Private Label LessonsFebruary 2, 2018
Progressive Grocer | February 1, 2018 –
Private Label Lessons From Overseas
American retailers looking to improve their private label offerings should pay close attention to what retailers in foreign markets, where private brands have long held sway, are doing to enhance their respective programs.
“U.K. grocery retailer Waitrose is commercializing personalization through a novel take on store loyalty programs by allowing its loyalty card holders to pick their own offers and receive 20 percent off their chosen selection of 10 items,” says Jim Holbrook, chairman and CEO of Stamford, Conn.-based retail services company Daymon. “Many of the offers are for their heralded line of private-brand products.”
Another model he holds up is that of German discounter Aldi Süd, which has “used online crowdsourcing to solicit feedback for new product ideas and designs. In the spring of 2017, Aldi Süd asked shoppers to share their ideas for the ultimate pudding dessert topping on Facebook. The winning idea will be rolled out as a new product across its stores.” Holbrook adds that U.S. specialty grocer Trader Joe’s has adopted a similar approach.
Additionally, in the realm of “private-branded services,” he points to French retailer Carrefour, which in Italy has launched the Blue Box handyman service “as a way to connect local businesses to customers,” while Netherlands-based Jumbo Foodmarkt has rolled out the “Pick & Mix Vegetable Snack Station within the produce section, where shoppers can fill a single-serve plastic container with a variety of snack-sized vegetables of their choosing for a single price.”
Of the latter initiative, Holbrook asserts, “Creative merchandising is something any retailer can employ, regardless of your scale.”
How Private Label Can Compete With the Digital Sector
As pure-play online grocery delivery and meal-kit services gain ever more traction with time-starved consumers, grocers’ private label programs may find a way to hold their own against these admittedly formidable competitors.
Howard Kaufman, VP of sales and marketing at Mesa, Ariz.-based private label supplier Lehi Valley Trading Co., suggests that brick-and-mortar food retailers fight back “[b]y developing and marketing meal-kit solutions under their respective private label brand[s] and selling [them] in store, emphasizing the convenient and ‘instant-gratification’ aspects offered versus delivery service. Grocers can also offer meal-kit solutions online – for example, via Kroger’s ClickList service – and provide same-day pickup service in store, again emphasizing convenience. Also leverage experiential marketing – sampling/demos – to drive awareness in store and demonstrate the high-quality/innovative attributes of [the] private label meal kit solutions offered. Finally, exploring a partnership with a ‘world-renowned’ chef to create unique offerings could also offer a point of differentiation.”
“When it comes to competing with online meal kits, today’s shoppers want taste, experience, convenience and healthy options and value — all delivered to their doorstep,” notes Linda Phan, category manager at Elk Grove Village, Ill.-based Topco Associates, a provider of private label products to its food industry member-owners and customers. “In response to the meal-kit trend, more and more retailers are offering delivery and online ordering. In the store, retailers can compete with pure-play grocery delivery and online meal kits through merchandising, ads and point-of sale-marketing.”
Adds Phan: “Grocers are creating secondary displays in store centered on building meals. These displays feature own-brand ingredients and recipes for meals such as fajitas, pasta dishes [and] weekday lunches. This in-store version of a meal kit delivers the convenience, taste and healthy options shoppers want, and can be supported by in-store or in-ad promotions.”
“We know shoppers are looking for solutions,” observes Phan’s colleague Kina Guyton, Topco’s director of marketing, expanding on the topic of impactful in-store displays. “Retailers have the benefit of being able to offer their own-brand products alongside their other destination categories and services. For example, pairing great premium own-brand cooking sauces … with a protein prepared by butchers in store and carefully selected fresh produce is the ideal way to showcase the best stores can offer.”
Continues Guyton: “Additionally, with the increased own-brand offerings in the affordable premium space, retailers can meet the shoppers’ desire to stay informed with tools such as unique recipes offered online and in stores highlighting key own-brand ingredients.”
“What’s lost in the meal delivery business is the experience of choosing your recipe and ingredients … and discovery,” points out Jim Holbrook, chairman and CEO of Stamford, Conn.-based retail services company Daymon. “Retailers have the power to provide that inspiration in the store. We found that the most engaged shoppers are 44 percent more likely to use their mobile devices to help them to decide what to buy. Offering apps to make suggestions and provide that inspiration in the store is critical.”
WHAT’S IN STORE — AND MORE
Retailers themselves have already rolled out strategies meant to position their private label products as viable, low-cost alternatives to the offerings of digital-only operations.
