Friday, March 27, 2009

Store Brand - Private Label Memo: Cost Plus World Market Introducing A Spate of New 'World Market' Store Brand Items; We Report and Offer Analysis

Retailer Store Brands: Special Report

Specialty, natural-organic foods, beverage and import goods retailer Cost Plus World Market is introducing a number of new store brand natural-organic and specialty foods items under its "World Market" store brand into its stores.

The Oakland, California-based chain, which has nearly 300 stores located throughout the U.S., sells an eclectic mix of products in its stores, including: specialty and natural foods; beverages; wines and craft beers; confections; specialty coffees (consumables); bath and body care items; and various hard goods products like furniture; kitchen goods-gadgets; gifts and related household-oriented items; most of which are imported from throughout the world.

The new items Cost Plus is introducing under its "World Market" store brand include:

~A new, three-item line of all natural pasta sauces imported from Italy. The three varieties are Marinara, Tomato-Basil and Artichoke. The pasta sauces are in 16oz jars with the "World Market" store brand name featured at the top of the label. The country of origin, "Italy," also is plainly marked on the label.

~A new six-item line of organic pasta, also imported from Italy. The pasta line includes specialty cuts like Conchiglie and Strozzapreti. The pasta comes in 16oz clear packages. The word "organic" is on the package, highlighted in white on a red background.

~A new line of "World Market" all natural specialty salsa in five flavors: Three Bean & Corn, Southern Peach, Three Chili, Roasted Tomato and Roasted Tomatillo. The salsa line is in 16oz glass jars with a black lid.

~Two new varieties (line extension) of its "World Market" all natural Tortilla Chips. The two new varieties, in 12 oz bags, are Blue Corn with Flaxseed and Sweet & Spicy with Flaxseed.

~Four new flavors in its "World Market" 3oz all natural Premium Chocolate Bar line. The new flavors are: Chili & Lime Dark Chocolate, Chipotle Chili Dark Chocolate, plain Dark Chocolate and Toffee Caramel Milk Chocolate. There are now 12 varieties in the line. All have a high cocao content ranging from 64% -to- 99%. The chili and lime and chipotle chili varieties are part of a trend towards combining savory flavors with sweet in chocolate confections. We think you will see this trend grow among confection product producers and marketers.

Cost-Plus aggressively growing brand 'World Market'

Cost Plus World Market has been introducing new items under its store brand, along with extending existing lines with new SKUs aggressively since early last year.

For example, in mid-to-late 2008 the retailer introduced a 12-flavor line of pyramid-shaped organic tea bags under the "World Market" brand.

Additionally, in late 2008, Cost Plus introduced a new line of single-origin extra virgin olive oils. The three item line features extra virgin olive oil from a single country -- Italy, Spain and Greece -- in the bottle. The country of origin is clearly marked on the respective bottle.

Many extra virgin olive oils contain oils mixed from more than one country. Olive oil lovers often prefer single-origin oils. This is the consumer (foodies mostly) market Cost Plus is going after with the line. The retailer recently promoted the 750ml bottles of single-origin extra virgin olive oil for $7.99 each, a discount of about 30% over the regular shelf price.

Cost-Plus and consumables

Cost Plus stores devote a significant amount of floor space to specialty and natural foods items, both under the "World Market" brand and those marketed by domestic and international specialty and natural foods companies.

The stores also feature large wine and craft beer departments. Those departments also include non-alcoholic beverages like bottled waters, specialty sodas, new-age beverages and related drinks.

The stores also sell bulk and packaged specialty coffees, including a nine-variety line (24oz bags) under the "World Market" store brand.

Taken together, consumables comprise the largest overall percentage of category sales in the Cost Plus World Market stores.

More store brand items

The "World Market" store brand has increasingly been comprising more of the shelf space in the stores' food section. This is a part of the retailer's strategy to differentiate itself more in the specialty and natural-organic foods category as a retailer by offering and promoting its own brand.

Cost Plus has been struggling as a company for the last three or so years. In the last year things have been even tougher for the retailer because of the recession. A significant percentage of Cost Plus World Market's sales are in categories such as furniture, housewares and gifts, all items shoppers are buying much less of because of the bad economy.

