NORTH STARS

BRIAN DUNN

MONTREAL (FNS) -- Loblaw Cos., which practically invented higher-quality private label in Canada with its successful President's Choice program, sees no end in sight to its growth potential.

Other Canadian grocers tend to feel the same about their own private label programs, which they are continuing to market aggressively.

"Although we launched President's Choice 15 years ago, it is still perceived as a top-quality alternative to national brands, offering tremendous value," said Robert Chenaux, president of Loblaw Brands, Toronto.

Canada's largest grocer is also launching PC Organics, the first line of products promoted as not genetically modified. The new line will be available to stores across Canada, but individual stores will decide whether to carry the new products.

Loblaw plans to introduce 20 to 25 PC organic products over the next year, including organic breakfast cereals, flour and jam.

Private label represents about 32% of Loblaw's grocery sales, excluding general merchandise and meat products. That's well above the Canadian average of 22% and 24.3% in Ontario, according to ACNielsen research, Markham, Ontario.

In addition to PC, the chain has a line of No Name brands introduced in 1978, as well as Farmer's Market for bakery goods, Sea Quest for seafood and Ziggy for deli foods. There is also a Too Good to be True label of over 200 items developed by a nutritionist for healthy eating, PC Decadent for luxury items and Splendido for Italian foods.

Loblaw uses a multimedia strategy to promote its PC label, including television, bus shelters, and in-store promotions and tastings. It also has cookbooks and videos featuring its private label products.

And, with its 1998 takeover of 160 Provigo and 70 Maxi warehouse discount stores in Quebec, Loblaw has been busy replacing Provigo's Generation private label program with its own PC program. At just 14.2% at the end of 1999, Quebec has traditionally lagged behind other provinces in private label penetration. One of the main reasons is that private label in Quebec was perceived as offering lower quality than national brands, a misconception that Loblaw is working to dispel.

"Quite frankly, it wasn't embraced because there was limited choice in private label offerings," suggested Chenaux. "But since we arrived in the market, we've enjoyed double-digit growth."

Although Provigo offered a good assortment of private label items in general groceries, Chenaux said it was weak in frozen foods, boxed meat and the upper end of certain dry grocery categories.

"We've made a major commitment that controlled label is going to be one of our key marketing initiatives and, quite frankly, our success has been phenomenal."

And although Quebec is primarily a French-speaking market with a unique culture, Chenaux said he was surprised to find how similar it was to the rest of Canada.

Still, Loblaw had to change the formula on certain PC products such as its sugar pie, meat pie, pizza and potato skins, which include a mixture of cheese curds and gravy known locally as Poutine.

"In basic staples there's not much difference and we hope to achieve similar penetration numbers in Quebec as we have in the rest of Canada."

The company recently ended a 12-week ad campaign promoting President's Choice in Quebec under the slogan, "It'll drive you wild." The campaign focused on PC's quality, taste, appeal and affordability.

Research showed the level of brand awareness of PC in Quebec was 66% before the campaign was launched. It enjoys higher brand recognition in Montreal than other parts of the province due to the city's English population and proximity to Ontario, where Loblaw dominates the market.

Private label is still growing at Metro stores here, according to Robert Comeau, vice president, private label development. It currently accounts for about 24% of grocery sales under Metro's Selection Merite label and Econochoix brand in the non-food sector.

Comeau said the percentage is much higher at the grocer's Super C warehouse stores.

"Our Selection Merite program is the most recognized private label program in Quebec, with 68% brand recognition," according to Comeau. "And 80% of our customers consider Selection Merite to be the same quality as national brands."

Comeau said private label is expected to grow by 75% over the next three years when it will represent about 40% of Metro's sales.

The grocer has opened a new division with 15 employees to develop new private label products. And, each year, it airs two TV campaigns specifically promoting its Selection Merite products, which are backed by year-round in-store programs and tastings.

Although Sobeys of Stellarton, Nova Scotia, took over Toronto-based Oshawa Group, Sobeys opted to drop its private label program in favor of the two brands it inherited from Oshawa.

It has replaced its Our Best label with Our Compliments and its second-tier Signal program with Smart Choice. The decision was based on the fact that Oshawa was twice the size of Sobeys and its private label program was well established in central Canada where Sobeys hopes most of its future growth will come from. Sobeys also felt Smart Choice was a better name than Signal.

As a result of the merger of private label programs, Sobeys now has about 60% more stockkeeping units, which now number around 3,000, and expects double-digit growth this year, according to Dale Macdonald, vice president, retail brands. He expects most growth will come in the non-food area.

"It was an extensive task to merge the two programs because we essentially had to review all product categories. For example, Our Best was strong in the non-food area whereas Our Compliments wasn't."

Sobeys' goal is to continue to raise private label brand awareness through increased trial using a national marketing strategy supplemented by regional promotions.

Although Macdonald wouldn't confirm the latest figures, private label accounted for about 24% of Sobeys sales in 1999.

"Markets vary, with Quebec being the fastest-growing area because it has the lowest share development," said Macdonald. "Our two major promotions occur during the summer and fall/holiday season."