Building the perfect package
Health and wellness driving dips & spreads
Getting Social: Q&A with Nancy Cota www.storebrands.com | March 2017
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The 2017 Private Label Hall of Fame inductees spearheaded significant changes in private brand partnerships, product development and promotion
A ‘Natural’ Resource Our State of the Industry survey reaffirms that retailers and suppliers continue to embrace natural/organics to grow store brands
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Contents
Volume 39 No. 3 March 2017
16 PLMA Hall of Fame Premium Tier The 2017 Private Label Hall of Fame inductees spearheaded significant changes in private brand partnerships, product development and promotion
Features 24 2017 State of the Industry Report A ‘Natural’ Resource Our State of the Industry survey reaffirms that retailers and suppliers continue to embrace natural/organics to grow store brands
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33 Packaging Building the perfect package A greater demand for more sustainable and economically attractive packaging is leading manufacturers to streamline designs
Departments 6 8 10 14
Editor’s Note Minding the Store Around the Industry Getting Social
Category Intelligence
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38 44 48 53 56 60
Honey and syrups Baking mixes and ingredients Dips and spreads Cookies and crackers Over-the-counter remedies Household cleaners About the cover: Congratulations to the 2017 inductees into the Private Label Hall of Fame: Peter Brennan, Tom Chaffee, Bob Mariano and Gary Smith. Cover design by Jeff Bowes.
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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. Reprints, permissions and licensing, please contact Wright’s Media at ensembleiq@wrightsmedia.com or (877) 652-5295. 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 / March 2017 / www.storebrands.com
Editor’s Note Business Intelligence for an Evolving Market
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EVENTS • MARKETING • DIGITAL • RESEARCH • CIRCULATION CORPORATE OFFICERS Executive Chairman
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Hall of Fame human beings, too
H
ere’s what I love about the Private Label Manufacturer Association’s 2017 Private Label Hall of Fame class (see our coverage beginning on page 16). Not only are the four inductees regarded as game changers in their industry, they are also just solid people. Clearly, there is a succinct connection between their successful careers and how they have lived their lives. Let’s start with Peter Brennan, who, sadly, died shortly after he was inducted into the hall of last month. Brennan was the president of Stamford, Conn.-based Daymon from 1994 to 2006. He is described as being “a key evangelist” for private label. Brennan was also a caring person, treating others like he wanted to be treated. After Brennan died, a woman who worked for Daymon posted on Facebook her “favorite story” about Brennan, which happened 10 years after she left the company. She said she saw Brennan on a plane sitting six rows behind her as she took her seat with her young son. The woman recognized Brennan but didn’t think that he — the president of Daymon — would ever remember her. After all, it had been many years since she worked at Daymon, and she figured Brennan had more important things to deal with than remembering former employees’ names. But when the woman made eye contact with Brennan on the plane, he said hello to her — calling her by name. When the plane was airborne, Brennan got out of his seat and approached where she was sitting. He briefly chatted with her and told her, “If there’s anything you ever need, my door is always open.” “I think he wanted me to really know that he in fact recognized me,” the woman wrote in her post. “I was so humbled.” And then there’s Thomas Chaffee, who spent his entire career of 43 years in private label, 36 years of it with Presto Products. Chaffee’s customers say he was the best salesperson they could ever ask for. But Chaffee got into private label to help people. When Chaffee interviewed with Presto as a young man in his 20s, he was told he would be selling private label products, which would help budget-minded consumers save money. Chaffee thought about the many people who live paycheck to paycheck and struggle to pay the rent. If he could help those people through private label, then that was the field for him. There’s also Gary Smith, who is being inducted after an illustrious career at Safeway, where he spurred the developed of the retailer’s Safeway Select premium line of products. The first words out of Smith’s mouth after I told him congratulations on his induction had nothing to do with his achievement. Smith said he would have never been able to do what he did without the people he worked with. “This is congratulations for the team,” Smith said. Finally, there is the fourth inductee, Bob Mariano, who recently retired as CEO of Roundy’s Supermarkets after 14 years. Like Smith, Mariano, who preached that private label food products should always exceed the national brands, didn’t use the word “I” when talking about his career highlights. He used the word “we.” He was also gracious and modest when discussing his induction. There are people in leading positions at many businesses in this world — too many of them, unfortunately — who believe that arrogance and aloofness are required for them to succeed. But the inductees of the 2017 Private Label Hall of Fame will have none of that. SB
2015
Lawrence Aylward, Editor-in-Chief laylward@ensembleIQ.com 6
Store Brands / March 2017 / www.storebrands.com
Supermarkets vs. Restaurants: Who Is Winning? It is a battle for the stomach and who will fill it: the supermarket or the restaurant? It has been going on for more than two decades but supermarkets have found aggressive ways to compete. Join news anchor Jodi Daley and PLMA president Brian Sharoff for an inside look at the battle and the creative approaches supermarkets are taking today. Plus, special reports by Len Lewis on shopping habits of elderly consumers, Roy White on dollar stores heading for Main Street, David Merrefield on Stater Brothers new CEO, and Brad Edmondson on the Trump consumer.
Jodi Daley
Brian Sharoff
PLMA
Len Lewis
Roy White
David Merrefield
Brad Edmondson
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www.plmalive.com
Watch the news. Don’t just read about it. Starts March 9. Presented by the Private Label Manufacturers Association
Minding the Store
Glowing opportunities for private label By Jordan Rost
ast-moving consumer goods (FMCG) manufacturers and retailers alike can agree that 2016 was a year full of complexities and new innovations that are pushing the industry forward. The first quarter of 2017 mimics a similar outlook, as we expect disruptors to continue reshaping the grocery landscape. Technology has not only empowered consumers to learn more about the products they purchase, but has also led to having more options than ever before of where, when and how to shop. Private labels are up against the same challenges that brands are facing when it comes to these industry disruptions.
Growing focus on healthier options A number of factors are influencing consumers to be more focused on health and wellness, including an aging population, rising healthcare costs, an increase in chronic diseases, demand for transparency and access to technology. Today, health and wellness extends far beyond treating ailments and getting checkups — and reaches the total store. Consumers are also finding new ways to indulge more healthfully. When looking at typical “indulgent” categories such as cookies, we see that “natural” options are on the rise within the private label view.
And consumers’ focus on natural isn’t limited to indulgence; health and wellness claims are also driving growth in categories that consumers may be eating for breakfast, lunch or dinner, such as frozen entrees. As a total category, sales of cookies with a “natural” 8
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claim have increased 10.8 percent in the latest 52 weeks (ending Dec. 31, 2016), representing more than $488 million in U.S. dollar sales. This growth could be attributed to cookies’ significant growth within private label; in the last year, dollar sales of store brand cookies increased 6.8 percent (compared to 0.5% growth for branded cookies). When it comes to frozen entrees, those with a natural claim also saw an increase (16.1 percent) in dollar sales in the past year. Much of this growth can be attributed to sales within private label, which saw 3.9 percent growth compared to a decline of 0.1 percent for branded frozen entrees.
A new mainstream If your private brands aren’t focused on reaching multicultural consumers, they are missing an opportunity to reach a significant part of the U.S. population. Hispanics, African-Americans, AsianAmericans and all other multiculturals already make up 38 percent of the U.S. population, with Census projections showing that multicultural populations will become a numeric majority by 2044. This population shift is creating an increasingly intercultural population, which is impacting American culture, especially when it comes to food. Culturally influenced flavors, cuisines and ingredients are growing rapidly and becoming much larger staples across Americans’ palates. Take tortilla chips, for example, which have roots in Latin cuisine and culture and have begun to appear more frequently in American households in recent years. Despite branded tortilla chips owning roughly 93 percent of market share (with approximately 7 percent share for store brands), private label tortilla chips are growing in dollar sales at a much faster rate — 11.7 percent compared to 2.8 percent for branded products. Whether private label retailers are seeking to reach today’s health-conscious or multicultural consumer (or a combination of both), 2017 is the year to up the ante on store brands that cater to healthier lifestyles and culturally vibrant palettes. SB Jordan Rost is vice president of consumer insights for Nielsen. His work explores emerging trends, shifting buying and media consumption behaviors and helps manufacturers and retailers make more informed business decisions. He shares his expert industry insights via thought leadership content, industry talks and with Nielsen’s clients.
AroundtheIndustry SHORT TAKES Southeastern Grocers transforms own-brand line Southeastern Grocers (SEG) is taking its store brand program to another level. The Jacksonville, Fla.-based supermarket portfolio, which operates BI-LO, Fresco y Más, Harveys and Winn-Dixie stores, said it’s conducting its largest transformation of private label products, which will span approximately 3,000 items across all categories throughout each banner-specific store throughout 2017. To date, SEG said it has tested more than 2,330 own-brand items, which led to improved quality reformulations on more than 2,260 products. Over the next year, the company said the rollout across all stores will provide quality, value and differentiation to customers without increasing the price. “Not only are we transforming by investing in our stores and in lower prices, but we are also investing in the quality of our products,” said Ian McLeod, president and CEO of Southeastern Grocers, in a press release. SEG is launching three new and refreshed brands in coming months — SE Grocers Essentials, SE Grocers and Prestige. The SE Grocers Essentials brand is billed as dependable quality at an affordable price. “These products offer honest, everyday value for all customers looking for reliable, budget household basics,” according to the retailer. SEG said the SE Grocers brand was developed “to quality benchmarks as close if not better than the taste and quality currently offered by the established brands already in the market but at significantly lower prices.” The Prestige brand “offers an indulgent experience, at an incredible price,” the retailer said.
Kroger purchases Murray’s Cheese Cincinnati-based The Kroger Co. purchased the equity of New York-based Murray’s Cheese, as well as the specialty retailer’s flagship location on Bleecker Street in New York City. Since 2008, Kroger has maintained a business partnership with Murray’s, which opened in 1940 and today has more than 350 of its shops in Kroger stores. “For cheese lovers and connoisseurs, it doesn’t get more authentic than Murray’s,” said Rodney McMullen, Kroger’s chairman and CEO, in a statement. “Our customers are excited to buy the unique offerings of Murray’s Cheese right in our stores, and we’re excited to ensure this iconic cheese shop will remain a part of the Kroger family for many years to come.” The Murray’s shops in Kroger’s stores replicate the experience customers have at Murray’s Greenwich Village flagship store, according to Kroger. Each shop carries hundreds of varieties of cheeses, charcuterie, olives, crackers and specialty food items from all over the world.
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Lidl plans 100 stores by mid 2018
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ere comes Lidl. For store brands, it will be an influx of new products. For supermarkets and other retailers, it will be more competition. The German supermarket chain will open 100 stores across the East Coast by mid 2018. The first stores will open this summer in Virginia, North Carolina and South Carolina. Lidl currently has 10,000 stores in 27 European countries. Lidl, like its German counterpart Aldi, offers an array of private brands. The retailer says on its website that its goal is to “build up brand ranges allowing items to be easily recognized and provide the customer with Lidl brand reassurance. Our private label items meet or exceed the quality of the equivalent national brand item.” According to a report from Business Insider, Lidl plans to eventually open as many as 600 stores in the United States. Business Insider also reported that Lidl says it will be “a hybrid similar to Trader Joe’s or Harris Teeter but closer to Joe’s.” Lidl’s U.S. operations are based in Arlington, Va. SB
DeCA to unveil own-brand lines
F
reedom’s Choice and HomeBase are the names chosen by the Defense Commissary Agency (DeCA) for its first-ever lines of private label products. The store brands will begin appearing on commissary shelves in May, and the number of products will continue to grow over the next four to five years. “Commissary patrons have been telling us for quite some time that they want to take advantage of the value offered by store brands, but commissaries have not had their own brand until now,” said DeCA Director and CEO Joseph H. Jeu. “We are proud of our new brands, and I believe our customers are going to be very pleased with the quality and low prices that Freedom’s Choice and HomeBase bring to our shelves.” Freedom’s Choice will be the commissary brand name for food items, and HomeBase for nonfood items such as paper products and other household items. DeCA announced its partnership with SpartanNash in February to begin developing the commissary brands. SpartanNash, through its military division MDV, is the distributor of grocery products to military commissaries in the United States. SB We know TRADER JOE’S has its fanatics, but you have to pay up for the product. Millburn, N.J., police arrested a 51-year-old man after he allegedly stole 12 bags of shrimp from a Trader Joe’s in January. The guy stuffed the shrimp in his clothes (12 pounds of it!) and left the store without paying. The shrimp’s estimated value was $118.
