PATHMARK INTRODUCES UPSCALE PRIVATE LABEL

STEPHEN DOWDELL

WOODBRIDGE, N.J. -- Pathmark Stores finally has entered the arena of premium private label.

The chain is introducing a 15-item, distinctively packaged Pathmark Preferred line throughout its stores in the New York metropolitan area this week in a bid to attract new customers and broaden its marketing appeal.

"This is an attempt to reach into the upscale market, and become competitive in an area of product selection that we have not really addressed until now," said Stan Sorkin, vice president of public affairs for Pathmark. "This line represents value in a different sense for Pathmark, with regard to the price-quality relationship."

Sorkin said that Pathmark will continue to introduce new Preferred products throughout 1994 and is likely to have the Preferred label dispersed "throughout the store" within the year.

The initial line brings an upscale store-brand entry into categories such as cookies, ready-to-drink iced teas, juices and russet potatoes. Imported dry pasta and pasta sauces are on deck, Sorkin added.

It's a significant step for a chain that has spent 25 years building and maintaining one of the industry's strongest private-label programs, with the mid-tier Pathmark brand and later, one of the first store-brand generic programs, No Frills. Together those programs account for about 24% of Pathmark's total grocery, frozen and HBC distribution, with more than 3,300 items under one or the other label.

Those two private labels have also helped solidify Pathmark's position as a value retailer in the market, with particular appeal to

families and economy-minded shoppers.

The new label breaks that mold, with products to be marketed as better than the quality offered by the leading brands in their given categories, at a price point set lower than everyday national brand prices but higher than the Pathmark label.

The strategy includes an element of defense as well, especially given the progress that competitor A&P, Montvale, N.J., has made with its extensive Master Choice premium line. Grand Union, Wayne, N.J., also preceded Pathmark in the upscale store brand arena by introducing a Grand Classic label in soft drinks and other lines last year.

"We've not had the ability to reach upper-income classes before this, and as a result they have tended to go somewhere else," Sorkin said.

After apparently watching A&P expand its Master Choice portfolio, Pathmark decided to try to redirect some of the flow of upper-end consumer traffic its way with its own premium label.

Progress in bringing the label to market, however, was interrupted by the Federal Government's imposition of the Nutrition Labeling and Education Act, mandating massive changes to food labels and slowing down Pathmark's suppliers, said Sorkin.

Pathmark will apparently not be in a hurry to catch up, however. "We will be more select with what goes under the label than some others," Sorkin said. "Otherwise, we would have gone into a me-too type of program that some other chains, including some of our competitors, have done."

Basically, Pathmark would work under criteria that would focus on premium products that are clearly distinct, from both counterparts in the national brand arena and its Pathmark label.

Industry observers said, however, that even with a careful approach to selecting and distinctively marketing its Preferred products, the chain could still risk confusing consumers and harming the franchise it has built with the Pathmark brand.

"Pathmark has one of the most highly developed private-label brands out there at the moment, and it is already fairly stratified," said Mark Husson, a vice president at J.P. Morgan, New York, and a former private-label strategist for British retailer Tesco.

"About the only thing missing, perhaps, is an upscale tier. But Pathmark, like Kroger Co., has spent a lot of time saying its basic brand is already consistently high quality. It will have to be careful how it presents this new tier in relation to the Pathmark brand, to avoid a mixed message about quality," Husson said.

In fact, in at least two examples of new line's packaging, for cookies and iced tea, the words "Pathmark Preferred" are prominently used, and are quite distinct from the familiar red, white and blue Pathmark logo. At the same time, however, that logo also appears prominently on the packages.

"Calling it Pathmark Preferred and using the Pathmark brand logo risks transferring the existing brand image to the new, premium product. Master Choice, on the other hand, is clearly distinct from other A&P brands, and does rely on the A&P name," Husson commented.

"Will that be a problem for Pathmark? It is potentially a mixing of messages. At a clearly upscale retailer, that might not be a problem at all. But Pathmark is a family, price-oriented chain, not a Food Emporium. It will be interesting to watch the impact," he said.

Husson and other observers agreed the chain is clearly seeing the need to respond to a growing emphasis on higher quality food retailing in the market, and acting on that vision is a smart move.

Another store-brand expert, Leon Galitsin, senior vice president at private-label nonfood supplier Confab Cos., Baltimore, said the new label is evidence that Pathmark is investing in a stronger focus on the store as a brand. "I think it is significant that it chose to use 'Pathmark' on the label. Remember, the company itself is no longer Supermarkets General, but now is Pathmark."

Sorkin said the chain is supporting the label's debut in its full-color rotos, along with extensive point-of-sale materials including "unique cost-per-measure labels, shelf extenders, aisle danglers, shopping bags and endcap signing. We will continue strong support print, and will also use radio and in-store broadcasting to communicate the message about the new lines," he said.

The packaging itself will reinforce the message, he said, with an emphasis on ingredients and other elements that make the Preferred product distinct.

Pathmark is using Daymon Associates, New York, to handle product sourcing, Sorkin said.