Store Brands - April 2017 by ensembleiq

Organicâ&#x20AC;&#x2122;s impact on private brands

Getting multiculturals to buy in on store brands

Getting Social: Kum and Goâ&#x20AC;&#x2122;s Erin Butler April 2017 | www.storebrands.com

Good Cents To stay competitive, dollar stores are investing in store brands that appeal to millennials

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Contents

Volume 39 No. 4 April 2017

18 Cover Story Good cents

To stay competitive, dollar stores are investing in own brands that appeal to millennials

Features 24 A Burgeoning Category Organic opportunity While category continues to offer budding option for private brands, retailers need to do their homework

29 Ethnic Trends Tough sell Multiculturals question the quality of private brands, among other things. So what’s the key to getting this growing population to buy in on store brands?

33 Packaging ‘Value’ proposition Investments in sustainable packaging solutions could help retailers connect with a growing number of environmentally conscious consumers

Departments 6 8 10 16 66

Editor’s Note Promotional Insights Around the Industry Getting Social New Product Concepts

Category Intelligence

38 44 48 51 54 58 62 64

Water, juice and other RTD beverages Salty snacks Meat and poultry Condiments and dressings Bread, rolls and dough Wet wipes Incontinence care Shave care

About the cover:

Dollar store chains are finding that it makes good economic sense to modernize their private brands to appeal to millennials. Cover design by Jeff Bowes

33 4

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 / April 2017 / www.storebrands.com

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Editor’s Note Business Intelligence for an Evolving Market

570 Lake Cook Rd. Suite 310, Deerfield, IL 60015 (224) 632-8200 • Fax: (224) 632-8266

Brand Director

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Managing Editor

Carolyn Schierhorn

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Contributing Writers

Kathie Canning, Dana Cvetan, Rich Mitchell

ADVERTISING & SALES Associate Brand Director Suzanne Caputo (201) 855-7628

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CUSTOM MEDIA VP, Custom Media Division Pierce Hollingsworth (224) 632-8229

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EVENTS • MARKETING • DIGITAL • RESEARCH • CIRCULATION CORPORATE OFFICERS Executive Chairman

Alan Glass

President & CEO

Peter Hoyt

Chief Operating Officer Chief Brand Officer

Richard Rivera Jeff Greisch

Chief Financial Officer

Len Farrell

Chief Business Development Officer & President, Ensemble IQ Canada President of Enterprise Solutions/ Chief Customer Officer Chief Digital Officer

Korry Stagnito Ned Bardic Joel Hughes

Chief Human Resources Officer

Greg Flores

Creating your own category, without going buggy

keep hearing that U.S. retailers need to emulate the ingenuity of their European counterparts when it comes to own brands. Well, one European retailer — Coop in Switzerland — recently raised the stakes in that department. In January, Coop, one of Switzerland’s largest retailers with about 2,000 locations, announced it will begin selling “burgers” and “meatballs” made with (gulp) mealworms (gulp again) at some of its stores. Coop is partnering with Essento, a Swiss company that makes food from insects, in the own-brand project. Mealworms are the larvae form of the mealworm beetle. They are often viewed as pests and can be found in dark and damp places like under decaying logs and leaves. Mealworms are hardly cute and have a tendency to gross people out upon sight. Mealworms, however, are edible for humans. Me? If I’m eating them in a burger, I don’t want to know about it. The Swiss might think otherwise, but there isn’t much of a market for bug-filled foods in America, unless you’ve lost a bet. Still, you have to hand it to Coop. The retailer is hitting on several elements trending in private label. First, there’s the health factor — mealworm larvae are nutritious and packed with protein. Second, there’s the sustainability factor — it takes more energy to “grow” meat on farms than it does to “grow” mealworm larvae. Third, there’s the distinct factor to differentiate yourself as a retailer of private brands — and it doesn’t get anymore distinct than bug burgers and meatballs. I also wouldn’t be surprised if the bug burgers and meatballs are positioned as gourmet items to command a higher price, another trend in private label. More than ever, American retailers and manufacturers must be distinct when it comes to growing private brands in food, beverage and household goods categories. We keep hearing buzz terms like “personalization” and “exclusivity” when it comes to generating more private label sales. “What will drive future growth in private label are categories actually being created by retailers themselves,” says Dave Harvey, Daymon’s vice president for global thought leadership. Once upon a time, and not long ago when the economy was in the tank, store brands could get away with knocking off top national brands with similar products and selling them cheaper as “value” products. While many of these products held their own from a quality perspective, cash-strapped consumers mostly preferred them because of their price. Now that the economy has improved and continues to improve — the Dow Jones industrial average recently cracked 20,000 for the first time — more consumers are looking beyond price, which has hampered private brand sales. In many cases, store brand sales are flatter than the back of a bed bug (sorry for the insect reference.) Nobody is saying that retailers should dump their own-brand value lines. That would be bad business, as there will always be an audience for those products. But if value is your only go-to strategy in private label, you can’t expect to grow sales, unless you’re banking on another Great Recession sometime soon. If you want to grow your own brands, there’s a lesson to be learned from Coop. But you probably don’t have to take the creepy-crawly route to do so. SB

