ON THE RIGHT PATH

Stephanie Fagnani

The customer is always right, and supermarket shoppers are no exception. Much as a sweater would be judged on the quality of its fabrics and its price value, foods must pass a number of criteria along the route that leads to consumer satisfaction. However, just as different shoppers would choose different colors of that sweater, an array of food choices must be supplied to reach those who hunger for a certain variety in their diets.

Retailers are continually finding ways to reach out to niche consumer markets through their high-quality, lower-cost, private-label offerings. SN has identified three areas -- the natural and organic arena; items designed for the Hispanic consumer; and products targeted toward kids -- that present pockets of opportunities for those grocers savvy enough to take full advantage of current market trends.

Organics

The natural and organic food industry has come into its own over the past several years, evident in the number of vendors exhibiting their wares at the Natural Products Expo trade show, held earlier this month in Washington. Too, the industry is rife for continued growth, particularly due to growing public concerns over obesity and healthful eating.

For supermarket retailers looking to stay on the forefront of this trend, having an extensive private-label program that targets these markets presents limitless opportunities.

"The opportunity really is in store brands right now," said David Van Meter, organic private-label sales manager for The Wizard's Cauldron, a manufacturer of dressings, condiments and sauces for the natural-food consumer, located in Yanceyville, N.C. "There is just a handful of really recognized names in the organic industry as far as a brand name [like Amy's and Muir Glen], but for the most part, there's no real strong national-brand equivalent."

For retailers, presenting private label as a storewide program that can take the place of the national brands is a main goal. Yet even more possibilities exist in the organic realm, Van Meter told SN.

"If they can offer a private-label organic item the same as a national-brand equivalent non-organic, for instance like an organic coffee vs. a Starbucks non-organic coffee at about the same price, consumers will give the private label a shot."

Many of the leading chains have already set in place store-branded natural and organic programs, which help them convey that they are looking out for the health of their shoppers and that they have done their homework.

Wegmans, a leading retailer headquartered in upstate New York, touted its cutting-edge approach to its "Food You Feel Good About" line online in a column by Mary Ellen Burris, senior vice president of consumer affairs, earlier this month.

The news is the complete removal of trans fats from the line as of Sept. 1. Wegmans shoppers are directed to look for the yellow banner, which signifies a FYFGA item, to avoid trans fats and to shop in Wegmans Nature's Marketplace, where all products -- including Wegmans Organics -- are free of trans fats.

Personal as well as environmental safety are main bullet points in Kroger's natural and organics store-brand program. The Cincinnati-based retailer's "Naturally Preferred" products, which include items such as soy milk, potato chips, honey, pasta, cereal and baby food, are said to originate through organic farming methods that protect the land "to produce foods that are both health-conscious and earth-conscious," according to the company's Web site.

While the food channel's early adopters of the organic genre, like Whole Foods and Wild Oats, will most likely remain top choices for the highly dedicated organic consumer, the aforementioned efforts can help tempt an organic-curious consumer who only shops the mainstream big-box retail channel, according to Katherine DiMatteo, executive director of the Organic Trade Association, Greenfield, Mass. Stores that have already made inroads in the quest for shopper loyalty through their non-organic items can carry that goodwill forward, she said, "because if the customer knows the store label for its taste and its value, then they may try a store label before they even try a brand-label organic."

Counting on that very real possibility, Harris Teeter, Matthews, N.C., hawks its "Naturals" line through declarations of superior taste, saying of its Naturals Organic Apple Juice: "From the first refreshing sip, we were hooked on the perfect blend of Rome Beauty, Golden Delicious and other organic apple varieties that make our juice tastefully sweet and crisp."

With taste being of utmost importance, this type of message can really spark purchases. After all, surveys show that 44% of respondents said they would buy an item if it meets their needs, and "that's a great group to tap," DiMatteo concluded.

Hispanics

It's no longer a secret that Hispanics are the fastest-growing ethnic group in the United States. It's also no secret that the Hispanic designation encapsulates individuals with roots in various regions, like Mexico, Puerto Rico and Ecuador. Identifying what form of Hispanic consumer base is shopping at their stores is the first step retailers must take in identifying the right private-label program to offer, sources told SN. Once that has been determined, a certain list of must-haves must be met when marketing store brands to this burgeoning consumer group.

"Have you done all the things that you are going to need in a store to attract the Hispanic? Do you have quality produce, fresh meats, a section for authentic Hispanic products, bilingual cashiers and bilingual signage?" asked Allen Lydick, a consultant in the Hispanic food business and president, owner and operator of Mexigrocers.com, an informational Web site.

