Store Brand - Private Label Memo: 'Big Score' At 'Big Y' Chain For Safeway's 'Eating Right' Healthy Foods Brand

Retailer Store Brands: Special Report

The family-owned, Springfield, Massachusetts-based Big Y supermarket chain is the first major food and grocery retailer in the U.S. to introduce and carry at least one of the two Safeway Stores, Inc. organic and healthy foods store brands -- "O' Organics" and "Eating Right" -- that the Pleasanton, California-based supermarket chain began marketing to other U.S. grocery retailers and wholesalers through its Lucerne Foods Inc. brands division last year, in its stores.

In Big Y's case, the popular supermarket chain is introducing numerous "Eating Right" brand healthy food and grocery items across multiple categories in its stores in New England.

Privately-held Big Y, which was founded in 1936 by Paul and Gerald D'Amour and was named after an intersection in Chicopee, Massachusetts where two roads converge to form a Y, currently operates 57 high volume supermarkets located in Massachusetts and Connecticut.

Among the Safeway Stores, Inc. "Eating Right" healthy food products being introduced this week at Big Y include: frozen entrees; cereal; soups; pasta; salad dressings; snack bars; cookies; and items in numerous other dry grocery and perishable categories, according to Carrie Taylor, Big Y's corporate dietitian, who's in charge of the supermarket chain's "Living Well Eating Smart" chainwide healthy foods program.

"With healthier eating a priority for many of our customers, we are pleased to bring new options to our shelves with the introduction of the 'Eating Right' brand at Big Y stores," Ms. Taylor says. "Our shoppers have long relied on us to meet all of their supermarket needs and with 'Eating Right' we're able to offer a great selection of functional and tasty products designed to help our customers reach their specific health objectives."

Safeway Stores Inc.'s Lucerne Foods, Inc. brand marketing division is handling the marketing of the "O 'Organics" and "Eating Right" brands to supermarket chains and wholesale grocers in the U.S. and globally.

There are currently 225 SKUS in 20 categories under the "Eating Right" brand, according to Alex Petrov, president of Safeway Stores' Lucerne Foods Inc. division.

Neither Big Y supermarkets nor Safeway Stores, Inc. is touting the fact that the "Eating Right" brand being introduced in the 57 Big Y supermarkets in Massachusetts and Connecticut is produced, owned and marketed by Safeway Stores, including the fact that the brand is a Safeway healthy foods store brand. Both are handling the introduction and marketing of the brand just as they would any other brand, regardless of its origin or ownership.

That's also why the marketing of the "Eating Right" brand to grocers like Big Y is being conducted by Safeway's Lucerne Foods Inc. division as a separate function from the store brand merchandising and marketing of the brand (and of "O' Organics") in Safeway's about 1,750 supermarkets in the U.S. and Canada. Safeway Stores, Inc. strategically views the brands not just as store brands, but as what the company hopes will become standalone organic and healthy food brands both in the U.S. and globally in the future.

Safeway doesn't operate any supermarkets in the New England states of Massachusetts or Connecticut where Big Y has its 57 supermarkets.

The closest states where Safeway has stores are in Washington, D.C., Maryland and Virgina.

This is an important distinction because in Big Y's case its customer base won't in most cases even be aware that the "Eating Right" brand items are a Safeway store brand, since there are no Safeway-owned supermarkets in the two states.

Our analysis is that Safeway will need to use this type of strategy to launch the two brands in the U.S., focusing on regional chains like Big Y which operate in markets where Safeway does not have a retailing presence.

For example, we don't see many retailers in the Western U.S., where Safeway is a major player and in many markets is the market share leader, carrying the "O Organics" and "Eating Right" brands because with little exception every retailer in the Western U.S. is a competitor of Safeway's.

Major competitor's like Kroger Co, Supervalue, Inc., Wal-Mart and Costco have their own organic and healthy store brands and aren't going to offer the store brands of a major competitor in their respective stores.