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AroundtheIndustry SHORT TAKES Earth Fare removes GMO ingredients from private brands Ashville, N.C.-based Earth Fare, which said it has served its communities for 40 years by making healthy food accessible and affordable, reported it has now removed GMO ingredients from its private label food products, which includes more than 500 items. With over 500 private brand items now on shelves and hundreds more soon to be launched over the next six months, Earth Fare said it is committed to transparency. The company says its non-GMO project is the culmination of two years of research and development.
CVS goes free from PHO CVS Pharmacy said it is the first national retail pharmacy chain to remove partially hydrogenated oils (PHO) from all of its store brand food products. The Woonsocket, R.I.-based retail pharmacy said it now offers over 600 own-brand snack and grocery options that are free from PHO, the primary source of artificial trans fats in processed foods. SB
Wegmans, Publix rank high in Poll
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ochester, N.Y.-based Wegmans and Lakeland, Fla.-based Publix Super Markets ranked second and third, respectively, in the Harris Poll’s 18th-annual Reputation Quotient (RQ) Summary Report, which reveals corporate reputation ratings for the 100 most visible companies in the United States as perceived by the general public. Wegmans and Publix are both well-known for their own brands. Publix, which offers three tiers of own brands, is featured in Store Brands February issue as the magazine’s 2017 Retailer of the Year. Amazon reclaimed the top spot in Harris Poll’s report, marking the ninth consecutive year the online retailer has ranked in the top 10. The top 10 companies for corporate reputation in 2016 are (in order): 1. 2. 3. 4. 5.
Amazon Wegmans Publix Johnson & Johnson Apple
Capacity in both New Jersey and Las Vegas Facilities Store Brands / March 2017 / www.storebrands.com
UPS The Walt Disney Google Tesla Motors 3M Co.
Issaquah, Wash.-based Costco ranked 14th and Cincinnati-based The Kroger Co. was 21th. The RQ measures companies’ reputation strength based on the perceptions of more than 23,000 Americans across 20 attributes classified into six corporate reputation dimensions: social responsibility, emotional appeal, products and services, vision and leadership, financial performance and workplace environment. SB
ASTA SAUCE BBQ SAUCE, SALSA, CONDIMENTS SIMMER SAUCES, INTERNATIONAL SAUCES
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6. 7. 8. 9. 10.
Bridgeport, New Jersey • North Las Vegas, Nevada
www.cheltenhouse.com National Retail Sales Manager - ALaddon@CheltenHouse.com
Getting Social
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Q A with Nancy Cota
Vice president of product management/fresh own brands for Albertsons How did you come to the world of private label? In 1990, I was the vice president of deli/foodservice for Safeway. The only private label products we offered were items like packaged potato salad. I knew developing own brands in our deli/foodservice departments could help us differentiate. I talked my boss into creating a job for me to launch own brands in our fresh departments. The first brand I launched was Primo Taglio premium deli meats and cheeses. Describe the private label industry in one word. Dynamic. What do you like most about the industry? What I like most about the industry is the huge opportunity for growth — the sky is the limit. What do you dislike most about the industry? Old-school thinking that this industry is about private label products that are lesser quality than national brands with the only purpose to give shoppers a cheaper option.
a difference. I also admire my dad, who was a wonderful father and serviceman. He taught me the importance of doing something with my life to make a difference for others. What trait in yourself do you attribute most to your success? Super positive attitude and the ability to develop strong relationships. What is the biggest obstacle you have ever overcome? A diagnosis of breast cancer, a double mastectomy and several years of recovery. What’s the best advice someone ever gave you? “Ride the horse that got you here.” In other words, be my authentic self. If you were born 100 years ago, what would you do for a living? I’d be a teacher for young kids. I get a lot of joy from seeing people grow and develop.
What one great thing does the industry have going for it? Shoppers “get it” and now embrace own-brand products as a smart choice to buy. What is the industry’s biggest challenge? Building platforms where own brands can be offered via ecommerce. If you could invent one private label product for yourself, what would it be? Fabulous age-defying skin products that are accessible, affordable and really work. Who is your hero and why? My husband Kevin. He keeps me grounded in my work/life balance and reminds me what is important in life. I travel every week in my job and work a lot of hours. We have seven children — four are biological and three are adopted. He makes sure the house runs smoothly. Who is the person you admire the most? In business, I admire Maria Shriver for her work in establishing “The Women’s Conference” and her as a trailblazer to empower women to make 14
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Nancy Cota with her three adopted children (from left): Zarina, Sergio and Christian.
It’s 5 o’clock (or later), what do you do for fun? Play a lot of bocce ball with friends and family, enjoy a glass of wine while watching movies on the Hallmark channel and entertaining guests. I also have a huge passion for adoption and spend time on the board of directors for a non-profit adoption agency. What song do you love to crank up in the car? “Fight Song” by Rachel Platten. What’s the best book you’ve ever read? “Architects of Change,” by Maria Shriver. What movie can you watch over and over? “Pretty Woman.” SB
Tom Chaffee: A passion for private label and helping people
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n 1973 Tom Chaffee took a job with Presto Products to sell private label products — and to help people in the process. Chaffee was in his early 20s and fresh out of the Air Force when he interviewed with Presto, an Appleton, Wis.-based manufacturer of value-added store brand products. When Chaffee was told in the interview that what he’d be selling would help budget-minded consumers save money, he knew that private label would be a good career choice. “As I heard more about the job, I realized it was what I wanted to do,” Chaffee says. “It was about helping consumers.” That he has done, spending 43 years in private label and helping countless consumers along the way. “I can tell you that my career in private label was pretty special to me,” Chaffee says. Chaffee spent 36 years with Presto and eventually became Presto’s vice president of sales. A career highlight occurred in 1998 when Presto, behind Chaffee, secured The Kroger Co.’s business for its plastic bags, wrap, containers and related products. Chaffee moved to Cincinnati, where Kroger is based, to oversee the business. Nick Hahn, former director of Kroger’s corporate brands who worked for several years with Chaffee on the project, says Chaffee never overpromised and underdelivered on anything related to the business. “When you’re dealing with hundreds of suppliers, all you can do is hope that the people you are dealing with are honest and have integrity,” Hahn says. “Tom was at the top of the list in both of those regards.” Hahn, who was inducted into the Private Label Hall of
Premiu
The 2017 Private Label Hall of Fam changes in private brand partnership
C
By Lawrence Aylward
hampions of quality products and optimum supplier-retailer partnerships, the 2017 inductees into the Private Label Hall of Fame have left indelible legacies, forever influencing the development and marketing of store brands. The late Peter Brennan, who led Daymon Worldwide from 1994 to 2006 and worked for the organization for 33 years altogether, died on Feb. 6 before learning of his induction. The other three inductees — Tom Chaffee, a longtime leader at Presto Products; Bob Mariano, a former CEO of Dominick’s and later Roundy’s; and Gary Smith, a 40-year veteran of Safeway — express pride at being selected into the Hall of Fame.
Selection criteria Each year, the Private Label Manufacturers Association Tom Chaffee speaks at a conference when he was chairman of the board for the PLMA Board of Directors. (Photo courtesy of PLMA)
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Fame in 2007, nominated Chaffee for induction this year. Monte Wood, the private brands manager at Eden Prairie, Minn.-based Supervalu, was also a Chaffee and Presto customer. Wood says Chaffee is the best salesperson he has ever had. “He brought you quality products and sold them with integrity,” Wood says. “He was always honest and never said anything bad about the competition.” Wood credits Chaffee with taking the entire private label
um Tier
me inductees spearheaded significant ps, product development and promotion
d and Carolyn Schierhorn
(PLMA) and Store Brands solicit nominations from a wide range of executives involved in the manufacturing, marketing or distribution of private brand goods. Those selected for the Hall of Fame have served as leaders in store brand development and innovation; advanced the growth of store brands through the creative use of marketing, merchandising and promotions; contributed significantly to store brand technology in terms of manufacturing, packaging, label design or quality assurance; and/or served as a champion of store brands within their own companies, business communities and the consumer marketplace. This year’s honorees — who are profiled beginning at the top of page 16 — join the 51 other visionaries inducted into the Hall of Fame since its inception in 2006. To see the complete list, visit the PLMA’s website at plma.com and click on “Hall of Fame.” business of plastic bags, wraps and containers to another level. “Because of some of the large accounts he called on, he was instrumental in changing that marketplace and driving market share in a category that is now 60 percent private label,” Wood says. In 2009, after spending 36 years with Presto, Chaffee joined Manawa, Wis.-based Sturm Foods, which manufactures dry groceries for private label, as director of
new business development and trade relations. Sturm Foods was acquired by TreeHouse Foods in 2010. Chaffee retired from the company in February 2016. Chaffee also has the distinction of being the only member of the Private Label Manufacturers Association to serve three terms as chairman of the board of directors. Serving on the executive committee, he was elected first vice chairman in 2009 and almost immediately had to step in to assume the duties of chairman when Peter Pappas, CEO of private label food supplier Clement Pappas & Co., became ill. Chaffee was subsequently elected to the position of chairman in 2010 and was re-elected the following year. Chaffee says he was “kind of blown away” upon hearing of his induction into the Private Label Hall of Fame. His peers, however, were not. “He belongs,” Hahn says. Chaffee has spent the last year “blowing off steam,” like a lot of new retirees do. He has golfed and hunted and spent time with his family and friends. In the near future, Chaffee plans to dedicate much of his time to various charities. After all, Chaffee is as passionate about assisting others as he was about his work in private label. “I’m going to continue my work of helping people,” he says.
Peter Brennan: Evangelist for private brands
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eter Brennan, who died last month at 69, impressed everyone he came in contact with, say his former colleagues at Daymon Worldwide, where he worked for 33 years, serving as president from 1994 to 2006. “Following in the footsteps of Daymon founders Milt Sender and Peter Schwartz, Peter Brennan was one of the key evangelists for private brands in the United States, beginning in the 1970s,” notes Daymon CEO Jim Holbrook. “His expertise and ability to influence and motivate retailers to leverage the power of their own brands was magnificent. Many a retailer made private brands a strategic pillar because of Peter.” John Ruocco, a grocery industry consultant based in the Dallas area, remembers fondly the first time he encountered Brennan — in 1972. Then working for American Home Products, Ruocco had just relocated to Detroit and asked five supervisors who reported to him for the name of the best person at American Home to introduce him to the city’s retailers. The supervisors all recommended Brennan, who then was only 24 years old.
www.storebrands.com / March 2017 / Store Brands
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“I met Peter early in the morning at a diner,” Ruocco recalls. “We were going to have breakfast, talk a little bit and go out and look at stores. But we remained at the diner until 2 p.m. and had both breakfast and lunch. “Peter knew more about the market than anyone else. He was brilliant. I was just blown away.” Ruocco later persuaded Brennan to join him at Daymon, his new employer. In his earliest years with the company, Brennan helped manage the A&P account in Cleveland, Ruocco recollects, noting that at the time Daymon was a brokerage business that drew commissions from private label suppliers while helping retailers develop and implement their private brand programs. What set Brennan apart during that period was his deep understanding of the need for better and more strategic relationships with suppliers and his recognition of the tremendous potential of store brands in the grocery sector. Until Brennan was named director of supplier relations, a new position at the time, Daymon’s account managers across the country often preferred to work with different private label vendors, Ruocco explains. Brennan strategically streamlined Daymon’s approach to bringing high-quality, visionary suppliers and retailers together. “Each of us back then had been doing our own thing,” remembers Thomas Schulke, who nominated Brennan for the Hall of Fame and now works for CHEP. “Peter was moved into a position where he became the mastermind between developing relationships with vendors and working strategically to ensure that Daymon was aligned with those manufacturers that were positioned to take private label where the more progressive people realized it needed to go. “He had to convince all of us mavericks within Daymon that we needed to trust him,” Schulke continues. “That was a hard sell because we each had our own little fiefdom. But he was able to accomplish that.” Dan Muller, who worked for Brennan during two stints at Daymon and now is a national sales manager for Merisant, emphasizes that “Peter redefined the private label broker.” His leadership ability recognized from the beginning, Brennan rose rapidly through the ranks at Daymon to become a The late Peter Brennan was widely regarded as a charismatic and persuasive speaker. (Photo courtesy of Daymon Worldwide)
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partner and then president and vice chairman of the company. He was a highly analytical thinker but also personable. “Whenever you spent time with him, it fueled your interest in the industry, your excitement to be a Daymon associate and your motivation to be better at your job,” says Dave Harvey, Daymon’s vice president of thought leadership. “He possessed that wonderful skill of focusing on the moment so that when you spoke to him, he was fully concentrating on you and your question. Simply put, Peter was a relationship person. He made all associates feel valued — regardless of title.”