H.E. Butt, San Antonio, segments its product selection based on consumer panel data culled in individual stores to make sure it is targeting the precise niche of Hispanic consumer in every region in which it operates, according to Mexico-based Andrea Wagner, director of the retailer's "own brand." Pinpointing the acculturation of the shopper is also a key ingredient to success, as it determines how Americanized the consumer is or is not. "They may not speak English, or may still cook a lot by scratch," she told SN.

"I think the biggest problem that we have is in people underestimating how knowledgeable the Hispanic trade is in shopping. They are looking for value just like we are," said Ed Sacks, president of Premier Marketing International, Richmond, Va. His company helps retailers, including Winn-Dixie and Acme Markets, identify what stores are Hispanic trade stores, and then supplies them with one of two proprietary product labels: Comida Sabrosa or Siempre Lo Mejor, each of which covers foods categories including spices, cheese, canned goods, frozen foods and tortillas.

While looking for value, the Hispanic consumer is also dropping more dollars in supermarkets than their Anglo counterparts, he added.

"They are spending 25% more than the average consumer because we're all going out to dinners and everything else, and they are going home and cooking meals."

All of this presents retailers with "a tremendous opportunity," according to Sacks, who noted that small bodega stores still exist because the mainstream supermarket has not recognized how to appeal to this customer.

"It's not a business where you can just dip your feet in the water. You've got to get in, and that's what we do -- we show people how to get in without drowning. The companies that recognize that today will be in a better position 10 years from now. Sure, you look at it now as a small segment of the market, but 10 years from now, the guy who put the right foundation here is going to be so much further along than everyone else," Sacks said.

H-E-B has a distinct advantage in reaching these shoppers through it own brand labels, as it operates 20 stores in Mexico and is able to source products in Mexico for sale there and also bring them across the border for sale in the United States, Wagner said.

Yet having the right product on the shelf is not the only factor in appealing to Hispanics. Product, communication and atmosphere go hand in hand.

To that end, H-E-B runs television ads for its own brand in both English and Spanish, as well as plays Spanish music in specific stores. Anything to help make the shopping experience comfortable for Hispanic consumers, she said.

"The Hispanic piece of the market is the largest minority now. If retailers don't take that into consideration, that customer will go somewhere else," Wagner said.

Kids

There is nothing small about the growing importance of kids as consumers. Oftentimes, through targeting the shoppers of tomorrow, retailers can also captivate today's shopper, thereby using their private-label products to bridge generation gaps. All it takes is the right product formulation, packaging and marketing program.

"Kids these days mature earlier than they used to. They are starting to become the decision maker when they go to the store vs. mom," said H-E-B's Wagner. "[Younger] kids have different needs than older kids, and we want to make sure that we fulfill them. We want to make sure the products are interesting for kids, but acceptable to moms. So we're not going to do purple ketchup and that kind of thing," she added.

Her chain's H-E-Buddy line, which uses a cartoon grocery-bag character as its draw, includes items like vitamin-fortified cereals, fruit juice with vitamin C, and a yogurt line called Kidsters that, through a special formulation, presents blueberry yogurt in a sky-blue color, banana yogurt in florescent yellow and strawberry in a beet-red hue.- "We want to make it fun for the kids so they learn how to eat healthy, but also make sure that it has the added benefits," said Wagner.

Super Store Industries, Lathrop, Calif., takes a similar approach. Owned by Raley's and Save-Mart Supermarkets, the company designs and develops all the private brands for both retailers under the Sunnyside Farms label. What started out as a line of chocolate "Cowabunga" milk has blossomed to include items like hanging bagged candy, macaroni and cheese with extra cheese, toaster pastries, fruit pies in boxes, ice cream, smoothies and an item called Milk Bread, which has the equivalent of eight-ounces of milk in each serving.

"We try to broad appeal to kids and their families. We position it so the kids can see it on the shelf and it's fun and everything, but then mom and dad taste it, too, and go, 'This is pretty good,"' said Jim DiMataris, director of marketing.

Like many retailers that cater to children through private-label lines, overseas retailer J Sainsbury developed its Blue Parrot Cafe line with the help of consumer panel groups that included both parent and child. Today, there are more than 150 Blue Parrot Cafe food products in categories like cereal, canned pork and beans, vegetables and frozen entrees. All products in the line limit the use of additives, fat and salt, and also include options for children with special dietary needs.

Establishing that link with the child, as well as with the parent, can only benefit a retailer in the long run.

"They [kids] are going to become our future shoppers. Competition is only going to get higher. You've got to bring your customer in when they are young to build that loyalty and that relationship," Wagner of H-E-B said.