FDI CONFERENCE 1999-10-04

ELLIOT ZWIEBACH

CORONADO, Calif. -- Private label can be a key driver in returning the center store to a more prominent place in the consumer's mind, distributors said here last week at the Mid-Winter Executive Conference of Food Distributors International.(For more on the conference see Pages 12-13).

"The center store produces the largest sales of any department, and we must transform that to our advantage," Douglas B. Stewart, president and chief executive officer of Sobeys, Stellarton, Nova Scotia, said from the audience during a panel discussion on store branding. "We can't rely on P&G or any other manufacturer to do that for us.

"We see private label as a key driver of our future growth and success, and we believe we must take destiny in our own hands and create an exciting range of products beyond fresh in our stores."

Speaking from the stage, panelist Joseph Sheridan, executive vice president of Wakefern Food Corp., Elizabeth, N.J., said it's up to brand manufacturers to revive interest in the center of the store.

"Nonperishables are the economic engine that allows retailers to invest in perimeter departments," he said. "But it's up to manufacturers to drive brands to stay relevant to consumers. But at times center-store brands are going lame in the eyes of consumers, and when we look at that department, we see it driving sales only 10 to 12 weeks a year.

Speakers said the private-label momentum has clearly crossed into the perishables side of the aisle as well.

"Private label was created as a value alternative to national brands, but as consumer trends are changing, perishables are becoming a more important part of store branding, not as a price alternative like private label but as a means of delivering home-meal replacements and natural foods."

Private label extends into the perishables department, he added. "To a shopper, an apple they buy at ShopRite is a ShopRite apple," Sheridan said.

Panelist Marv Imus, owner of Paw Paw Market, a single-store operator in Paw Paw, Mich., said he agreed that perishables is a key driver of business today, "but canned goods are still the core. Consumers still like canned goods, and we try to create marketing strategies around that department."

Imus said many customers are willing to try private-label brands, "and some are very loyal to those items, but we don't try to get customers to switch if they're not interested. We simply deliver what they want."

Besides private label, another key to strengthening a store's identity is market differentiation, the panelists said.

According to Sheridan, Wakefern's ShopRite operators use a database of 4 million customers to help them make decisions on how to brand their stores. "Customers have certain expectations, and what they expect from ShopRite is for us to deliver a safe meal to their families. What we do to reinforce that expectation is how we differentiate ourselves."

Imus said consumer expectations and perceptions are an important part of creating a store's identity. "If we deliver on the perception, then we meet their expectations. But if we say we're something we're not, then we fail."

The same holds true for manufacturers, according to panelist Robert Steele, vice president and general manager for the North America Market Development Organization of Procter & Gamble, Cincinnati.

"We can't be middle of the road -- we must differentiate ourselves to win," he said. "We must be the best at what consumers want."

He said P&G no longer feels focus groups are an effective way to determine consumer needs. "To get an in-depth understanding of what consumers need to make life better, we must go into their homes and spend days following them around to identify the kinds of products they need," Steele explained.

For ShopRite, differentiating itself means talking to 100 shoppers and 100 nonshoppers at each store, "and when a new competitor opens nearby, finding out what points of differentiation that store has and then coming back with programs to compete," Sheridan said.

"To establish points of differentiation, we look at perishables because perishables have quality attributes that allow the consumer to make a choice beyond simply price. There's always a price expectation, and you can't ignore it. But once we cater to customers looking for price and variety, we have to look at other attributes geared to different groups of consumers -- a lot of little rhythms."

According Imus, Paw Paw has built its business on knowing its customers. "For years my father used to know most customers personally, but now we rely on computers to keep track of that information," he said.

When Paw Paw thinks in terms of store identity, "we don't use destination categories," Imus said, "because our entire store is the destination. We've been very successful over the years because of our people and how we execute and deliver what the consumer expects, and we've been able to compete with Meijer, Kroger and a new Sav-A-Lot right across the street."

When the Sav-A-Lot opened, "we tried to determine how it would affect us," Imus said. "But we decided it was not likely a limited-assortment store customer was shopping with us, and we chose not to destroy what we already had to go after another type of customer."