Bob Mariano: Revolutionized ‘own brand’ concept
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lthough honored to be inducted into the Hall of Fame, Bob Mariano is quick to point out that he has always viewed the definition of “own brand” to be much more than private label packaged goods. A grocery retailer’s brand, he says, is the complete impression it makes on customers through the synergy of its private brands, unique specialty offerings, freshprepared food, deli and bakery items, the produce and meat departments, in-store events, and store ambiance. The Mariano’s banner in the Chicago area exemplifies his philosophy, attracting customers with its hip, cosmopolitan vibe, affordable prices, and blend of made-to-order stations, ethnic food, piano music, and atmosphere of adventure and fun. “All of these parts differentiate the brand for customers and add to their shopping experience,” Mariano says. Mariano began his grocery industry career in 1967 as a part-time deli clerk at a Dominick’s Finer Foods supermarket in Chicago. His passion for quality and leadership ability evident from the beginning, he served in roles of increasing responsibility before being named president and CEO of Dominick’s in 1995. He left the company after it was acquired by Safeway in 1998. In 2002, Mariano became the chairman and CEO of Milwaukee-based Roundy’s Inc., which operates several Wisconsin chains. He launched Mariano’s Fresh Market in 2010 with a store in Arlington Heights, Ill.; the banner now includes 40 stores. Retiring last September, Mariano currently serves as a strategic adviser to Cincinnati-based The Kroger Co., which acquired Roundy’s, including Mariano’s, in 2015. “When I first met Bob, he was the senior vice president of perishables at Dominick’s and I was the vice president of groceries,” remembers Don Fitzgerald, a group vice president
Remembering
PETER BRENNAN Former President & Vice Chairman • Daymon
2017 Private Label Hall of Fame Inductee 1947 – 2017 Peter Brennan was a special person to the Daymon organization - not just because he was the former President - but because he was a leader who had the rare gift for building relationships with everyone he met. Peter’s visionary leadership and dedication helped Daymon achieve great things. In his 35 years of service, Peter developed the architecture of the Daymon business, took great pride in mentoring our associates and helped to shape the private label industry that we all know today. His influence, passion and kind-hearted spirit can still be felt throughout the halls of Daymon today.
at Roundy’s. “Back in the 1980s and 1990s, he understood the role of the own brand and how important that was to the retailer and, more importantly, to customers — in terms of making that connection with them and creating loyalty.” A kind, thoughtful person, Mariano nonetheless has always had exceptionally high expectations for his products, whether a store brand cereal or fresh-baked muffins, and the employees who worked for him, Fitzgerald notes. “Bob was obsessive about having the right amount of blueberries in the blueberry muffins, for example,” he says. “That was because it was our own brand, and he wanted it to be the right quality at the right price. He took this mission very seriously and would often leave a package with me and point out where we weren’t living up to the standards.” As a manager, Mariano propelled his staff to excel, according to Fitzgerald. “He pushes you and takes you to places that you otherwise wouldn’t have reached,” Fitzgerald emphasizes. At Dominick’s and later at Roundy’s, Mariano was ahead of his time in insisting that private brand food products not just be national brand equivalents. “In the area of food, it was a mandate that we exceed the national brands wherever possible in the eyes of the customer,” Mariano shares. “We also paid close attention to
packaging and made sure that the packaging reflected the quality of the product inside the box, carton or can.” Before debuting new private brand product lines, retailers need to fully understand their customers’ needs and wants, Mariano maintains. Besides analyzing shopper data and statistics from market research firms, he made a point of visiting stores and talking to customers and employees. “You need on-the-ground research — being in the stores and asking employees and customers what they like, what they don’t like, and what they’re looking for,” Mariano says. “Having that interaction is critical to settling in on where you want to be.”
Bob Mariano frequently spoke with customers in his stores. (Photo courtesy of Roundy’s)
Congratulations
on your induction into the 2017 Private Label Hall of Fame
from the 20
Store Brands / March 2017 / www.storebrands.com
team
Gary Smith: Pioneer credits Safeway team
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ary Smith was honored to learn he was inducted into the Private Label Hall of Fame. But Smith, who spent 40 years of his distinguished career at Safeway, was also humbled. “This is congratulations for our team,” says Smith, who headed the Safeway group that created and introduced the ground-breaking Safeway Select premium line of own-brand products in 1992. “I have a tough time accepting awards or recognition for a team effort.” But Smith’s peers, while recognizing that Smith has no place for grandstanding, say he belongs in the Hall of Fame with the other private label greats. “It is well-deserved,” says Rick Jones, who worked with Smith at Safeway for several years when he ran the retailer’s
private label manufacturing operations in the 1990s. “Gary was a very creative proponent and marketer of store brands.” Smith began his career at Safeway in 1961 when he was 19, stocking store shelves at night while going to college during the day. He was promoted several times at Pleasanton, Calif.-based Safeway and relocated several times during his career. In 1988, Smith moved to Oakland to oversee Safeway’s grocery operations there. Two years later he was also entrusted to oversee the operation’s marketing and buying decisions for private brands. Smith felt Safeway had the chance to develop a compelling premium private label line to go with its value and national brand equivalent lines. He developed a team to develop products that were better tasting and of better value than the national brand equivalents — products that consumers could only purchase at Safeway. “It was really unheard of at the time,” Smith says. Smith and his team worked with a manufacturer to develop an own-brand cola to compete with Coca Cola and Pepsi. Then came high-end chocolate chip cookies, pasta sauces, salsa, pet food and other products. “When the line came out, it was a redefining moment for private label in the industry,” Smith says. “It established the upper tier of private label products.” Rick Davis, the former CEO of GA Communications, says
www.storebrands.com / March 2017 / Store Brands
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Smith challenged himself to enter uncharted territory. Davis recalls when his company, which handled Safeway’s advertising for many years, presented a radical concept to Smith in 1994 to consolidate its 10 advertising divisions into one. “It was based on new technology that allowed us to take digital photography, archive it and share it across a network,” Davis says. Smith saw the merits of the concept and that it could save Safeway millions in the long run. But he also knew it was a gamble, considering it had never been done. Davis says Smith did his due diligence and assembled a group to study the concept. Convinced it would work, Smith went with it. “The results of his decision were incredibly successful,” Davis says. “It was Gary’s vision — and I would add to that courage — that it would work.” In 1995 Smith was named chief marketing officer of Safeway, a position he held until he left the company now owned by Albertsons in 2001. But Smith did not retire; he formed Encore Associates, a strategic advisory firm for consumer packaged good companies, and Encore Consumer Capital, a private equity firm. The 74-year-old is currently the chairman of the board for Encore Associates and an operating partner for Encore Consumer Capital. Smith is also on the board of directors at TreeHouse Foods, the nation’s largest manufacturer of private label foods.
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Store Brands / March 2017 / www.storebrands.com
While at Safeway, Gary Smith led the team that introduced the ground-breaking Safeway Select premium line of own-brand products in 1992.
Linda Nordgren, president and CEO of Encore Associates, nominated Smith for the Hall of Fame. “It is his vision and passion that has for more than 40 years highlighted the value of great quality private label brands and is respected and admired by all those who know him,” Nordgren noted in nominating Smith. SB Aylward, editor-in-chief of Store Brands, can be reached at laylward@ensembleiq.com. Schierhorn, managing editor of Store Brands, can be reached at cschierhorn@ensembleiq.com.
A ‘natural’ resou
Our State of the Industry survey reaffirms that retailers and suppliers continue to embrace natural/orga By Lawrence Aylward
he big reveal from our 2017 State of the Industry Report is more of an affirmation than a revelation. It’s that the natural/organic segment continues to play a substantial role in the innovation and development of private label products. Retailers/wholesalers and suppliers have corraled the natural/organic segment for several reasons. One, they are following a growing consumer crowd that is demanding better-for-you products made with fewer ingredients. Two, they recognize a vast opportunity in a segment not dominated by the big national brands. And, three, they see the chance to create that all-important 24
Store Brands / March 2017 / www.storebrands.com
exclusive own-brand product or line to differentiate their businesses from the competition. “The natural/organic category is becoming mainstream,” says Robert Stewart, the private brands manager for Keene, N.H.-based Grocers Supply, a subsidiary of C&S Wholesale Grocers, which offers an array of own brands to its customers. “We’re seeing huge growth in the demand for natural/organic products. And consumers are looking for those products in every category.” Overall, the results of Store Brands’ industry survey paint a portrait of an industry that is upbeat and eager to grow. Consider: • While many retailers/wholesalers (41 percent) surveyed
ABOUT THE STUDY: Store Brands’ 2017 State of the Industry Report is based on a research questionnaire that was fielded in January 2017 via web and telephone interviews of retailers, wholesalers and suppliers in the Store Brands’ database. Debra Chanil, director of research for Ensemble IQ, the parent company of Store Brands, directed the project and tabulated and confirmed the results. Results in this report represent a total of 188 responses received.
Retailers/wholesalers that took our survey: Buyer/Merchandise Manager/Marketing Manager/Category Manager Director/General Manager C-level (chairman, CEO, president, COO, CFO owner) Store Manager Store Brand/Private Label Brand Manager Vice President/Senior VP/Executive VP Regional/District Manager Other
37% 19% 17% 13% 4% 3% 2% 5%
Source: Store Brands Market Research, 2017
Type of retail format that respondents represent: Supermarket/Grocery Wholesaler/Wholesaler-supplied Independent Convenience store Drugstore Online retailer Mass merchandiser
urce
anics to grow store brands
Club store Dollar store Other
60% 16% 14% 7% 5% 4% 2% 1% 4%
Note: Multiple responses accepted. Source: Store Brands Market Research, 2017
Number of stores that respondents represent: 33% 13% 17% 11% 26%
1-10 11-50 51-200 201-500 More than 500 Source: Store Brands Market Research, 2017
offer two tiers of store brands, 23 percent now offer four tiers, a telltale sign that retailers/wholesalers are investing more in private label. Twenty-two percent offer only one tier, and 14 percent offer three tiers. However, of the 22 percent that offer one tier, only 4 percent offer that tier as a value brand. It’s the “cheap” image that private label, in general, is trying hard to shed. • Private label experts have been banging the innovation drum, telling retailers/wholesalers to back off the value-only proposition. According to our survey, retailers/wholesalers cited “serving as an innovator” as the most important role that store brands should play in their companies. They are getting the message.
