GRAND UNION UPSCALES ITS PRIVATE-LABEL LINE

RUSSELL REDMAN

WAYNE, N.J. -- Refashioning and expanding its upscale store brand, The Grand Union Co. here has introduced a new premium label of more than a dozen groceries.

Called Grand Premium, the line became available in stores in early May, a store source said. Items include tortilla chips, soda, barbecue sauce, cereal, salad dressing, spring water, cookies, microwave popcorn, peanuts, mixed nuts, maple syrup, mustard, spaghetti sauce, olive oil, preserves and refrigerated orange juice.

The top of the front page of a circular promoting the line read, "Introducing a Grand Union Exclusive: Grand Premium Brand . . . Superior Quality at the Right Price!" The Grand Premium logo appeared in the upper left corner, and the label's products and prices were listed on an inside page. The ad did not make comparisons to national brands.

A Grand Union spokesman declined to comment about Grand Premium.

The chain's previous upscale line, Grand Classics, was phased out over the last couple of months after being introduced in late 1993, according to a source familiar with the company. Grand Classics only included soft drinks and nuts, he said. Grand Union decided to revamp its premium store-brand program in late 1994, the source said. That included adding more products to the line and changing its name to better identify it as a preferred brand and as a Grand Union product, he explained.

However, one industry source said that since Grand Union is in bankruptcy reorganization, it should concentrate on national

brands and not take the risk of rekindling a weak premium-label program.

"I think it's a mistake on their part. They're walking down the wrong road," he said. "They have a very strong branded market. I don't think it's in their best interest to push private label. They need to do a better job in marketing the national brands rather than focusing on the private label, which doesn't seem to be growing, at least in the New York market."

Since competitors like ShopRite already have strong, well-promoted store brands, Grand Union should take a different approach by building its national-brand appeal -- especially since the initial upscale label didn't catch on with customers, he noted.

"I don't see why it's going to do any better this time," he said. "I mean, not just in design, but position with the consumer."

Still, some industry analysts said an upscale store brand -- or at least a solid private-label program -- is important for Grand Union because several chains in its Mid-Atlantic trade area already offer preferred lines. Those include A&P and Waldbaum's (Master's Choice), Acme Markets (President's Choice), Pathmark (Pathmark Preferred) and Edwards Super Food Stores (Sensational).

"Premium private labels seem to be all the rage these days among the food retailers, and I think it positions [Grand Union], in some ways, on a more level playing field with competitors. Maybe the thing to do is to avoid not having one," said Chuck Cerankosky, senior vice president at Hancock Institutional Equity Services, Cleveland.

"Having the premium label on top of your store-brand program gives the whole thing a higher appeal, higher visibility and probably a better overall quality image," Cerankosky explained. "I would certainly say if you're the last one on the block to get involved in managing the private-label program as a whole, you're going to have a distinct disadvantage."

But competition isn't necessarily what motivated Grand Union to buttress its premium line, according to Debra Levin, a principal at Morgan Stanley & Co., New York. "Generally, the premium labels help to bolster customer loyalty and also provide greater gross profits," she said. "Grand Union isn't unaware of what the competition is doing. But [Grand Premium] is also probably a move designed to help their bottom line."

"It's generally important to have a strong private-label program," Levin added.