AFTER ONE YEAR, KROGER'S PRIVATE SELECTION IS A HIT

DAN ALAIMO

CINCINNATI -- Rapidly expanding in item count while contributing to the retailer's bottom line, the upscale Private Selection line is among Kroger's most successful product launches ever, reported a spokesman.

Introduced on Oct. 1, 2000, Private Selection now accounts for about 6% of the company's private-label sales and has increased from 300 to 470 items, said Gary Rhodes, director of corporate communications.

"The brand is being very well received by customers, and corporate brands as a whole are one of the growth engines driving the company," he said. "I would expect that to continue, especially in a weaker economy."

Kroger has a total of 5,500 private-label items -- 3,500 are produced by the company itself in its 41 manufacturing facilities, Rhodes said. He could not say how many of the Private Selection items are made by Kroger.

Citing numbers disclosed in the earnings conference call for the second quarter, Rhodes said private label represented 26.6% of grocery dollar sales for Kroger East -- stores operating under the Kroger banner. Meanwhile for Kroger West -- including such banners as Fred Meyer, Ralphs and QFC -- private label was 20% of grocery sales, up from 16% two years ago to 18%.

"What we have here is a vote of confidence in the premium-quality private label," said Brian Sharoff, president of the Private Label Manufacturers Association, New York. He noted that many retailers choose to emphasize lower-priced, private-label lines in an economic downturn, but the ones who focus on the higher-quality products see more market share gains.

"As an association, we have never seen the correlation between economic hard times and the private-label growth that the brands have said takes place," Sharoff said.

Sharoff said other top supermarket retailers have adopted the same premium private-label strategy, but an announcement like Kroger's will encourage others to consider it.

"As a precursor to the economic hard times that some people are going to say loom ahead, Private Selection suggests Kroger understands that the best way to build your private-label brands is by having superior quality, superior packaging, superior assortment. That is what consumers are going to respond to," he said.

Kroger has three tiers of private-label: Private Selection, which compares favorably with national brands; store brands under Kroger's banners that represent the majority of the company's private-label stockkeeping units; and the FMV line -- For Maximum Value -- which is a value brand, Rhodes said.