• Sixty-three percent of retailers/wholesalers surveyed cited that unit sales of store brands increased in 2016 from 2015. Eighty-five percent expect unit sales to increase this year. Scott Negro, who works in private brands for Sunbury, Pa.-based Weis Markets, seems to epitomize the mindset of retailers/wholesalers that are seizing the day, so to speak, when it comes to leading-edge private label. “We’re embracing private label and trying to maintain our relevance to our customers,” says Negro, whose company operates more than 200 stores in the midAtlantic. “We want to give our customers exactly what they want with store brands.” www.storebrands.com / March 2017 / Store Brands
25
2017 State of the Industry Report Natural/organic tier takes shape
There is a distinct connection between the emergence of the fourth-tier offering of private brands and the natural/organic segment. Seventy-two percent of retailers/wholesalers surveyed are offering natural/ organic products as an emerging product line. Stewart says it’s simply a matter of addressing the needs of all consumers through store brands. “It has become more important in private brands to have more structure within tiers so we can market to all consumers,” he adds. Negro believes the natural/organic segment has plenty of room for growth and that retailers/wholesalers have created another tier to capture that growth. “[The natural/organic segment] still has a very narrow penetration of households and has a long way to go until it levels off,” he adds. Allen Benz, CEO of Brooklyn, N.Y.-based Snack Innovations, is one of the many suppliers capitalizing on the natural/organic trend. Benz says Snack Innovations, which began in 2008, has made tremendous inroads by offering better-for-you snack foods as own brands and hasn’t come close to maxing out its growth. “The masses are still buying regular potato chips and tortilla chips for the most part,” Benz says. “But you will see a lot more of these products in terms of organic and natural in the coming years.” Richard Ellinghausen, president of Buena Park, Calif.based Nectave, which offers organic agave as a sweetener for private label, says what’s driving the category is the growing wave of people who simply want to eat betterfor-you foods to be healthier without having to go to the gym everyday. But Ellinghausen points out one big factor related to such products. “If they don’t taste good, nobody is going to buy them,” he says. Percent of retailers/wholesalers interested in future private label development of: Fresh prepared foods Center-store grocery items Deli Bakery Packaged beverages (no milk) Refrigerated/frozen prepared foods Dairy products (including milk) Health & beauty products General merchandise Non-food essentials Value-added produce OTC medicines/preparations Alcoholic beverages
46% 44% 43% 42% 38% 38% 37% 34% 33% 33% 30% 29% 19%
Source: Store Brands Market Research, 2017 Note: Multiple responses accepted
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Store Brands / March 2017 / www.storebrands.com
Percent of retailers/wholesalers operating one to four tiers: Four-tier program
Three-tier program
23% 14%
22%
One-tier program
41%
Two-tier program
Source: Store Brands Market Research, 2017
Percent of retailers/wholesalers offering: 72% 54% 30% 27% 18%
Natural/Organic Gluten-free Eco-friendly Non-GMO None Source: Store Brands Market Research, 2017
Note: Multiple responses accepted
Percent of retailers/wholesalers increasing store brand focus: 46% 31% 30% 29% 28% 23% 22% 18%
Natural/Organic National brand equivalent Premium/Upscale Value Fresh Free from Non-GMO/Eco-friendly Not increasing focus Source: Store Brands Market Research, 2017
Note: Multiple responses accepted
Percent of retailers/wholesalers actively pursuing in private label: 64% 52% 51% 41% 35% 26% 23% 21% 20% 17% 11%
Organic Gluten-free Natural Better for you Local sourcing Premium/gourmet Supply chain transparency Environmental responsibility Non-GMO Social responsibility None Source: Store Brands Market Research, 2017
Note: Multiple responses accepted
2017 State of the Industry Report Changing roles for store brands
Nearly 60 percent of retailers and wholesalers surveyed say they are increasing store brand development. But it’s more than that: Many retailers and wholesalers want their own-brand creations to be viewed as innovations to drive store traffic and customer loyalty. “Not so many years ago we were just following the national brands and replicating their products at a cheaper cost,” Stewart says. “Now we are actually creating new products. It’s a fundamental shift if you think about it. Private label is really driving innovation in a lot of categories.” Stewart also believes that branded-company mergers have hindered them from developing new products. “Whenever there are mergers and acquisitions, the branded companies don’t spend as much on new products and innovation,” he says. “They kind of lose their forward-looking focus.” Negro says Weis Markets’ store brand development team has an innovative mindset. “Customers’ demands are ever-changing, and we need to continue to stay on top of that,” he adds. “It’s a challenge, but there is nothing better than creating something new, especially when it works.” At Snack Innovations, the last thing Benz says he wants to do is offer me-too products. “Everything we make is innovative, whether it’s the flavor profile or the entire product,” he says.
The private brands pipeline
Percent of retailers/wholesalers increasing number of suppliers in 2016:
More Suppliers
58%
About the Same Number of Suppliers
35%
Decreased Pace
Maintained Pace
7%
Source: Store Brands Market Research, 2017
Reasons that retailers/wholesalers are increasing/maintaining store brands: 1 Adding more product lines 2 Increase sales, broaden market 3 Better margins 4 Create cutting-edge products 5 Increase natural/organic offerings Source: Store Brands Market Research, 2017
Retailers/wholesalers rank roles of store brands in order of importance: 1 To serve as an innovator to drive store traffic and customer loyalty 2 To provide loyal shoppers with lower-cost alternative 3 To earn higher margins 4 To compete against national brands Source: Store Brands Market Research, 2017
19%
More than 100 Between 51 and 100 Between 26 and 50
8%
56%
Fewer than 25
17%
Source: Store Brands Market Research, 2017
Retailers/wholesalers rank attributes in selecting suppliers: 1 A strong quality assurance program 2 A proven track record in terms of deliverables 3 New ideas for product concepts 4 Ability to partner with us 5 Lowest cost
Fewer Suppliers
12%
Source: Store Brands Market Research, 2017
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58%
Increased Pace
Number of suppliers used by retailers/wholesalers:
A majority of retailers/wholesalers use fewer than 25 suppliers for private label manufacturing. But that percentage of retailers/wholesalers using fewer than 25 suppliers climbed to 56 percent in 2016 compared to 42 percent in 2015. The percentage of retailers/wholesalers using between 25 and 50 suppliers also declined to 17 percent in 2016 compared to 26 percent the previous year. Perhaps retailers/wholesalers are taking a less-is-more approach when using suppliers. While “the lowest cost” is most always a major
30%
Percent of retailers/wholesalers increasing store brand development:
Store Brands / March 2017 / www.storebrands.com
6 Ability to deliver smaller quantities of product 7 Ability to deliver custom products and/or packaging 8 Strong commitment to environmental improvement 9 Ability to meet large quantity product minimums Source: Store Brands Market Research, 2017
2017 State of the Industry Report
Of the 51% of retailers/wholesalers that manufacture store brands, here are top categories: Prepared food
factor in doing business in almost every industry, retailers/wholesalers ranked it fifth among nine attributes for selecting the right suppliers. Their top choice in selecting a supplier was “a strong quality assurance program.” That’s not surprising considering that trust in a product’s quality — from its origin to its performance to its safety — is vital to private label’s success today. The trust factor is something that is boding well for store brands, which wasn’t always the case, Stewart says. “More consumers are trusting private brands,” he says. “They have become more receptive and comfortable with the quality of the products.”
Bakery Dairy Other (including shelf stable, frozen, grocery, produce nuts, organic) Source: Store Brands Market Research, 2017
57% 55% 20% 34%
Note: Multiple responses accepted
Of the 51% of retailers/wholesalers that manufacture store brands, most do a small percentage: 24% 10% 9% 8% 49%
5% percent or less More than 25% Between 6% and 10% Between 11% and 25% Do not manufacture store brands Source: Store Brands Market Research, 2017
Note: Multiple responses accepted
Bullish on sales growth
Sixty-three percent of retailers/wholesalers reported an increase in unit sales of store brands in 2016 compared to 2015. Twenty-one percent reported a decrease. What’s more, retailers/wholesalers are bullish on 2017 sales — 88 percent expect unit sales to increase in 2017. “I feel good about our store brand growth this year,” Stewart says. “Consumers are receptive to and comfortable with the quality of our products.” Suppliers are also bullish. Ninety-eight percent of respondents expect private brands to grow in 2017, including 19 percent who expect strong growth. Benz is really bullish on Snack Innovations’ growth. In the past few years, Benz says sales have doubled year on year for the company. He expects another banner year this year. “We are already in communication with some major retailers for private brands and expect to increase business another 100 percent in 2017,” he adds. Percent of suppliers reporting increase/decrease of unit sales of private brands in 2016 compared to 2015: 69%
Increased
Decreased
15%
Source: Store Brands Market Research, 2017
Dollar Sales Increased
12%
Stayed the same
Dollar Sales Decreased
17%
Source: Store Brands Market Research, 2017
30
Stay the same
2%
19%
Strong Growth
16% 63%
Modest Growth
Source: Store Brands Market Research, 2017
Unit sales increased by more than 10%
25% 21% 9% 8%
Unit sales stayed the same
16%
Unit sales decreased by 1% to 2%
10% 5% 3% 3%
Unit sales increased by 1% to 2% Unit sales increased by 3% to 5% Unit sales increased by 6% to 10%
Percent of suppliers reporting increase/decrease in dollar sales of private brands in 2016 compared to 2015: 71%
Decline
Percent of retailers/wholesalers reporting unit increase/ decrease of store brands in 2016 compared to 2015:
16%
Stayed the same
Percent of suppliers reporting expecting store brand growth/decline in 2017:
Store Brands / March 2017 / www.storebrands.com
Unit sales decreased by 3% to 5% Unit sales decreased by 6% to 10% Unit sales decreased by more than 10% Source: Store Brands Market Research, 2017
Getting on the same page
Retailers/wholesalers believe these trends will drive private label in next two years:
Most suppliers surveyed — 72 percent —say their top challenges with store brands are that retailers/ wholesalers don’t merchandise, promote or market them adequately enough and that more attention is paid to national brand promotions than store brands. Clearly, whether retailers/wholesalers agree or not with suppliers’ assessment, it is an issue that needs to be addressed. Retailers/wholesalers and suppliers also differ on ranking the most important trends that will drive
1 More private label product categories 2 Increased foodservice offerings at retail
Suppliers cite top challenges for store brands: 36% 18% Too-frequent national brand promotions by retailers 18% Lack of innovation 13% Quality issues 6% Retailer consolidation 5% Lack of product/supplier transparency 3% Lack of acceptance by consumers in certain categories 1%
3 Online grocery (ordering and having product delivered/picked up curbside)
Too little promotional/merchandising by retailers
4 Continued growth of organic products
Inadequate marketing efforts by retailers
5 More private label products that offer exclusivity 6 Movement away from value products to more premium private label 7 Continued emphasis on locally sourced products 8 More coupons for private brands delivered via email and social media 9 Continued growth of free-from and clean-label offerings 10 More sustainable packaging for private label Note: Respondents were asked to choose top three. Categories ranked in order of importance.
Note: Respondents were asked to pick only one answer.
Source: Store Brands Market Research, 2017
Source: Store Brands Market Research, 2017
• Custom blends • Custom base products • Extruded • Mixes • Cooked corn • Masa flour • Inclusions
www.storebrands.com / March 2017 / Store Brands
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2017 State of the Industry Report
private label in the future. Retailers/wholesalers rank “more private label product categories” as the top trend that will drive store brands, while suppliers believe it is “more private label products that offer exclusivity.” Even though they differ on the most important trend, perhaps they are not far off. A popular exclusive item can drive store traffic and build store brand loyalty, Stewart points out. Increased store brand loyalty, subsequently, could lead to more product lines. “If you can build enough brand loyalty, then you’re going to increase your overall market share big time,” Stewart adds. SB
Suppliers believe these trends will drive private label in next two years:
Aylward, editor-in-chief of Store Brands, can be reached at laylward@ensembleiq.com.
