are popular with customers, Sanders said. Dorothy Lane also combines its new Todd Norman private-label wine with national-brand crackers and cheese in a $34 wine and cheese basket. National-brand crackers are used because the retailer doesn't have store-brand crackers, Sanders said.

Dorothy Lane also uses private-label products as much as possible in baskets with items that shoppers choose themselves, Sanders said.

Gift baskets can be profitable, since private-label margins are at least 10 percentage points higher than those of national brands, Dell said. However, it all depends on sales volume.

Retailers also need to factor in labor costs, although for the most part, retailers fulfill orders with existing staffers rather than hiring additional personnel, he said.

Still, one of the biggest challenges to selling gift baskets is finding staffing, as well as space.

Those are two reasons why Stauffers of Kissel Hill hasn't made its gift-basket business a full-time operation. Instead, the retailer's floral department fills requests.

Due to the large size of baskets, Stauffers doesn't keep many on display, instead relying on promotional materials or word-of-mouth to build the business.

Dorothy Lane sells gift baskets primarily in the floral department at its three stores, but cross sells them in other parts of the store during the holidays.

Space and staffing are challenges to a gift-basket business, Salzano said. But the return on investment could make it work the effort.

"Any quality marketing and merchandising program that expands the awareness of private label is worthwhile," he said, "even though it may be a slow process."