THE PRIVATE SECTOR

RICHARD TURCSIK

Private label remains a powerhouse for supermarkets, with the Top 10 categories accounting for more than $6.25 billion in annual sales.

Retailers continue to build their private-label programs through extensive advertising, massive displays, in-store sampling and a constant tinkering and updating of labels. And the Top 10 private-label Center Store categories -- ice cream, carbonated beverages, frozen plain vegetables, sugar, canned vegetables, cold cereal, bottled juices, canned/bottled fruit, cookies and frozen juices -- are no exception.

"You promote the Top 10 categories because you have them in your ad frequently. That is your basic program," said Michael Rourke, senior vice president, communications and corporate affairs at A&P, Montvale, N.J.

Private label has long been a key sales strategy at A&P, with the chain being one of the innovators of the concept, manufacturing its own baking powder and selling it under the A&P brand over a century ago.

In recent years, A&P has had great success with its Master Choice line of superpremium private-label products. Although Master Choice primarily covers specialty foods and delicacies, some products in the Top 10 categories, like chocolate chip cookies and muesli cereal, are included in the mix.

Other retailers are also having success with the Top 10 private-label items.

"Private label is important to grocery retailers because of the profitability behind it. Most companies are trying to build up their private-label business, and Randalls and Tom Thumb are no exception," said Peter Kemp, senior category manager for Randalls Food Markets, Houston.

Advertising and promotion are important to keeping the Top 10 items in the spotlight, retailers said.

"To promote the Top 10 categories, Harris Teeter is using a 'business as usual' approach. We conduct regular promotions, watch our shelf space and update packaging," said Ruth Kinzey, corporate communications manager, Harris Teeter, Charlotte, N.C.

"We stand behind our brands because they are high quality. We want to make sure we have the correct selection at store level, and we will do whatever it takes to drive volume in that category," said Kemp of Randalls.

To promote its line, Randalls uses consistent ads and sharp retails. It also redesigns labels that have become old-fashioned and frequently demos both new and existing private-label items.

"Besides being promoted at appropriate times throughout the year, we run private-label sales [with between 30 and 60 items] on a regular schedule every six to eight weeks," said Mike Shultz, senior vice president, Hughes Family Markets, Irwindale, Calif.

Sales of most of the Top 10 categories are up at Hughes, said Schultz.

According to Information Resources Inc., Chicago, ice cream remains the top Center Store private-label item. For the 52 weeks ended Dec. 29, 1996, private-label ice cream had sales of $975.6 million, a 6.7% increase over 1995.

For example, Harris Teeter has had remarkable success with its Hunter Farms superpremium ice cream, which is produced at the retailer's own dairy plant.

"Hunter Farms All-Natural Ice Cream is very popular with our customers. That item is received very well, and is a top seller for us. We have excellent sales with the brand," Kinzey explained.

Ice cream is followed by carbonated beverages, which had sales of $856 million, a decrease of 1.6%. Much of the decrease can be attributed to price wars instituted by industry behemoths Coca-Cola and Pepsi, and consumer interest in bottled waters, iced teas, juices and new-age beverages.

But some retailers are still witnessing growth in the carbonated beverage category. For example, Big Y Foods, Springfield, Mass., is adding new World Classics flavors to its lineup. World Classics is a superpremium private label produced by Topco Associates, Skokie, Ill., which also manufactures the Kingston brand.

"We are building brand loyalty by promoting the best of the best carbonated beverages, between our upscale private-label World Classics brand and our Big Y brand, which is promoted weekly," said Phil Schneider, director of grocery.

With sales of $740.1 million, a decrease of 0.67%, private-label frozen vegetables are third on the list.

"We promote our top private-label frozen foods through our weekly circulars, using allowances from the manufacturers," said Val Vivenzio, director of frozen foods at Big Y.

"The top frozen-food categories are selling very well at our chain," he added, noting that packaging changes on frozen products are conducted as needed.

Sugar is the fourth largest private-label item, with sales of $689.8 million, a 6.09% increase. Of the Top 10 items, it has the largest percent of category sales -- 57.4%.

"Our top private-label item has always been sugar," said Gary Price, vice president, merchandising, Minyard Food Stores, Coppell, Texas.

Private-label sugar is so popular at Minyard that the chain stocks both 4- and 5-pound bags of its Hy-Top sugar from Federated Foods.

In the canned vegetable aisle -- the fifth largest private-label category with sales of $645.3 million, an increase of 7.43% -- promotion also drives sales. The Elizabeth, N.J.-based Wakefern Food Corp., which is the merchandising arm for ShopRite Supermarkets, uses an annual "Can-Can Sale" to drive sales, for example. During the event, both national and private-label items are featured, but private-label items are often at such hot prices that consumers stock up on them by the case.

"Canned vegetables react very well to a twice a quarter promotion," noted Big Y's Schneider.

Despite price wars by the big three manufacturers, cold cereal remains a private-label Center Store mainstay, with annual sales of $531.8 million, an increase of 1.67%. Much of the growth is coming from new varieties, many of which are replications of successful national brands.

"In cold cereal, we are now up to over 30 SKUs, and we were at less than 10 two years ago," said Schneider.

The bottled juice category is also a strong one for supermarkets, exhibiting annual sales of $480.2 million, a 7.52% increase.

"We have added apple juice with added calcium, and Vitamin C is also big," Schneider said. However, he added, "for the most part bottled juices are slow, except for the cranberry blends. They are promoted weekly."

The eighth largest category is canned/bottled fruit, with sales of $471.3 million, a 4.32% increase.

At Hughes Markets, canned fruit is one of the growing categories.

"We are currently reviewing categories of canned fruit, canned tomatoes, ketchup, and assorted general merchandise. We have approximately 450 [private-label] items and we plan to keep expanding the line as long as there are opportunities," Shultz said.

Riding high on the popularity of items such as superpremium chocolate chip cookies, which in many circles are considered better than national brands, the cookie category saw a 9.41% sales increase to $444.1 million.

While private-label frozen-juice sales are still strong, rounding out the Top 10 list with sales of $419.7 million, sales declined 3.71% over the past year. Much of the decline is attributed to the growing popularity of refrigerated fresh juices, store-squeezed juices and more varieties of shelf-stable juices.

TOP 10 PRIVATE-LABEL ITEMS

Item $ sales (millions) % change % of category

1.Ice Cream $975.6 6.70% 26.3%

2.Carbonated

Beverages $856.0 -1.60% 7.7%

3.Frozen Plain

Vegetables $740.1 -0.67% 43.9%

4.Sugar $689.8 6.09% 57.4%

5.Canned

Vegetables $645.3 7.43% 31.5%

6.Cold Cereal $531.8 1.67% 7.1%

7.Bottled Juices $480.2 7.52% 16.0%

8.Canned/

Bottled Fruit $471.3 4.32% 32.6%

9.Cookies $444.1 9.41% 13.0%

10.Frozen Juices $419.7 -3.71% 31.3%

For the 52 weeks ended Dec. 29, 1996.

Source: Information Resources Inc., Chicago.