Store Brands - Jan 2017 by ensembleiq

Prime opportunity for premium private brands

Portion control equals convenience and flexibility

“Free from” movement gains momentum www.storebrands.info | January 2017

The

Great Reformulation

Tops Friendly Markets transforms private brand line from product to packaging

PUMPING UP PRIVATE LABEL In this exclusive analysis, we preview FMI’s newest report: The Power of Private Brands.

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Contents

Volume 39 No. 1 January 2017

18 Cover Story

The Great Reformulation Tops Friendly Markets transforms private brand line from product to packaging

Features 14 Logistics

Keeping food safe from farm to fork FSMA final rule on sanitary transportation requires enhanced collaboration among retailers and their supply chain partners

28 Exclusive Analysis

Pumping up private label Opportunities exist for supermarkets to grow store brands, a new FMI report outlines

36 Specialty & Gourmet Update A ‘prime’ opportunity

The merchandising of premium store brands can enable retailers to expand and solidify their shopper bases while bolstering revenues

40 Health & Wellness

No gluten. No trans fats. No BPA. No GMOs. No sesquipedalians … As the “free from” movement gains momentum, how should private brands respond?

45 Packaging

Just enough

Portion-control packaging offers consumers convenience, flexibility and choice

47 Smart Merchandising

Spicing up packaging, displays Brand-blocking, off-shelf displays and great packaging can boost sales of store brand spices and seasonings About the cover: Dave Damrath and Johns Persons from Tops Friendly Markets show off new product packages in their left hands. In their right hands — before the great reformulation of the Tops brand line — are the preceding packages. (Photo by Jim Bush and cover design by Jeff Bowes)

45 4

Departments 6 8 10 72

Editor’s Note Minding the Store New and Noteworthy New Product Concepts

Category Intelligence 50 54 58 61 64 68

Coffee & tea Oils & vinegars Fruit & nut snack mixes Sauces & marinades Paper products Cosmetics & beauty care products

Store Brands (ISSN-0190-9851; USPS # 0488-370) is published monthly by EnsembleIQ, 570 Lake Cook Rd., Deerfield, IL 60015. Subscriptions: One year, $95; two years, $146. One year, Canada $112; two years, Canada $150, One year, foreign $175; two years, foreign $285. Payable in advance with a bank draft drawn on a US bank in US funds. Single copies $10, except foreign, where postage will be added. Canada Post: Canada returns to be sent to IDS, P.O. Box 456, Niagara Falls, ON, L2E6V2. Periodicals postage rates paid at Deerfield, IL and additional mailing offices. Printed in USA. POSTMASTER: send all address changes to Store Brands PO Box 1842 Lowell MA 01853. Copyright 2017 by EnsembleIQ. All rights reserved, including the rights to reproduce in whole or in part. All letters to the editors of this magazine will be treated as having been submitted for publication. The magazine reserves the right to edit and abridge them. The publication is available in microform from University Microfilms International, 300 North Zeeb Road, Ann Arbor, MI, 48106. The contents of this publication can not be reproduced in whole or in part without the consent of the publisher. The publisher is not responsible for claims and representations.

Store Brands / January 2017 / www.storebrands.info

Delicious by design Innov ov o vation v ation • In Inspiirration ation • V Val alue

www.furlanis.com

Editor’s Note Business Intelligence for an Evolving Market 570 Lake Cook Rd. Suite 310, Deerfield, IL 60015 (224) 632-8200 • Fax: (224) 632-8266 Brand Director (973) 264-4389 Editor-in-Chief (330) 635-2586 Managing Editor (224) 231-6359 Contributing Writers

Kevin Francella kfrancella@ensembleIQ.com EDITORIAL

Lawrence Aylward laylward@ensembleIQ.com Carolyn Schierhorn cschierhorn@ensembleIQ.com Kathie Canning, Dana Cvetan Rich Mitchell

ADVERTISING & SALES Associate Brand Director Suzanne Caputo (201) 855-7628 scaputo@ensembleIQ.com Regional Sales Manager Mike Mandozzi (224) 632-8194 mmandozzi@ensembleIQ.com

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Online grocery: What’s in it for private label? ’ve heard how online grocery is going to revolutionize the retail industry. I’ve also heard how online grocery is flopping like a bad Nicholas Cage movie. So what do retailers believe about online grocery? And what impact do they think it could have on sales of their private brand products? To get some answers on the subject, I recently spoke with Samir Bhavnani, a vice president at 1010data, a data management and analytics firm. Bhavnani specializes in grocery analytics. Like a lot of folks, Bhavnani likes to shop, including at the supermarket. But that doesn’t mean that Bhavnani believes that online grocery will go the way of New Coke. Why does Bhavnani believe that online grocery will succeed? One word: technology. “The world is changing, and it’s changing very rapidly,” he says. He’s right. For all we know, consumers will be able to “beam” a pound of salami and a bag of chips, a la “Star Trek,” to their homes 25 years from now. Talking to Bhavnani reminded me of a presentation I heard a few years ago from a guy who makes futurism a full-time job. Now, this guy, Jack Uldrich, isn’t some phony palm reader you see on the boardwalk in Atlantic City. He is a respected futurist who helps companies prepare for the future by gaining foresight into the things that will eventually impact the way they do business. I remember Uldrich saying that in five years we will know twice as much as we know now about technology and science, and in 10 years we will know four times as much as we know now. And Uldrich said the knowledge we gain will change what we do in “profound ways.” Right now, online grocery might not look like a burgeoning opportunity to some retailers. But don’t be fooled, Bhavnani says. “Any retailer that acts like it’s 1995 is in big, big trouble,” Bhavnani warns, noting that more consumers will continue to buy groceries via their cell phones and tablets and through convenient apps. So, what does all of this mean for private label? A few things: • Consider that millennials are likely to lead the charge in online grocery, given that many of them grew up carrying around iPhones, not teddy bears. • Also, according to a new study by the Food Marketing Institute (see our exclusive analysis of the report beginning on page 28), millennials are embracing private label more than any other age group and have a greater propensity to be heavy buyers of such products. “The millennial generation has fundamentally changed how retailers should go to market,” Bhavnani says. But it’s not just millennials. Bhavnani expects aging baby boomers to take more advantage of online grocery in the future. Bhavnani realizes that all retailers are different and that many things, from geography to number of stores, will impact how they approach online grocery. While he’s not suggesting they go all in at once, he does advise retailers to keep testing and learning the concept. “Private label manufacturers and retailers have a very strong opportunity to built private brands [through online grocery],” Bhavnani states. May I leave you with an enlightening quote from Mark Twain that, all these years later, makes sense as it pertains to online grocery: “The secret of getting ahead is getting started.”SB

2015

Lawrence Aylward, Editor-in-Chief laylward@ensembleIQ.com 6

Store Brands / January 2017 / www.storebrands.info

What do they see that you should know about?

Another year is starting. Can you see what’s ahead? PLMALive has assembled its yearly press panel to evaluate the past twelve months and forecast what’s in the future. Here’s a chance to match your powers of prognostication with the experts. Join host Tim Simmons and PLMA’s corps of commentators. Starting January 12.

Tim Simmons

PLMA

Len Lewis

Roy White

Carol Angrisani

Christopher Durham

www.plmalive.com

Presented by the Private Label Manufacturers Association

Minding the Store

Retailers have golden opportunity with premium private brands By Jordan Rost

mericans are keen to experience the finer things in life, regardless of household size, region or ethnicity. And it’s not just among the wealthiest of consumers. Today, 46 percent of Americans say they are financially better off now compared to five years ago, indicating that they may be more able (and willing) to purchase higher-end products that meet their desire for a premium experience. Consumer packaged goods (CPGs) in the “premium” tier — defined as goods that cost at least 20 percent more than the average price within its category — are experiencing strong growth. The combination of sustained consumer optimism in the United States and strong buying power and spending indicates the potential for continued growth in the premium segment. According to a recent Nielsen survey on product premiumization, a higher-than-average price tag is not necessarily a deterrent among consumers. In fact, only 17 percent of Americans say they consider a product to be premium solely because it’s expensive, suggesting that products experiencing price hikes without a clear value proposition are likely to dwindle. Instead, Americans primarily view premium products as those with exceptional quality (54 percent) and superior function or performance (45 percent). Beyond basic-need products, consumers are also in search of and purchasing premium items based on how products make them feel. By offering premium products, private label retailers can directly tap into consumers’ desire (and often, demand) for specialized, enhanced or exclusive benefits. But what’s most critical for store brands that offer premium products? Above all else, they must deliver on consumers’ expectations when it comes to experience and meet a need that was previously not addressed or unsatisfactorily so. 8

Store Brands / January 2017 / www.storebrands.info

While retailers can solve consumer needs via premium in-store offerings, they can augment the in-store experience with digital technologies. For example, retailers can leverage digital apps to surround their private label products with content and digital experiences that elevate their products to a more premium level. Beyond meeting elevated desires and needs, product innovation is also fueling growth within the premium segment. Retailers that are able to successfully drum up consumer attention and excitement across their store brands will likely increase their marketing spend on those specific categories. With this in mind, the premium private label segment has an opportunity to stand out within an increasingly competitive and complex retail environment.

Top premium categories for private label Consumers aren’t just trading up on big-ticket purchases; they’re also shifting to premium buys for everyday items. Categories experiencing strong premium sales include personal care, beauty and home care categories. Within private label, these categories are also showing strong sales and relevant market share. For example, in the 52 weeks ending Oct. 29, 2016, the household care category generated $12.5 billion in private label sales, taking 21.9 percent of share among all brands. Not far behind are personal care items, which drove private label sales of $4.7 billion in the last year, bringing in 11.2 percent share of all brands. And though the beauty care category only represents 4.8 percent share of all brands, it still generated more than $803 million in private label sales last year. As main drivers of the premium segment, private label retailers should keep these categories top of mind when it comes to determining marketing spend and shelf space allocations. These categories, particularly in the premium space, should fare well in the years to come. SB Jordan Rost is vice president of consumer insights for New York-based Nielsen. His work explores emerging trends and shifting buying and media consumption behaviors — and helps manufacturers and retailers make more informed business decisions.

New and Noteworthy SHORT TAKES Amazon launches Wickedly Prime, debuts new store Without fanfare, Seattle-based Amazon. com introduced its first Wickedly Prime private label food products in December. Amazon.com revealed that the new line so far includes four snacks: a cheese and caramel popcorn mix, blue corn tortilla chips, sweet potato tortilla chips and soft shell almonds. Available only to Amazon Prime members, the products are positioned as gourmet. For each SKU, Amazon includes “Goodness at a Glance” information on whether the item is gluten-free, kosher, non-GMO, vegan or free of artificial colors or preservatives. All of the items have at least four such claims. The Wickedly Prime line represents a departure in how Amazon approaches private label. The company’s earlier private label lines — Happy Belly, Mama Bear and Presto! — did not broadcast their affiliation with Amazon, merely stating “AFS Brands LLC” on their packaging. In contrast, the Wickedly Prime line not only has “Prime” in its name but also the logo features the Amazon “smile” (plus a stylized red tongue). Amazon.com also unveiled a brickand-mortar store that allows shoppers to check in via a mobile app, take the products they want and automatically pay upon leaving, all without scanning barcodes or waiting in checkout lines. The new store, Amazon Go, offers a checkout-free experience to Amazon account holders, made possible by the same technology used in self-driving cars: computer vision, sensor fusion and deep learning. The Just Walk Out technology integrated into the store automatically detects when products are taken from or returned to shelves, and keeps track of the items in a virtual cart. Shoppers check in by scanning a barcode on a dedicated mobile app, and, upon leaving, are charged via their Amazon account. 10

What do coconuts and byproducts have in common? They’re just two of the items that Whole Foods expects to be trendy in 2017

etailers and manufacturers of private label food and beverage may gain an idea or two from Whole Foods Market’s recent take on food trends. For starters, the Austin, Texas-based organic grocer predicts that a new wave of WELLNESS DRINKS will go far beyond the fresh-prepared juice craze and include kava, Tulsi/holy basil, turmeric, apple cider vinegar, medicinal mushrooms (such as reishi and chaga) and adaptogenic herbs (maca and ashwagandha). Whole Foods is also a believer in BYPRODUCTS. Rather than discarding them, food producers can find innovative ways to give byproducts new life, whether it’s leftover whey from strained Greek yogurt or spent grains from beer. Whole Foods is also going coconut over COCONUTS, citing that virtually every component of the versatile fruit nut seed is being used in new applications. For instance, the white flesh of the coconut is now used in flours, tortillas, chips, butters and other products. Coconut oil is used in a growing list of natural beauty products. And coconut sap is being turned into coconut sugar as an alternative to refined sweeteners. And then there’s Japanese food, and we’re not just talking sushi. Long-celebrated condiments with roots in Japanese cuisine such as ponzu, miso, mirin, sesame oil and plum vinegar are making their way from restaurant menus to mainstream American pantries, according to Whole Foods, with SEAWEED a rising star as shoppers seek more varieties of savory greens. Japanesestyle pickles will also continue to gain popularity. Also on Whole Foods’ list is CREATIVE CONDIMENTS, which the grocer cites as previously rare and unfamiliar sauces, dips and condiments featuring black sesame tahini, habanero jam, ghee, pomegranate molasses, date syrup, plum jam with chia seeds, beet salsa and piri piri sauce, to name a few. SB

Superfoods gaining more power

uperfoods, typically of high demand in the food, drink and beauty sectors, will soon see a distinct shift towards more diverse categories driven by increasing health-consciousness, according to Canadean, a consumer insights firm. Canadean’s report finds that consumers are more conscious of their health than ever and aim to improve it proactively through healthy living rather than reactively through the use of conventional medicines. “Our research shows that 63 percent of consumers believe plant botanicals or extracts will have a positive impact on their health,” said Lia Neophytou, associate analyst at Canadean. “The increasing trust that consumers have for formulations including superfood extracts is therefore widening the possibility for manufacturers to incorporate superfood ingredients within their products across several sectors.” SB

Store Brands / January 2017 / www.storebrands.info

New and Noteworthy Deflation ruled in 2016 The USDA’s Economic Research Service (ERS) reported in late November that 2016 would mark the first year since 1967 that retail food prices would reflect annual deflation in the U.S. Retail food prices were flat or decreased for eight of the first 10 months of 2016. In 2017, supermarket prices are expected to rise between 0.5 and 1.5 percent, according to ERS. In Canada, consumers will pay more to put food on their tables in 2017, according to “Canada’s Food Price Report 2017.” The report forecasts a rise in food prices between 3 percent and 5 percent higher, considerably higher than the general inflation rate. The biggest factor is the falling Canadian dollar, according to the report.