2015

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

Store Brands / April 2017 / www.storebrands.com

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Promotional Insights

Four months into the year, there are strong signs of evolving store brands By Ryne Misso

collection of retailers has kicked off 2017 with plans to revamp and enhance their private label products. Southeastern Grocers, the parent company for grocers Winn-Dixie, Bi-Lo, Harveys, and Fresco y Más, plans to remake its entire private label assortment, while Phoenix-based Sprouts wants to grow its private label lines after a 2016 that showed its private label sales outpacing the company average. This news follows a growing trend among grocers of overhauling, improving the quality of and diversifying their private label assortment. Changes to private labels across the nation have taken many forms. Many retailers have improved the packaging and appearance of their store brand products. Others have introduced multiple different private label brands to their assortment, including options from the bottom shelf to the top. Organic and natural private label products are receiving more promotional support in recent years as well. To build excitement and drive traffic for revamped private labels, many of these changes are reflected in retail promotions. Market Track reviewed circular promotions from 2014 through 2017 to highlight how certain retailers have transformed their store brands just in the past few years. Both Giant-Carlisle and Target made distinct changes to their packaging on their private label products. Giant-Carlisle changed the packaging on its GIANT frozen pizza brand in 2015, and then again in 2016, making the company’s private label pizzas appear more gourmet, in line with other national brand options in the freezer aisle. Similarly, Target’s packaging for its Archer Farms almonds changed to a bolder yellow color in 2015. Sprouts, which intends to continue evolving its own brands this year, went through a similar transformation with its store brand coffee. Retailers such as Safeway have also made changes to how they promote their private brands, without significant changes to packaging. For example, in 2016, Safeway began promoting its O Organics canned tomatoes brand in lieu of its Safeway Kitchens brand. This change was likely driven by the increasing demand for better ingredients and natural products. 8

Store Brands / April 2017 / www.storebrands.com

Enhancements like these are being executed by grocers across the United States, and it is becoming more evident that changes are necessary not only to compete with the improving quality of national brands, but also to align private labels across all categories with the expectations and preferences of consumers today. Market Track’s 2017 Shopper Insight Series survey, which asked 1,000 respondents about their grocery shopping behaviors and preferences, showed that enhancing the quality of private label brands will be particularly important among younger demographics. Across all age groups, 78 percent of survey respondents purchase private label products. However, older demographics are driving that average up — 85 percent of consumers ages 40 and over buy private label, compared to only 71 percent of people 29 years old or younger. A similar story can be told about consumer perception of the quality of and ingredients in private label products. While 74 percent of those over 40 think private labels have the same ingredients as national brands, only 61 percent of those under 29 have the same perception. When asked about private label quality, 72 percent of consumers 40 and over consider store brands to be on par with national brands, compared to only 62 percent of those under 29 years of age. Younger demographics are by no means a lost cause for retailers when measuring the opportunity in the market for their private label goods. More than two-thirds of shoppers ages 18 to 39 say they buy private label today. However, perception issues about quality and ingredients are more prevalent among younger age groups as well. To quell these concerns, grocers need to assess their store brands and understand where they are missing the mark. Winn-Dixie’s intentions, according to CEO Ian McLeod, are to do just that in 2017. “The customers have to have faith in the product,” McLeod said, adding that after sampling some of the retailer’s legacy private label products, he had them pulled from the shelf until the grocer, “got something better.” SB Ryne Misso is director of marketing for Market Track, a provider of advertising and promotional tracking, brand protection and ecommerce pricing solutions.

