Private School

Catch ‘em when they are young and they will be hooked for life. This is an adage that has proven especially true along Madison Avenue, where products running the gamut from breakfast cereals to Happy Meals have become ingrained as comfort foods to millions.

Perhaps that is why Aldi introduced Little Journey—a complete full line of private label baby products from newborn diapers to toddler foods. According to Aldi officials, Little Journey baby foods include infant cereals, organic puree pouches, Little Munchers baked whole grain corn snacks, Yogurt Bites and whole grain Puffs.

Little Journey was launched at the request of shoppers who are continually demanding higher quality and more functional products from retailers and manufacturers.

“The Little Journey product line is another way we’re using our shoppers’ feedback to make grocery shopping as simple and convenient as possible,” says Liz Ruggles, director of marketing at Aldi, based in Batavia, Ill. “With Little Journey we’re able to better support and grow with our shoppers and their families—from those first smiles to the first day of preschool and beyond.”

According to the PLMA (Private Label Manufacturers Association), based in New York, store brand sales reached a record $118.4 billion in 2015, an increase of $2.2 billion over 2014. In the supermarket channel, store brand sales were $62.5 billion, even with 2014, but over a two-year period sales increased 2 percent, or $1.1 billion. As per these numbers, nearly one of every four items sold in a supermarket is a store brand.

Supermarket operators are looking to bump those numbers up even higher as they battle an increasing number of outlets, including online shopping, for the consumers’ dollar, say industry observers.  

“It is strategically important to the account to build their brand to ‘own’ their customers,” says Paul DaRe, vice president, sales and marketing at Furlani’s Food Corp., the Toronto-based manufacturer of the Furlani name brand line of frozen garlic breads, along with private label. “Some do that better than others. It adds a value counterpoint to some of the brands.There is also an ability of private label to keep the brand honest in pricing, and keep the ‘brand tax’ somewhat out of the equation.”

As a result, retailers are now giving their private label more prominent shelf space, say observers.

“We have seen a real change in the way retailers take ownership of their brand,” says J.B. Weiler, executive vice president of sales at Cornfields, the Waukegan, Ill.-based manufacturer of G.H. Cretors Popped Corn and Hi I’m Skinny Sticks salty snacks, along with a substantial private label operation. “Retailers have recognized that their private label program generates traffic, profit, volume and loyalty. Retailers are their own captains and are no longer taking a back seat on front-and-center merchandising.”

By teaming with a company such as Cornfields, retailers can offer their shoppers a popcorn with equal or higher certifications, including gluten- and GMO-free, organic, whole grain and kosher, than the national brands, Weiler says.

“We offer consumers the opportunity to trust their retailer’s brand, not only as the price leaders versus national brands, but as a brand that will provide additional health benefits,” he says. “Cornfields fries, bakes, extrudes and pops—both air and wet. We also have ‘candy kitchens’ for caramelization and do chocolate molding, drizzling and enrobing on site.”

Hickory Harvest, an Akron, Ohio-based manufacturer of trail mixes, offers private label roasted and flavored nuts, trail mixes, yogurt-covered and flavored pretzels, chocolate covered nuts and fruits, along with organic options.

“All are offered in a number of packaging options including deli tubs, stand-up packaging, single-serve packaging and holiday trays,” says Mike Swiatkowski, vice president of sales.

He notes that the trail mix category is a great way for retailers to enter the specialized private label realm.

“Nuts and trail mixes are some of the top categories for private label due to a limited national brand presence,” Swiatkowski says. “A regional retailer certainly has an advantage in capturing market share with strong margins in these categories. The nuts and snack mix markets have expanded over the past five years and continue to expand, which in turn drives more private label opportunities for retailers.”

Hickory Harvest also offers bulk quantities of all of its products in five- and 25-pound cases, and can customize offerings. “We can manufacture almost any combination of mixes from those that are filled with sweet treats, to healthy varieties to seasoned blends of trending flavors,” Swiatkowski says.

In the coffee category the biggest growth trend is the single-serve K-Cups and the same is true for private label.