ShopRite expands organic private brands ShopRite, which began offering organic items in 1999, has increased the line in a big way. ShopRite’s parent company, Keasbey, N.J.-based Wakefern Corp., said it is launching a private brand of organic and other free-from products at all 270 of its ShopRite stores, located in New Jersey, New York, Connecticut, Maryland, Delaware and Pennsylvania. Marketed as Wholesome Pantry and Wholesome Pantry Organic, the brand is designed as an accessible alternative for customers seeking clean label products. Wholesome Pantry’s free-from line includes products “void of 110 ingredients” and contains no artificial additives, flavors or ingredients. The organic line complies with standards set by the USDA National Organic Program. The Wholesome Pantry lineup includes products found in nearly every aisle, including frozen, produce, dairy and meat, along with more than 35 wholesome snack varieties such as Almond Energy Mix and Organic Banana Chips. More than 100 Wholesome Pantry items are available on shelves now, with the number expected to triple in the coming months. The products are also available online through the retailer’s ShopRite from Home service. 12

Good news for private brands in South Korea, India and Spain, but not so good in Greece rivate label products have been making plenty of news overseas — mostly good but some bad. In South Korea, convenience stores have begun producing their own private brands, thanks to chains’ wide distribution capacities, according to a story in The Korea Herald. “The private brand business here will continue to grow across all industries, centered on firms with strong distribution channels,” Suh Yong-gu, a professor of marketing at Sookmyung Women’s University, told The Korea Herald. According to the report, the launch of 7-Eleven Korea’s private coffee brand Seven Café is a solid example of how an affordable private brand product has become a serious threat to existing brands. According to 7-Eleven Korea, Seven Cafe ranked No. 1 in terms of the number of products sold at the chain’s stores between July 1 and Nov. 16, marking the first time that a private brand outperformed established branded items sold at 7-Eleven outlets in South Korea. Seven Cafe began operations at 20 vendors in January 2015 and had expanded to 4,200 vendors by the end of November. Suh also told The Korea Herald that an affordable price tag is one of the biggest advantages of private brands. Convenience store retail brands in South Korea are also collaborating with consumer goods manufacturers on added-value products, according to the report. For instance, South Korea’s leading convenience store chain CU worked with dairy company Seoul Milk to release CU Big Yogurt, a 270-millileter bottle that’s about 4.5 times bigger than the original smaller-size yogurt drink. In India, the private label segment of online retailing is expected to triple in sales to $5 billion (U.S. dollars) in 2017, according to a Dec. 26 article on Business-Standard. com, a major Indian business news website. An earlier article posted on Livemint.com, another Indian financial news site, noted the robust expansion plans of online grocer BigBasket.com, which plans to extend its private brand offerings to non-food categories and offer more SKUs under its existing private label lines. Spanish supermarket chain Eroski recently celebrated the 10th anniversary of its gourmet line SeleQtia by creating a partnership with the Basque Culinary Centre in San Sebastian, Spain, to create new products, modernize its image and enhance the “sensory experience” of customers, according to a story in European Supermarket Magazine. New products added to the gourmet line include fresh and frozen pizzas, fresh and dry filled pasta, Cantábrico sardines and sweet pastries. News is not as good in Greece, where the the price of private label products has increased up to 25 percent the last few years while prices of brand products have lowered, according to www.ekathimerini.com, a Greek news site. As a result, the price gap between private label and brand products is shrinking and market share of private label products is decreasing. SB

Store Brands / January 2017 / www.storebrands.info

New and Noteworthy 5 ways to boost fresh sales in 2017

Kroger keeps streak alive

or the past few years, in response to rising consumer demand, retailers have introduced a plethora of “fresh-focused” store formats playing up the produce, meat/seafood, deli/prepared food and bakery departments. Here are five ways for retailers to maintain a booming fresh offering by utilizing store brands in the mix: 1. Stay on top of health and other trends Since fresh products are closely connected with consumer perceptions of better health and nutrition, retailers need to strike the right balance in communicating these properties to customers, so that they’ll be encouraged to incorporate more and varied fresh items into their diets. “When promoting fresh food, retailers should be careful not to lecture or pressure consumers into eating healthy,” notes Dionysios Christou, vice president of marketing at Coral Gables, Fla.-based Del Monte Fresh Produce. “They should promote the nutritional value and many benefits that the products can bring to consumers and their families.” 2. Light it up Another sage recommendation is to make sure that the products look as good as possible by presenting them, quite literally, in the best light. 3. Borrow ideas When promoting fresh food, grocers shouldn’t feel locked into marketing and merchandising strategies from their own retail channel — or even limit themselves to retail ideas at all. 4. Keep it simple As with many things, simpler is better when it comes to fresh. Avoid vast assortments in prepared foods. Additionally, better organized departments will ensure that customers find what they’re looking for faster. 5. Create a worthwhile experience Above all, retailers must strive to make their fresh departments as inviting as possible. They should adopt various tactics such as eye-catching promotional items and merchandising activities that entice and educate consumers. SB

Despite education, consumers still worried about GMOs

enetically modified organisms (GMOs) are the fastestgrowing food additive concern among consumers, even though consumers are more informed about GMOs and the benefits of their use in producing food, according to a report from the NPD Group, a Chicago-based global information company. In 2013, over half of consumers had little to no awareness of GMOs and that percentage has shrunk to a little over a third. As awareness has grown, more consumers recognize that GMOs have benefits in producing better and more resilient crops. But for many consumers, the benefits of GMOs don’t outweigh their worries, the NPD Group stated in its report, “Navigating GMOs for Success,” which explores how genetically modified foods or beverages impact grocery shopping and consumption habits. SB

Cincinnati-based The Kroger Co. reported identical supermarket sales growth, without fuel, of 0.1 percent for the third quarter of 2016, which ended Nov. 5. The chain reported net earnings of $391 million, or $0.41 per diluted share, for the quarter compared with $428 million, or $0.43 per diluted share, for the third quarter 2015. The slight increase marked the 52nd consecutive quarter of same-store sales growth for the company. Kroger continues to enjoy success with natural, organic and health and wellness products. Its Simple Truth private brand experienced double-digit growth for the quarter.

Supervalu looks ahead With its sales of Save-A-Lot, Eden Prairie, Minn.-based Supervalu Inc. said it is now a more focused company. In December, Supervalu finalized the sale of its Save-A-Lot business to an affiliate of Onex Corp. for $1.365 billion in cash, subject to customary closing adjustments. Supervalu and Save-A-Lot entered into a five-year professional services agreement pursuant to which Supervalu will continue providing certain back office services to Save-A-Lot.

Lidl holds first U.S. hiring event Arlington, Va.-based Lidl U.S., a division of the German retailer Lidl Stiftung & Co., held its first hiring event for store management positions on Dec. 12 in Greenville, N.C. The discount grocery retailer, which sells mostly private brand products and operates in a manner similar to Aldi, expects to open its initial stores on the East Coast by 2018 and has said it will eventually own and operate 150 stores in this region. The first wave of Lidl stores will be located from the Pennsylvania and New Jersey area down to Georgia.

Thyme Farmers Market to expand private label offerings Downers Grove, Ill.-based Fresh Thyme Farmers Market said it will expand its private label line as part of its 2017 growth and development plans. Since its 2014 inception, Fresh Thyme has opened 48 stores throughout the Midwest with 20 new stores in 2016 alone. Stores are located in 10 states in the Midwest. Fresh Thyme plans to have open 70 stores by the end of 2017. SB

www.storebrands.info / January 2017 / Store Brands

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Flavor Evolution

Jerky trail mixes bring true innovation to the snack category At Dick Stevens, we’ve created a line of healthy, flavorful snack products unlike any other snacks on the market. Our gluten-free, reduced-sodium jerky trail mixes combine pieces of jerky with nuts, dried berries and seeds, resulting in a whole new flavor sensation consumers crave. Unlike the “me-too” flavored jerky products that have flooded the category in recent years, the one-of-a-kind Dick Stevens line represents true innovation, says Jeff Eckert, founder and president.

New products:

And in the trail mix category, which, Eckert notes, has drifted away from its healthy roots, Dick Stevens stands out as a nutritious, protein-rich alternative with a unique flavor profile.

Private label:

Dick Stevens performs well whether it’s merchandised as a jerky product or a trail mix. Today’s health-conscious, flavor-seeking consumers can see the difference. Priced at $3.99 for a 6-ounce bag and available in five varieties, Dick Stevens brings a low price point to your snack set and a larger-than-average size. We offer standard beef, chicken and turkey jerky trail mixes and two premium versions, made with hemp-encrusted bison and pomegranatekernel-encrusted beef. Attractive, stand-up aluminum packaging further distinguishes Dick Stevens from other jerky and trail mix products in the market. We’ve made a significant commitment to the production of our unique blends of jerky trail mixes, and we’re expanding in 2017 with new flavors, new products and our first private label offerings for retailers.

New flavors: In addition to our current line of beef, chicken, turkey, hemp-encrusted bison and pomegranate-kernelencrusted beef, we’ll soon be expanding with pork and bacon varieties as well.

Store Brands / January 2017 / www.storebrands.info

We’ve developed a jerky trail mix energy bar that is both flavorful and high in nutrition. Unlike many “better for you” bars that come up short in terms of flavor and others that taste good but lack a strong nutrition profile, we are planning the rollout in the coming months of a product that offers both healthfulness and flavor, just like our core Dick Steven line.

Our unique production capabilities include a new, state-of-the-art facility that is both SQF Level 2 certified and USDA inspected. We are working with several retailers on new private-label lines of jerky trail mix, as well as lines of both jerky products and trail mix products. We’ll also offer private label versions of our energy bars when we begin production on those products later in 2017. Each day, more and more consumers are discovering the unique combination of healthfulness and flavor that Dick Stevens offers. Join our growing network of retail partners who satisfy their customers’ snack cravings with Dick Stevens products. Email us at dick@dickstevens.com or call (888)767-6179 for more information.

Store Brands Exclusive Analysis

Pumping up Opportunities exist for supermarkets to grow store brands, a new FMI report outlines By Lawrence Aylward

hile dollar sales of private brand products have been slumping at supermarkets and other regional grocery chains, a detailed report from the Food Marketing Institute’s (FMI) Private Brand Leadership Council suggests that those retailers can reverse the decline by differentiating their store brand offerings with more innovative and exclusive products. FMI’s report, “The Power of Private Brands,” confirmed that private label grocery sales — hampered by deflation and a decline in supermarket trips — haven’t kept up with national brand sales the last two years. But the report, which details information FMI conducted in conjunction with Information Resources Inc. (IRI) and Daymon, stresses that grocers can take advantage of the growth potential of private label by customizing products, recognizing the need to invest to drive store brand innovation and embracing a wider range of promotion vehicles, including emerging social media platforms. “It will be a lot of hard work and will require retailers to think differently about their store brands, but there is a lot of opportunity for them [with private brands],” Mark McKeown, client insights principal at IRI, told Store Brands. Kristof Duna, director of private brands at Merchants Distributors Inc. in Hickory, N.C., and co-chair of the FMI Private Brand Council’s research and education committee, says the research justifies what he is seeing in the 28

Store Brands / January 2017 / www.storebrands.info

marketplace. But while supermarkets and regional grocery chains have lost dollar share, Duna believes they can regain it by investing more in private label innovation. “There are still retailers that want to take the benefits of private brands without really looking at the investment needed to keep them on the cutting edge,” Duna adds. Dave Harvey, Daymon’s vice president for global thought leadership, says retailers simply need to think differently to distinguish their own-brand offerings to increase sales. “What will drive future growth in private label are categories actually being created by retailers themselves,” Harvey states. The report, released to coincide with the FMI Midwinter meeting in Arizona this month, has suggested next steps, and the report’s final chapter called “Putting It All Together” guides the reader on how to benefit through specific actions. FMI will keep the conversation going well after the report is released, including through a series of webinars that educate the industry on key findings. “Too often, and after significant effort by stakeholders, research is released but quickly finds its way to a book shelf or a file cabinet,” says Doug Baker, FMI’s vice president of private brands. “The FMI Private Brand Leadership Council wanted to develop a tool that would be used throughout the year to generate discussion to help brand owners and their trading partners continue to stay ahead of key trends, consumer demand and competitive pressures.”

ABOUT THE STUDY In its detailed report, “The Power of Private Brands,” the Food Marketing Institute’s (FMI) Private Brands Leadership Council took a multidimensional view of the private brand business by conducting numerous forms of research and analysis that included several research partners, most notably Information Resources Inc. and Daymon. The report looks at the private brand business through four lenses: u From the register: A look at the implications of sales data across tiers and categories. u From the consumer: A look at the private label consumer based on a national survey and analysis of social media. u From the industry: Perspective on industry attitudes and performance based on a trading partner survey that sheds light on differing viewpoints. u From the world: A view of the forces shaping global retailing and how private brands have unique opportunities with changing shoppers around the world. The report is available at www.fmi.org in the website’s “Store” section.

private label Here are 10 key highlights from FMI’s study:

1 Nearly all U.S. households — 96 percent — are purchasing some form of private brand at supermarkets and regional grocery chains that sell food products.

2 Private brands performance has been on a declining

trajectory at supermarkets and other regional grocery chains that outpaces that of national brands.

3 Much of the private brand decline at those retail locations is due to the deflationary impact of dollar sales in dairy, eggs and cheese.

4 The industry views private label’s main role as being a

loyalty builder, which overshadows other benefits such as margin building and leveraging national brands.

5 Product customization is the biggest opportunity for private brand growth.

6 The industry views the biggest threat to private brands to be a lack of capital investment to drive innovation.

7 Organic private brand represents a small but growing segment of the industry.

8 While percent of sales on promotion/advertising

increased across the board in total U.S. food, private label experienced the greatest increase.

9 Millennials are embracing private brands and are more likely to be heavy buyers.

10 The best store brand quality perceptions belong to perimeter categories — 74 percent quality perception for dairy, 70 percent for fresh produce and 68 percent for bakery.