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AroundtheIndustry SHORT TAKES Walmart trying to close price gap on CPG items Walmart is trying to close the price gap on consumer packaged goods with its competitors, including Aldi, the Kroger Co. and Amazon. According to a Reuters report, which cites unnamed vendor sources “with direct knowledge of the matter,” Walmart was running a new pricecomparison test in March in at least 1,200 U.S. stores. The price test was launched across 11 Midwest and Southeastern states, including Iowa, Illinois and Florida, focusing on grocery price competition that accounts for 56 percent of Walmart’s revenue. Walmart’s tests are aimed at finding the right price point across a range of products that will attract more shoppers and then adjusting prices as needed, the Reuters report stated. Reuters also reported that Walmart met with some of its branded vendors and “demanded” they reduce the cost they charge the retailer by 15 percent.

Earth Fare holds ‘Dirty Food Swap’ In March, Asheville, N.C.-based natural food retailer Earth Fare held its Dirty Food Swap, urging customers to exchange so-called “dirty” private brand products for those with the “cleanest” ingredient decks. Shoppers who brought in a competitor’s private brand food item received 25 percent off Earth Fare brand products. “We believe that a key component to living a healthier, longer life is making the right food choices, and that means saying no to harmful ingredients that are, sadly, all too common on many grocery store shelves,” said Earth Fare President and CEO Frank Scorpiniti. As additional support for its commitment to making healthful food widely available, Earth Fare donated $1, up to $5,000, to area food banks in its surrounding communities each time a customer took part in the food swap.

Good supplier-retailer relationships can equate to successful store brands By Lawrence Aylward hroughout her presentation during the Private Label Manufacturers Association’s annual Meeting & Leadership Conference held March 23-26 in Tucson, Ariz., Ahold Delhaize’s Jac Ross stressed the importance of a trusting and amicable supplierretailer relationship when it comes to developing, introducing and ensuring the success of innovative private brands. Ross, Ahold Delhaize’s senior director of own brands product development, innovation and integrity, used the retailer’s Limited-Time Originals: Twisted Chocolate line of store brand products as an example. There are more than 30 products in the line, including Twisted Chocolate Cream Soda, Twisted Chocolate Hummus and Twisted Chocolate Brioche, that are offered for only six to eight weeks at a time. “When they’re gone, they’re gone,” Ross said. The Twisted Chocolate line is wildly popular among consumers who shop Ahold Delhaize’s Giant Food Stores. The line screams private brand innovation — loudly. “The line has been most successful in terms of generating excitement with our customers,” Ross said, noting the products contain chocolate “and a few extra ingredients to give them a twist.” But the secret to keeping products in the line exciting is to keep them available for only short periods during the year. However, Ross realizes that can be difficult for suppliers, starting with short product runs at the plant. “That can cause suppliers potential inefficiencies,” she said. “So why on earth would they want to [partner with us on this]?” Ross’ point is that when retailer-supplier relationships are strong, the supplier is happy to participate in such an agreement, knowing that it will benefit the retailer. “As manufacturers, if you can support these type of programs, it’s going to provide foot traffic into our stores because we are being innovative,” Ross said. The payoff for suppliers is a happy customer. That’s good business 101. SB

Kroger’s amazing streak ends In early March the Kroger Co. reported its fourthquarter and annual earnings, including -0.7 percent in same-store growth (excluding gas), which ended more than a 13-year streak or 52 quarters of same-store quarterly growth. Still, the Cincinnati-based supermarket chain reported a $506 million profit on $27.6 billion in revenue, beating Wall Street’s estimates. For the year, Kroger reported net earnings of $2.05 per diluted share and same-store sales growth of 1 percent.

Store Brands / April 2017 / www.storebrands.com

Ahold Delhaize’s Jac Ross: Innovation can mean many things, such as limiting a time that a product is offered.

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AroundtheIndustry SHORT TAKES Private brands comprise nearly 20% of frozen dessert sales Ice cream is among the largest supermarket food categories — one of only 10 with double-digit billion dollar sales, according to Rockville, Md.-based market research publisher Packaged Facts in its latest Frozen Desserts in the U.S. report. Given the high standing of ice cream among food categories in the grocery sector, it isn’t surprising that store brand products are so prominent, accounting for nearly 20 percent of all frozen dessert sales, the report stated. One reason that retailers want in on ice cream sales via their private branded products is that ice cream is an expensive category for stores since it must be kept frozen and requires a lot of space to accommodate consumer demand for a plethora of varieties and novelties.