Major regional chains throughout the west also in many cases either have their own organic and healthy foods store brands or carry such private label brands through arrangements with a wholesaler. Additionally, since these regional chains are direct competitors with Safeway in states like California, Oregon, Washington, Colorado, Arizona and the like, they won't in all probability offer Safeway's "Eating Right" or "O Organics" store brands on their respective shelves either. It makes little sense for these chains to compete with Safeway on the brands.

We believe this will hold true in other parts of the U.S. where Safeway has a retail presence like the Washington D.C./Maryland/Virgina tri-state market region, Texas, Florida, Illinois-Indiana and Alaska, in addition to the Western U.S.

As a result, that's why we believe Safeway will have to conduct a niche retailer strategy, placing its "O Organics" and "Eating Right" brands in non-competitive, select chains primarily in parts of the U.S. where it isn't a retail player.

Natural~Specialty Foods Memo (NSFM) was one of the first, if not the very first, publication to report that Safeway Stores, Inc. was marketing its "O Organics" brand to another retailer, France's Carrefour (the world's third-largest global retailer) internationally, in the three stories from December, 2007, and the January 8, 2008 piece, linked below:

~December 27, 2007: Marketing Memo: Safeway's O' Organics Brand in Asia
~December 23, 2007: Safeway's O' Organics Brand: Part Duex
~December 21, 2007: Friday Fishwrap: Safeway's O' Organics Brand
~January 8, 2008: Media Memo: Safeway's O' Organics Brand In Asia

In April of 2008, we first reported in this piece [April 28, 2008: Marketing Memo: Safeway Stores, Inc. to Market its 'O' Organics' and 'Eating Right' Organic and Healthy Brands to Other Retailers in U.S. and Globally] about Safeway's corporate plans to market its "O 'Organics" and "Eating Right" brands to other supermarket chains in the U.S.

Linked below are four related past pieces on the topic from Natural~Specialty Foods Memo (NSFM):

~August 6, 2008: Marketing Memo: Safeway's Challenge: Going From Store Brand Marketer to Consumer Brand Marketer With its O' Organics and Eating Right Brands
~April 28, 2008: Marketing Memo: Safeway Stores, Inc. to Market its 'O' Organics' and 'Eating Right' Organic and Healthy Brands to Other Retailers in U.S. and Globally
~April 28, 2008: Retail Memo: Safeway CEO Burd Says Shoppers Buying Store Brands Over National Brands By As Much As Six -to- One in it's North American Supermarkets

Safeway's Lucern Foods, Inc. division isn't confirming or not confirming, but based on our reporting, sources and research, Springfield, Massachusetts-based Big Y appears to be the first U.S. supermarket chain that's agreed to carry one of the two Safeway brands, "O Organics" and "Eating Right." In Big Y's case, it's carrying the "Eating Right brand" only at present.

Big Y is a popular, high volume retailer in New England. As a result, landing the chain is a major niche retailer score for Safeway and its "Eating Right" brand, in our analysis.

Big Y also is a well-known regional chain in the trade. Safeway's landing of the chain for its "Eating Right" brand should create greater interest in the brand from similar retail chains in other parts of the U.S., particularly in market regions where Safeway doesn't operate supermarkets in.

We expect to see at least two more regional chains in the U.S. announce their respective plans to carry either just the "Eating Right" healthy foods brand or both the "Eating Right" and "O' Organics" brands from Safeway in the next couple months.

[Readers: You can follow Natural~Specialty Foods Memo (NSFM) on Twitter.com at www.twitter.com/nsfoodsmemo.]

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.]

[You can follow Natural~Specialty Foods Memo (NSFM) on Twitter.com at www.twitter.com/nsfoodsmemo.]

Store Brand - Private Label Memo: Store Brand Organic Products Gaining Prestege With Consumers Says New Study of What Shoppers Are Discussing Online

Retailer Store Brands: Special Report

The introduction and aggressive marketing of high-quality retailer store brand organic products is leading to a change in consumer perceptions in a positive direction, according to a soon to be released research report called the J.D. Power & Associates Private Label Industry Report.

The report is from J.D. Power & Associates Web Intellegence Division, which conducts content analysis research using information from a variety of online sites and sources as a way to guage consumer attitudes and perceptions. Most people know J.D. Power for its industry ranking of automobile quality. However, it's a full service research firm which also focuses on consumer package goods in addition to other consumer products research.

