Safeway, Daymon to Part Ways

JULIE GALLAGHER and ELLIOT ZWIEBACH

PLEASANTON, Calif. — As part of a move aimed at bringing its corporate-brand-building responsibilities in-house, Safeway here will end its five-year relationship with Daymon Worldwide. The private-brand broker declined to comment.

"Given the strategic importance our own brands play in our future as a retailer, we thought it would be better for Safeway employees to manage the process instead of a third-party broker," Brian Dowling, a Safeway spokesman, told SN. Safeway will end its relationship with Daymon Worldwide effective May 28, he said.

In its place, Safeway will create a new program called Safeway Direct Connect to facilitate the ability of suppliers "to work directly with the chain to grow our business together," Dowling said. "The new model is designed to accelerate the growth of Safeway's consumer brands business."

“The move signals that [Safeway] is looking to develop more long-term and more sophisticated relationships that revolve around ‘how do we satisfy the shopper?’ more so than ‘how do we drive the lowest cost out of this?’” observed Jim Hertel, managing director of Willard Bishop. “Safeway’s private-brand suppliers should think about ‘what am I going to have to invest in to be the type of supplier that will rise to the top?’ Historically it would have been all around being a low-cost producer, and that’s probably going to change a little bit.”

Safeway’s suppliers will likely have mixed feelings about the change, noted an industry observer who requested anonymity.

“They don’t like paying commissions to Daymon or having them stand between themselves and the retail buying organization,” he said. “On the other hand, Daymon is a powerful advocate for private label and has a very strong marketing/merchandising team.”

Hertel expects at least some retailers will follow Safeway's lead and work independently of a private-brand broker.

"Some folks look at the Daymon relationship as essentially free labor and expertise that can be deployed in the different directions of the retailer's choosing," said Hertel. "Others will look at it, in my opinion, as Safeway did, and say, 'If this is going to be a core competency, we need it in-house and not being delivered by a third party."

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