SAFEWAY PUTS ON THE DOG IN PET STORE FOOD FIGHT

RICHARD TURCSIK

OAKLAND, Calif. -- In the dog-eat-dog world of premium pet foods, Safeway here is using its Safeway Select private label to take a bite out of the pet superstore market share.

In some markets, Safeway is using its weekly circulars to tout its Safeway Select lines of pet foods as an attractively priced alternative to expensive pet store exclusive brands. Safeway began rolling out the Safeway Select line of pet foods two years ago as an upscale alternative to its mainstream Trophy brand of products.

For example, last month Safeway's Phoenix division ran a vertical strip in its weekly circular alerting shoppers that "If you've been buying professionally formulated pet food at your favorite pet food store. STOP! You're paying too much!" The ad then listed 14-ounce cans of Safeway Select dog or cat foods at two for $1 and Safeway Select premium cat food in 6-ounce cans at four for $1.

Also featured was its mainstream Trophy brand. Trophy Tasty Nuggets dog food in a 20-pound bag was $4.99, $1 off, and a 10-pound bag of Trophy cat litter was 99 cents, a savings of 50 cents.

Debra Lambert, a Safeway spokeswoman, told SN the Select line of pet foods has grown to encompass 42 stockkeeping units -- 17 in dog food and 25 in cat food -- since it was first introduced in mid-1993.

"We are using Safeway Select as a vehicle to compete against the pet food supercenters. The whole idea of Safeway Select is that it is a premium pet food designed to go against the pet foods sold in the specialty stores, but at supermarket prices," she explained.

"We have been constantly adding new items to our Safeway Select pet food line on an ongoing basis, and there are more items to come," she added.

Industry observers told SN

Safeway has a good chance of winning back market share lost to the PetsMarts of the world if the Select line is properly merchandised.

"What Safeway has chosen to do is brilliant!" exclaimed Burt Flickinger, an industry consultant with A.T. Kearney, New York.

"At a time when the entire industry is under siege from pet category dominant retailers, Safeway is working very closely with its manufacturers to put together programs to reintroduce consumers to the pet food proposition in major supermarkets," he said.

"The attempts by the branded manufacturers to come up with a premium pet food product have failed. But it is possible where the branded manufacturers have failed the well-positioned premium private label can succeed," said Gary Giblen, managing director at Smith Barney, New York.

Flickinger said, "Safeway has taken the pet food category really one level higher than any of the branded folks have done. In fact, the Select line could be a major turning point in supermarket retailing in terms of fighting back the category killers and having the supermarkets starting to win on some of the key categories that they have lost volume on over the last few year.

"Safeway is building a dam right in the middle of where all of the erosion is coming from, stopping the outflow and recapturing the consumers who really did want to do one-stop shopping but didn't have the option of super premium in any mainstream retailers prior to this Safeway initiative," Flickinger said.

He noted that Safeway is merchandising Select at chest to eye-level positioning, while Trophy has eye-level positioning, and the national brands still have prime space.

"Safeway is supporting their pet food department with very effective shelf management in terms of items stocked and line optimization. They are not carrying as broad a depth as other retailers are carrying. They have the key sizes, key flavors, key brands," Flickinger said.

Jeffrey Hill, managing director at Meridian Consulting Group, Westport, Conn., said Safeway is getting very aggressive in trying to market its premium private label across many franchises.

"The notion of comparing it against a pet center product, i.e., Iams or Hills Science Diet, is an excellent strategy to try to reinforce the credibility of the franchise," he said.

Bill Spencer, president of the Consulting division of Gage Management, Minneapolis, said not only is Safeway looking to recapture some volume lost to Hills and Iams, but because the margins on pet food are "pretty attractive" it is a good financial move too.