Janet Eden-Harris, vice president of J.D. Power and Associates Web Intelligence Division, which is based in Westlake Village, California, offered a preview of the firm's research into consumer attitudes of store brand organic products this week at the IRI (Information Resources, Inc.) Summit in Las Vegas, Nevada.

She said the J.D. Power Web-based research project shows that consumer attitudes about many store brands have shifted in the last couple years. Rather than has has been the case in the past, in which generally store brands, including organics, have been considered by consumers to be of lower-quality, with a low-price focus (including poor packaging quality), private label brands, particularly store brand organics, are now being thought of as unique and as having quality commensurate with that of traditional manufacturer-marketer brands.

"It's clear that consumers have begun to discard the idea that private label brands are of lower quality than traditional brands, which provides an opportunity for retailers to differentiate themselves with high-quality, reasonably priced store brands," Ms. Eden-Harris said in her presentation at the IRI conference.

The firm's report analyzed about 50,000 spontaneous conversations between March, 2008 and March, 2009 in various Blogs and online message and review boards that mentioned and discussed store brand/private label products from a variety of retailers, according to Ms. Eden-Harris.

Retailers with one-half of 1 percent or more of all discussions during the year are included in the report, she said.

The research report is designed to provide insight to retailers on what drives consumers to purchase their private label brands, as well as to help consumer packaged goods manufacturers develop strategies for differentiating and marketing their brands.

Ms. Eden-Harris said in her presentation at the conference that the complete study and its results will be released in April.

Below are a few highlights of the firm's report regarding private label or store brand organic products from Janet Eden-Harris' presentation at the IRI Summit:

>The report finds that the amount of online conversation about private label products has increased steadily during the past year, with volume peaking during the fall of 2008 as the economic crisis was unfolding.

>Organic store brand pricing is a strong motivator for consumers. But the quality and flavor of private label organic products drive the highest levels of positive sentiment, according to the Web-based content analysis study.

> Store brand food products from Safeway, Trader Joe's and Whole Foods garner particularly high levels of positive consumer recommendations, compared with other private label brands, and are perceived as being particularly healthful and flavorful.

>Positive consumer sentiment for store brand food items, especially organics, is higher than it is for non-food products such as diapers, paper products and cleaning supplies. The report's conclusion: This suggests that these products are perceived by consumers as commodities, purchased for their lower cost rather than as a favored brand in their own right.

In her presentation, Ms. Eden-Harris said the improved perception of store brand organic products doesn't mean opportunity has to be lost by brand manufacturers' and marketers.

"While retailers continue to gain ground with their private label products, there is still enormous opportunity for consumer packaged goods manufacturers," she said. "Innovation is still a big growth driver, and CPG companies still lead in that regard. New and differentiated products that are priced to value will win market share."

We agree with that conclusion since at least in "phase one" of store brand organic product development most of the retailer brand products have been versions of products already produced and marketed by brand manufacturers' and marketers. In fact, retailers like Safeway Stores with its O' Organics brand used sales data from its in-house natural-specialty foods department to decide which items to create under the private-label organics brand.

Additionally, most retailers rely on traditional manufacturers not only to produce their store brands but in many cases to offer advice and suggestions on private label product development.

However, we're now seeing what we call "phase two" of retailer brand organic product development in which select retailers like Safeway, Kroger, Wal-Mart, Trader Joe's (TJ's has always been a "phase two" natural-organic product developer and innovator), Target, Whole Foods, Costco and a few others are innovating and actually creating some products under their respective natural and organic store brands that don't exist under manufacturer brands in the retail marketplace.

In our analysis though food company manufacturers and marketers, particularly in the natural and organic segment, continue to be the innovators when it comes to new product creation and development. Retailers still tend to be followers rather than brand innovators overall in the categories.

J.D. Power's Web Intelligence Division analyzes consumer behavior online by using proprietary Natural Language Processing and machine-learning algorithms to dissect the who, what and why of online opinion, offering in-depth insights for some of the world's leading brands, according to Ms. Eden-Harris. It's a form of content and opinion analysis based on what consumers are commenting and opining on on the Web.