Store Brands / April 2017 / www.storebrands.com

What the national brands are up to

n an otherwise lackluster year for U.S. sales of consumer packaged goods, many of the industry’s top performers in 2016 generated growth by satisfying two seemingly contradictory desires of American consumers — convenient nutrition and indulgences such as confections and alcohol. This was among the findings of research released by The Boston Consulting Group (BCG) and Chicago-based IRI. Companies such as Blue Diamond, BodyArmor, Califia Farms, Bragg and The Wonderful Co., which market convenient foods and functional beverages that contain plant-based ingredients that promote nutrition or aim at boosting energy, were among the CPG growth leaders in 2016. Also among the industry’s best performers were companies that derive much of their sales from indulgences, such as confectioners Mars and Hershey, soft-drink maker PepsiCo, snack cake brand Hostess, and beer and spirits company Constellation Brands. Sales of ice cream, spirits, wine and salty snacks all grew by continued on page 14

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AroundtheIndustry SHORT TAKES Nice-Pak named Walmart’s Private Brand Supplier of the Year Orangeburg, N.Y.-based Nice-Pak, a wet wipes manufacturer, received the Private Brand Supplier of the Year Award from Walmart, one of the company’s largest customers. Walmart’s Private Brand Supplier of the Year Award is new for Walmart in 2017 and was awarded to Nice-Pak as a result of their overall collaboration with product innovation, thought leadership and category insights. Nice-Pak, founded in 1957, has been a Walmart supplier for over 35 years, supplying both branded and private brand products that are manufactured in the United States. Nice-Pak received Walmart’s 2014 Corporate Responsibility Award and Walmart’s 2013 Certification of Appreciation Award. SB

Store Brands / April 2017 / www.storebrands.com

continued on from page 12 4 percent to 5 percent, about three times faster than retail sales in the CPG industry overall. “Our research shows that the growing popularity of convenient nutrition and wellness remains one of the most powerful trends in the U.S. consumer packaged goods industry,” said Jim Brennan, a BCG partner and co-author of the study. “But this does not mean that American consumers’ craving for indulgences has diminished.” The findings are based on the fifth-annual analysis by BCG and IRI of the growth performance of more than 400 CPG companies with annual U.S. retail sales of more than $100 million in measured retail channels. The channels include grocery, drug, mass-merchandise and convenience stores. SB Sales of Costco Wholesale’s Kirkland Signature-branded liquors have increased 46 percent over the past five years in part to the “cult status” of Costco’s Kirkland Signaturebranded wine and spirits. According to a report, many customers swear by the private label products, and some are even convinced that the spirits actually are top-shelf liquors such as Grey Goose and Tanqueray hidden behind Costco packaging. SB

AroundtheIndustry U.S. supermarkets increasing investment in digital, mobile and social media

ine in 10 supermarket retailers say they plan on reducing budget from print circulars and moving it to digital, mobile and social media, according to the second-annual study, “Advertising and Promotional Practices Among U.S. Supermarket Retailers,” by Aptaris, an enterprise marketing and promotions management innovator, and dunnhumby, a customer science company. The study provides an in-depth review of grocery industry best practices with a look at expected changes in the coming years, which could greatly impact private brands. With responses from nearly 70 food retailers representing more than 4,600 stores across 34 states, the study details growing investments in social media, mobile and more relevant promotions by U.S. grocers in response to changing consumer buying behavior. Other key findings in the study include: u Digital circulars are an important first step in online engagement — While digital circulars have become the norm, sophistication varies widely. With shoppers increasingly moving their planning and shopping online, digital optimization is important to omnichannel success. u Plan, execute, evaluate and adapt — Many food retailers are investing in social, mobile and digital tactically, but not strategically. Retailers with greater budget allocation and digital/social presence are much more likely to measure the effectiveness of their efforts. u One size fits no one — Consumers are demanding relevant content, but only 36 percent of grocers use segmentation in their print pieces. This picture may change rapidly, with 42 percent planning to start segmented print outreach in the next two years. u Opportunity gaps exist in social media — Total shopper usage of social media far exceeds retail social presence, presenting grocers with a green field opportunity to grow social engagement across vehicles u Loyalty cards can successfully drive engagement beyond the circular — Loyalty retailers have above-average transaction sizes and emphasize technology integration, digital/mobile and social, targeted print outreach and greater levels of sophistication. SB