1 More private label products that offer exclusivity 2 Online grocery (ordering and having product delivered or picked up curbside) 3 Continued growth of ‘free-from” and clean label offerings 4 Movement away from value products to more premium private label 5 Continued growth of organic products 6 More sustainable packaging for private label 7 More coupons for private brands delivered via email and social media 8 More private label product categories 9 Increased foodservice offerings at retail 10 Continued emphasis on locally sourced products Note: Respondents were asked to choose top three. Categories ranked in order of importance. Source: Store Brands Market Research, 2017
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Store Brands / March 2017 / www.storebrands.com
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Packaging
Building the perfect package A greater demand for more sustainable and economically attractive packaging is leading manufacturers to streamline designs n By Rich Mitchell ackaging is becoming much more than a simple container for shipping and merchandising store brands. The need to keep consumables fresh and safe is leading to a steady upgrade in designs, while greater shopper interest in sustainability is having a significant impact on the size and composition of packages. Indeed, more manufacturers are making it easier to recycle containers by using fewer materials and incorporating environmentally sound elements. The subsequent lower weight of items also makes it easier and less expensive to transport products. While demand for food containers is forecast to increase 2.8 percent from 2015 to 2020, demand for lightweight plastic items, as well as flexible bags and pouches, will rise 4.1 percent and 3.2 percent, respectively, compared to just 1.7 percent for metal containers and 1.4 percent for glass, reports the Freedonia Group Inc., a Mayfield Village, Ohiobased industrial market research firm. Demand for beverage packaging, meanwhile, is forecast to increase 1.9 percent from 2019 to 2024, with unit sales of plastic and paperboard containers set to rise 3.6 percent and 2.1 percent, respectively,
the Freedonia Group notes. Meanwhile, projections are for unit sales of metal packaging to increase just 0.1 percent, while glass packaging sales will decrease 0.8 percent. “There is a general movement from rigid containers to flexible packaging,” states Mike Richardson, the Freedonia Group’s senior industry analyst, adding that a focus on lighter options also is trigging a consumer switch within the rigid beverage category from bottles to cans. Use of clear plastic cans is also becoming more popular as consumers seek to view product prior to purchase and merchandisers pursue a reputation for transparency, he notes.
A reusable requirement Because packaging is an increasingly crucial variable in shoppers’ purchase decisions, it’s vital that retailers and their suppliers pinpoint the most pertinent alternatives for the different consumer segments, indicates Mintel, a global market research firm. “Packaging continues to grow more important as brands look to packaging to not only convey benefits and product information but also to shape a consumer’s experience with the product and to capture new-use occasions,” Mintel notes in its June www.storebrands.com / March 2017 / Store Brands
33
Packaging 2016 “Food Packaging Trends, US” report. Packaging that helps extend shelf life is likely to motivate shoppers to target such products, Mintel states. In an April 2016 Mintel online survey of 1,887 adults who purchased non-alcoholic beverages in the previous 30 days, 62 percent indicated that they pay attention to the packaging format, with such elements as materials and shape being particularly influential. Functionality is another key consumer focus, with such elements as ergonomics and the ease of opening bottles and containers becoming more relevant, says Frank Lin, director of marketing and strategic development with Amcor Rigid Plastics, an Ann Arbor, Mich.-based packaging supplier. It is the greater demand for sustainable options, however, that is a major catalyst for packaging enhancements, he notes, citing the greater use of post-consumer recycled content (PCR) in designs. “As shoppers become more aware of the ingredients in food and beverage products, they also have concerns about the materials in packaging,” Lin says. In an April 2016 Mintel online survey of 1,922 adult food shoppers, 40 percent of respondents between 18 and 34 years of age stated that they recycle most food packages, as do 37 percent of persons between 35 and
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54, and 52 percent of respondents 55 and over. “Many grocery shoppers think of the environmental impact of packaging before purchasing products, so the use of sustainable materials is important for brands to highlight,” says Erin Reynolds, marketing director of Evergreen Packaging Inc., a Memphis-based packaging manufacturer. “Consumers will continue to vote with their wallets, and fresh, clean and sustainable benefits are among their top purchase priorities.”
Satisfy the shoppers “Brands that align with consumer values and help them feel good about their purchases will be in a good position to succeed in the market,” Reynolds states. “As a result, manufacturers and brands should take consumer preferences into consideration.” Packaging developers seeking to extend the shelf life of foods, meanwhile, are incorporating a variety of barriers in designs to better protect products from oxygen, moisture and carbon dioxide, Lin says. Recyclable polyethylene terephthalate (PET), a form of polyester that is transparent, lightweight and shatterproof, is another packaging material becoming more popular, he notes. “There is a shift toward PET in both beverage
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Packaging and food products as consumers want to see the contents in the package and it offers supreme clarity,” he states. “Declining resin costs also is increasing the preference for PET” because of lower production expenses and product prices. Ease of use and safety considerations are additional purchase drivers. Many older individuals who want to easily access packages without scissors are seeking flexible packaging with tear strips or notches, says Laurie Cardillo, vice president of product innovation and management at LiDestri Food & Beverage Inc., a Fairport, N.Y.-based supplier of sauces, dips, salsa, oils, beverages and spirits. Younger families are seeking containers with protective attributes, such as shatterproof jars and bottles. “Consumers want packaging that is convenient, opens easily and is simple to store and handle,” Cardillo adds. Shopper interest in such enhancements will likely fuel a greater transformation of packaging designs in the near future, with freshness, safety and sustainability top of mind, analysts note. While most suppliers, for instance, are currently incorporating relatively inexpensive resins in designs, such as polypropylene, more packages will
36
Store Brands / March 2017 / www.storebrands.com
incorporate higher-priced nylons to better protect contents from air and light, Richardson states. “The smart environmental thing to do often dovetails with the smart economic thing,” Richardson says. “Lighter packaging is good for the environment and the bottom line because it results in lower transportation and raw material costs.”
Easier said than done With packaging becoming more important in consumers’ purchasing decisions, it’s vital that manufacturers satisfy their desires. Yet, producing the most attractive options can still be onerous. While flexible packaging typically is less expensive to manufacture than rigid options because it requires fewer materials and has the halo effect of being environmentally friendly, it also can be more difficult to recycle, says Esther Palevsky, the Freedonia Group’s senior industry analyst. “Pouches often contain layers with different resins or have a composition of paper, film and foil, but [they] often won’t be accepted for recycling because the package is not made of a single material,” she says. SB Mitchell is a freelance writer from Wilmette, Ill.
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Category Intelligence: Honey and Syrups
Purely delectable Mother Nature’s liquid sweeteners are blooming in popularity By Dana Cvetan
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look for ways to make own-brand honey stand out in a crowded field.
38
ttracted by the health halo surrounding honey and maple syrup, consumers have positively flocked to sweeteners over the past few years, according to market intelligence agency Mintel. The honey segment grew by an impressive 57 percent (and its sales surpassed that of sugar substitutes) from 2011 to 2016, according to Mintel’s December report, “Sugar and Sweeteners – U.S.” In the maple syrup segment, sales also rose by double digits — 11 percent — from 2014 to 2016. The honey and syrup categories can thrive even more if retailers promote their suitability for diverse usages, the report suggests. For example, liquid sweeteners such as these dissolve easily in cold beverages like the ever-popular chilled coffees and teas. Honey was the second most-used sweetener type after white granulated sugar, Mintel found in an Internet survey of 2,000 adults it conducted in September. While 71 percent of consumers reported using white granulated sugar in the previous month, 59 percent used honey in the same period. Maple syrup was the fourth most-used sweetener, with 53 percent reporting they used it in the previous month. Additionally, 75 percent of consumers
Store Brands / March 2017 / www.storebrands.com
indicated they believe honey is a healthy product. Survey respondents said they used the sweeteners in hot drinks and cold drinks, and as a topping on prepared food and in recipes.
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The United States imports about 70 percent of its honey, reports Gordon Marks, executive director of Washington, D.C.-based True Source Honey LLC, a not-forprofit organization that certifies the origin and quality of its client companies’ honey and promotes pure, traceable honey in the marketplace. A few years ago, honey was at the center of one of the largest food fraud cases in the United States. Despite federal crackdowns, millions of pounds of illegally sourced honey and honey of questionable quality entered the United States from China. Because of this, retailers want an audited supply chain, says Greg Mohr, vice president of business growth for Bee Maid Honey Limited, based in Winnipeg, Manitoba, and a member of the True Source Honey program. “This is on trend with consumers wanting to know where their food comes from. Consumers are demanding more natural products and honey is on trend for use in cooking and sweetening,” Mohr says. Retailers are concerned about quality and are becoming more aware of issues such as illegal transshipments that have harmed the honey industry, says Chris Olney, vice president of sales and marketing for Honey Tree Inc. in Onsted, Mich., and also a member of the True Source Honey program. “Many private labels now feature True Source Certification on their honey labels. This logo shows that honey has been honestly and ethically sourced,” Olney says.
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Category Intelligence: Honey and Syrups Honey’s promise Product introductions featuring flavor and format variety in the honey category show that the segment is strong, according to Mintel. Phil de Vooght, chief commercial officer for Natural American Foods in Onsted, Mich., agrees. Retailers are looking for ways to stand out in a crowded field of more than 536 honey brands,
Honey and syrup category performance Syrup/Molasses
Maple/Pancake and Waffle Syrup
Private Label
All Brands
Private Label
All Brands
Dollar Sales (in millions)
$248.6
$829.1
$229.2
$686.3
Change vs. Year Ago
+1.8%
-1.0%
+2.2%
-0.8%
Dollar Share
30.0%
100%
33.4%
100%
Unit Sales (in millions)
81.3
246.4
72.1
194.6
Change vs. Year Ago
-1.7%
-1.7%
-1.6%
-1.8%
Avg. Price Per Unit
$3.06
$3.37
$3.18
$3.53
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 Dec. 25, 2016. Note: Does not include all syrup and honey subcategories.
40
Store Brands / March 2017 / www.storebrands.com
de Vooght says. “As a result, we’re fielding more customer requests for unique and specialty honeys, such as mono-floral, raw and certified fair trade varieties,” he reports. “Although it hasn’t translated to store brands yet, we’re seeing some new offerings that add portability features to the honey category,” de Vooght adds. “Brands like (Natural American Foods’) Buzz + Bloom are now offering single-serve packets of certified organic and non-GMO honey that make it easy for consumers to carry honey in purses or backpacks.”
Maple’s appeal Consistency, availability and variety are what retailers demand in their private brand maple syrup, says Bill Hill, USA director of sales and marketing for Great Northern Maple Products in SaintHonoré-de-Shenley, Quebec. As they do with branded product, retailers also require high-quality private brand maple syrups, Hill says. Attractive labels help convey that private brand product quality is at least as good as branded, he adds. While more expensive to ship, glass packaging also continues to signify high-quality product, Hill
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Category Intelligence: Honey and Syrups notes. Great Northern Maple Products packs its most popular syrup sizes (8 ounces and 12 ounces) in glass and offers plastic jugs for larger sizes. “As the category grows, I expect there will be multi-packs with two or three bottles, enabling new trial with new flavors,” Hill says. Great Northern Maple Products follows food and flavor trends and, consequently, now offers kombucha, maple-coconut, agave nectar and maple-agave organic syrups in private label, Hill adds.
Health and safety The younger generation is boosting sales of organic and natural maple syrups, Hill notes. “They recognize the health benefits compared to table syrups that contain additives. They like it natural — right from Mother Nature. Health is key to purchase decisions today and a main reason for the rise of organic/ natural maple syrup sales.” Overall, consumers are showing more interest in the origins and
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Store Brands / March 2017 / www.storebrands.com
sourcing of their foods, de Vooght says. “Honey is uniquely able to capitalize on this trend because of the pollen that’s present in honey in its natural state,” he notes. “As such, we’re seeing strong growth in sales of honeys that are raw or unfiltered, reflecting a lower degree of processing than has been the norm for the industry historically.” Desiring to know where your food comes from, whether sourced locally or from specific regions around the globe, is a trend, says Olney, who notes that concerns about residues in food, particularly sweeteners, have been increasing. Consumer apprehensions about white sugar are contributing to positive interest and sales in the honey category, de Vooght adds. “Our research indicates that although honey is composed of natural sugars, consumers perceive the product as more natural, wholesome and beneficial than traditional granulated sugar,” he notes. SB Cvetan is a freelance writer based in Barrington, Ill.