The purpose of the Web-based content and attitude analysis research is to glean what consumers are saying online as a way of better understanding consumer behavior, attitudes, opinions and trends.

With so many consumers now using online product review sites, Blogs, chat forums and social networking sites like Twitter and Facebook, we think such research is now essential, along with more traditional methods, in order to better understand consumer attitudes in the food, grocery and consumer products space.

In fact, Natural~Specialty Foods Memo (NSFM) uses our own form of Web-based content analysis often to spot, analyze and write about consumer behavior and trends based on information gleaned from search engines, social networking sites, online review sites and message boards and Blogs.

Using the Web to better understand consumer behavior and attitudes will become even more important sense so many consumers are using the Web to search for products, retailers and related information, along with reviewing products at online review boards, and generally increasingly using the Web as an integral part of overall consumer and shopper behavior.

Below is a linked selection of past stories from Natural~Specialty Foods Memo (NSFM) on and directly related to the retailer store brands topic:

~March 12, 2009: Retail Memo: Whole Foods Market is Selling Brand 'Wild Oats'- We Offer Three Retailers We Suggest Could Benefit From Buying the Brand

~January 31, 2009: Store Brands - Private Label Memo: Smart & Final-Owned Henry's Farmers Market Preparing to Debut New Natural & Organic 'Sun Harvest' Store Brand

~August 24, 2008: Marketing Memo: Store Brands 2.0: Better Store Brands and Brand and Shopper-Marketing Changing How Food Retailers Sell Their Own Brands

~August 6, 2008: Marketing Memo: Safeway's Challenge: Going From Store Brand Marketer to Consumer Brand Marketer With its O' Organics and Eating Right Brands

~April 28, 2008: Marketing Memo: Safeway Stores, Inc. to Market its 'O' Organics' and 'Eating Right' Organic and Healthy Brands to Other Retailers in U.S. and Globally

~April 28, 2008: Retail Memo: Safeway CEO Burd Says Shoppers Buying Store Brands Over National Brands By As Much As Six -to- One in it's North American Supermarkets

~June 4, 2008: Marketing Memo: Ingredients For 'Free Media' Marketing Success: Safeway Stores Finds Them With Announcement of its New 'Eating Right For Kids' Line

~May 9, 2008: Retail Marketing Memo: Safeway Uses Mother's Day Holiday to Launch its New 'mom to mom' Store Brand Baby Products Line in its Stores

~December 27, 2007: Marketing Memo: Safeway's O' Organics Brand in Asia

~December 23, 2007: Safeway's O' Organics Brand: Part Duex

~December 21, 2007: Friday Fishwrap: Safeway's O' Organics Brand

~January 8, 2008: Media Memo: Safeway's O' Organics Brand In Asia

~February 6, 2008: Retail Memo: Raley's Attempts to Come 'Full-Circle' With New Private-Label Natural and Organic Products' Brand

~April 7, 2008: Retail Memo: Wal-Mart, Target, Drug Chains Further Blur the Natural~Specialty Foods' Retail Class of Trade Lines

~October 11, 2007: Thursday Talking Points Memo:
Category Marketing Dominance: How Whole Foods Market, Inc. Became King of the Supernatural Retail Grocery Category and Why it Will Continue to Reign For Some Time

~February 11, 2008: Retail Trends Memo: UK's Asda Pioneering the 'Store-Grown' and 'Store-Raised' Niche: Will Raise its Own Kobe-Style Beef and Grow its Own Truffles

~December 9, 2008: Organics Category Memo: Wither Organics? Organic Food & Grocery Category Sales Down; But Double-Digit Growth Still Possible With Mass Market Lift

~November 28, 2008: Consumer Behavior Memo USA: 'Life, Liberty and the Pursuit of Frugality' - America's New Consumer Frugality

~November 28, 2008: Retail Memo: Target Corp. Launching Major Expansion of Food and Grocery Products in its Target Discount Format Stores

~May 3, 2008: Retail Memo: Loblaw's New President Charts A Course to Return the Grocer to Its 'Glory Days' of Being Canada's 'Best' as Well as Biggest Food Retailer

~December 12, 2007: Mid-Week Marketing Memo: Tesco's Fresh & Easy

~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

~January 30, 2008: Retail Memo: A Peak Inside a New Trader Joe's Store

[Reader Note: You can follow Natural~Specialty Foods Memo (NSFM) on Twitter.com at www.twitter.com/nsfoodsmemo.]