Additionally, overall sales of specialty and natural foods are down as well because many consumers are trading-down and buying convention grocery products instead of specialty, natural and organic items in order to save money on their overall food bills.

As a way to fight this trend, Cost Plus has been promoting its store brand specialty, natural and organic items regularly, both in its weekly advertising circulars and in-store, reducing prices by 15% -to- 30% and sometimes more on the items.

The "World Market" items also are priced below similar manufacturers' brand specialty and natural foods items on the store shelves. By doing this Cost Plus is attempting to build sales of the store brand, which in many cases it obtains a higher gross margin on than it does the manufacturers' brands.

Like most retailers selling store brands, it also hopes to build consumer brand loyalty to the "World Market" brand, thus resulting in repeat trips to the stores, since the only place shoppers can buy the brand is at Cost Plus World Market.

Expect to see Cost Plus continue its aggressive store brand program, including more natural and organic items, both in the form of line extensions and completely new products.

store brand strategy and manufacturers brands

Of course, this strategy isn't so good for specialty and natural foods brand manufacturers-marketers, since there's only so much shelf space on the stores' shelves. Each time a new "World Market" store brand SKU or line is introduced that means room has to be made for the items on the shelf. That room most often comes from discontinuing manufacturers' items or reducing the number of shelf facings given to the items, as is the case with all retailers with store brands.

Additionally, since the store brand items are priced below competing manufacturers' brands, those brand marketers with like items in the Cost Plus stores are experiencing reduced sales, compared to say when there wasn't a competing "World Market" similar brand item on the shelves.

As an example, Cost Plus now merchandises a complete line of store brand spices and seasonings. Prior to completing the full line last year, specialty spice company Spice Hunter was the only full spice and seasonings line in the stores. This resulted in very high sales volume for the Spice Hunter brand at Cost Plus World Market. But now with a competing full spice and seasonings line under the "World Market" brand, the store brand items take sales away from Spice Hunter, as they do in each category in which the "World Market" brand competes with the various manufacturers' brands on the shelves, both domestic and imported.

More consumables' space: store and manufacturers' brands

Cost Plus would likely benefit right now from actually increasing the amount of square footage it devotes in its stores to consumables since few shoppers are buying much in the way of the other hard goods items the stores sell. Even though specialty and natural category sales are down because of the recession, consumers are still buying far more of the items than they are furniture, imported kitchen gadgets and exotic gift items from places like South America.

Perhaps more consumables in the form of both store brand and manufacturers' brand specialty, natural and organic, and even a few niche conventional items, might be the best way for Cost Plus World Market in helping it not only in the current recession, but overall as a way to reverse its fortunes. After all, the retailer was having trouble prior to the recession . Therefore the difficulty is more systemic than it is a result only of the current economic recession, although it is making the problems worse.

Perhaps an additional 1,000 square feet or so (the stores are about 20,000-30,000 square feet in size) devoted to consumables, taken from furniture, gifts and the like, in the Cost Plus stores would be part of the ticket to creating a more healthy Cost Plus World Market for the company? Based on the retailer's continued struggles, we think its worth a shot.

[Related past posts: January 28, 2008: Monday Marketing Memo: Cost-Plus World Market Restructuring: We Think Specialty Foods and Beverages Can be the Key to a Successful Repositioning ...July 25, 2008: Retail Field Report Memo: Specialty Retailer Cost Plus World Market Is At A Serious Crossroads: We Offer Analysis and Suggestions For Moving Forward]

[Natural~Specialty Foods Memo (NSFM) Editor's Note: Beginning today and over the next week NSFM will be offering extensive news, features and analysis on and about the fast-growing retailer store brand or private label movement. These stories can be indentfied by the header: Store Brand - Private Label Memo. Additionally, each of the pieces will have the sub title: Retailer Store Brands: Special Report.

The growth in conventional, natural, organic and specialty-premium store brands has been moving fast for about the last five years. The current economic recession has been and is increasing store brand or private label product development, marketing, merchandising and sales even more so. It's an important topic and issue. We plan to bring NSFM readers analysis and insight on the topic you can't read elsewhere. Stay tuned.

Read the first story in the special report series here: March 27, 2008: Store Brand - Private Label Memo: Store Brand Organic Products Gaining Prestege With Consumers Says New Study of What Shoppers Are Discussing Online.]

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