Category Intelligence: Baking Mixes and Ingredients
Transforming norms Home bakers want better ingredients, more variety and … fun By Dana Cvetan
Do
develop clean label baking mixes.
here’s a shift underway in the baking mixes and ingredients category that reflects the public’s changing values and tastes. Consumers are backing away from processed foods, artificial ingredients and preservatives, and that has greatly impacted the baking mixes category. Market intelligence agency Mintel projects a steady, long-term decline across all segments, forecasting a total U.S. sales drop from $4 billion to $3.6 billion between 2010 and 2020. Even so, there’s hope for reviving the category, the agency says in its report, “Baking Mixes, U.S.” from January of last year. Grocery shoppers in general are choosing fresher, less-processed alternatives. Some key groups, such as households with children and Hispanics, still choose mixes for convenience reasons. Millenials are more likely to buy mixes because they enjoy baking and consider it a fun activity to share with others. “Millennials are a very social generation and often tend to view cooking at home as a platform for getting together with friends and family and trying new products and recipes, (so) marketing messages that emphasize these elements rather than convenience are likely to resonate most with millennials,” the report states.
Cleaning up “In the baking mix category, manufacturers are focused on cleaning up ingredients. This includes removing artificial colors, artificial flavors, preservatives and genetically modified ingredients. Ingredient listings should include recognizable ingredients and be as short as possible,” says Samantha McCaul, marketing manager for Concord Foods LLC in Brockton, Md. The clean eating trend is the biggest trend that’s affecting the market today, McCaul says. Citing data from The NPD Group, she says 40 percent of primary grocery shoppers “are interested in pursuing clean eating when clean eating is defined.” To stem decline, store brands need to provide “better for you” mixes and ingredients, Mintel says. Not only are consumers more likely to regard mixes that are free from artificial colors, artificial flavors and preservatives as more healthful, they will likely perceive them as being better tasting as well, the report says. Mintel also advises introducing a wider range of organic products, noting that natural channel sales of organic baking mixes and ingredients grew about 1 percent from late 2013 to late 2015.
No bleach In the ingredients sector, unbleached flour is the next big thing, says Pat Kelly, manager of sales support for Renwood Mills in Newton, N.C. People are ignore consumers’ becoming more penchant for sophisticated convenience in their baking. and smaller Although there are not many portion sizes. unbleached
Don’t
44
Store Brands / March 2017 / www.storebrands.com
Category Intelligence: Baking Mixes and Ingredients flours on the market, it is growing as a sub-category, Kelly says. “I see that as an opportunity for store brands,” he adds. Kelly also sees a shift to convenience in the category, and that means smaller packages: a 2-pound bag rather than the traditional 5-pound bag. Again, this provides an opportunity for store brands, as many retailers don’t carry 2-pound bags of flour, Kelly says. Smaller packages make sense for two reasons: They avoid waste and also could indirectly encourage consumers to purchase more value-added specialty flours that are geared toward specific types of baking, he adds.
More variety Baking from scratch may be becoming less common because many people lack both the skill and the time to pull it off, yet they still like to bake, Kelly says. Though cake mix sales are declining, muffin and cookie mix sales are growing, he says, and the varieties that are growing are the ones with unique flavors and flavor combinations. Beyond the basics such as plain, corn, blueberry and cinnamon muffin mixes, consumers crave flavors such as banana, banana nut, honey cornbread, cranberry, cranberry orange and pumpkin, Kelly says. Use this
opportunity to expand the category, differentiate your brand and position the product for different seasons, he advises. Additionally, the mixes that are growing most are the ones with a premium connotation. Kelly says bag-in-a-box packaging works best. It displays well on the shelf; conveys more information to the consumer; is more sanitary and better tasting than product in a box; and with a re-sealable inner bag, it allows for more than one use. Millennials prefer functional packaging that is easy to open and use, McCaul adds. Kelly notes that the shift toward buying local is impacting the category. McCaul agrees, adding that today’s consumers “value transparency from manufacturers. They want to know what’s in their food, how it’s made and where it’s made or grown.” Mintel’s report concludes that U.S. sales of baking mixes are likely to continue to fall unless manufacturers and retailers “address increasing consumer wariness toward packaged, Brownie Mixes processed foods.” Mixes with fewer or no artificial ingredients and preservatives Private All Label Brands and also organic options “will best keep pace with evolving $5.1 $309.0 consumer preferences. -18.6% -5.4% These types of products will 1.7% 100% resonate most strongly among 3.5 170.0 millennials, households with -14.4% -1.8% children and Hispanics.” SB
Baking mix and ingredient category performance Baking Mixes Private Label
All Brands
Dollar Sales (in millions)
$38.3
Change vs. Year Ago
-9.8%
Dollar Share
Cake/Cupcake/ Pie Mixes Private Label
All Brands
$1,525.8
$14.4
$525.0
-4.6%
-14.6%
-5.6%
2.5%
100%
2.7%
100%
Unit Sales (in millions)
26.6
991.9
10.5
355.6
Change vs. Year Ago
-12.7%
-3.1%
-17.6%
-4.4%
Avg. Price Per Unit
$1.44
$1.54
$1.38
$1.48
$1.45
$1.82
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 Dec. 25, 2016. Note: Does not include all baking mix product subcategories.
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Store Brands / March 2017 / www.storebrands.com
Cvetan is a freelance writer based in Barrington, Ill.
Category Intelligence: Dips and Spreads
Big spread Penchant for health and wellness, snacking, unique flavors driving diverse category By Carolyn Schierhorn
Do
prominently display private label salsa and nacho-style cheese dips in the snack chips aisle.
48
ong gone are the days when Americans of all ages spread plain butter on toast, bread or rolls and smiled with satisfaction, notes Colleen McDonald, marketing manager for St. Francis, Wis.-based Wixon, a manufacturer of spices and seasonings. Butter, the most commonplace of staples, now comes in assorted flavors to appeal to the daring taste buds of modern-day consumers, she says. “We are seeing bold new flavor combinations and versatile offerings with multiple applications,” McDonald shares. “For store brands that are looking to make an entrance in a category that is not yet oversaturated, butters with unique flavors combine familiarity and adventure for consumers. With taste being one of the top motivators to purchase, retailers should consider varieties such as spiced or herbal butter.” Across the entire category of packaged dips and spreads — which includes shelf-stable and refrigerated products from salsa to spreadable cheese — retailers and vendors of private brands are emphasizing novel taste sensations and betterfor-you choices. The category as a whole is “driven by taste as well as quality ingredients and healthful options,” McDonald says. Store brands should target consumers “who are looking for that dip or spread
Store Brands / March 2017 / www.storebrands.com
Don’t
that makes them feel like they are indulging” while also being neglect to good for them, she advises. develop single“Focusing on new and exciting flavors, with allserve packages of natural ingredients or minimal dips and spreads ingredient labels, will be key,” paired with chips McDonald adds. or crackers. In terms of sales growth, the most robust segment for private brands is refrigerated flavored spreads, according to IRI, a Chicago-based market research firm. Private label constitutes 12.4 percent dollar share of this $778.6 million segment, with retail sales increasing by more than 18 percent to $96.5 million during the 52 weeks ending Dec. 25, 2016. But center-store spreads remain a much bigger subcategory — one that keeps evolving. Staples such as the kids’ lunchbox favorites, peanut butter and jelly, are being jazzed up with cutting-edge combinations of spices and seasonings to entice millennials, notorious foodies who are prone to snack throughout the day versus sitting down for three square meals. For example, Goodyear, Ariz.-based Southwest Specialty Food, a manufacturer of both branded and private label spreads, dips and other items, offers habanero-flavored Ass Kickin’ Peanut Butter. The Jam Stand, a startup in Brooklyn, N.Y., meanwhile, makes Not Just Peachy Sriracha Jam, touted as “packing the heat and the sweet.” Research by Rockville, Md.-headquartered Packaged Facts indicated that 53 percent of U.S. consumers are seeking bolder flavors. Non-peanut nut butters continue to gain traction and spark innovation in taste and texture, influenced by the popularity of the Nutella chocolate and hazelnut spread plus the need or preference of many consumers to avoid peanuts. The Kroger Co., for one, offers both creamy and crunchy varieties of its Simple Truth Organic Hazelnut Spread as well as Simple Truth Almond Butter and Cashew Butter. When it comes to chocolate, hazelnut and other spreads, three trends are impacting product development — health, sustainability and gourmet — points out Marianna Rinaldi, a spokeswoman for Socado, a private label vendor in Villafranca, Italy. The company recently launched two new spread lines: DolCrem Premium, which includes a
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Category Intelligence: Dips and Spreads cocoa spread and a white milk and hazelnut spread, and DolCrem Free, which is a hazelnut spread that is both palm oiland gluten-free. Although nut butters are a highprotein snack, sweet spreads tend to be strictly indulgent. Cookie butters, or cookie spreads, are a segment that has exploded in growth, according to Oak Brook, Ill.-based Kruger North America, a manufacturer of specialty nut and sweet spreads. Consumers commonly spread cookie butter on graham crackers and apple slices or use it as a topping for ice cream and even pancakes. If not in this space already, retailers might want to consider launching a line of private label nut-based and sweet spreads, a subcategory that global market research firm Mintel estimated will reach $6.5 billion by 2018 (a 65 percent increase from 2013). The more breakthrough the brand, the better. In its latest “Nut-Based Spreads and Sweet Spreads — US” report, Mintel noted that consumers seek increasingly innovative flavors, “including indulgent chocolate spreads (24 percent) as well as new or unusual flavors of nut spreads (21 percent) or sweet spreads (17 percent) such as macadamia butter or plum.”
Serendipity As with spreads, packaged dips have increased in variety, versatility and healthfulness — with both shelf-stable and refrigerated products heavily influenced by ethic food trends, particularly growing interest in Latin American, Middle Eastern and Asian cuisines. In some cases, familiar ingredients are being paired in unexpected and delicious
Dip and spread category performance Refrigerated flavored spreads
Dips Private Label
All Brands
Dollar Sales (in millions)
$10.2
Change vs. Year Ago
-8.9%
Dollar Share Unit Sales (in millions) Change vs. Year Ago Avg. Price Per Unit
Private Label
All Brands
$389.4
$96.5
$778.6
+0.4%
+18.3%
+1.1%
2.6%
100%
12.4%
100%
4.2
125.2
30.9
227.8
-6.6
-0.8
+17.7%
+2.2%
$2.42
$3.11
$3.12
$3.42
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 Dec. 25, 2016. Note: Does not include all dips and spreads subcategories.
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Store Brands / March 2017 / www.storebrands.com
ways, according to the International Dairy Deli Bakery Association, which notes that refrigerated dips are available that combine salsa with hummus, for example, and hummus with dairy-free ranch dressing. Among adults, millennials are much more likely to purchase dips (and chips) than older generations, states Mintel’s “Chips and Dips — US” report, issued in February 2016. A survey of adult internet users revealed that 63 percent of millennials purchased hummus from a grocery store in the previous six months versus 36 percent of non-millennials; 81 percent of millennials purchased salsa versus 69 percent of non-millennials; and 66 percent of millennials purchased guacamole versus 38 percent of non-millennials. No longer considered just party fare, chips and dips — and veggies and dips — have become snacking mainstays. U.S. dip sales reached $2.8 billion in 2015, according to Mintel, a 26 percent increase since 2010. To some extent, dip manufacturers have followed the lead of chip manufacturers in the trend toward more wholesome and healthful products, says Todd Mullane, vice president of private label for Dakota, Ill.-based Berner Food & Beverage, noting that consumers for years have had access to baked potato chips, chips made without certain oils, and chips consisting of alternative ingredients such as sweet potatoes and lentils. Berner manufactures a line of clean label shelf-stable dips in several varieties, including Salsa Con Queso, White Salsa Con Queso, Stadium Style Cheddar, Bacon & Bean, French Onion, Caramelized Onion, and Spinach. These limited-ingredient dips are gluten-free and contain no monosodium glutamate. “We have taken ingredients that are hard to pronounce and even harder to spell out of the product while still trying to maintain that same great taste people are accustomed to,” Mullane says. In the refrigerated space, hummus increasingly commands center stage. Although the product is inherently nutritious, manufacturers such as Quebec City-based Fountain of Health have been raising the quality and wellness bar. “Our products are made with 100 percent natural ingredients. We don’t use preservatives, and all of our products are Non-GMO Project-verified,” says the company’s sales and marketing analyst, Mahdi Hachana. Fountain of Health recently added a Roasted Beets SKU to its organic hummus line, which also includes Traditional and Roasted Garlic flavors.