Store Brands - Private Label Memo: Smart & Final-Owned Henry's Farmers Market Preparing to Debut New Natural & Organic 'Sun Harvest' Store Brand

Breaking News & Analysis: Retail Store Brand Development

Los Angeles, California-based food and grocery retailing chain Smart & Final LLC, which acquired the Henry's Farmers Market and Sun Harvest natural grocery chain (38 stores; 30 Henry's Farmers Market and Henry's Marketplace stores in Southern California; 8 Sun Harvest natural markets in Texas) from Whole Foods Market, Inc. in the summer of 2007, shortly after the Whole Foods-Wild Oats merger, is preparing to rollout a new natural and organic products store brand, multi-category line under the "Sun Harvest Natural" and "Sun Harvest Organic" labels.

The new "Sun Harvest" store brand will replace the retailer's existing "Henry's" and "Wild Oats" store brands, which it has been merchandising since acquiring the Henry's Farmers Market chain from Whole Foods in 2007. Henry's and Sun Harvest were two natural foods retail banners operated by Wild Oats Market, Inc., in addition to its flagship Wild Oats store banner.

Some products in a couple store categories, such as fresh meat, bulk foods and perhaps one or two others, will remain under the Henry's store brand. But the Henry's and Wild Oats' store brand items in all other categories will be changed to the new Sun Harvest store brand. New items also will be developed under the Sun Harvest store brand.

Their will be two "Sun Harvest" store brand labels -- "Sun Harvest Natural," for natural products items, and "Sun Harvest Organic," for organic products.

The two "Sun Harvest" brand labels -- natural and organic -- have two different looks but work cohesively with each other, suppliers who've seen the labels tell Natural~Specialty Foods Memo (NSFM).

The "Sun Harvest Natural" label is brown with warm tones and the "Sun Harvest Organic" label is green, which has become sort of a universal color for all things organic. Additionally, there are slight differences as to how the graphic image of a given product is depicted on the "natural" and "organic" item labels. For example, a label for "Sun Harvest Natural" cooked beans features cooked beans in a bowl on it. In contrast, the label for a similar "Sun Harvest Organic" item depicts the beans not in a bowl (a serving suggestion), but rather shows the beans out of a bowl in their pure form, without a serving suggestion.

Additionally, some of the "Sun Harvest" store brand natural and organic labels in certain categories such as ice cream have more of a whimsical-looking label to them and are designed to look less serious and more fun. The goal behind this design thinking is to put a smile on the face of shoppers when they see the items in-store -- to make natural and organic fun in a sense, as well as to sell product.

Smart & Final's plans for the new "Sun Harvest" private label store brand were announced to a select group of the retailer's suppliers, called the "Smart Alliance," at a company seminar in November, 2008. At one breakout session during the seminar, Smart & Final's director of corporate branding, Todd Fryer, gave a presentation on the new store brand line, along with presenting new labels for the retailer's conventional grocery "First Street" store brand, which it merchandises in its 282 non-membership warehouse-type stores and its new Smart & Final Extra format stores.

During that session Fryer also introduced the retailer's then new director of natural and organic products, Michelle Weisberg, who he said is in charge of converting over 500 food, grocery, perishable, vitamin-supplement and non-foods "Henry's" and "Wild Oats" brands across all store product categories into the new "Sun Harvest" store brand, along with creating and developing new store branded items category-wide.

Suppliers working with Ms. Weisberg, who is an industry veteran in creating natural, organic and specialty private label products for retail chains and is known for her product development innovation and creativity, tell Natural~Specialty Foods Memo (NSFM) she is developing what will be some extremely value-priced natural and organic items under the Sun Harvest brand, as well as developing some extremely creative specialty and premium-oriented natural and organic food, grocery and non-foods products under the new private label brand.

