A new trend is emerging among food retailing chains. We call it "store-grown" and "store-raised". It's a phenomenon in which a handful of grocers are taking the store-branded or private-label products' process to the next level. "Store-raised" refers to a retailer raising animals to store-brand and sell as fresh steaks, poultry and the like. "Store-grown" is the same process but involving exclusively growing fresh produce and related products for store-branding and sales. UK retailer Asda is taking the lead in these two areas, which we see emerging as a niche trend.
Wal-Mart, Inc.-owned United Kingdom (UK) supermarket chain Asda plc. is taking the concept of store brands to a entirerly new level. Asda CEO Andy Bond tells us the UK's number-two largest retail chain, which heretofore has positioned itself primarily as a discount food retailer, will take a decidely upscale approach and start breeding Japanese Wagyu cattle in England and undercut the prices gourmet department store food purveyers Harrods, Selfriges and others charge for the super-fat-marbled steaks, commonly called Kobe-Style beef.
Kobe beef steaks from Japanese-bred Wagyu cattle are considered the best beef in the world, as well as the most expensive. The beef is so completely marbled with fat that it is graded as beyond prime in terms of its quality. The beef is so expensive that it's generally only offered for sale in gourmet food boutiques, super high-end butcher shops, and the very most upscale of upscale supermarkets.
In order to sell the super-prime beef at more competitive prices, Asda plans to raise its first herd of beef a bit differently than is commonly done in Japan. That first herd, which will be raised for the grocery chain in Yorkshire, England will be a cross between the Wagyu breed and Holstein dairy cattle. The crossed-breed will produce beef with slightly less marbled fat than pure-bred wagyu, but will still be graded above prime, and full of the fat which makes it tender.
Because the Wagyu cattle are being cross-bred with the Holstein cows, Asda can't officially call the beef it sells wagyu. However, it can use the term "Kobe-style" beef, which is the brand name most consumers are familar with anyway. Wagyu cattle also are being raised in the U.S. However, no U.S. supermarket chain is having the cattle raised for it on an exclusive basis like Asda will be doing in England. In the U.S., the beef is generally called "U.S. Kobe-style" beef.
Asda, which currently operates 340 stores and five different retail formats in the UK, isn't only taking the concept of store brands to the next level by initiating what we call "store-raised" with its wagyu beef venture. Bond also says the grocery chain will soon start planting truffle forests in Yorkshire as well, near where the wagyu cattle are going to be raised.
Like Kobe beef, truffles are a delicacy, and generally reserved for the wealthy, or those who don't might spending more than they can afford for the treats which grow beneath the ground. In fact, super high-end restaurants often pair a fat-marbled Kobe steak along with a side-dish of truffles for indulgent--and cash-laden--diners. Lower-end truffles can sell for about $150 pound. Higher-end truffles, like the black truffle, sell for $350 -to- $500, depending on the quality, availability and other variables.
By eliminating the middle-man and growing its own truffles, Asda plans to be able to service the higher-end consumer market while at the same time selling the delicacies for far less than gourmet grocery stores in the UK currently do. Perhaps the retailer can expand the market for both items as well?
Asda's "store-raised" (Wagyu beef) and "store-grown" (truffles) approach is an interesting one as it retains the chain's discount positioning in that it plans to undercut the gourmet retailers' on price, but also demonstrates a new direction the retailer is moving in. That direction is to upscale its product offerings and merchandising--while still retaining its discount positioning--so as to go after Tesco plc., the UK's number one retailer.
Tesco, like Asda, operates numerous formats, ranging from hypermarkets that sell everything from groceries, to electronics and clothing, to Tesco Express stores, small-format, limited assortment convenient grocery market. Tesco also is a leader in the UK in upscale retailing, which is a niche it has been growing into for a few years now.
Asda has a major new store expansion program in progress, backed by its Wal-Mart parent's deep pockets. Wal-Mart is the largest retailer in the world. Tesco is the world's number three retailer.
We see what we term "store-raised" and store-grown" as an emerging trend in the food retailing industry. Whole Foods Market, Inc. has had organic produce grown specifically for the grocer in a limited experiment, and plans to do more. UK upscale grocer Waitrose has also done so. However, other than Asda, we know of no other food retailer who is specifically raising (or having raised) a special breed of animal for its stores. Nor do we know of a retailer who is growing a regular super high-end item like truffles on a regular basis as Asda will soon start doing.
Both of these proprietary concepts, "store-raised" and "store-grown," also have the added benefit of allowing the retailer to tap into the fast-growing "locally-grown" consumer market, if they choose like Asda is doing to have the animals and truffles raised and grown locally. We see this phenomenon then as a double marketing threat: the high-quality control and proprietary marketing benefits of controlling the products, and the advantages of tapping into the local consumer movement.
Look for other retailers to get involved with the "store-raised" and store-grown" concepts as an extension of their store product brands' programs and positioning. There is an "exclusiveness cachet" to doing so, as well as competitive and economic benefits which can be harnassed as a way to differentiate a retailer from all others.
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