A CLOSER LOOK Beginning on page 30, a series of charts with text expands on “The Power of Private Brands” study. The text includes insight from the following sources close to the report to help retailers better understand what’s behind the numbers: u Mark McKeown, client insights principal at IRI; u Kristof Duna, director of private brands at Merchants Distributors Inc. and co-chair of the FMI Private Brand Leadership Council’s research and education committee; u Dave Harvey, Daymon’s vice president for global thought leadership; u Carl Jorgensen, Daymon’s director of global thought leadership/wellness; and u Nicole Peranick, Daymon’s director of global thought leadership/culinary. www.storebrands.info / January 2017 / Store Brands

Store Brands Exclusive Analysis Down but not out

10%

Food and beverage (no liquor)

Dollar sales percent change vs. years ago

6% 4% 2% 0% -2%

Total

-4%

National Brands

-6%

Private Label

DOWN BUT NOT OUT p INSIGHT: Since the second half of 2014, dollar sales of food and beverage (no liquor) private label products have declined at supermarkets and regional grocery chains, outpacing national brands. One of the reasons is the decline of store trips, which doesn’t surprise McKeown. “Consumers aren’t just shopping at one retailer anymore,” he adds. Private label is big business in the Unites States, with sales of $795 billion (including nonfoods) across multiple retail channels, according to IRI. Private brands command 24.2 percent of all retail sales, with grocery retailers owning 29.2 percent of that share. NEXT STEPS: Despite the recent decline, grocery retailers have a strong opportunity to increase sales in private label, Harvey says. They can start by looking to pump up private label sales with innovative and new products in areas of the store where national brands don’t dominate.

ui ‘16 ld in g)

‘1 6

Q (B 3

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-8%

“Grocery retailers also need to think of private brands as [extending] beyond items and products,” Harvey adds, noting that services, from product delivery to nutrition consulting, can play a major role. “This is really a new frontier for their private brands.”

DEFLATION DEPRESSES SALES q INSIGHT: The majority of the decline in private label sales at grocery is due to deflation in dairy, eggs and cheese, which is noticeably steeper than the rest of total edibles. McKeown says deflation of packaged meats has also had an impact. With dairy, eggs and cheese in the mix, private label dollar sales were down more than 15 percent in the third quarter of 2016 when compared to the same time the previous year because of deflation in commodity products. But remove dairy, eggs and cheese from the equation, and private label sales were down only about 2 percent.

Deflation depresses sales Majority of decline due to dairy, eggs and cheese Dollar sales percent change vs. years ago

Total Edibles (no dairy, eggs and cheese)

-5%

-10%

-15% -20%

Total

-15%

National Brands Private Label Q1 ‘15 Q2 ’15 Q3 ‘15 Q4 ’15 Q1 ‘16 Q2 ’16 Q3 ‘16

(Building)

Store Brands / January 2017 / www.storebrands.info

-20%

Dairy, Eggs and Cheese

Total National Brands Private Label Q1 ‘15 Q2 ’15 Q3 ‘15 Q4 ’15 Q1 ‘16 Q2 ’16 Q3 ‘16

(Building)

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Store Brands Exclusive Analysis Keeping private label relevant Retailers were asked: Which of the following strategies do you use to build competitive advantages? Here’s how they responded:

98%

Private brand program

95%

Customer service Produce program

93%

Community support and community ties

93%

Meat/poultry program

93% 91%

Deli-fresh-prepared program Checkout experience with a focus on speed and friendliness

88%

Social media program

88%

Organic assortment throughout the store

88%

Special events

79%

“There is still deflation, but the slope is not nearly as “We think those days are over,” McKeown adds. steep,” McKeown says. NEXT STEPS: By offering multiple tiers of private brands — NEXT STEPS: While McKeown is unsure when deflation will the key being middle and upper tiers that highlight quality, end, he is certain that retailers have an opportunity to increase not low price — retailers can increase the number of heavy private brand sales by enticing consumers to trade up from buyers of private brands. low-level to mid-tier store brands by offering more exclusive and “Going forward, in order to win in the U.S. private label quality products, which could then create consumer loyalty. market, retailers need to [adopt] a multi-tiered strategy,” “This is what has me very bullish on private label — that McKeown says, noting that product quality and uniqueness grocery retailers are saying they are going to use their brands is more reflected in the middle and upper tiers. to build loyalty with their shoppers,” McKeown adds. “That If grocers can entice shoppers with quality and unique is a critical mindset they must have in building their brand store brands in one area of the store, they can win architecture with different tiers and understanding the role consumers’ trust to do the same thing in other store areas, of those different tiers. McKeown notes. “I applaud the grocery retailers that are looking at their brands as a critical part of Household mainstays generating loyalty,” McKeown continues. More tiers could lead to increased sales by heavy buyers. “This needs to grow.”

HOUSEHOLD MAINSTAYS u INSIGHT: What private label has going for it is that 96 percent of U.S. households purchase such products at supermarkets and regional grocery chains. Fortynine percent of household consumers consider themselves medium-level buyers (26 percent to 75 percent of their total purchases) of private brands. McKeown says grocery retailers need to figure out how to best position their store brands and move beyond marketing and merchandising them only as the lowest-priced items on store shelves, which is how they were originally presented in the 1970s and 1980s. 32

Store Brands / January 2017 / www.storebrands.info

Not buying

96% Buying private label

Percent of U.S. households

10%

Heavy (76%+)

49%

Medium (26-75%)

41%

Light (Less than 26%)

Percent of purchases

KEEPING PRIVATE LABEL RELEVANT t INSIGHT: While nearly 98 percent of retailers use private brand programs to build competitive advantages through differentiation, it’s vital that they keep those programs relevant, Jorgensen says. “More consumers are shopping around solutions, not products or product categories,” he adds. “[Retailers] need to change their thinking and move away from categories and more toward solutions.” Peranick says consumer needs are as fragmented as ever, and that retailers need to adapt. “The one-size-fits-all strategy is just not working anymore,” she adds. NEXT STEPS: Within the theme of differentiation, grocers have an opportunity to leverage their private brands around personalization, Peranick says. “Private brands is one area where retailers have complete control, and retailers are the ones to better address the needs of their trading areas,” she adds. To keep up with trends, retailers need to create a culture of creativity, Harvey says. “Some ideas might be great successes and others might not be as successful, but retailers can show their shoppers that they are thinking differently and trying new things,” he notes. Jorgensen stresses that capital investment in private brands is crucial. While some retailers may consider it risky, they have to look at the potential payback — growing loyal brands with higher margins. “Investing strategically in private brands is less risky

than investing in many other aspects of retailing,” Jorgensen notes.

SAVING MONEY…AND MORE q INSIGHT: Private label product purchasers feel good about what they’re buying because they are saving money. That’s fine, but McKeown says retailers also need to make consumers feel good about the quality of products they’re buying. “It’s about saving money and providing better products on par with national brands, and in many instances providing products that national brands haven’t brought to the market yet,” he adds. NEXT STEPS: Grocers need to find more avenues to provide quality products, much like they have done with organic products, McKeown says. “Grocers looked at what Whole Foods Markets was doing with organic and said to themselves, ‘Well, we can do that.’ And once they figured out the sourcing, they realized there was a lot of money to be made there [with private brands].” But while store brands need to resonate with consumers as quality products and offer other benefits, such as clean labels, this doesn’t mean that retailers should jettison their value-tier private brand products, McKeown affirms. “They still need to offer value products,” he adds. “In a competitive environment, there are still items where consumers are price sensitive — fresh dairy, some produce and center-of-the-store items where price is the primary factor involved in purchasing decisions.”

Saving money ... and more Even though non-heavy buyers express less-favorable perceptions about private label, they recognize the benefits of store brands.

Feels good because I am saving money

Feels good about serving to family

Feels good about serving to guests

Finds store brands better than national brands Heavy

Packaging looks of lesser quality

Medium Light

Tried product, but quality not as good as national brands

Family did not like

www.storebrands.info / January 2017 / Store Brands

Store Brands Exclusive Analysis Boosted by beverage Sales have grown for national brands and private label since late 2013.

Dollar sales percent change vs. years ago

7% 6%

Total

National Brands

Private Label

3% 2% 1% 0% -1%

BOOSTED BY BEVERAGE p

ui ‘16 ld in g)

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Q (B 3

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Q 1

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-2%

millennials, even though retailers from all walks say they are a tough audience to crack from a marketing standpoint. Millennials, born between 1980 and 2000, now comprise a quarter of the U.S. population and are larger than the baby boomers. According to several reports, millennials aren’t influenced much by advertising. So to Kristof, millennials will continue to be prime candidates for private label — if they like the products, that is. The good news for store brands is that millennials identify some private brand products to be virtually the same as national brand products, Kristof says.

INSIGHT: What is it about the beverage category that causes it to consistently grow for private label and national brands? Jorgensen attributes the growth to “a hotbed of innovation.” “There are so many different types of waters — plantbased, energy-based, hydration-specific, flavored … you name it,” he says. “It has been a top area for innovation and is beautifully suited to private brands.” NEXT STEPS: For retailers, it’s a category to continue to explore and invest in. Jorgensen points out that private label manufacturers like the category because it’s a high-margin segment, and products are easy to manufacture, package, label and distribute. Matching up with millennials Peranick says the growth of health and wellness Age group is embracing private label and has a greater products across many categories has especially benefitted propensity to be heavy buyers of store brands. beverage and will continue to do so. In addition, the 5% increased demand for on-the-go healthy products has also Heavy 10% 10% 9% driven up sales. 14% “When you have those factors — health, convenience and also that this is where a lot of the innovation has been in terms of flavors and packaging — it has created a lot more opportunity,” she adds. 57% 50% 49% Medium 49%

45%

MATCHING UP WITH MILLENNIALS u

INSIGHT: Kristof is not surprised that millennials have a greater propensity to be heavy buyers of private label products. He points out that research cited in the FMI report indicates that consumers, mainly millennials, are becoming more brand agnostic. “The difference between millennials and the generation before them is that millennials grew up with access to information at their fingertips,” says Kristof, a millennial himself. “So they are much more likely to do their research on their own. In the past, [more people] relied on the companies themselves, trade organizations or the government to do that research for [them].” NEXT STEPS: Grocers can’t afford not to pay attention to 34

Store Brands / January 2017 / www.storebrands.info

41%

40%

45%

46%

Boomers

Silver

29% Light

Total

Millennial

Gen-X

“They are smart enough to understand that, and realize that it doesn’t make sense to pay more for the national brand,” he notes. So if grocers and private label manufacturers continue to introduce quality products that match up to national brands, they’ll be feeding right into millennials’ hands.

WHERE PRIVATE BRANDS CAN IMPROVE q

INSIGHT: Cleaning supplies and beer/wine/spirits top the list of private label products that heavy buyers of store brands avoid most. Duna says it has been difficult for private brands to break through in these categories because the national brands have had a stronger and longer foothold, and private brands Gaining with organics 40% haven’t invested enough to drive innovation Private brands are consistently capturing in the categories. more of a percentage of total organic sales. Duna notes there is still a negative Total vs. Organic quality perception toward these items as 31% 30% Total private brand products, noting that most older consumers are more apt to use Organic national brands in these categories because 23% 23% they simply believe they are better. 24% 20% NEXT STEPS: In the report, FMI says the 16% poor quality perception of these products 14% doesn’t mean private brands are failing. 11% “More likely it means that national brands have set a very high bar in certain categories, including in consistency and marketing, and have done a great job associating their products with high quality,” F&B Dept Dept Dept Dept (No Liquor) Beverages General Frozen Refrigerated the report states. Food While Duna says there are items among these products where flavors, textures GAINING WITH ORGANICS p and scent formulas are so distinct and unique that private INSIGHT: FMI data reveals that organic private brands brands haven’t been able to replicate them, he believes represent a small but growing segment of the industry. private brands are getting close in some areas, such as with However, organic private brands are consistently capturing carbonated soft drinks. more share points of total organic sales. Duna also believes more investment is needed in these NEXT STEPS: Kristof says store brands are finding success in categories to improve store brands. organics because no national organic brands are dominating “There are certainly private labels that do well, but they any segments of the category, which could also bode well for haven’t broken through quite as well,” he adds. SB future organic private brands. Organics are also popular among Where private brands can improve millennials, who prefer brands that The percentage of heavy private label buyers who avoid support their local communities. these store brand products. The connection is that millennials perceive many organic products to Cleaning supplies have local origins. Organic food is also Beer, wine, spirits perceived to have many other benefits: pesticide-free, more sustainable and Pet needs better for animal welfare. And while organic continues to Personal care represent an opportunity, Kristof Cosmetics believes the newer trend beyond organic is clean label and products featuring Soups fewer ingredients. “Organic is great because you know Soft drinks the standards those products are sourced Paper products under. But you can still have an organic product with a long list of ingredients,” Baby (diapers, wipes) Kristof adds, noting that more consumers Coffee/tea want organic products with fewer ingredients that they can pronounce. www.storebrands.info / January 2017 / Store Brands

Specialty & Gourmet Update

A ‘prime’ opportunity The merchandising of premium store brands can enable retailers to expand and solidify their shopper bases while bolstering revenues • By Rich Mitchell

he increasing shopper interest in newer cuisines and healthy eating is creating powerful growth opportunities for store brands. While many consumers perceive private brands to be lower-cost alternatives to national selections, more retailers are now targeting a wider range of shoppers by launching innovative and higher-end specialty, gourmet and premium items. Such products typically have higher margins and can function as powerful magnets to draw new shopper segments to outlets. Attractive elements include trendy flavors such as Mediterranean, Middle Eastern and Asian selections, as well as items that are locally sourced, sustainable and have cleaner labels. “Offering the same things as everyone else won’t get a retailer anywhere,” says Jim Wisner, president of Wisner Marketing Group Inc., a Libertyville, Ill.based consumer research, consulting and education firm. “There is a need to create products that will generate greater customer loyalty.” That includes offering higher-tier, health-oriented selections such as items that are gluten-free, organic and non-GMO, as well as premium products that go beyond the national brand equivalent, says Carol 36

Store Brands / January 2017 / www.storebrands.info

Spieckerman, president of Spieckerman Retail, a Bentonville, Ark.-based retail strategy firm. “Private brands are seizing upon consumer trends and, in some cases, going after the trends before the national brands,” she states. “The old model was for private brands to be slow followers and then fast followers. But in many instances they are now leading the charge.”

Keep the customer Offering specialty private brands such as natural and organic items, meanwhile, can boost total store revenues by enabling shoppers to do their entire grocery shopping in one location, notes Diana Sheehan, director of retail insights at Kantar Retail, a Boston-based retail and shopper insights consultancy. “It lowers the risk of losing the customer to other outlets … while also adding convenience by eliminating the need for consumers to make a second trip to a different store,” she notes. The steady rollout of premium, gourmet and specialty selections is part of the evolution of private label programs, Spieckerman says. “Most retail organizations have many years of

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Specialty & Gourmet Update experience running in-house brands and are becoming more efficient, nimble, agile and proactive in developing and merchandising the products,” she states. “Companies are moving into niches when before there may have just been a lot of hand-wringing.” Indeed, the amount of private brand specialty foods in retail outlets is “growing like crazy,” Wisner says, noting that category revenues over the past decade have been increasing by double digits annually. That expansion is likely to continue, as research by Wisner Marketing Group found that about 40 percent of shoppers say it is important that their stores offer private brands that are different or better options than other products on shelves. “The core national brand equivalent still accounts for 70 percent of store brand volume, but that is starting to shrink,” Wisner states. “Consumers are moving to premium because it also represents value as they feel they are getting more for their money.” Retailers that are expanding their lines of store brands to offer more specialty, gourmet and premium selections, however, face potential operating challenges. Some companies, for instance, lack the ability and staffing to adequately source, brand, merchandise and market the higher-tier items, Wisner says. “It requires the judgments and creative skills that have not always been core competencies of retailers,” he states.