Smart & Final plans to begin phasing the new "Sun Harvest" store brand natural and organic products into the stores soon, replacing the "Henry's" and "Wild Oats" branded products gradually throughout this year. The existing store brands will be replaced with the new "Sun Harvest" items in a gradual manner, as those products sell down and new "Sun Harvest" store brand products are developed.

It's a huge project, which includes about 500 skus throughout most product categories in the Henry's Farmers Market , Henry's Marketplace and Sun Harvest banner stores, ranging from dry grocery, perishable (dairy-deli) frozen, bakery (such as breads), to vitamins-supplements, body care, and non-foods. The majority of the new store brand skus will be in the consumables categories.

Sun Harvest brand and multi retail-format synergies

Smart & Final's Todd Fryer also said at the fall, 2008 seminar for select Smart & Final partners that the retailer plans to merchandise some of the "Sun Harvest" store brand natural and organic products in its 282 Smart & Final non-membership warehouse stores and its new "Extra" format stores, as appropriate. Doing this not only leverages the Sun Harvest brand across many more than the 38 Henry's and Sun Harvest banner stores, it offers the added benefit of allowing Smart & Final to obtain a lower cost of goods from its private label suppliers because the added Smart & Final and "Extra" banner stores allow for considerably more sales volume for the new natural and organic products' store brand line.

Smart & Final also is putting a particular emphasis on making sure the new Sun Harvest natural and organic store brand food and grocery items are competitively priced, particularly in price-sensitive categories like bottled juices, basic grocery items and others. Doing this is even more important because of the current recession, and it appears to us Smart & Final-Henry's is well aware of that, based on conversations we've had with supplier representatives who are working on the development of the new store brand with the retailer, along with our own research, analysis and reporting on the new store brand development.

Smart & 'Naturally' (and organic) serious

As we've previously reported on and written about, Smart & Final LLC has taken its entry into the natural and organic grocery retailing sector very seriously since its 2007 purchase of the Henry's Farmers Market chain from Whole Foods Market, Inc. The company operates the chain independently, using the existing Henry's corporate office in Southern California it acquired as part of the purchase of the chain. But the retailer also has and is integrating aspects of the natural grocery chain's buying, merchandising and operations with its Smart & Final corporate operations where it makes sense, and where it offers synergies, like in certain aspects of the new "Sun Harvest" store brand development program.

Since acquiring Henry's Farmers Market from Whole Foods, Smart & Final has cleaned up most of the Henry's and Sun Harvest banner stores, which were looking rather poor under Wild Oats' ownership, has significantly improved the quality and pricing in the fresh produce and fresh meat categories and departments, improved everyday prices across all categories (lower and better than before) and increased the chain's promotional activity. For example, among numerous other promotions, Henry's is currently running a 25% off full line item sale on all of the vitamins and nutritional supplements it sells in its stores, along with featuring a host of Super Bowl Sunday-related natural-organic food and drink items in its advertising flyer and in-store at special sale prices.

Smart & Final-Henry's Farmers Market also recently replaced one of the existing Henry's banner stores in the city of Santee in Southern California with a brand new natural and organic foods market, which is just down the street from the older store which it closed, and soon will open three new Henry's banner stores in Southern California, one in Carlsbad (near San Diego ) in late April, another in Monrovia, also set to open in late April, and a third in Woodland Hills, which is scheduled to open in early May. [Read our November 6, 2008 piece here: Retail Memo: Henry's Farmers Market to Open New Store in Santee, CA On November 12; More New Store's and Remodels On the Way.] [We also suggest reading this June 2, 2008 related story we wrote and published in the Blog: "Retail Memo: Analysis: Free of Wild Oats Markets, Inc.'s Ownership, Henry's Farmers Markets Seems to Be Starting to Get its Groove On."]

Based on our observation and analysis, sales seems to have improved across the board at all the Henry's and Sun Harvest stores since Smart & Final acquired the small chain from Whole Foods in 2007. Whole Foods essentially sold the stores to Smart & Final right after the Wild oats merger. Therefore other than care taking for the Henry's and Sun Harvest stores for a short time, Whole Foods Market didn't really operate them in any significant way and therefore isn't responsible for the shoddy look of many of the stores when they were sold to Smart & Final.