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Category Intelligence: Dips and Spreads Creative convenience Beyond coming up with new flavors for their private label dips and spreads, manufacturers and retailers need to focus on convenience and portability, Hachana emphasizes. “As our lifestyle has changed to be more dynamic, product offerings have to adapt with more on-the-go options,” he says. “Smaller formats for snacking, single serves and portable packaging are becoming more and more popular. Consumers are asking for practicality and convenience to get what they need in this fast-moving world of ours.” That’s why Fountain of Health developed its mini line: a 2-ounce portion of hummus that can be used for many snacking occasions, according to Hachana. The company also has a line that combines the single-serve portion with multigrain crackers. Customer convenience should also guide merchandising efforts in this category. Dips and spreads2/22/17 are rarely alone, 7.25x4.875_BPB_LiveArea_7.25x4.875 3:23eaten PM Page 2 so it is
important to cross-merchandise them, Mullane says. Shelf-stable store brand salsas and cheese dips should be prominently displayed in the snack chip aisle, he suggests. Pita bread, bagels, crackers and chips of all types, in turn, should be placed near refrigerated spreads and dips. “The dips and spreads category is not mature yet and is still growing,” Hachana points out. Consequently, retailers have considerable opportunity to amp up their presence in this category and drive sales. Though hummus is a fast-growing segment, Hachana notes that household penetration in the United States is still relatively low — below 30 percent. “Our recommendation,” he says, “is to have manufacturers invest more in store demos, thus exposing shoppers who have never tried hummus to multiple choices of flavors and formats.” In addition, these demos can introduce customers to the product’s health benefits and multiple uses. As Hachana observes, “there is educational work to be done to attract more people to the category and maintain established bonds.” SB
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Category Intelligence: Cookies and Crackers
Protein-fortified cookies anyone? Retailers could heighten awareness, sales with healthy offerings By Lawrence Aylward
e want healthy cookie!” Maybe the Cookie Monster from “Sesame Street” announcing this wouldn’t be much of a stretch these days, considering the continued consumer movement toward eating better-for-you foods. The healthy cookie movement has been happening for several years, but it’s getting stronger and with a few new twists. Chocolate-chip protein cookies anyone? Get this: According to a 2015 report from Mintel on cookies, healthy options of cookies, while small in terms of current overall sales, are expected to increase 32 percent in sales through 2020. Standard and premium cookies are expected to increase 13 percent during that timeframe. Overall, sales of private label cookies were up more than 5 percent in 2016 when compared to the previous year, according to data from IRI. Private label owns about 15 percent of the cookie category. In its report, Mintel states that private label could find opportunity in healthy cookie options, such as fiber-enriched cookies, because 56 percent of consumers perceive own brand cookies as having equal quality with name brands. Sylmar, Calif.-based Fantasy Cookies, a private label supplier, noticed the healthy cookie trend several years ago (of course, many trends seem to start on the West Coast and move East). Fantasy Cookie began manufacturing cookies with fruit juice that were also up to 98 percent fat-free. Fantasy Cookie says it was one of the first cookie manufacturers to offer low-carb cookies, and says it rolled out organic cookies before organic was popular. Matt Cobb, Fantasy Cookie’s purchasing manager, says the healthy cookie trends have transcended to protein-fortified and plant-based products. Organic cookies, of course, also continue to grow. Cobb says Fantasy Cookie doesn’t use any hydrogenated oils (trans fat) in its products. “Also, many of our customers are now requiring non-GMO and and develop some non-GMO Project-verified ingredients for their lines,” he adds. healthful Cobb says one challenge the cookie options. healthy cookie segment faces is sourcing the highest-quality
ingredients at the lowest prices, making it easier for consumers to purchase better-for-you products at an affordable price. Most retailers that Fantasy Cookie partners with offer up to three tiers of cookies. One is a lower value tier that includes artificial colors, preservatives and flavors. Another is a higher-end natural tier of products that contain no artificial colors, preservatives and flavors, such as Fantasy Cookie’s products. Cobb says many retailers have added an organic third tier. Cobb notes that many of the retailers partnering with Fantasy Cookie see the value of promoting their own-brand healthy cookies and are putting the marketing dollars behind them. “One of our most recent own-brand customers is using end caps and readymade displays to promote its new organic cookie line,” Cobb says. According to Mintel, healthy cookies appear of particular interest to households containing children under 17, and more than half of households with children purchased such cookies during a threemonth span in 2015. Also, Mintel reports that consumers under 45 are “significantly more likely” to pay more for healthy cookies. “While consumers may regard cookies as an indulgence, brands should realize those same consumers — millennials, in particular — are paying close attention to cookie health profiles,” according to Mintel.
Don’t
forget to crossmerchandise crackers with cheese, spreads, soups and hummus.
Do
www.storebrands.com / March 2017 / Store Brands
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Category Intelligence: Cookies and Crackers Better for you extends to crackers
cracker purchasers agree that crackers are healthier than other salty snacks. “This reputation helps make the category competitive against other snacking options outside of the category,” Mintel states. But cracker sales slowed to 0.8 percent in 2015-16 after growing 13 percent from 2011-2016, according to Mintel, which forecasts crackers to grow about 3 percent through 2021. Sales of private label crackers were down about 8 percent in 2016 when compared to 2015, according to IRI. Still, Mintel believes there is Cookies Crackers opportunity for private label suppliers. “Product innovation will shape future growth for the category,” according to Mintel. “New Private All Private All Label Brands Label Brands product development featuring convenient packDollar Sales (in millions) aging, cutting-edge flavors, and healthy alterna$1,144.9 $7,461.1 $501.1 $6,961.2 tive bases (that don’t forgo good taste) are areas Change vs. Year Ago +5.4% +1.4% -8.2% +0.6% of interest indicated by cracker consumers.” Dollar Share 15.3% 100% 7.20% 100% The top three attributes that drive purchase Unit Sales (in millions) 479.8 2,869.0 272.2 2,618.8 for cracker buyers are taste, flavor and texture. Change vs. Year Ago +1.26% -0.4% -6.39% -0.54% Healthy ingredients and product attributes Avg. Price Per Unit $2.39 $2.60 $1.84 $2.66 such as whole grains, low/no salt, no artificial Source: InfoScan Reviews, IRI, a Chicago-based market research firm. Total U.S. supermarkets, drugstores, ingredients and high fiber are of secondary mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending Dec. 25, 2016. Note: Does not include all cookie and cracker subcategories. interest to consumers but may represent a While cookies continue to build a healthier image (not that there’s anything wrong with the routine fare), crackers already have a healthy reputation. According to Mintel’s “Crackers, U.S. January 2017” study, close to two-thirds of cracker buyers perceive crackers as an easy, healthy snack. Over half of
Cookie and cracker category performance
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ovira Biscuit Corporation is one of the leading cracker manufacturers in the US, principally dedicated to the manufacturing of Soda Crackers, a Hispanic favorite. It produces their own brand, Rovira Export Soda Crackers, as well as Private Label and Co packing manufacturing. Based in Ponce, Puerto Rico, Rovira Biscuit is a close-held, family owned corporation, with over 89 years of experience baking the best all natural soda crackers in the market. Our formula uses cero preservatives or additives and uses a 24 hour natural fermentation process that imparts a unique flavor profile. The manufacturing plant is equipped with two brand new, state of the art manufacturing lines which can handle any type of order, large or small. We currently process 150,000 pounds (75 tons) of flour every day at our 100,000 square feet manufacturing facility. Rovira Biscuit offers high quality crackers in a variety of packaging options. Quality assurance programs and process control programs are designed to build Quality into the process. We have the strictest food safety protocol certification from Safe Quality Food (SQF) Level 3. We also have the OK Kosher certification and are in compliance with Food and Drug Administration (FDA) HACCP programs. Due to our proximity to US mainland, we can handle different
54
Store Brands / March 2017 / www.storebrands.com
types of distribution logistics, from factory to door or as required. There is no doubt that we offer the perfect combination of Tradition, Know how, Attention to Detail and Quality Focus that our customers rely on and our clients expect. With this formula in place, we will continue to make the best soda crackers preferred by the Hispanic market, for many more years. Like what you’ve read? Go to Rovira.com for more information and please contact us at customerservice@rovira.com.
Category Intelligence great opportunity for innovation, according to Mintel. At Venus Wafers in Hingham, Mass., requests for organic crackers are soaring, says James R. Anderko, national sales manager for the company. Venus Wafers manufacturers conventional and organic crackers and flatbreads for private label. About 95 percent of its products are non-GMO. In the past year, Anderko says the company has received a 75 percent increase in inquiries from retailers that are interested in purchasing organic products that Venus already manufacturers as well as working with Venus to create new organic products in the category. It seems some retailers may be seeking that allimportant exclusive private brand in the cracker category. Anderko doesn’t expect organic growth in the category to slow soon. With the growth, Anderko says the challenge for manufacturers like Venus is to not compromise on characteristics and taste when producing organic products. Most of the products that Venus manufactures have as few as three ingredients and nothing artificial. With the increasing consumer demand for free-from products, Anderko realizes that Venus Wafer is positioned nicely. More retailers are looking for upscale private label products, which is Venus Wafer’s forte, Anderko says.
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“Consumers want more than just a saltine,” he adds. Anderko believes consumers are willing to pay more for organics and free-from products because of everything they are reading and hearing about unhealthy ingredients and what they should and shouldn’t be eating. While Anderko says Venus Wafers offers basic cracker and flatbread flavors, including sesame, multigrain and multiseed, the manufacturer has also taken advantage of recent flavor trends that pair well with such products, including olive oil, sea salt and peppercorn. For retailers, in regard to the type of high-end crackers that Venus Wafers manufactures, Anderko says it’s vital to get consumers to buy them and try them whether through sampling, advertising or discounting. “There is a lot of opportunity to cross-merchandise these products within the deli with cheese, spreads, soups and hummus,” Anderko says. “We see retailers doing that a lot. I think there are a lot of opportunities to grow the private label business.” SB Aylward, editor-in-chief of Store Brands, can be reached at laylward@ensembleiq.com.
www.storebrands.com / March 2017 / Store Brands
55
ROVIRA BISCUIT CORPORATION Own Brand and Private Label Manufacturer
customerservice@rovira.com www.Rovira.com
Category Intelligence: Over-the-Counter Remedies
A new slant Dosing formats and packaging that break with tradition could mean growth for store brand OTC products By Kathie Canning
Do
consider transdermal drug-delivery systems.
56
he self-treatment of ailments is big business. U.S. sales of over-thecounter (OTC) cold, allergy and sinus tablets alone totaled more than $4.5 billion during the 52 weeks ending Dec. 25, 2016, according to data from market research firm IRI. (See table, p. 58.) But prescription remedies represent a threat to sales of OTC remedies, particularly on the cough, cold and allergy side. One-third of surveyed U.S. consumers, in fact, indicated they use a prescription remedy for a cough, or cold or the flu, while onequarter reported they rely on such a remedy for allergies, notes global market research firm Mintel in its April 2016 “Cough, Cold, Flu and Allergies Remedies — US” report. However, 44 percent of surveyed consumers say they still use an OTC remedy for a cough, a cold or the flu before consulting a doctor. And recent Rx-to-
Store Brands / March 2017 / www.storebrands.com
OTC switches have been a boon to the OTC market, especially on the allergy-relief front, Mintel reports. Retailers could look outside the standard pill format to find own-brand OTC growth opportunities. Although pills make up more than 60 percent of the OTC market, consumers are suffering from “pill fatigue,” says Dianne Galang, director of sales/health, beauty and baby for Daymon Worldwide in Stanford, Conn. She points to Woonsocket, R.I.-based CVS Pharmacy as one retailer that recently “thought outside the pill.” In 2016, CVS introduced a line of OTC items in single-serve coffee pods, she says, “mixing medicine with the soothing relief of hot liquids.” Daniel Da Silva, account manager with Mooresville, N.C.-based BestCo Inc., suggests that portable dosage formats could appeal to “busy mothers on the move.” Gummies — highly successful in the multivitamin segment — could add value within the OTC mix, too.