Corporate backing is crucial To be successful, operators also must have a chainwide commitment, starting with senior leadership, to offer and support specialty and premium items, says Scott Lindsay, president of Product Development Plus Inc., a Toronto-based developer of private brands. “If the organization isn’t fully prepared, the retailer could have a costly failure to clean up,” he states. “The private brand strategy needs to align with and support the retailer’s corporate mission. The brand team must understand as much about its target consumers as possible and develop a proposition that will resonate with them.” Unlike basic private label assortments, which attract many price-conscious shoppers, the upperend selections must appeal to consumers seeking quality and typically warrant more promotions and advertising, Sheehan notes. A further consequence of launching specialty, gourmet and premium private brands is the prospect of diminishing shelf space for national brands, which could make those product suppliers hesitant to offer retailers their latest selections, she states. “National manufacturers may pull back on promotions and bring fewer items to stores if they are not getting the necessary lift,” Sheehan says. “They may not see the need to replace products that are performing well with something new.” Deciding on the optimal specialty, gourmet and premium selections to carry, meanwhile, can be tricky as retailers in different locations often have widely diverse customer bases and competitors. “Offering the proper mix of products is always contextual and it involves considering the other brands already in the retailer’s product portfolio, including national selections, as well as the identity of the store and what consumers expect,” Spieckerman says. “In some cases, introducing premium store brands is ill-advised if it will create confusion, while in other instances it can be a real opportunity.”

Give a nod to non-foods Food items are typically the simplest store brands to develop and likely will generate the greatest returns, Wisner notes. What’s more, suppliers seeking to launch higher-end non-food store brands, for instance, can face patent barriers that prevent them from leveraging the necessary production technologies, he states. 38

Store Brands / January 2017 / www.storebrands.info

Because many consumers also view non-food private brands as staples, “retailer investment in such products is less of a concern to them,” Sheehan states. The exception involves outlets where retailers position non-food store brands as points of differentiation, including items in the health and beauty sections of drug stores, she adds. Indeed, private brand medications already are a prime focus of consumers. In a February 2016 Kantar Retail online survey of 4,000 primary household shoppers, 44 percent of respondents indicated that they had purchased a private brand over-the-counter item the last time they bought from the category. Other non-food sectors, however, appear to have less potential for dominant premium private brand activity. The Kantar Retail survey revealed that just 38 percent of respondents purchased a store brand household paper product when last shopping the category, as did 15 percent of soap/body wash shoppers, 14 percent of skin care purchasers, 9 percent of hair care product buyers, 8 percent of pet food customers and 7 percent of baby care consumers. Yet, because 61 percent of respondents noted that they are willing to spend more on a brand

that they trust, retailers with popular private label programs are in a stronger position to prosper from the higher-end selections. “Consumers across the store are moving toward more premium, gourmet and different types of products that apply not only to food but to nonconsumables as well,” says Jordan Rost, vice president of consumer insights for Nielsen, a New York-based market research firm. There is an opportunity for retailers of store brands to take “what might be an outdated view of what a private label can be and modernize that” by instilling confidence in higher-quality and premium private brand items, he notes. Though store brands are losing share to national brands in some product categories, Rost states, premium, gourmet and healthful private brands are expanding in different sectors. “I’m not sure private label has been able to capture as much as a lot of retailers would like,” he adds. “But that’s the big opportunity — figuring out how to bridge that gap and start to appeal to some of those consumers.” SB Mitchell is a freelance writer from Wilmette, Ill.

www.storebrands.info / January 2017 / Store Brands

Health & Wellness

No gluten. No trans fats. No BPA. No GMOs. No sesquipedalians … As the “free from” movement gains momentum, how should private brands respond? • By Carolyn Schierhorn

•

•No Soy •

•No 40

•

Grans Fats

No Soy

rans Fats No T

Store Brands / January 2017 / www.storebrands.info

that are unfamiliar, unpronounceable or more than five in number. When deciding what to eat today, consumers don’t just consider the organoleptic qualities of food or its cost, notes Jim Wisner, the founder of Libertyville, Ill.-based Wisner Marketing Group. Although taste, aroma, appearance and texture — as well as price — remain important, “how that food product fits with an individual’s cultural values” can be pivotal, he says. Julie Quick, a Plano, Texas-based senior vice president for Shoptology, draws a distinction between particular health-driven dietary restrictions such as avoiding lactose and the embrace of a more holistic view of food. “Only about 7 percent of Americans follow a lactose-free diet and actively purchase lactose-free products, so that’s still pretty ‘niche,’ ” Quick offers as an example. “But what’s becoming more universal is the desire to eliminate some of the things that got added to the food supply chain that don’t need to be there such as antibiotics, hormones and pesticides.” Concerns about food content have created a fertile landscape for new product development. Some industry experts, however, take issue with vendors and retailers that exacerbate fears about the country’s food supply.

Need for education, candor

•

•No

Peanuts

•

•No

•

•No Corn •

•No GMOs • No Peanuts

•

•No Gluten•

•

No GMOs

nce the purview of food allergy sufferers, vegans, dieters and people with celiac disease, the active avoidance of certain common food constituents has become mainstream. Whether out of concern for their health, the environment or animal welfare, more and more American consumers eschew products that contain an ever-growing list of ingredients and additives or are produced No Glutenin a particular way. These “dietary demons,” depending on the individual, may include gluten, bisphenol A (BPA), artificial food coloring and preservatives, GMOs, highfructose corn syrup, trans fats, monosodium glutamate (MSG), soy, corn-fed beef, eggs that are not cage-free and even sometimes the entire dairy category, to name just a few. In addition, many people are heeding the advice of journalist and activist Michael Pollan, author of the 2008 book In Defense of Food: Avoid food products No Corncontaining ingredients

Consumers nowadays have easy online access to the latest “scientific” food-related studies, as well as to the opinions of all manner of vocal celebrities, from the controversial Dr. Mehmet Oz to gluten-free champion Miley Cyrus. As a result, misconceptions abound, yet people today are genuinely more knowledgeable about what they consume, says Heather Mangieri, RDN, a spokeswoman for the Chicago-based Academy of Nutrition and Dietetics. The public’s perception of a better-for-you diet has completely changed, Mangieri observes. While applauding the penchant of consumers to read product labels and eat more healthfully today, she worries that many individuals view good nutrition in terms of what they believe they shouldn’t eat, as opposed to what they need to eat to have a balanced diet. “I do think it’s great that consumers are paying

• No Dairy•

No Pe

luten •No G •

•No Corn •

orn •No C •

•

rans Fats No T

• rans Fats No G

•

•N 42

Store Brands / January 2017 / www.storebrands.info

•

more attention to what they eat and what’s in their food,” says Mangieri, the founder of Pittsburgh-based Nutrition CheckUp. “But as with anything else, it can be taken too far.” One problem is that consumers tend to be afraid unnecessarily of polysyllabic chemical names, and food manufacturers have started to capitulate to the pressure of these misperceptions. “I’ve seen manufacturers of products that have vitamin and mineral enrichment actually take those vitamins and minerals back out of the products because consumers are fearful of chemicals and want a short ingredient list,” Mangieri shares. Most shoppers would not recognize, for example, that d-alpha-tocopherol is a form of vitamin E. Rather than removing difficult-to-pronounce but beneficial chemicals from food products, manufacturers and grocery retailers — including developers of private brands — need to do more to educate consumers about the purpose of various substances, according to Mangieri. Although taking traditional preservatives out of processed food products isn’t necessarily a bad decision, consumers need to be made aware of potential consequences such as shorter shelf life and higher prices, she adds. “Most consumers are not food scientists, so things that may be perfectly fine may not look that way to them,” Wisner agrees. “This is a huge challenge for the industry right now. But, clearly, consumers are voting with their wallets, and there is a definite trend toward wanting a comprehensible and shorter ingredient list.” Mangieri, moreover, is particularly concerned that people with life-threatening food allergies and serious medical conditions such as celiac disease could have their health compromised by manufacturers that are too quick to jump on the

• No Soy•

•

•No Trans Fats

•No Grans Fats

• No Dairy•

•

• No Soy•

free-from bandwagon without understanding the rigor that goes into ensuring that a facility’s manufacturing processes and supply chain are entirely free of the allergens in question or other excluded substances. “I find that the free-from trend has resulted in some confusion and minimization of the seriousness of true food allergies,” she says. Both Mangieri and Wisner also oppose the propensity of some manufacturers and retailers to place “gluten-free” and other free-from claims such as “no GMOs” on products that do not normally contain those substances. “This is disingenuous,” says Wisner. “And it also heightens attention to what people perceive as the risk of these things.” “Oftentimes, food companies will use consumer fear of certain ingredients to their advantage and increase the cost of products even if a particular ingredient was never included in those items,” Mangieri adds. Retailers need to take the high road with their private brands and be selective with their free-from claims, limiting them to attributes that are truly meaningful and distinguishing, Wisner suggests.

•

ten No Glu

• No Corn•

Health & Wellness

Proceed with enthusiasm and caution Still, retailers and private label manufacturers would be foolish not to embrace the opportunities created by the free-from food movement. This is an exciting time, with product innovation flourishing, and private brands have the chance to establish strong bonds with socially conscious and health-conscious shoppers, notes Phil Lempert, the Santa Monica, Calif.-based editor of SupermarketGuru.com. Private label vendors are already responding to the trend. The Official Program Guide of the Private Label Manufacturers Association’s 2016 Private Label Trade Show listed more than 110 exhibitors under the index heading “Gluten-free, Health & Dietetic Food.” Indeed, a number of retailers, cooperatives and organizations such as the Independent Grocers Alliance have developed organic lines, which by definition are “pesticide free.” But the grocery industry needs to be careful, Lempert warns. “As a marketing effort, the free-from food movement is a powerful way to connect with consumers,” he says. “My fear is that from a retail standpoint as well as a branding standpoint, we get carried away.” Take cage-free eggs, for example. A number of retailers have already introduced cage-free private brand eggs, while some supermarket chains have vowed to carry only cage-free eggs by 2020, Lempert notes.

Health & Wellness “The problem is that cage-free eggs cost a lot consumer preferences. For example, he applauds the more,” he says. “While the average cost of a dozen efforts of Kellogg’s and General Mills to remove artifieggs is about $1.30 today, that cost will doubleo Gluten cial food coloring from their cereals. Although studies N by 2020” if the pledge to ban standard eggs from have not shown a causal link between food dyes and O s M G o stores is carriedNout. attention-deficit/hyperactivity disorder (ADHD), What’s more, consumers don’t understand the defithere is some evidence that certain artificial dyes can nition of “cage free,” according to Lempert. The term increase hyperactivity in susceptible children. This is just means that the hens can “get up, flap their wings, a situation in which the potential gains outweigh the turn around and lay their eggs on hay,” he says, noting investment costs in Lempert’s opinion. that cage-free henhouses can still be very crowded. Assessing what ingredients and additives to Many consumers erroneously believe that eliminate from their private brand products and “cage free” means “free range,” Lempert continues. what new SKUs to roll out is a massive and complex “People think that cage-free hens are happy-go-lucky undertaking for retailers. and running around on pasture, which would actuallyNo Corn “When it comes to a store brand, you’ve got so quadruple the cost of eggs,” he estimates. much skin in the game,” Lempert observes. “What Peanuts of people not being able you really want to do is make sure that not only does To prevent the dire No scenario to afford staple food products, the food industry needs the consumer get a great price and great quality, but to do a much better job of explaining to consumers the also you are building trust. potential impact of their demands du jour — rather “Retailers need to be listening to consumers to than blindly giving consumers what they believe they make sure that their store brand products are as want but don’t fully understand, Lempert maintains. closely aligned as possible to what consumers desire. “What we don’t want to do is kill the golden Otherwise, nobody is going to buy them.” SB goose,” he emphasizes. Be that as it may, Lempert respects manufacturSchierhorn, managing editor of Store Brands, can rans Fats ers and retailers that pay close attention to changing No Tbe reached at cschierhorn@ensembleiq.com.

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ugar •No S •

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•No

ggs •No E •

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•No Soy •

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Packaging

Just enough Portion-control packaging offers consumers convenience, flexibility and choice By Dana Cvetan

ortion control packaging represents a pretty logical reaction to the pace of modern life. With so many of us rushing around and pressed for time, it affords convenience, prevents waste and addresses worries about eating too much, especially when it comes to treats. With on-the-go eating and snacking so prevalent, portion-control packaging offers choice. In fact, 33 percent of U.S. adults agree there are not enough conveniently packaged snacks, market intelligence agency Mintel reveals in its “Global Packaging Trends 2017” report, released in December 2016. Additionally, a third of U.S. adults think highquality food packaging is an indicator of product quality, the report found. This presents an opportunity, Mintel notes, advising retailers to roll out unique packaging structures to differentiate products on-shelf and also help form and support brand identity. “The majority of consumers are paying attention to package format and design, and purchase drivers are either being directly related to or being communicated through packaging,” reports Beth Bloom, Mintel senior food and drink analyst. The dominating thrust of packaging design, the report states, is to advance brand recognition while also entertaining and engaging consumers. While

price is an important consideration in purchasing decisions, retailers can leverage brand trust to extend their product portfolios, Mintel states.

Consumer clamor There is an enormous demand for portion-controlled foods and beverages, especially in better-for-you products, and this offers opportunity for retailers, says Vivian Tran, vice president of new business development for Today’s Food, a division of Tasty Brands in Syosset, N.Y. Overall, convenience is the major attraction of portion-controlled items. “The numbers are out there” to support expansion of single-serve foods and beverages in portioncontrolled packaging, observes Jim Wisner, president of Libertyville, Ill.-based Wisner Marketing Group, citing shrinking family and household sizes as important demographic factors driving demand. When it comes to product development, retailers should consider convenience and portability, Wisner advises. “Convenience is paramount. Think of what you would eat in your car. People didn’t used to eat in their cars, and now everyone does.” We’ve become a nation of snackers, Wisner points out. People aren’t eating full meals as they once did and graze more often. This less leisurely pace of dining has consumers thinking more www.storebrands.info / January 2017 / Store Brands

Packaging about health and wellness and how to control consumption, especially of indulgent snacks such as potato chips, he adds. Convenience and portion-controlled packaging go hand-in-hand for today’s on-the-go consumers, agrees Cindy Vogel, director of marketing for MJS Packaging in Livonia, Mich. One of MJS Packaging’s customers, a manufacturer of pickled products, is exploring a new multi-pack of plastic, single-serve containers to cater to this need, Vogel reports. “This is a big departure from [the company’s] current glass jar, and will provide consumers with a fresh and convenient solution for controlling portions,” she explains.