On the road to becoming major regional, multi-format player

In addition to taking a serious and well-focused to date operations and development approach with the Henry's-Sun Harvest chain, Smart & Final is moving strongly into a more overall consumer-focused food and grocery retailing approach with the development and growth of its Smart & Final Extra format stores. [See our story on Smart & Final's "Extra" format from yesterday at this link: Retail Memo: Los Angeles, CA-Based Smart & Final to Significantly Grow its New 'Extra' Food and Grocery Retailing Format This Year in the Western U.S.

Historically, Smart & Final has put more of a retailing focus on the institutional customer -- small grocery store, convenience store and restaurant buyers, for example, than on individual customers -- with its non-membership flagship stores. The stores sell to the public as well as institutions. But because of the focus on large and multi-pack items tend to cater more to the institutional customer more than to individual shoppers. All of the Smart & Final's stores are in the Western U.S. and Mexico.

In recent years Smart & Final has added more single-pack items in those non-membership warehouse-style stores. And because they are non-membership, unlike Costco or Sam's Club which require shoppers to pay an annual membership fee, the stores also make it easier for non-institutional consumers to shop them, which many individual customers do. The non-membership Smart & Final stores began as sort of a cash & carry operation for institutional customers primarily. They've evolved though over the years to targeting both institutional and individual consumers.

With the opening of its first Smart & Final "Extra" banner and format store in August, 2008, the retailer signaled it was going after individual shoppers in a big way with the about 35,000 square foot hybrid supermarket-warehouse format stores.

Smart & Final plans to use numerous skus from the new Sun Harvest natural and organic store brand line, which will include at least 500 skus, in its "Extra" format food and grocery stores. For example, at the November, 2008 seminar, the retailer said it plans to merchandise numerous Sun Harvest store brand items in its "Extra" stores, one of the first of which will be Sun Harvest Natural California Style Pizza, which is a frozen, all natural upscale style pizza in various varieties. Think California Pizza Kitchen brand or Wolfgang Puck brand pizzas.

Doing this -- merchandising numerous skus of the "Sun Harvest" store brand natural and organic products in the "Extra" stores, which sell fresh, perishable and shelf-stable food and grocery products -- will allow Smart & Final to further the hybrid (in a natural and organic direction) nature of the stores, growing the specialty and natural merchandising and product offerings in the "Extra" stores, while still maintaining the format's conventional grocery and fresh foods focus.

Timing good for new Sun Harvest store brand

We think the timing for Smart & Final-Henry's Farmers Market of its new "Sun Harvest" natural and organic store brand is good because consumers are shifting to store brands across all categories in order to save money in the current recession. This is equally, and probably even more true among natural and organic food and grocery shoppers, who are being forced to trade-down in whatever ways they can in order to still be able to afford natural and organic food and grocery items over conventional products. Many are trading-down from natural-organic to conventional in fact because they must. Value-priced store brands help such shoppers to continue to buy natural and organic.

We also think integrating the majority of the "Henry's" and all of the "Wild Oats" store brands into a single new store brand -- "Sun Harvest" -- is a good idea because not only does it allow for a clearer shopper focus on a single store brand, but using the Sun Harvest name, say rather than keeping the "Henry's" brand, allows for better brand marketing at the Smart & Final banner stores, since it's less associated with a store name -- Henry's Farmers Market -- than the brand "Sun Harvest" is. Shoppers might look with a crooked eyebrow at a brand called "Henry's" throughout those stores. But brand "Sun Harvest" fits right in.

Additionally, "Sun Harvest" is a far more universally-oriented brand name than "Henry's" is. It's also much more tuned-into natural and organic products in the minds' of consumers we believe. "Sun" and "Harvest," sound fresh, natural, organic. "Henry's" on the other hand being a proper name just sounds, well...like a proper name. The brand name "Sun Harvest" therefore resonates much better in consumers minds with "natural and organic" than does the brand name Henry's does, in our analysis.

