BRANDS NEED INNOVATION TO FUEL SALES, PANEL SAYS

DAVID ORGEL

BOCA RATON, Fla. -- Brands will continue to fuel the food industry's growth, but the definition of brands and the drivers of success are changing.

A panel of food-industry executives here said last week that the widening perception of brands to include certain store labels and the store itself is creating more growth avenues for the industry. However, brands need to seize on opportunities for innovation if the momentum is to continue, panelists stressed.

"The trends will be driven by brands," said Dan Swander, managing director of Swander Pace & Co., a food and packaged-goods industry consultant. "Private label is another brand. Brands mean something."

Swander participated in a panel called "Winning the New American Consumer," which was presented at The Lipton Experience 2000, an event focusing on business and food-industry trends, sponsored by Lipton, Englewood Cliffs, N.J., an operating unit of the Anglo-Dutch consumer-goods giant Unilever.

The event was co-produced by Business Week. Other panel members included Joseph J.H. Campbell Jr., president and chief executive officer of Associated Grocers, Baton Rouge, La.; Nick White, executive vice president of Wal-Mart's Supercenter division; and Gary M. Rodkin, president and CEO of Pepsi-Cola North America. The moderator was Scott Shuster, consulting editor, Business Week Executive Programs.

White said Wal-Mart has been only partially successful to date in growing the brand identity of its franchise. "We're working towards making the store a brand, but we haven't got it done nearly as well as we should have," he said. "There's still a big opportunity to grow the branding of our store."

Wal-Mart has moved toward this goal through alterations in its advertising approach, he said. "Our ads have now gone away from pricing items to talking about things like our associates and customers. We're trying to bring the brand closer to the consumer."

Campbell said independents can improve their images by borrowing from the playbooks of retailers such as restaurants. "The restaurant business has done a superb job of branding themselves as specialized operators," he said.

He noted some independent groups are getting more respect from consumers with bannering programs. "So, for example, we have the Associated Food Stores ad group," he said. "And you must qualify for it. We also have our own store brands. We must make sure our brand is quality."

Rodkin stressed that brands are all about innovation, and cited examples including his company's introduction of a version of Tropicana Orange Juice that contains calcium. This functional food now represents about 14% of Tropicana's business, he said.

"In the last 10 years there's been so much emphasis on price, but if we can focus on innovation on the brand side, that would create greater demand," Rodkin said.

"We spend a lot to create demand for our products and try to get into consumers' heads to figure out what it will take," he added.

White applauded brand efforts such as the Tropicana with calcium move that have the potential to become big hits with consumers. "We believe there are a lot of opportunities for home runs that aren't being taken advantage of," White said. "Some suppliers are not listening to consumers. I tell manufacturers that we're in this together. As a retailer we are the conduit to the consumer. Manufacturers need to know what the consumer wants and create and perpetuate it."

But price also remains important in the merchandising equation, Campbell stressed. "Five or six years ago our private label was our leading soft drink in our stores," he said. "Brands were high priced, but they have since lowered prices and re-attracted people. So our private-label sales went down."

What types of brands may have trouble in the future? According to Rodkin, the issue comes down to the retailer's category management needs. "You need to prune brands and selection," he said. "So while there are some opportunities for regional niche brands, it's a tough spot for guys in between the main brands and the private label; it's a tough squeeze in the middle."