Growth potential

There is strong potential for private label customizable meals, particularly if they can be heated in a microwave.

Snack packaging is a $5.2 billion category experiencing considerable growth, says Tran, citing Nielsen statistics from September 2015 to September 2016. “Over the last year, we have seen 15 percent growth in sales and 19 percent growth in volume, so there’s a tremendous demand from consumers for convenience packaging.” Lunches and snacks for children, protein snacks for adults and breakfast for everyone are subcategories that are ripe for development, Tran says. Consumers also want that convenience for athome or in-office meals, Wisner points out. He sees tremendous potential for expansion of individual, even customizable meals, particularly if they can be heated in a microwave. Subcategories such as microwavable hot cereals, macaroni and cheese and rice side dishes have been expanding the category, he observes. These products are not only convenient, they can accommodate the different tastes and overlapping meal schedules of many households. “Open a pantry and see how many things are there that wouldn’t have been there 15 years

ago. Everyone’s pantry has become a single-serve vending machine,” Wisner declares. Consumers are looking for convenience and healthy options, Tran says. “There is demand from millennial and Gen X moms (in particular) for children’s products that are healthier. Right now, we’re in a day and age where (in many families) there are two working parents, or single parents, and not a lot of time, so convenience packaging is very important to them.” Currently, the portion-controlled category for children is dominated by Kraft Foods with its Lunchables product, Tran points out.

Meeting demand Innovation is happening in the portion-controlled category, Tran says, with more products designed to appeal to the young, more options for breakfasttype snacks and meals, and more items for kids that they can assemble themselves. Some of the most popular individual snacks, says Tran, are ham and cheese, turkey and cheese and pizza. Portion-control packaging is a smart way to cater to small families and single-person households, Vogel says. “Products such as coconut oil have gained tremendous popularity but are often offered in package sizes (16- or 32-ounces) that aren’t suitable for a small family, including a senior citizen living alone,” Vogel adds. “Consumers become very frustrated with the product spoiling before they can use all the contents, so a smaller-sized package is a perfect fit.” Portion control is very important to consumers who want to avoid wasting food, agrees Mitsumasa Takeda, vice president of the Living Essentials Department for Mitsubishi International Corp. Attention also must be paid to ease of use, especially for elderly consumers, he says. Aging consumers require packaging designs they can open and grasp easily, Takeda explains. Packaging should be simple, lightweight and shaped so it’s easy to handle. Additionally, it’s important to make on-pack printing easy to read, he points out.

Production commitment Manufacturing portion-control packaging requires capital investment in technology and equipment and is not necessarily an area where retailers can be “fast followers,” Wisner cautions. But the potential is so promising that Wisner sees the category as a good bet for private brand. “The trends are definitely going in this direction,” he says. “What I think will start to happen is that we will see some companies moving to co-packers as a faster way to market.” SB Cvetan is a freelance writer based in Barrington, Ill. 46

Store Brands / January 2017 / www.storebrands.info

Smart Merchandising

Spicing up packaging, displays Brand-blocking, off-shelf displays and great packaging can boost sales of store brand spices and seasonings By Kathie Canning

s their interest in exotic dishes and ethnic fare continues to grow, American consumers are seeking out the spices and seasonings they need to prepare such dishes at home. That’s good news for the spice and seasoning category. In fact, a January 2016 report from London-based Technavio forecasts that the U.S. spices and seasonings market will expand at a compound annual growth rate of almost 7 percent between 2016 and 2020. Also wielding an influence, according to the market research firm, are ethnic groups living in the United States who yearn for homeland-specific flavors. To ensure their private brand spices and seasonings get their fair share of that projected growth, retailers will need to do more than invest in product development that meshes with current and emerging trends. They will also need to devise and act on a merchandising strategy that aims to attract the attention of shoppers. To see what retailers are doing well, we visited three Chicago-area stores: The Fresh Market store in Lincolnshire, Ill., operated by The Fresh Market Inc., Greensboro, N.C.; a Fresh Thyme Farmers Market store in Deerfield, Ill., operated by Fresh Thyme Farmers Market, Downers Grove, Ill.; and a Whole Foods Market store in Deerfield, Ill., operated by Austin, Texas-based Whole Foods Market. Our visits took place in November.

The Fresh Market Foot traffic in The Fresh Market store was light during our mid-morning visit. The store’s spices and seasonings are located on one side of an aisle situated in the left-hand side of the store. We found a wide selection of spices, spice/seasoning grinders and jarred seasoning blends under the TFM (The Fresh Market), TFM Pantry Collection and TFM Culinary Collection brands. A nice-looking wood frame separates the main spice and seasoning items — most of them under the retailer’s own brands — from the various brands of seasonings on the lower shelves. The upside: n With dozens of SKUs, The Fresh Market’s own brands have the largest presence within the spice and seasoning offerings, and they are merchandised in a brand-blocking fashion. n The store dedicates an entire end cap to bulk bagged TFM spices and seasonings.

A display rack situated on top of the meat case showcased a number of own-brand seasoning blends, including TFM Culinary Collection Maple Bacon Spice Rub/Marinade, TFM Pantry Collection Signature Spice Rub/Marinade, TFM Pantry Collection Alderwood Smoked Sea Salt Grinder and others. To the right of the seasoning display, the store placed jars of TFM Gourmet Turkey Brine seasoning, accompanied by a large sign that communicated the price of $6.99.

The downside: n In the seasoning display rack on top of the meat case, the TFM Steak and Chop Grinder product was out of stock.

Fresh Thyme Farmers Market The Fresh Thyme Farmers Market store was moderately busy during our mid-morning visit. The spices and seasonings are located in an aisle on the left-hand side of the store, perpendicular to cashier stands in the front of the store. Most of the spices and seasonings are located in a wood-framed area; ownbrand offerings are available under the Fresh Thyme Farmers Market and Fresh Thyme Farmers Market Organic brands. Extracts such as vanilla and basics such as pepper are located on the bottom shelf of the wood-framed unit and include some Fresh Thyme Farmers Market offerings. The upside: n Most of the retailer’s store brand spices and

t A display rack situated on top of the meat case at The Fresh Market store showcased a number of ownbrand seasoning blends. www.storebrands.info / January 2017 / Store Brands

Smart Merchandising containers of commonly used spices such as garlic and oregano under the 365 Everyday Value brand. The other area holds a wide variety of jarred spices and seasonings, including those under Whole Foods Market’s own brands.

p The distinctive, colorful design for the Fresh Thyme Farmers Market spices and seasonings makes them hard to miss.

seasonings are brand blocked: One row is at eye level (organic, about a dozen SKUS), while the other is a couple shelves below it (non-organic, about a dozen SKUS). The distinctive, colorful design for the Fresh Thyme Farmers Market spices and seasonings makes them hard to miss.

The downside: n A large standing sign on the walkway outside of the store communicated a “50 percent off” sale on Frontier herbs, spices and extracts, while large shelf signage called out the sale prices on the shelf. No signage communicated the value proposition of the own-brand offerings. n An end cap dedicated to bulk spices features the Frontier brand, not the Fresh Thyme Farmers Market brand. n Other than a branded black pepper display (Supreme Spice), we noticed no spices or seasonings being displayed within the fresh meat department.

Whole Foods Market Foot traffic was heavy during our late-morning visit to the Whole Foods Market store. The spices and seasonings are located in an aisle toward the right-hand side of the store. The section boasts two wood-framed areas on opposite sides of the aisle. One area is dedicated to bulk unbranded spices and large

u At the Whole Foods Market store, an end-cap display featuring “Thanksgiving Essentials” was entirely dedicated to items under the retailer’s own brands, including a number of spices and seasonings under the 365 Everyday Value Organic brand. 48

Store Brands / January 2017 / www.storebrands.info

The upside: n Whole Foods’ offerings are blocked by brand: the 365 Everyday Value brand starts at about eye level, while the Whole Foods Market Organic and 365 Everyday Value Organic brands are located below it. We counted dozens of SKUs; of the three stores we visited, this one had the largest store brand presence in the spice and seasoning category. n An end-cap display promising “Holiday Essentials” housed baking essentials under Whole Foods Market’s own brands. In the middle of the display were baking spices under the 365 Everyday Value Organic brand: Vietnamese Cinnamon, Nutmeg, Pumpkin Pie Spice, Vanilla Extract, Ginger and Cinnamon. The downside: n We noticed only one spice/seasoning display by the meat and seafood departments: a threetiered cart featuring several varieties of Borsari seasoning blends.

Cater to the occasion To attract attention to store brand spices and seasonings, retailers will want to make the items front and center within their holiday and seasonal merchandising sets. Steve Thomas, senior vice president corporate brands for Gel Spice Co. in McKinney, Texas, suggests that retailers make use of display shippers during these peak consumption periods. For example, they could showcase own-brand salt and pepper shaker shippers as well as seasoning salt and steak/barbecue spice shippers during spring and summer for cookouts. Retailers will also want to think outside of center store, placing private brand spice and seasoning displays in the meat, poultry and seafood departments. And if they offer refrigerated and/or frozen spices under their own brands, retailers could benefit from wellthought-out cross-merchandising efforts within the refrigerated and frozen sections of the store. Packaging tweaks also can help on the merchandising front. “We feel that attractive vignettes of each specific spice item add an attractive feature to all spices and help each own brand stand out on the shelf,” Thomas says. SB Canning is a freelance writer based in Libertyville, Ill.

Category Intelligence: Coffee & Tea

Expand your share of cup Retailers could leverage trends toward cold brew coffee and functional tea to reinvigorate private brand sales in this category By Kathie Canning

consider adding cold brew coffee to the ownbrand mix.

hen it comes to a morning eye opener or an afternoon pick-me-up, it’s hard to beat a cup of coffee or tea. And U.S. consumption statistics reflect that reality. A July 2015 Gallup poll, for example, revealed that just under two-thirds of U.S. adults drink at least one cup of coffee a day. U.S. coffee drinkers average 2.7 cups per day — essentially the same number of cups that the Washington, D.C.-based company reported back in 1999. And in its “Tea Fact Sheet — 2015,” the New York-headquartered Tea Association of the U.S.A. relays that roughly four in five U.S. consumers — and a whopping 87 percent of millennials — drink tea. However, approximately 85 percent of the tea consumed in the United States is iced

Mind the trends Although the consumption statistics are a positive for the coffee and tea segment, retail sales have been losing ground recently in many coffee and tea subcategories. But retailers that focus their efforts on emerging trends with significant growth potential could boost sales of private brands within the category. One emerging growth area is cold brew coffee, notes Erik Hansen, executive vice president of sales

for Coffee Holding Company Inc. in New York. “We are seeing this emerge across all price-point and quality levels,” he says. Another emerging trend retailers might want to pursue is the addition of more premium-type products to the canned coffee segment, says Clay Dockery, division vice president, corporate brands for Suffolk, Va.-based Massimo Zanetti Beverage USA. For example, retailers could win over environmentally aware core organic consumers by packaging private brand organic coffee in a recyclable steel can. For his part, David Goldstein, CEO of Elmsford, N.Y.-based Barrie House Coffee Co. Inc., points to a trend toward premium coffee in all formats. He also notes that consumers now want more than convenience from single-serve coffee formats — their quality expectations are on the rise. “Espresso capsules will become more mainstream as the U.S. adopts [the] international format at home [on] a larger scale,” Goldstein adds. Yet another emerging coffee trend is that toward in-store roasting, says Jacques Shalo, CEO of Java Master International LLC in Wixom, Mich. “Since roasted coffee is best consumed within 14 days and ground coffee only lasts a day before it becomes stale, the opportunity of on-site roasting is attractive to retailers as a distinctive quality advantage,” Shalo says. Several emerging trends are wielding an influence on the tea side as well. Consumers’ understanding of tea’s health benefits continues to grow, and that reality presents growth opportunities — for herbal teas, in particular. According to “Tea in the US,” a March 2016 report from Londonbased Euromonitor International, U.S. sales of herbal or medicinal teas grew by 14 percent in 2015. Beau Bernstein, director of sales and marketing for Haelssen & Lyon North America Corp. in New York, says herbal teas also offer “endless miss the opportunities for flavor profile chance to experimentation.” They make good educate partners for functional ingredients and engage with health benefits, too. He consumers via points to turmeric, mushrooms social media. and probiotics as some of the functional ingredients of highest

Don’t

Store Brands / January 2017 / www.storebrands.info

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Category Intelligence: Skin Care Products and Cosmetics

consider the environmental footprint of store brand single-cup coffee and tea.

consumer interest, citing information from IRI and Chicago-based SPINS. Japan’s matcha tea — the most potent of green teas — also is in growth mode, Bernstein notes. “Matcha is the most potent of all green teas in terms of its antioxidant components, and it goes very well in many other iterations — with milk, in smoothies, in yogurt, with citrus or ginger, and with chocolate,” he explains.

Consider the environment The right packaging also could spur private brand growth within the coffee and tea category. Shalo notes that simplicity, clarity, transparency and sustainability are four packaging trends that show signs of staying power. Of those trends, sustainability is perhaps the biggest, at least when it comes to single-cup coffee and tea formats. As Dockery points out, packaging waste has been cited as the biggest reason consumers are not drinking more singleserve coffee. But many store brand manufacturers have been working to address the situation. For its part, Massimo Zanetti introduced the 100 percent

Store Brands / January 2017 / www.storebrands.info

compostable PURPOD100 coffee pod. Certified by the Biodegradable Products Institute, the pod is made of bio-based materials that will break down and turn into soil in less than six months. Tops Markets LLC, Williamsville, N.Y., recently partnered with Massimo Zanetti to offer 12 varieties of 100 percent compostable single-serve coffee pods under the TOPS Coffee House Creations brand. Hansen agrees that sustainability-minded improvements to single-cup coffee and tea formats are of high consumer interest. “Initially cost was a prohibitive factor, but intense competition is quickly driving down the packaging costs to manufacture,” he adds. On the coffee side, Goldstein also points to an emerging trend toward larger family bulk packs or value packs for consumers seeking value pricing and variety.