And of course the "Wild Oats" store brand is merely a relic of past ownership, a name Smart & Final has to get rid of anyway as part of its purchase agreement with Whole Foods Market, Inc.

Rolling on out

The first new "Sun Harvest" natural and organic store brand items should start hitting the Henry's stores in Southern California and the Sun Harvest natural markets in Texas soon in a gradual rollout basis

Then later, selected "Sun Harvest" store brand items, such as the Natural California Style Pizza to start, will begin appearing in the Smart & Final "Extra" stores. Selected "Sun Harvest" store brand items, such as natural and organic apple juice and some others, also will be selectively introduced in a more limited manner into the 282 (and growing) Smart & Final non-membership warehouse stores later this year.

Retail Memo - Specialty Foods: Balducci's Creates Some Value On the High-End With 'Balducci's Own' Specialty Store Brand, Now Including Caviar

Pictured above: The Balducci's store in Manhattan's Chelsea neighborhood, one of the 10 upscale specialty and epicurean foods markets operated by the gourmet grocer. The Chelsea Balducci's is an urban store. The specialty foods retailer's store's in other places like Maryland and Virginia has a more suburban look to them however.

Upscale Food Retailing in the Recession: Let Them Eat (Balducci's Own Store Brand) Caviar

Bethesda, Maryland USA-based specialty and epicurean foods retailer Balducci's is sticking a gold-plated fork in the eye of the current economic recession as well as adapting in its own unique way by creating a value proposition around its Balducci's Own store brand specialty and gourmet products, which now includes caviar.

The storied specialty foods retailer, which has survived many an economic recession, has introduced a line of caviar under its own store brand -- the "Balducci's Own Brand."

"In this economy, Americans everywhere are scaling back on their holiday menus," says John Coleman, Balducci's wine, cheese and coffee merchant. "However, many party planners, food connoisseurs and epicureans alike are still looking for ways to enjoy their annual holiday luxuries."

There you go. Balducci's is a perfect example of what we've been saying -- that regardless of format or income-level consumer catered to, retailers must create their own unique value propositions in this serious economic recession.

Granted, this is an interesting and rather high-end value proposition in general. But that's Balducci's niche, and always has been. But even the wealthy can use a little relief, even when it comes to caviar prices.

The most value-priced Balducci's Own brand caviar is Farmed California White Sturgeon. It retails for $55 to $299 per ounce through New Year's Day. The caviar regularly goes for $80-$475 per ounce, according to John Coleman.

The caviar comes in three different types: Wild Caspian, which comprises the Sevruga ($199-$1,175 per ounce) and Royal Osetra ($249-$1,500 per ounce) varieties; Farmed International, which consists of the Farmed California White Sturgeon and the first true Russian Sturgeon to be successfully cultivated in Germany for the production of genuine Osetra caviar ($120-$725 per ounce); and Domestic, which consists of salmon caviar from Alaska and paddlefish caviar from the Tennessee and Mississippi rivers (($9.99-$29.99 per ounce and $35-$199 per ounce, respectively).

"With the new line of Balducci's Own caviar, you can still indulge, and very often under $100," says Coleman. "And with the Balducci's brand, you can rest assured that you are getting -- or giving -- the highest in quality."

The 10-store specialty and epicurean foods retailer has been beefing up its Balducci's Own store brand over the last year. The line includes numerous varieties of products in the cracker, cookie, oil, vinegars, condiment, coffee, sauces and others categories. All are priced below comparable domestic and imported manufacturers' specialty and gourmet brands.

Balducci's also offers a second store brand line -- Balducci's Premium -- which offers numerous epicurean food and grocery items across numerous categories. It's priced higher than its Balducci's Own brand.

In addition to operating 10 specialty-gourmet foods markets on the east coast, Balducci's has a significant online shopping and mail order delivery business via its Web site here.

The Balducci's stores are smaller-sized markets but are packed full of fresh and shelf-stable specialty food and grocery products across all categories, including fresh produce, meats, deli-prepared foods, dairy and grocery. The are best described as neighborhood-sized stores packed to the ceiling with specialty foods of all types, in an upscale setting.