DAYMON TO REWORK KMART PRIVATE LABEL

LISA SAXTON

TROY, Mich. -- Kmart here has solicited the services of Daymon Associates to rework and shore up its private-label program.

Mary Lorencz, manager of media relations for Kmart, confirmed the alliance between the mass merchandiser and the Stamford, Conn.-based master broker.

Lorencz offered no further information on Kmart's plans, and officials at Daymon did not return SN's calls on the subject.

Nonetheless, industry observers said, the move fits right into the overall restructuring of Kmart, something that has been taking place throughout the past year.

"They've been negotiating it for a long time," said Burt Flickinger, a management consultant based in New York. "Daymon would work closely with the Kmart organization to source Kmart exclusive private-label products from all over the world in every single major food and beverage category.

"Daymon's one of the best houses internationally, so it's an ideal relationship across the two companies.

"This move puts Kmart in exclusive brands with food, beverage and household items in a big way for the first time in its history," said Flickinger. "It will really help Kmart catch up and move up the track to close the gap between Kmart and Wal-Mart, between Kmart and Walgreens, and all the major supermarkets, mass-volume retail and chain drug accounts that have at least a five-year head start on Kmart in [the private-label] area."

"I think this is a sign that the group running the merchandising and marketing side of Kmart today is becoming much more effective," said Sidney Doolittle, a

partner with the Chicago-based retail consulting firm, McMillan/ Doolittle. "They're taking action, which is a good sign, because they need to.

"Wal-Mart, with a strong, very good private-label program, has made Kmart much more vulnerable. So Kmart is beginning to address some of the key issues that consumers are concerned about," said Doolittle.

Jeffrey Hill, managing director of Meridian Consulting Group, Westport, Conn., said a "key plank in the mass merchant platform today is clearly private label. The move to hire Daymon is likely a suggestion that private label will become an increasingly important part of the portfolio.

"The careful balance of nationally branded product and private label and managing that mix is critical to the success of the mass merchants," said Hill. "Wal-Mart has made private label a significant part of its strategic platform. So has Target. Kmart must wrestle down its level of commitment to this area."

Ed Comeau, an analyst with Lehman Bros., New York, said the Daymon alliance bodes well for the future of Kmart's new management team.

"Historically, I think the tendency as a company was to do everything themselves in terms of technology, retail, merchandising, private label. And they generally made a mess of it. Now the new management at Kmart is of the mind to let more experienced, better qualified parties take over their business, whether it be merchandising, distribution, etc.," said Comeau. "There's a lot of restructuring at Kmart. Everything is wide open for re-examination."

Flickinger said all the "major bellwether categories" will be handled by Daymon, including food, beverage and all the "monster household categories, such as heavy-duty laundry detergent, bar soap, light-duty dish liquid soap, automatic dishwashing detergent and hard-surface cleaners."

Another significant aspect of the partnership, he said, is that Kmart is making a commitment to exclusive brands, which will help reinforce the new management's strategy to make Kmart, as a store, the star of the campaign.