Both brands have been so successful for Safeway that it is that success (above expectations) which provided the idea for the grocery chain to take the brands beyond the walls of the retailer's own stores and market them to its U.S. competitors and to food and grocery retailers throughout the globe.
Safeway is part of a growing trend among food retailers to go from being "private label" sellers to "store brand" marketers with their own-brand food and grocery products.
This private label emphasis started to change slightly in the late 1980's when supermarkets like Loblaws introduced its more upscale Presidents Choice brand, which the Canadian food retailer eventually marketed to supermarket chains in the United states, as well as using it as its higher end store brand in its Canadian stores.
By the mid -to- late 1990's numerous other supermarket chains were starting to create better quality and looking store brands, along with using beginning to use some classical brand marketing strategies to create different levels (and brand names) of store branded products: super value, value, premium, natural, organic and the like.
About five years ago retailer branding started getting kicked up a notch with Safeway Stores, Inc. creating O' Organics, Kroger improving its store brands and developing its own natural and organic store brands, regional supermarket chains like Wegmans and Publix doing the same, as well as mass merchants target and Wal-Mart greatly upscaling their store brands.
Natural foods retailers Whole Foods Market and Wild Oats (now part of Whole Foods), along with specialty grocer Trader Joe's and the Costco and B.J's Wholesale club chains, were a major influence on these supermarket chains in terms of developing the higher quality and more niche oriented store brands like O' Organics. All of these retailers were leaders in the creation and marketing of these store brand 2.0 lines.
Along with this development, food and grocery retailers started putting much more emphasis on store or shopper-marketing of their store brands, developing and using numerous marketing-oriented ways to build the brands besides the past reliance and traditional emphasis on price and display building in-store only.
The marriage of higher quality store brands and shopper marketing is in full bloom today. Food and grocery and discount chains led by Safeway, Kroger, Wal-Mart (which right now is developing an upscale food and grocery store brand), Target, Trader Joe's, Whole Foods, Costco, BJ's (and others) and numerous regional players, are beginning to view their store branding operations in more classical brand marketing terms rather than as merely an extension of the procurement department, which is how private label was handled for decades.
Jim Lucas, who is the executive vice president of the shopper marketing division for DraftFCB, a marketing and advertising agency in Chicago, writes about what we call store brands 2.0 and shopper marketing in an article in tomorrow's (August 25, 2008) Advertising Age. Mr. Lucas' piece is informative theoretically but also extremely applicable and hands on. That's why we wanted to bring it to Natural~Specialty Foods Memo readers. Below is the piece and by Jim Lucas.
The Newest Brands? Open for Business
Retailers Have Switched Gears, Marketing Their Stores and Labels and Strengthening Bonds With Shoppers
By Jim Lucas: August 25, 2008
Many marketers are rapidly becoming more concerned with how retailers think. They want to know their concerns, objectives, equities and images and how they go about creating bonds with shoppers.
That's because today's retailers are evolving far beyond their historical role as simple points of distribution for selling national brands. They have changed their approach, marketing their stores as their own brands and systematically building better, stronger relationships with shoppers.
As a result, on behalf of our clients, we must now help the retailer build its business.
Think about it: With the average U.S. household making 150 to 200 store visits a year, it seems reasonable that while shoppers might make several trips to their local stores each week, they may not purchase the same branded products each time. Thus, shoppers generally have more contact and experience with their local retailers than with the majority of national brands.
Going their own way
Clearly, the nature of retailers' value creation has dramatically changed. And rather than just establishing loyalty to branded products, retailers want voices of their own. They are seeking to establish their own brands, and they are doing so by tailoring their customer experiences, differentiating them from their competitors' and creating better, ongoing relationships with shoppers.
Today's retailers have made huge inroads in fortifying their relationships with shoppers. Research by "Private Label Strategy" authors Nirmalya Kumar and Jan-Benedict E.M. Steenkamp clearly suggests that the nature of shopper loyalty is changing. While many shoppers are still loyal to brands, a significant portion increasingly are loyal to stores. This may be largely a function of convenience, but at the very least, retail brands are becoming more established in the minds of shoppers.
For example, Aldi, the European hard-discounter extraordinaire, has done a good job making its customers feel like smart shoppers. It has been aggressive in driving down prices on branded consumer package goods through strongly negotiated deals with manufacturers. It has created a wide range of store-brand products that also keep the price of the average shopping basket down. Its small, Spartan store formats help make the shopping experience more efficient. It has also developed a number of near-legendary promotions featuring "hot-priced" items ranging from well-known brands of wine to laptops specifically designed for and sold through Aldi stores, which are known as a place to "treasure hunt."