And Mark Bolling, executive vice president/OTC and generic Rx for Piscataway, N.J.-headquartered PuraCap Pharmaceutical LLC, points to opportunity in single-dose liquid and solid sachets. “We are focusing greatly in this area to differentiate our value proposition to the trade and consumers,” he says. “We believe active consumers desire ‘instant’ therapy or benefit.” Bolling believes that soft gel formats and oral dissolving strips are also poised for growth. And transdermal drug delivery systems hold growth potential for both seniors and children, he adds.
Flonase nasal spray, retailers now can introduce Flonase equivalents. And private brand suppliers also are working on the launch of an equivalent to Nexium 24-hour acid reducer, which also made the jump from Rx to OTC. “These are the perfect categories in which to capture new sales because you are not taking from an existing segment — it’s all new business,” Harrington stresses.
Don’t neglect to quickly capitalize on Rx-to-OTC conversions.
Enter new categories Rx-to-OTC switches represent another opportunity for private brand growth. Retailers need to act fast, however. “Capitalizing on Rx-to-OTC launches quickly is key for every retailer; otherwise, their competition is carrying it before they are,” Galang says. Recent Rx-to-OTC switches are expanding private brands into new territory, notes Tony Harrington, category director for health & beauty care at Elk Grove Village, Ill.-based Topco Associates LLC. For example, with the OTC conversion of
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Category Intelligence: Over-the-Counter Remedies Packaging tweaks also could help boost ownbrand OTC sales. Although retailers typically emulate the national brands, environmental concerns will soon translate into less packaging while still maintaining product security, Galang says. Harrington agrees. “National brands are often packaged twice: first in labeled bottles, which are placed inside printed five-panel cartons,” he
explains. “Own brands are taking the lead and eliminating the unnecessary packaging of the fivepanel carton and just using the labeled bottle.” Clear bottles constitute another trend. Harrington says Topco Associates recently introduced carton-less clear bottles for many of its OTC tablet products. Even the best store brand OTC product — boasting an on-trend format and great packaging — still could benefit from its fair share of marketing and merchandising. On the marketing front, consumer education is critical, Galang points out. “Retailers should take advantage External Analgesic Rubs of offers from private brand suppliers with shippers, increased signage, Private All power wings, etc.,” she states. “These Label Brands displays give retailers an increased $48.80 $617.60 billboard [to get] their message -6.50% 12.90% out, whether it’s about cost savings, 7.90% 100% comparing active ingredients to the national brand or prevention versus 12.5 102.3 treatment.” SB -5.60% 6.30%
Over-the-counter remedy category performance Cough/Allergy/ Sinus Liquids and Powders
Cough/Allergy/ Sinus Tablets
Cough Syrup
Private All Private All Private All Label Brands Label Brands Label Brands Dollar Sales (in millions)
$370.90
$1,224.00 $1,466.50 $4,528.30 $151.00
$577.60
Change vs. Year Ago
2.90%
3.30%
-0.80%
0.20%
-2.20%
-0.40%
Dollar Share
30.30%
100%
32.40%
100%
26.10%
100%
Unit Sales (in millions)
59.2
150
187.1
464.2
29.4
6.1
Change vs. Year Ago
-2.50%
-0.40%
-5.20%
-3.00%
-5.40%
-3.90%
Avg. Price Per Unit
$6.26
$8.16
$7.84
$9.76
$5.14
$7.59
$3.92
Source: IRI, a17_0123_AD_H_Store Chicago-based market research Total U.S. supermarkets, drugstores, mass Brands firm. Mag_OLai.pdf 1 2/9/17 11:09 AMmarket retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending Dec. 25, 2016.
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Store Brands / March 2017 / www.storebrands.com
$6.04
Canning is a freelance writer from Libertyville, Ill.
Category Intelligence: Household Cleaners
Quick, clean and green Consumers want convenient household cleaning products that work and protect their health and the planet By Dana Cvetan
Do
focus on developing natural, freefrom cleaners.
leanliness helps keep us healthy, yet exposure to harsh cleaning chemicals can pose a threat to our health. Household cleaning products designed as natural and safe could encourage increased spending in the category, global market research firm Mintel notes in its November 2016 report “Household Surface Cleaners — US.” The natural cleaner market appears to be heating up, Mintel states, as evidenced by Unilever’s recent acquisition of Seventh Generation, a natural cleaner manufacturer. Millennial and Generation Z shoppers demand full ingredient disclosure about household cleaning agents, says Charles Kaye, CEO of Auburn Hills, Mich.-based Greenblendz, a manufacturer of ecofriendly cleaning products. “The timing for plant-based, free-from household cleaning products has never been stronger because the millennial shopper is demanding safer chemistry and transparent ingredient decks in their everyday products,” says Lyne Appel Downing, vice president of sales and marketing for Greenblendz.
Don’t
category about making cleaning products healthier while preserving their ability to do ignore the their job. “You still have to kill importance of the viruses and the bacteria,” fragrance in says Chris Dresselhuys, director winning over of product management consumers. for Sheboygan, Wis.-based Rockline Industries. “While the majority of consumers still rely on the effectiveness of traditional quaternary [ammonium chloride] cleansers, there is a growing segment of consumers that prioritizes products that employ more naturally derived cleaning agents in the place of synthetic agents,” Dresselhuys adds. Retailers want cleaning product formulations that have strong performing capabilities, meet the criteria for healthier products, and exhibit the price points of a private brand, Downing says. “Where grocery and supermarket retailers once ignored natural and organic, they are now full-on asking for more SKUs across multiple categories so that they don’t lose their customers to natural stores,” she adds. “Club stores and drugstores are also jumping into the game.”
Saving … everything
The buying population perceives free-from products to be healthier, and that is a priority for them, Downing says, noting that Greenblendz shuns the use of chemicals that can cause allergies, eczema and respiratory issues. There’s a lot of effort and discussion in the 60
Store Brands / March 2017 / www.storebrands.com
Saving time, storage space and the environment all matter in this category. Convenience is key for students, two-income families and older generations, Downing says. Convenient products such as disposable cleaning wipes are especially popular among parents, 89 percent of whom use them compared to 76 percent of the population generally, according to Mintel. Wipes are also important to parents as a means to destroy flu-causing germs. However, younger adults are delaying starting families and household sizes are shrinking, and that could put a crimp in sales, the report adds. Sales of some labor-intensive specialty cleaners have lagged, Mintel reports. This is partly because advances in appliances such as self-cleaning ovens and surfaces such as no-wax flooring have made them less necessary — and partly because younger generations have a more casual attitude toward cleaning, preferring convenient, allpurpose products. Sustainability has been on the minds of retailers
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Category Intelligence: Household Cleaners for a long time, Dresselhuys notes. “There’s definitely an increased awareness of these issues as millennials mature and become primary household shoppers,” he says. “They seek balance between efficacy and environmentalism.” Configuring the right kind of refill containers and eliminating unnecessary packaging can save
Household cleaner category performance Household Cleaners Private Label
All Brands
Dollar Sales (in millions)
$201.9
Change vs. Year Ago
-10.5%
All Purpose Cleaner/ Disinfectant Private Label
All Brands
$3,342.6
$53.2
+1.1%
-6.8%
Toilet Bowl Cleaner/ Deodorizer Private Label
All Brands
$1,144.3
15.8
$521.0
+2.5%
-39.0%
-1.1% 100%
Dollar Share
6.0%
100%
4.7%
100%
3.0%
Unit Sales (in millions)
88.5
1,033.7
27.4
390.1
8.1
188.7
Change vs. Year Ago
-16.4%
-0.4%
-9.9%
+2.1%
-35.8%
-1.2%
Avg. Price Per Unit
$2.28
$3.23
$1.94
$2.93
$1.96
$2.76
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 Dec. 25, 2016. Note: Does not include all household cleaner product subcategories.
resources and storage space in the home and make shipping more efficient, Dresselhuys adds. The shift to PCR (post-consumer resin) bottles that is happening in the category also bodes well for sustainability advancement, says Steve Berry, founder of Greenblendz. Furthermore, the move toward compostable materials made from sugarcane and other natural substances will be become more cost-effective, he adds.
Scents sense The surface cleaner market is highly saturated, and growth is slow at an expected 1.1 percent increase — with $5.1 billion in sales — in 2016, according to Mintel. Innovating in a way that caters to specific needs could help boost the category. Scent can serve that purpose, particularly among multicultural consumers and younger adults, states Mintel, which advises retailers to employ natural scents, unique combinations and scent series that align with other household cleaning products. “What is important with store brands is that every retailer today can offer household products with fragrances that outperform national brands,” says Lori Miller Burns, director of marketing relations
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Category Intelligence: Household Cleaners and communications for Marietta, Ga.-based Arylessence Inc. “The retailers that are increasing market share are taking the time to carefully select on-trend and desirable fragrances, choosing the fragrance offerings they know appeal to customers.” Cleaning is a chore, Burns adds. “Yet this chore can become just a bit more pleasurable through the fragrance experience,” she says. “Fragrance is the one ingredient that product development teams can control to ensure they meet the trends and fragrance
preferences customers are seeking in cleaning products,” enabling store brands to maintain a competitive edge against national brands.
Generations count Millennials may command major buying power today, but Generation Z consumers are close behind and will comprise 40 percent of the North American population by 2020, Downing notes. “With the digital platform a part of their DNA, they have been made aware of millennials’ desire for safe consumer products and in addition are looking for products that talk about values and social causes,” she says.
Interestingly, members of Generation Z are influencing their parents and grandparents, Downing adds. “The old message of being better for the planet has been replaced by being ‘better for you.’ Health is a concern to all the generations,” she says. Health concerns do indeed cross generations, Dresselhuys agrees. Older consumers and baby boomers are still a very large consumer segment, and they care about what they bring into their homes, he says. They also care how well a product works, Dresselhuys notes. “You have to drive the first purchase,” he says. “It’s a practical category. People bring it home, try it out. And if it gets the job done that they want done — sold!” SB Cvetan is a freelance writer based in Barrington, Ill. 64
Store Brands / March 2017 / www.storebrands.com
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ADVERTISER NAME
PAGE#
Evergreen Packaging . . . . . . . . . . . . . . . . . . . . . . . . 35, 62 Furlani’s Food Corporation . . . . . . . . . . . . . . . . . . . . . . . .5 Global Tissue Group . . . . . . . . . . . . . . . . . . . . . . . . . . IFC, 3 ITI Tropicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Ice River Springs Company . . . . . . . . . . . . . . . . . . . . . . . .9 KLN Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 LB Maple Treat Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Nepa Carton & Carrier Company . . . . . . . . . . . . . . . . . 36 Private Label Manufactures Association . . . . . . . . . . . . 7 Roundy’s Supermarkets ,Inc . . . . . . . . . . . . . . . . . . . . . 20 Rovira Foods Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54, 55 Safeway/Albertson’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Smitty Bee Honey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Superior Pack Group . . . . . . . . . . . . . . . . . . . . . . . . . . . IBC Time-Caps Labs, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 Tower Labs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 TreeHouse Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 Trilliant Food & Nutrition . . . . . . . . . . . . . . . . . . . . . . . . 29 US Nonwovens Corp . . . . . . . . . . . . . . . . . . . . . . 15, 23, 65 Wonder Natural Foods . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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