Educate and engage them To bolster growth of store brand coffees and teas, retailers also will want to look beyond product and packaging development — to strategic marketing and merchandising. For the experiential coffee segment, retailers will want to think both inside and outside the store, Dockery suggests. Inside the store, retailers could engage in sampling events and consumer education. “The new nutritional guidelines suggest consumption of three to five cups of coffee a day with validation of benefit for brain and liver function,” he says. “Assistance in educating consumers is a significant opportunity.” But retailers should make sure the employees performing the demos and other educational activities actually have interest in and knowledge about coffee and tea, Bernstein cautions. “With the growth of specialty and craft in all categories, it is important to have a person conducting a demo beside a display that, when combined, actually excites, educates and inspires shoppers in the store — and thus drives trial and repeat,” he says. Outside the store, retailers could leverage social media platforms to educate consumers about the origins of coffee, present fun coffee facts and discuss the quality of own-brand offerings, Dockery adds. The distinctive aroma of coffee could also go a long way to market store brand offerings. “The aroma that accompanies in-store coffee roasting is one of the greatest tools for building awareness and sales for store brand coffee,” Shalo maintains. On the merchandising front, Dockery

recommends that retailers identify categories with market basket affinity. “Consider unique locations for coffee displays beyond the same aisle and tie in with the most common market basket categories,” he advises. Retailers also might want to engage in brand blocking for own-brand coffee and tea instead of taking the “old school” approach where private brand

Don’t

items are placed to the right of their national brand counterparts, Hansen says. “This is a stronger brand strategy and presents confidence in [the] store brand being able to represent itself solo versus piggybacked [to] the national brands,” he says. SB

forget to call out the health benefits of store brand teas.

Canning is a freelance writer based in Libertyville, Ill.

Coffee and tea category performance Ground coffee

Ground decaffeinated coffee

Single-cup coffee

Whole coffee beans

Instant tea mixes

Single-cup tea

Tea — bags/loose

Private All Private All Private All Private All Private All Private All Private All Label Brands Label Brands Label Brands Label Brands Label Brands Label Brands Label Brands Dollar Sales (in millions)

$348.5

$4,021.1

$54.7

$297.8

$619.8

$3,852.8

$75.6

$460.4

$38.7

$278.2

$3.7

$131.6

$83.4

$1,159.4

Change vs. Year Ago

-9.9%

-2.5%

-12.9%

-6.1%

-39.5%

+6.6%

-0.7%

+1.4%

-12.5%

-6.0%

-34.3%

-23.4%

-7.9%

+0.4%

Dollar Share

8.7%

100%

18.4%

100%

16.1%

100%

16.4%

100%

13.9%

100%

2.8%

100%

7.2%

100%

Unit Sales (in millions)

66.6

629.6

10.2

45.8

77.3

418.5

8.2

51.0

14.6

82.5

0.7

17.8

37.9

365.5

Change vs. Year Ago

-6.3%

+0.4%

-9.7%

-3.6%

+40.0%

+7.7%

-1.0%

+1.0%

-10.4%

-6.3%

-17.1%

-15.0%

-10.6%

-0.9%

Avg. Price Per Unit

$5.23

$6.39

$5.36

$6.50

$8.02

$9.21

$9.27

$9.03

$2.66

$3.37

$5.37

$7.40

$2.20

$3.17

Source: IRI, a Chicago-based market research firm. Total U.S. supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending Oct. 30, 2016. Note: Does not include all coffee and tea subcategories.

www.storebrands.info / January 2017 / Store Brands

Category Intelligence: Oils & Vinegars

A different direction Newer oil and vinegar alternatives that emphasize health and quality can help boost sluggish store brand activity By Rich Mitchell

have displays that allow shoppers to sample the product.

erchandisers of store brands are having difficulty gaining traction in the oil and vinegar landscape. Despite substantially lower average prices, store brand sales activity remains significantly below the national brands. While unit sales of vinegars rose 6.7 percent for the 52 weeks ending Oct. 30, 2016, store brand activity was down 0.1 percent, reports Chicagobased market research company IRI. In addition, unit sales of olive oil were up 5.3 percent, while store brands rose just 0.7 percent. Sales of edible oils in 2016, meanwhile, will total approximately $3.5 billion, up about 2.7 percent from approximately $3.4 billion, reports Euromonitor International Inc., a Chicago-based market research firm.

Growth is forecast to be about 2.6 percent over the next five years, with sales reaching approximately $3.6 billion in 2021, Euromonitor forecasts. Yet, even with such flat activity, the growth potential of store brands is promising. Private label suppliers, for instance, are developing products for the vibrant base of health-oriented shoppers, while also seeking to design more visually appealing packaging. “To best compete against the national brands, 54

Store Brands / January 2017 / www.storebrands.info

store brands should be different from what currently is on shelves,” says Salvatore Russo-Tieri, managing director of Bono USA Inc., a Fairfield, N.J.-based producer of extra virgin olive oils. “That includes bottles of different shapes and sizes and perhaps engraving on the glass. The products must catch the eyes of shoppers and have great presentation.” Bottles also should have labels that clearly list product ingredients and attributes, adds Kaylee Mikolon, sales and marketing manager for Modena Fine Foods Inc., a Clifton, N.J.-based provider of balsamic vinegars and glazes. “There often is a lot of misleading information or lack of information that prevents consumers from understanding the vinegars they are buying,” Mikolon notes. “Providing accurate information on labels, shelf displays or via educational programs would be most beneficial.” Packaging materials, meanwhile, already are evolving, with more merchandisers switching to polyethylene terephthalate (PET) plastic from traditional glass bottles, says Mark Coleman, senior vice president of retail for Cantania Spagna Corp., a Ayer, Mass.-based supplier of vegetable, olive and blended oils.

Follow the leader While presentation is important, it’s also crucial that store brand oils and vinegars match or exceed the quality of the national selections while also meeting evolving consumer demands. Such interests include foods that emphasize health and wellness, Coleman states,

Don’t

ignore the importance of traceability and “extra virgin” authenticity

Category Intelligence: Oils & Vinegars

consider uniquely and attractively shaped bottles for oils and vinegars.

adding that organic selections already are becoming prevalent. “Organic canola oil and olive oil are growth drivers in their respective categories,” he notes. “Organic farming has grown to high levels, and sustainability is much better than it was 10 years ago when organics tried to launch in this country.” Better-for-you options, including organics, also are becoming more prominent in the vinegar sector, Mikolon adds. “Unfiltered raw vinegars along with other healthy drinkable vinegars are popular consumer trends,” she says. “There are more of these products on shelves from both the national brands and store brands.” Other health-oriented product attributes include natural flavors, fewer additives, no preservatives or added sugars, and non-GMO ingredients, Mikolon says. “Retailers need to respond to the direction consumers are moving in,” she notes. “At the same time, they should promote alternative usages for vinegars that consumers may not be aware of, and provide more premium options.” Detailing the host of conventional and

untraditional uses of oil and vinegar can generate revenues for store brands, Coleman states. “The American consumer is waking up to the fact that there are different quality levels for olive oil as well as a wide array of uses in the kitchen such as for frying and cooking,” he says. “As long as the profits for private brands are there, the staying power will only grow stronger in the years to come.”

Accentuate the positive

Merchandisers of extra virgin olive oil, meanwhile, can distinguish their selections by spotlighting that the items have gone through a certification process that traces the olive oil back to its source, RussoTieri states. That is crucial because many sellers are allegedly calling conventional olive oils “extra virgin” and charging an unwarranted premium for the items, he notes. Producers of the higher-priced and higherquality extra virgin olive oil typically crush olives and extract the juice without the use of chemicals and industrial refining. “More consumers are becoming wary of what they are buying and are putting a strong emphasis on traceability,” Russo-Tieri notes. “Certifications are the best ways to regain trust and attract additional customers.” Because many national brands do not certify that their olive oil is extra virgin, retailers should aggressively spotlight the store brands with that designation in their marketing, he says. “It gives the store brands a leg up if customers know that their extra virgin olive oil is the real deal,” Russo-Tieri adds. “It lets shoppers then know that they are getting the proper health benefits and flavor.” To best highlight store brands within outlets, meanwhile, retailers should Cooking and salad oils Olive oil Vinegar situate items on shelves in the “hip to shoulder range Private All Private All Private All and never on the top or Label Brands Label Brands Label Brands bottom shelves,” Coleman Dollar Sales (in millions) $734.2 $1,810.6 $341.2 $1,178.5 $251.6 $554.6 notes, adding that product Change vs. Year Ago +0.0% -1.1% +4.6% +7.0% +3.1% +12.4% demos are a powerful way to Dollar Share 40.5% 100% 29.0% 100% 45.4% 100% generate activity. Unit Sales (in millions) 201.0 428.7 50.6 154.6 121.6 212.6 For maximum visibility, Change vs. Year Ago +0.1% -0.2% +0.7% +5.3% -0.1% +6.7% retailers can place bread and Avg. Price Per Unit $3.64 $4.22 $6.74 $7.62 $2.07 $2.61 an open bottle of olive oil on the middle shelf of a display Source: InfoScan Reviews, IRI, a Chicago-based market research firm. Total U.S. supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending Oct. 30, 2016. Note: Does not include all oil and vinegar subcategories. for tasting, with selections

Oil and vinegar category performance

Store Brands / January 2017 / www.storebrands.info

Category Intelligence: Oils & Vinegars for purchase above and below the items, RussoTieri states. The store brands also should be situated alongside the national selections for an “apple to apple” comparison, he says.

Because many national brands do not certify that their olive oil is extra virgin, retailers should aggressively spotlight the store brands with that designation in their marketing, he says. While it is important to give shoppers a choice of product options, retailers still face the challenge of determining the optimal amount to merchandise, Coleman says, adding that an excessive array of national selections can impact store brand sales. “Many retailers are still stocking too many branded products,” he notes. “This only eats away at their own store brand penetration and share.”

Look beyond price Determining the optimal pricing also can be

mystifying. While lower-cost store brands help entice consumers to eschew comparable national selections, it is most important for the store brands to meet or exceed shopper quality expectations if retailers are to sustain revenues, Coleman says. Indeed, Russo-Tieri says that while pricing of store brands should be in line with the national selections, it is more important to compete on taste. “Products with certifications are naturally going to cost a specific amount so it can’t turn into a race for a lower price than the national brands,” he notes. “There is a certain value connected to the items, and it doesn’t always turn out that extra virgin products will be the lowest price.” In developing such products, it is important that retailers work closely with their suppliers and that each party knows the other’s plans and ideas, Russo-Tieri states. Retailers should visit suppliers’ processing plants and ensure that their inventory needs and timetables can always be met, he says. The parties also should expect to maintain a long-term relationship in order to “grow together and learn how each other works,” Russo-Tieri adds. SB

Don’t

place store brand oils and vinegars on the top or bottom shelves.

Mitchell is a freelance writer based in Wilmette, Ill.

www.storebrands.info / January 2017 / Store Brands

Category Intelligence: Fruit & Nut Snack Mixes

Snack attack Retailers should consider offering ‘beach-front property’ to items in this category By Lawrence Aylward

consider offering more space to private brands in the category, including at checkout.

t’s a train that retailers need to jump on. And if they’re already on it, they need to ride it as far as it will go. That’s the message from Scott Reindel, vice president of business development and retail strategy for the Trophy Nut Co. in Tipp City, Ohio, and Bob Kaufman, president of Woodstock Farms Manufacturing in Edison, N.J., to retailers on the potential that fruit and nut snack mixes offer as private brands. “If you’re not in this game, get in it and get in it in a big way,” Reindel states. “This category is growing. If you’re a retailer and you have only devoted 8 feet to this category in the last 10 years, you are greatly missing the boat. There is so much opportunity.” Kaufman simply adds, “Private label is booming in this category.”

According to Mintel’s June 2016 report “Nuts, Seeds and Trail Mix — US” the category grew 28 percent from 2011 to 2016, driven by the popularity of snacking and the health benefits and convenience of these snacks. In 2016, total retail sales were $8.6 billion, and Mintel predicts total category sales to grow an additional 23 percent to reach $10.6 billion in 2021. While there’s room on the train, Reindel says seats are being taken up quickly. “There is a renewed focus on the category,” he adds. “Retailers are dedicating more space and 58

Store Brands / January 2017 / www.storebrands.info

for private brands in particular. … They are now devoting beach-front property to these items. When I say beach front property, I mean checkout.” Reindel points out that closure rates in the category — meaning the rate in which people who shop an aisle at the store buy a product from that aisle — are 66 percent, making it a “destination” category. Joe Setton, vice president of domestic sales for Setton International Foods in Commack, N.Y., which grows and manufacturers pistachios and pistachio products for private label, says retailers are giving his company’s products more exposure on end caps and at the front of the store. “They are being highlighted more. And the more you highlight them, the more growth you’re going to get out of them,” Setton says.

Category drivers In a survey within its report, Mintel states that 40 percent of consumers say that “high protein” is a type of nut, seed or trail mix of which they want to see more. Thirty-five percent listed high fiber, and 33 percent listed no additives/preservatives. The health factor is driving the category, especially with nuts. “Nuts are a good source of protein, which is easy to call out on packaging,” Reindel says. “Retailers are looking for romance copy, and there are a lot of good claims to make with nuts.” While Setton says pistachios have always been known as a tasty snack, more people are catching on that they are a nutritious snack, which has helped to grow Setton’s business the last few years. Setton has taken advantage of the nutrition factor by launching new and innovative products, such as the pistachio chewy bite. It features only three ingredients: pistachios (50 percent), cranberries and agave nectar. The company also offers a dark chocolate pistachio, which Setton describes as “a little more decadent.” “So you are getting pistachios miss the with dark chocolate, which has its opportunity own health benefits,” he adds. to educate Mintel’s survey reports that 28 consumers about percent of consumers say they the nutrition want more “organic” offerings. factor of fruit “Organic dried fruits are and nut snacks. popular,” Kaufman says, noting that mango, papaya and pitted

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Category Intelligence: Fruit & Nut Snack Mixes prunes are not only popular in trail mixes but also as straight SKUs. “Millenials view them as highenergy foods.” Innovation is also fueling the category. For instance, not only does Woodstock offer organic nuts, it offers organic flavors to go with them. The company also offers a salad topper featuring nuts, seeds and dried fruit. “Between flavorings and innovation of mixes, we are bringing more to the table. But we don’t need to reinvent the wheel,” Kaufman says, noting that what’s important is to stay on top of flavors, such as sriracha and ghost pepper, and adapt them whenever possible to conventional and organic products.

According to Mintel, 75 percent of consumers are likely to eat nuts, seeds or trail mix as a type of snack. Trophy Nut has also embraced flavoring. It has developed an extensive line of flavor profiles that work across stand-alone nuts and mixes. They include spirit-influenced flavors, including honey bourbon pecan, chile lime cashew and bloody mary peanut. “We’re working on big projects with large retailers looking at bold and innovative flavors,” Reindel says. For Setton, continuing to educate consumers and retailers on the healthfulness of pistachios will cultivate demand. “We have to continue to show them that pistachios are one of the healthiest nuts,” he says. “The more we do that, the more retailers will feature them. The education doesn’t stop.”