Believing that their long-term growth is tied to shopper loyalty, retailers increasingly want to develop their own shoppers. And because it is easier to get additional shopping trips, and increased purchases per trip, from shoppers who like your store, retailers are consistently using organized, data-driven, shopper-insight approaches. Retailers as diverse as Best Buy, H&M, Zara, Tesco, Tchibo, Kroger and Safeway are creating better touch points and shopping experiences to build stronger, more-loyal shoppers. This is largely the result of the creation of their own voices -- their retail brands.
U.S. supermarket chain Kroger is a prominent example of such a makeover. While working hard to become more efficient in its operations, Kroger also has negotiated sharper prices for its shoppers, has developed its store brands and is experimenting with new formats (for example, Kroger Right Now, a convenience, vending-machine format at gas stations). Kroger also is leading retailers in its investment in a shopper-loyalty program (with Dunhumby, the same firm that was instrumental in establishing Tesco's successful shopper program), the kind of strategic investment that provides an advantage in developing shopper insights and the ability to uniquely tailor the shopping experience to reach core shoppers.
Safeway, another U.S. food retailer, recently has aligned itself with freshness and quality. Its lifestyle-store format has remade perishable areas such as produce, ready-to-eat meals, bakery and salad bar while creating new category/aisle descriptors (for example, Poetry in Bloom for floral). Its "Ingredients for Life" campaign extends the freshness/quality focus beyond the store. Moreover, its creation of store-brand product lines Eating Right and O Organics is designed to meet shoppers' needs. Such store-brand product lines are not simply about price points but are in sync with customers' lifestyles -- and unique to Safeway. It will be interesting to see how the marketplace reacts to Safeway's announced rollout of its house brands to competitive grocery chains. Will the availability of those brands at other stores cannibalize Safeway trips and sales?
It's an intriguing move because there does not seem to be a clear historical precedent. For example, Canadian-based Loblaw sold its President's Choice products to other retailers, typically in the U.S., so increased sales were generated from the additional distribution. But typically only one retailer or store banner carried the President's Choice items in a given market; thus there was really no competition for shopper loyalty or trips.
These supermarket examples, which similarly exist in other retail categories, indicate a fundamental change in how retailers are now approaching profitability. While efficiency is important, it's a "greens fee." Whether they be Whole Foods Market (natural/organic), H&M (celebrity design) or Zara (fresh fashion), retailers see long-term profitability as linked to their ability to provide unique shopping experiences that create loyal shoppers.
This shift in perspective suggests that the brand-marketing discipline many grew up with -- and the marketing-mix tools previously used -- have evolved. Retailer brands are now about connecting with shoppers' lives to build bonds and differentiate one retail experience from another.
Retailers are focused on positioning themselves through alignment with shoppers' lifestyles, and these positionings are less about marketing platforms than strategic cultural ideas.
It is also worth noting that retailer brands are generally complex, with many more dimensions than a traditional CPG brand, demanding that retailers turn to a new and growing set of marketing-mix tools to create the voices of their multidimensional brands.
The new marketing mix being used to create and maintain these retail brands is a far cry from the traditional one. Store ambience, layout, category organization, food theater, store-brand product lines, shopper programs, design, assortment and websites are just a few of the tools being used.
Today's retailers are first and foremost "meaning managers" or "choice editors" aligned with the needs and lifestyles of their shoppers. Retailers and manufacturers together must align with shopper needs to create unique shopping experiences and programs that help shoppers choose one store over another.
It is also important for retailers and manufacturers to align business goals, including driving traffic to the store or a specific destination in the store; creating larger sales receipts, better conversion rates, solution selling and cross-selling; and improving the total shopping experience -- for example, making it easier or more engaging, entertaining, educational or inspirational to shop.
Manufacturer brands must provide solutions that align with and help build and leverage retailers' equities, are tailored to retailers' needs and objectives, and are consistent with the positions the retailers are trying to establish and maintain.
Today's challenge for brand marketers is to help leverage retailers' marketing-mix tools (the shelf, category organization, in-store media or loyalty programs) or co-create new tools (new media, unique offerings, tailored products or packaging) to help retailers build stronger, better brands.
ABOUT THE AUTHOR
Jim Lucas is exec VP-director of the shopper-marketing division of DraftFCB in Chicago. He previously served as director of strategic planning and research at Draft, Chicago.