“Private label has a significant presence in all segments of the coffee category, including cans, bags of ground and whole bean, and single-serve cups,” says Jerry Gilbert, vice president of sales at Mother Parker’s Tea & Coffee, based in Mississauga, Ont., Canada, with U.S. offices in Ft. Worth, Texas. “Private label coffee is growing faster than the rest of the category and is being fueled by tremendous growth in the single-serve segment. Whole bean coffee is also trending up in private label, and while canned coffee has been impacted the most by single-serve growth, declines in the segment have slowed for both brand and private label over the past year.”

Distant Lands Coffee prides itself on its sustainability and social responsibility platforms.

“Our team works with clients to utilize proven branded product strategies in building their private label coffee business,” says Henry Stein, senior vice president of sales for the Renton, Wash.-based company.

Retailers should do their homework when selecting a private label supplier and ensure they use quality ingredients that meet or exceed the national brands, say observers.

“Fremont uses 100-percent California tomatoes in our ketchup, just like Heinz, Hunts and Del Monte,” says Mike Hackbarth, vice president, private brand and customer demand at The Fremont Co., based in Fremont, Ohio. “We source specific tomato varieties regionally in California during the peak of the harvest to ensure the best tomato paste is used specifically to make ketchup. Heinz does the exact same thing. California supplies more than 30 percent of the world’s tomato paste needs and is looked upon as the best source.” He adds that a private label competitor uses a combination of California paste, along with Midwest tomatoes in the summer and fall.

“Using a completely different key raw material source, different varieties and processing creates inconsistency in the ketchup produced throughout the year,” Hackbarth adds.

While deep discounting on secondary brands can cannibalize private label sales, retailers can combat that by properly merchandising their store brand, Hackbarth says.

“Focusing on premium brands and shielding ads and merchandising with a quality private brand offering will provide the consumer with a value perception,” he says. “The ketchup category has multiple sizes and package styles, which is overkill. Strategically build a product mix based on customers’ needs and avoid duplication with sub brands, package styles and flavors.”

Similar scenarios play out in other private label categories.

“When it comes to garlic bread there is a mix of consumers,” says DaRe. “Some are brand loyal, including being loyal to private label, while others are more apt to switch brands according to what is on deal.”

DaRe says retailers can increase frozen garlic toast sales by properly merchandising it. “There is a high level of correlation between the Italian entrées, frozen lasagna in particular, and garlic toast. They end up in the same basket quite often,” DaRe says. “So either a secondary display, an end cap display or even a pure secondary permanent display with frozen lasagna would make sense.”

Jeff Gehres, senior director of sales and product development at Request Foods, a private label frozen dinner manufacturer based in Holland, Mich., says growth in that category is coming from skillet bag dinners and the newer slow cooker meal kits designed for the Crock Pot.    

“It is good to get a new private label item on the end cap when it is first introduced to get that initial trial,” Gehres says. “When merchandising the product next to the national brands the customer can see that there is a cost savings and a like item in that category.”

Even though the category is dominated by Nestlé and its Stouffer’s brand and ConAgra Foods with its Healthy Choice and Marie Callender’s brands—which are often featured on deal—Gehres says there is still room in the freezer case for a private label. “The retailer can develop a quality private label frozen dinner and the consumer will only find that product under their private label brand at their stores,” he says. “This should keep customers coming back.

Of course private label goes beyond just food stuffs. One of the largest private label growth areas is within household paper products. According to observers, new technologies are a leading driver of sales.

“U.S. Alliance Paper is applying TAD (Through Air-Dried) technology to a wider array of premium products as consumers look for “fluffier,” and greater absorbency,” says Steve Saraf, vice president of sales for Edgewood, N.Y.-based U.S. Alliance Paper. He adds that sales are also being stimulated by shoppers looking to pantry-load. “There is greater demand for ‘mega’ and ‘giant’ rolls, primarily in bath tissue and paper towels, as well larger club packs,” he says. “U.S.

Alliance Paper is continuing to innovate products and packaging that deliver on convenience as well as on sustainability through recycled fiber and certified virgin fiber.”