Even more business From Kaufman’s perspective, the key to attract even more business to the category is for retailers to offer top-shelf products. The formula is simple: If the private brand product is of good quality and value, consumers will return again to purchase it, he says. “The retailer’s job is to develop the right packaging to attract the customer to the product and the right price point to sell the first bag,” Kaufman says. “My job is to get consumers to buy the second, third and fourth bags.” Trophy Nut takes a similar approach, and it’s working. While value-driven retailers offer entrylevel products, Reindel has found that consumers are willing to pay for high-end products. For one large retailer, Trophy Nut manufactures a snack mix priced at $8. And it sells. Snacking presents another opportunity for growth. According to Mintel, 75 percent of consumers are most likely to eat nuts, seeds or trail mix as a type of snack. Mintel’s survey reveals that 28 percent of consumers snack in the morning, 52 percent in the afternoon and 44 percent in the evening. Trophy Nut offers a line of breakfast mixes, including a cinnamon bun mix and a strawberry granola mix. “They have been a huge hit for us,” Reindel says.

Supply — a continuing challenge

Despite the category’s recent success and bright outlook for the future, there are still challenges. When asked the top challenge in the category, Kaufman didn’t hesitate to answer. “Supply … the continued quality of supply,” he says. In most cases, Kaufman realizes that supply — considering Mother Nature’s impact on growing conditions of nuts, fruit, seeds and grain — is out of his hands. As a grower, Setton keeps a close eye on weather trends, especially in California, where 98 percent of all pistachios are grown in the United States. Dry fruit snacks “Water is an issue and so is temperature,” he says. “Pistachios need Private All cool winters for proper growth. These Label Brands things can impact the crops and prices.” $120.0 $997.8 When dealing with a commodity+6.0% -1.0 % driven category, it’s not always easy to 12.3% 100% hold price. 45.2 376.6 “You have to try, but you aren’t always -13.3% -2.5% going to win that battle,” Reindel says.

Fruit & nut snack mix category performance Snack Nuts/ seeds/corn nuts Private Label

All Brands

$1,276.4

$4,199.2

Change vs. Year Ago

+0.1%

-0.5%

Dollar Share

30.4%

100%

Unit Sales (in millions)

287.4

988.5

Change vs. Year Ago

-3.3%

-3.2%

Avg. Price Per Unit

$4.44

$4.25

Dollar Sales (in millions)

$2.44

$2.65

military commissaries and select club and dollar retail chains for the 52 weeks ending Oct. 30, 2016. Note: Does not include all fruit and nut snack mix subcategories.

Store Brands / January 2017 / www.storebrands.info

Aylward, editor-in-chief of Store Brands, can be reached at laylward@ensembleiq.com.

Category Intelligence: Sauces & Marinades

Going global Retailers that respond to growing interest in international cuisines are best-positioned to boost sales of own-brand sauces and marinades By Rich Mitchell

he sauces and marinades sector is taking on a foreign flavor. With more foodservice menus containing global recipes and consumers learning about newer tastes during their travels and via social media, demand is building for more internationally inspired options at retail. Indeed, merchandisers of store brands that enable consumers to easily replicate foreign tastes at home can potentially garner larger revenue streams while differentiating their products from the national suppliers. Thai, Jamaican, Cuban, Indian and Korean selections are generating the most interest, as are health-oriented recipes, states Mintel, a global market research firm, in its December 2015 “Cooking and Pasta Sauces, Marinades — US” report. In addition, large numbers of millennials in particular are seeking hot and spicy flavors, with many gravitating to chili sauces and Sriracha selections, states Euromonitor International Inc., a Chicagobased market research firm, in its December 2015 “Sauces, Dressings and Condiments in the US” report. Besides seeking newer and more exciting tastes, many shoppers are studying product ingredients to determine quality, Mintel notes, adding that “this corresponds with the fact that more than half of consumers always try to eat healthy and maintain a balanced diet.” This is resulting in a greater demand for natural products, as more shoppers seek sauces and marinades that have no additives or preservatives; are made with simple or minimal ingredients; and have low or no sodium, sugar or fat, Mintel reports. “Opportunity also lies in convenience-minded products, versatile items such as marinades that also can be used for basting and dipping, as well as pasta sauces that are suitable for dishes that don’t contain pasta,” Mintel adds.

detail how sauces and marinades can be used in recipes.

Cross the border Sales of cooking sauces, pasta sauces and marinades grew 12 percent from 2010 to 2015 and are forecast to rise 13 percent between 2015 and 2020 to $6.2 billion, according to Mintel. Natural and better-for-you options will generate more

activity, and there also will be wider assortments of international cooking sauces, Mintel forecasts. Indeed, retailers should offer store brands that capitalize on the increasing popularity of Central and South American flavors, as well as Korean and fermented offerings, suggests Vincent Barcelona, vice president of customer experience and corporate chef at Supreme Oil Co., an Englewood, N.J.-based sauce supplier. “Consumers are getting maxed out over what has been available on shelves,” he states. “They are looking for the next big flavor, the next ‘aha’ trend. As independent chefs in restaurants create new ideas and foods, people are being exposed to items from other parts of the world. It eventually trickles down into the retail sector.”

Don’t

put too much information on product labels.

The widespread consumer focus on healthful eating also is triggering a movement for sauces and marinades with clean labels and organic ingredients, says Ernest Dieterle, chef and corporate manager of culinary product development for Chelten House Products Inc., a Bridgeport, N.J.-based supplier of sauces and marinades. “Shoppers are becoming savvier about what they consume and are demanding items with higher nutritional values and fewer artificial components,” he states. “They want ‘real’ food.” The most successful store brands will feature flavors that consumers are specifically seeking, rather than involving items that merchandisers are www.storebrands.info / January 2017 / Store Brands

Category Intelligence: Sauces & Marinades

use packaging that is both attractive and functional.

working to jumpstart, Barcelona states. “To generate sales, there must be pull from the customers who ask stores to create products after being exposed to the flavors at the restaurant level,” he says. “That makes the retailer more willing to take a leap of faith and bring the selections into stores.” It’s also vital that retailers’ marketing and branding teams understand sector trends if they are to develop the most pertinent store brands, Barcelona states.

Be more nimble Merchandisers of store brands, meanwhile, often have a competitive advantage over national manufacturers as they are able to respond much more quickly to changing shopper trends, Dieterle says. Such retailers typically can streamline the extensive research and testing that national brand suppliers usually undertake before rolling out new selections, he states. “Retailers who are aware of the changing consumer palates and understand evolving shopper eating behaviors can shift their merchandising strategies much more quickly than the national brands,” he notes. “National manufacturers are very apprehensive about changing anything because of

Store Brands / January 2017 / www.storebrands.info

the inherent brand equity in their products. They have a much slower reaction time.” To enhance the visibility of the newer brands, retailers should merchandise items in the most desirable store locations, such as endcaps with eye-level facings, Dieterle says. Placement on shelves alongside national brands is also a valuable way to enable shoppers to easily compare the items, including ingredient statements, quality, freshness and price. In addition, in-store demos can generate enthusiasm for store brands by illustrating to shoppers the prospect of using newer and more exciting flavors to create restaurant-style meals at home, Barcelona notes. Tastings also enable retailers to gauge consumer reaction to specific selections prior to investing in large-scale rollouts. “Before stores bring in trailer loads of an item, it is prudent to first get a handful of cases or a pallet from suppliers, sample them, and see what the response is,” Barcelona states. Retailers can further generate interest in storebranded sauces and marinades by merchandising the items in a multitude of locations, such as the meat department, vegetable section and ethnic aisle, Dieterle adds.

Have a plan

Expand the options

selections should feature both novel products as well as those that mimic the most popular national brands, he states. “Private label retailers have the authority or expertise to make similar products as the national suppliers, but there is a shift that is leading to innovative rollouts as well,” Dieterle says. “Millennials and Generation Xers want the next new thing, and store merchandisers have the creative license and liberty to introduce new flavors.” The strongest private label opportunities over the next few years, meanwhile, will likely come from the continued merchandising of ethnic sauces and marinades along with more natural and organic items and products with clean labels, Dieterle states. “There will be a huge emphasis on health and wellness, and consumers will view products that they once saw as fringe — such as items with chia, algae and seaweed — as being more functional,” he notes. “Global flavors also will become more popular. And because of a shift by consumers to eating smaller meals throughout the day rather than three main meals, more items will come in smaller pack sizes.” SB

Having an array of store brands that appeal to a range of shopper segments is also vital, and

Rich Mitchell is a freelance writer based in Wilmette, Ill.

“It is important to have an intelligent, mapped out, merchandising strategy,” Barcelona states. “Retailers can’t just place items on the shelf and expect someone to grab them. There has to be a marketing effort that includes strategic locations.” To further generate attention, product packaging should be attractive and functional, Dieterle states, adding that enabling shoppers to easily view the contents will generate a perception of freshness. “The best bottles also go on the shelf without looking sloppy,” Barcelona notes. “They must be stackable, align well in a row and look secure with a firm break seal that says they can’t be tampered with.” In addition, labels should be simple with a minimal amount of information to avoid clutter, he states. Yet, it’s also important that retailers detail the ways that consumers can use specific sauces and marinades in their recipes, Dieterle says. Possible communication vehicles include package labels, retailer websites, e-mail and other social media.

Don’t

forget to crossmerchandise sauces and marinades in the meat department, vegetable section and ethnic aisle.

www.storebrands.info / January 2017 / Store Brands

Category Intelligence: Paper Products

Roll out new concepts Mature category sees emerging innovation — with novel shapes, sizes, formulations By Carolyn Schierhorn

develop creative new products.

ith roughly $16 billion in annual retail sales in the United States, according to Chicago-based market research firm IRI, paper products — toilet tissue, paper towels, facial tissue and napkins — constitute a mature category that is beginning to spark the creativity of inventors and entrepreneurs. “There is an enormous market for paper products. But wherever you go in the world, this category has seen very little innovation,” observes Oday Abbosh, the founder and CEO of Londonbased Better All Round.

Abbosh hopes to change that with his “one-hand grab” Ora paper towels, which launched at Tesco in the United Kingdom and are debuting at certain Target stores in the United States and through Target.com. These 9.25-inch-diameter circular paper towels are configured in a stackable cone shape that does not require a cardboard inner tube (or core). The packaged product looks like a giant crayon. Abbosh initially conceived the design to reduce paper waste (the edges of rectangular towels are rarely used) and promote sustainability, but he says the product’s main selling point is convenience. For example, a mother carrying an infant can easily grab an Ora towel with one hand to wipe up a spill without knocking the stack of towels over, he notes. 64

Store Brands / January 2017 / www.storebrands.info

But the product appeals to consumers of all ages, Abbosh maintains. “We’ve been so touched by elderly people actually writing in with oldfashioned pen and paper — the handwriting obviously indicating a tremble or shake — to tell us that it’s so much easier for them to pick up an Ora sheet versus having to steady a roll and at the same time tear it it off,” he shares. Beyond conventional kitchen usage, consumers are placing the product in the bathroom to serve as guest towels and on the dinner table to replace napkins, Abbosh adds. Vancouver, B.C.-based Caboo Paper Products Inc., meanwhile, aims to shake up the entire category with its “tree-free” 100 percent bamboo and sugarcane toilet tissue, paper towels, napkins and facial tissue. “We are making a more sustainable product than traditional paper made from wood pulp,” insists Albert Addante, Caboo’s CEO, who spoke with Store Brands during the Private Label Manufacturers Association’s most recent Private Label Trade Show in Rosemont, Ill. “Bamboo and sugarcane are grasses, which grow back very quickly — in as little as three to four months after harvest. And there is no need to replant them.” The toilet and facial tissue are very soft, while the towels perform as well as tree-based products, Addante says, adding that the particular bamboo used by Caboo is not a food source for pandas. Both environmental awareness and cost savings are behind the more widespread industry trend toward “mega rolls” and larger multipacks of toilet tissue and paper towels, points out Mark Greenberry, director of retail sales for Haines City, Fla.-based Sofidel America. More sheets per roll means that fewer cardboard cores are needed, and bulk sizes reduce the total amount of packaging the products require. Sofidel and several other private label manufacturers of paper products, including Medford, N.Y.-based Global Tissue Group, have also adopted more sustainable manufacturing limit paper practices, reducing their water products to and energy usage and carbon incremental dioxide emissions. change. When it comes to product aesthetics, the relatively recent

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Category Intelligence: Paper Products

remember the decorative aspects of this category.

introduction of four-color printing is potentially transformational for the rolled paper towel segment, Greenberry points out. “In the past, paper towel manufacturers have been constrained by two-color printing capability,” he says. “But now, with fourcolor printing capability, you can get a very highquality print on your paper towel, which allows you to generate a lot more consumer interest.” As a result, manufacturers can now more easily create seasonal and holiday paper towel patterns — featuring eye-catching Halloween, autumn or Christmas designs, for example, Greenberry suggests.

Spurring growth

Photo courtesy of Better All Round

Beyond conventional uses, Ora paper towels can be used informally as napkins.

For the 52 weeks ending July 10, 2016, IRI data show that unit and dollar sales declined 4 percent and 0.3 percent, respectively, in the nearly $8.6 billion toilet tissue segment, the largest paper products subcategory. On the bright side, private label toilet tissue (accounting for almost 20 percent of retail value share) experienced a smaller decline

in unit share (1.7 percent) and a slight increase in dollar sales (0.6 percent). The numbers were better for the second largest segment, paper towels — a $5.1 billion subcategory. Retail sales of paper towels during IRI’s reporting period increased 1.6 percent, while private label paper towels (accounting for 28.5 percent of dollar share) fared better, increasing 3 percent. However, the third largest segment, the $1.5 billion facial tissue subcategory, saw decreases in both dollar and unit sales: a decline of 2.2 percent and 4.7 percent, respectively, for all brands and a decline of 5.9 percent and 9.1 percent for private label. Besides developing more innovative items, retailers can invigorate sales in the paper products category by better leveraging e-commerce, according to London-based Euromonitor 66

Store Brands / January 2017 / www.storebrands.info

Don’t

International. Paper products “are ideal for purchasing online” neglect to because consumers frequently champion your buy them in large quantities company’s and need to replenish them sustainability periodically, notes the market research firm in its “Tissue initiatives in and Hygiene in the US” report store and on published in June 2016. your corporate In its March 2016 report website. “Category Insight: Paper Products,” global market research firm Mintel points out that 33 percent of American consumers of household paper products usually buy in bulk. To encourage online sales, retailers should use their websites to highlight the sustainability attributes of their paper products, as well as competitive prices and such qualities as softness and strength, Addante says. Retailers should also be more creative about merchandising paper products in the store, Greenberry adds. While it’s important to display private brand products alongside their national brand counterparts to emphasize the value of private label offerings, special displays — of fourcolor seasonally printed store brand paper towels, for instance — can call attention to decorative as well as other traits of the category. Caboo’s Addante notes that environmentally concerned retailers should champion their commitment to sustainability in their stores. Showcasing bamboo and sugarcane paper products, for example, would enable the retailer to tell a compelling story about corporate social responsibility, he says. From a health standpoint, consumers today — especially millennials — are concerned about chemicals that could come in contact with skin. Indeed, Mintel observes that 25 percent of U.S. users of personal care products, including facial and toilet tissue, believe it’s important for such products to be fragrance-free. Accordingly, in-store signage and product packaging should tout freefrom traits and other important information. Of utmost importance, paper products should be effectively cross-merchandised in the store, vendors stress. Facial tissue, for instance, should be displayed in the cosmetics department and pharmacy department as well as in the household paper products aisle. What’s more, packets of pocket-size facial tissue should be placed at checkout to stimulate impulse purchases, especially during the cold and flu season. SB Schierhorn, managing editor of Store Brands, can be reached at cschierhorn@ensembleiq.com.