“Tops recently launched its partnership with Instacart in November 2017, so our Tops private label items are available via Instacart in more than half of our stores, with the rollout of the remaining stores occurring in first quarter of 2018,” says Nicky Walsh, director of business development with the in-house Daymon team at the Williamsville, N.Y.-based northeast regional grocer.
“Shoppers will find numerous clean, ready-to-eat prepared foods in the store, in addition to many options designed to go from fridge to table with minimal effort, offering the convenience of meal delivery without all the harmful additives that typically accompany a convenience meal,” notes Frank Scorpiniti, president and CEO of the Asheville, N.C.-based Earth Fare. “In addition, our Daily Meal Deals ensure that a family of four can prepare a different hot, clean meal each evening for less than $10, and in less than 30 minutes.”
Holbrook cites West Des Moines, Iowa-based Hy-Vee’s meal-prepping party program, in which five to 12 customers gather by appointment in a store club room with a kitchen to prepare a recipe together, and then divide up the results for home consumption.
When it comes to decisively vanquishing online rivals, however, as Brian Sharoff, president of the New York-based Private Label Manufacturers Association, observes: “There is no one answer that fits all. Some retailers may find that offering their own websites is the best solution. Others may find that enhanced services in the store will work better. Most retailers will need to perfect both techniques in order to defend themselves.”
Expanding the Definition of Private Label
Most people think of grocer’s private label as products – but there’s a strong case to be made for services as well.
“Branding a service or department is another powerful way to leverage private brand,” explains Jim Holbrook, chairman and CEO of Stamford, Conn.-based retail services company Daymon. “We see it all the time, whether we recognize it or not – like Best Buy’s Geek Squad – a private-brand service.”
He adds, “Many retailers are upping the ante in creative ways,” citing the “the interesting efforts of Lowes Foods, [which] has created exclusive and experiential destinations with its fresh departments like Sausage Works, a Pick n Prep produce butcher, the Beer Den and their Community Table.”
In another example of this – as well as of how to compete effectively with pure-play online meal-kit delivery services – “Midwestern U.S. supermarket chain Hy-Vee has begun a meal-prepping party program that runs like a local book club,” notes Holbrook. “A group of five to 12 customers schedule a time to gather in a kitchen-equipped club room in the store to prepare a recipe together, and then divide up the meals for everyone to take home.”
Whole Foods Market, meanwhile, has “rolled out its Responsibly Grown produce-rating system that assesses growing practices impacting human health and the environment,” he adds. “The system labels fruit, vegetables and flowers as ‘good,’ ‘better’ or ‘best’ to help shoppers make informed choices. In addition to produce growing practices, the Responsibly Grown program addresses the threats facing pollinators, including high-risk pesticide use, loss of habitat, and disease spread from managed bees to wild pollinators.”
On the other side of the pond, private-branded service endeavors have included those of French retailer Carrefour, which has introduced the Blue Box handyman service in Italy to connect local businesses with customers, and Dutch grocer Jumbo Foodmarkt’s Pick & Mix Vegetable Snack Station in the produce department, enabling customers to fill a single-serve plastic container with a range of snack-sized vegetables for one price.
As Holbrook puts it, “Anything that is creating a direct relationship with the consumer that is exclusive to that retailer is a private brand – and is very powerful.”
Retailers Evolve Private Label Strategies in 2017
Retailers altered their private label strategies from imitation of national-brand products to differentiation from them in 2017, according to new research from branding and marketing firm Daymon.
The news comes as a “welcome change,” the Stamford, Conn.-based firm said, given that up to 98 percent of national-brand products are carried by the competition. The 50-retailer analysis found that largely driving the shift were unique products, price checking, customized promotion and consistent placement across stores.
In addition, 2017 saw retailers addressing customers’ desires for enhanced shopping experiences by launching new concept stores and racing to digitize both online and offline.
“Private brands have entered a renaissance period that has allowed them to become more differentiated than ever before,” said Daymon CEO Jim Holbrook. “We are seeing that retailers with distinctive, one-of-a-kind private brands will survive and thrive, while those with national-brand equivalents will struggle as competitive pressures mount.”
According to Daymon, four out of five shoppers now purchase private label goods every on almost every shopping trip, so it’s not surprising that retailers’ own brands are positioned to “disrupt the industry.” As the firm puts it, if grocers don’t have a solid private label strategy, they’re “dead in the water.”