Category Intelligence: Cosmetics & Beauty Care Products

Looking good Women also want to feel good about the cosmetics and beauty care products they choose By Dana Cvetan

make bold statements with beauty merchandising.

omen have many reasons for using beauty products. Some are expressing their individuality. Others are indulging in fashion trends, aiming for a more youthful look, enhancing their gifts or covering their flaws. The goal however, is pretty much the same — to look good. Seventy-one percent of women who use beauty products say that it’s important to always look their best when they walk out the door, and 69 percent say that using beauty products boosts their self-esteem, according to global market research firm Mintel Group Ltd. Retail beauty product sales have been on an upswing for several years, reaching $46.2 billion in 2015, Mintel notes in its March 2016 report “The Beauty Consumer — US.” Furthermore, Mintel projects sales will grow at an annual average rate of 2 percent to 3 percent through 2020, driven by an improving economy and population growth.

Performance, price, loyalty Because cosmetics are used as a means to an end, performance is all-important in the category, says April Vignone, president of product and packaging development for New Windsor, N.Y.-based Verla International Ltd.

Retailers want performance-driven color cosmetics and skin care products using the latest and newest natural raw materials and the most advanced technology to deliver results, she notes. Cost-savings are another important factor, says Aileen Vitale, marketing and sales manager for Clifton, N.J.-based Disposable Hygiene. “Retailers consistently ask us if we have the ability to supply like/kind products under a private label offering, whether it be in the cosmetics category, skin care or personal cleansing categories,” she explains. “They are always looking to be able to offer their customer base a cost-saving alternative that performs as well and sometimes better than brand.” Retailers want their own-brand beauty programs to be successful, on-trend to consumer desires, and able to produce high profit margins, observes Karen Combest, executive vice president of Prospect, Ky.based Louisville Ladies LLC. Body lotions, soaps, cotton balls, facial towelettes and polish removers have performed admirably under store brand banners, Combest says. But retailers can do better in the overall cosmetic and beauty products category. The key? Don’t fear innovation, she advises. “Make bold statements in store for beauty,” Combest urges. “While there are fiscal risks with being bold and aggressive, the bigger and scarier risk is your competitor doing it first.” Beauty products are more about desire than need, and the category’s consumers are usually on the lookout for what’s new and improved, Combest observes. “Even if a woman has been using the same foundation for 10 years, she is still looking for something more, something that will work better,” she says. Because a long-term strategy is necessary in this category, retailers need to collaborate with their suppliers to build the brand, Combest says, noting that minimally a five-year strategy fail to leverage and plan of action is required. fashion Retailers should use basic brand trends when building tactics: promotion, developing price, planogram, in-store new cosmetics presentation and advertising, and beauty she says. products. “It should be about creating, building and marketing a

Don’t

Store Brands / January 2017 / www.storebrands.info

Category Intelligence: Cosmetics & Beauty Care Products

develop a longterm strategic partnership with suppliers.

brand that affords [retailers] higher margins, better customer loyalty to their brand, and an increased number of annual shopping visits,” Combest says.

Technology is key Some of the biggest improvements in the category come from increasingly efficient and environmentally friendly ingredient technologies, Vitale says. “Consumers are continuing to look for ingredients that have a minimal impact on the environment without giving up the safety and performance of the products,” she notes. Consumers also are looking for improvements in moisture retention and collagen regeneration technology to boost the performance of natural cleansers, antiaging serums, oxidant-rich moisturizers and intense treatment masks as well as color cosmetics, Vignone reports. In addition, health-conscious consumers want skin boosters that revitalize, restore and brighten skin as well as remove toxins.

Demographic differences Retailers can succeed by catering to a somewhat ignored demographic — aging women and men, says Combest. “The opportunity is mind-boggling, because while they are selective and appreciate value more than Gen X, baby boomers still want quality products in quality packaging. They are not as brand-driven as Gen X and, quite frankly, are a prime example of an opportunity gap begging to be catered to.” Fashion is very important to both millennials and Gen Xers. They live their lives online and love discovering new trends, especially in colors, Combest says. Fashion trends dictate colors trending for upcoming cosmetic seasons but, more importantly, provide guidance to desired textures and product finishes to complement the overall look, Vignone says. “For example, the newest sheer eye-gloss

Don’t

trends extend from the runway fabric trends with high shine forget that and luminosity,” she points out. As always, what’s seen on the women who use cosmetics runway or in the entertainment prioritize industry will continue to carry over to the younger buying product generations such as millennials, performance. Vitale agrees. The difference now, she adds, is the speed by which trends circulate and consumers’ desire to be able to procure those hot items quickly — all due to social media.

Health and convenience As in other categories, consumers want more “natural” products, Combest says. Three years ago, roughly 12 percent of the U.S. population was looking for more natural ingredients, and now, it’s almost 30 percent, she relates. More and more brands are turning to healthier ingredients as the movement toward natural and organic options continues to increase, Vignone says. “We are very conscious about what we put in and on our bodies,” she notes. Products that are portable, easy to use and save time are irresistible to beauty care product consumers, Combest says. Convenience is a must for busy women whose lifestyles demand multi-benefit products that are easy to use at home and on-the-go for immediate touch-ups, Vignone agrees. Convenience, she notes, can take on many forms: “It can include a natural moisturizer that can be used for face, lips and even your hair; or a highlighter stick product that can be used to add a natural glow to your cheeks, color to your lips and contour to your eyes; or a dewy gloss that can be added to your lips, eyes and cheeks.” SB

Cosmetic and beauty care category performance Cosmetics — Eye Private Label

All Brands

Dollar Sales (in millions)

$31.0

Change vs. Year Ago

+6.2% 1.5%

Dollar Share

Cosmetics — Facial

Cosmetics — Nail

Private Label

All Brands

Private Label

All Brands

$2,115.3

$29.5

$2,058.0

$184.7

+1.2%

+9.9%

+6.1%

-1.7%

100%

1.4%

100%

Cosmetics — Lip Private Label

All Brands

$1,453.0

$17.1

$902.6

-5.0%

+34.5%

+8.5%

12.7%

100%

1.9%

100%

Unit Sales (in millions)

5.3

375.3

3.7

259.5

81.6

403.8

3.3

183.6

Change vs. Year Ago

-2.7%

-2.2%

+4.2%

+4.8%

-8.6%

-9.6%

+41.0%

+4.0%

Avg. Price Per Unit

$5.87

$5.64

$7.96

$7.93

$2.26

$3.60

$5.10

$4.92

Source: InfoScan Reviews, IRI, a Chicago-based market research firm. Total U.S. supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending Oct. 30, 2016. Note: Does not include all cosmetic and beauty product subcategories.

Store Brands / January 2017 / www.storebrands.info

Grandos® capsules suitable for Nespresso® machines.* Also under your brand.

* This brand is the property of third parties who are not in any way related to Intercafé Soluble Coffee Vertriebsgesellschaft m.b.H.

FINE FOODS INTERNATIONAL NEW YORK (LP) 9907 Baptist Church Road · Saint Louis MO, 63123-4903 Phone (877) 842 1300 Toll free · Cell (314) 677 7022 A CAFEA GROUP COMPANY

NewProductConcepts ALL PRODUCTS LISTED NOW AVAILABLE FOR PRIVATE BRANDING.

One-hand grab paper towels

100 percent recycled tissues, towels

Ora paper towels are round to minimize paper waste and packaged in a stackable cone configuration that does not require a cardboard core, according to London-based Better All Round. But the product’s main differentiating attribute is convenience, the company says. Ora sheets can be grabbed with one hand by a mother carrying an infant or an elderly person with a tremble, for example. The product comes in one-pack, two-pack and three-pack sizes.

Edgewood, N.Y.based U.S. Alliance Paper now offers three tiers of paper products for private label: the value Daisy brand, the mid-level Delicate Touch brand and the sustainability championing Earth First brand. Products in the latter tier are manufactured from 100 percent recycled paper with up to 80 percent post-consumer content. What’s more, the products are whitened without chlorine bleaching to meet or exceed EPA guidelines.

www.ora-home-usa.com

www.usalliancepaper.com

Toasted coconut chips

Heirloom tomato pasta sauce

Santa Monica, Calif.-based NSI Group, which specializes in natural and organic food products, debuts toasted coconut chips — including plain, cocoa-coated, sea salt caramel, spicy and bacon-flavored. The snack is gluten-free, non-GMO and kosher. The company also makes freezedried fruit and vegetables and a paleo trail mix. Packaging options include a clear or foil-layer standup pouch, a clamshell-style container or a PET canister.

Based in Boisbriand, Quebec, the Mondiv Division of Lassonde Specialties now offers red pasta sauce made from heirloom tomatoes for private branding. Heirlooms are a bit less acidic than other commercially produced tomatoes and have a more pronounced flavor profile, according to the manufacturer. Packaging options include a glass jar, jug, pouch or carton.

www.nsifood.com

www.mondiv.com

Artisan turkey breasts, bacon crumbles Godshall’s Quality Meats, based in Telford, Pa., is introducing a line of fully cooked, spice-rubbed artisan turkey breasts, as well as a line of uncured turkey bacon crumbles in such flavors as chili lime and barbecue-seasoned. The company plans to roll out clean-label snack sticks, exotic-flavored deli slices and charcuterie bites later this year.

www.godshalls.com

New in Packaging

New on the Shelf

Two-compartment plastic milk jug

Bath product gift set

This new packaging concept divides a gallon of milk into separate half-gallon compartments, each with its own cap. Designed to prolong freshness, the invention allows one half gallon to remain sealed while the other is consumed. According to the company, San Francisco-based 2Packagesin1, the container fits in a standard refrigerator door and is easy to handle (even by children) when pouring milk into a glass. The company has also developed two-compartment packaging for salad greens and ground meat.

Owned by Deerfield, Ill.based Walgreens Boots Alliance, London-based Soap & Glory released this gift set as part of its major rollout into U.S. stores. The set contains shower gel, a bath scrub, hand lotion, foot cream, body cream, a head band and more. This private brand’s eyecatching packaging is primarily pink with retro black-andwhite photography of attractive women from an earlier time engaging in bath and beauty routines.

www.2packagesin1.com

www.soapandglory.com

Store Brands / January 2017 / www.storebrands.info

570 Lake Cook Road, Suite 310, Deerfield, IL 60015 Phone: 224-632-8200 • Fax: 224-632-8266

Advertising Sales and Business Staff

Ad Index ADVERTISER NAME

PAGE#

Atlas Paper Company . . . . . . . . . . . . . . . . . . . . . . . . . BC Peter Hoyt President and CEO 773-992-4456 phoyt@ensembleIQ.org

Berner Food & Beverage . . . . . . . . . . . . . . . . . . . . . . 41 Bono USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Borges Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Ned Bardic

Catania-Spagna Corporation . . . . . . . . . . . . . . . . . . . 55

Chief Customer Officer 224-632-8224 nbardic@ensembleIQ.com

Chelten House Products, Inc . . . . . . . . . . . . . . . . . . . 22 Delgrosso Foods Inc . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Di Alfredo Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Jeff Greisch Chief Brand Officer 224-337-4029 jgreisch@ensembleIQ.com

Digimarc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14, 15 DS Brands, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . 25, IBC Eastsign Foods (Quzhou) Co Ltd . . . . . . . . . . . . . . . . 52

Richard Rivera Chief Operations Officer 973-264-4380 rrivera@ensembleIQ.com

Fine Foods International . . . . . . . . . . . . . . . . . . . . . . . 71 Furlani’s Food Corporation . . . . . . . . . . . . . . . . . . . . . 5 G .S . Gelato & Desserts, Inc . . . . . . . . . . . . . . . . . . . . . 42

Kevin Francella

Giovanni Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Brand Director 973-264-4389 kfrancella@ensembleIQ.com

Global Tissue Group . . . . . . . . . . . . . . . . . . . . . . . IFC, 3 Godshalls Quality Meats Inc . . . . . . . . . . . . . . . . . . . . 23 Haelssen & Lyon North America Corp . . . . . . . . . . . 51

Suzanne Caputo Associate Brand Director 201-855-7628 scaputo@ensembleIQ.com

Irving Consumer Products Inc . . . . . . . . . . . . . . . . . . 65 ITI Tropicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Java Master . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Mike Mandozzi Regional Sales Manager 224-632-8194 mmandozzi@ensembleIQ.com

Bette J. Boyers

Massimo Zanetti Beverage USA . . . . . . . . . . . . . . . . 25 Mother Parkers Tea & Coffee . . . . . . . . . . . . . . . . . . CT Multisorb Technologies . . . . . . . . . . . . . . . . . . . . . . . . 31 Nepa Carton & Carrier Company . . . . . . . . . . . . . . . . 39

Advertising Manager 224-632-8251 bboyers@ensembleIQ.com

Private Label Manufacturers Association . . . . . . . . . 7 Royal Paper Converting, Inc . . . . . . . . . . . . . . . . . . . . . 11 Snak King Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

www.ensembleiq.com United States Markets Convenience • Grocery/Drug/Mass Store Brands Specialty Gourmet Multicultural • Green • Technology Hospitality • Apparel 74

Canadian Markets • Convenience • Pharmacy • Foodservice

Store Brands / January 2017 / www.storebrands.info

Stonewall Kitchen . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Trilliant Food & Nutrition . . . . . . . . . . . . . . . . . . . . . . 27 US Nonwovens Corp . . . . . . . . . . . . . . . . . . . . 67, 69, 73 Woodstock Farms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

1. RECYCLING IS GOOD FOR THE ENVIRONMENT. 2. RECYCLED TOILET PAPER IS ROUGH AND SCRATCHY.

IT’S TIME TO RETHINK NUMBER TWO.

16APM10923

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