www.storebrands.com / April 2017 / Store Brands

Getting Social

Q A with Erin Butler

The owned brands category manager at Kum & Go, a convenience store chain in the Midwest How did you come to the world of private label? My career started on the manufacturing side. I worked on Huggies Diapers at Kimberly-Clark, frozen foods at ConAgra and new product development for branded cheese and butter products at Dairy Farmers of America. I grew up in Des Moines, Iowa, and when I decided to move back, it was clear that there is not a lot of CPG manufacturing in Des Moines so I started looking at the retail side. Owned brands has been a nice transition to retail for me because I still get to manage a brand like I have in my past work experience. Describe the private label industry in one word. Opportunity. While private label has grown a lot in the past 10 years or so, we are nowhere near where Europe is in terms of its private label share of market. What do you like most about the industry? It’s an interesting challenge to figure out how brands and private label will work together on the shelf, where it makes sense to add private label and when it’s time to let a product line go because it no longer fits the consumer need that it filled when it was first launched. There is always more to do and think about, which keeps me on my toes. What one great thing does the industry have going for it? There are a lot of great manufacturers that offer national brand quality products or even better than national brands. If a retailer can create the story around its own-brands products that justifies an equal or even higher retail price to a branded product because of the premium look and quality, the opportunity is there for that retailer to take it. If you could invent one private label product for yourself, what would it be? Running shoes. I’m an avid runner, and it would be great if I could find a less-expensive option that offered the same support as the brand that I buy. 16

Store Brands / April 2017 / www.storebrands.com

What trait in yourself do you attribute most to your success? My balance of analytical skills and strategic thinking. I was a math major in college so working with numbers is something I definitely enjoy. But my strength comes in what I can see in those numbers and how I apply that learning to long-term thinking. It’s 5 o’clock (or later), what do you do for fun? In the evenings, I like to try new recipes with my husband when cooking or maybe go for a run with friends. Once a month I go to a book club (although we rarely discuss the book). You have a week off. Where do you go and why? I have a long list of places that I’d like to visit like Thailand and India but top of mind right now is Italy because my husband and I just booked our honeymoon there. We’ll be spending two weeks exploring the Amalfi Coast, Rome, Florence and Cinque Terre. I am beyond excited to experience a new country and culture. Maybe I’ll even get some private label ideas while I’m there.

Erin Butler, an avid runner, competes in the New York City Marathon.

What’s the best book you’ve ever read? That’s an impossible question for me to answer because I’m always reading a different book. But a few that rise to the list are “Life After Life,” “The Kitchen House” and “The Time Traveler’s Wife.” What movie can you watch over and over? I do love the movie “Love Actually.” I have to watch it at least once a year at Christmas. SB

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Cover Story

Good Cents To stay competitive, dollar stores are investing in own brands that appeal to millennials By Carolyn Schierhorn

n a seemingly contradictory marketplace increasingly influenced by millennials — where consumers prioritize health and wellness yet regularly indulge and where shoppers willingly pay more for premium items but still look for bargains — dollar store chains are at a crossroads. Traditionally serving lower income and price-conscious middle-class customers, with a strong presence in small towns and urban neighborhoods, these chains fared well during the recession. But in a more robust economy, they’ve found the need to modernize their images and private brands to better meet the demands and tastes of today’s customers. The two biggest national chains in this sector — Chesapeake, Va.-based Dollar Tree Inc., which owns both the Dollar Tree and Family Dollar banners, and Goodlettsville, Tenn.-based Dollar General Corp. — face increasing competition from mass merchants

Store Brands / April 2017 / www.storebrands.com

and discount grocery retailers. To thrive in this climate, the dollar store chains are starting to test new concepts and embrace key trends.

Growing focus on wellness After years of paring down hundreds of items in its private brand lines to enhance SKU productivity, Dollar General is launching new brands and expanding existing lines, in part to appeal to millennials. An article on Fortune.com last year noted that young adult shoppers account for 12 percent of the retailer’s customers but 24 percent of its sales. “We unveiled a new line called Heartland Harvest in early 2016, aimed at providing better-for-you food items, that is really resonating with our millennial customer base,” says Mary Winn Pilkington, Dollar General’s vice president of investor relations. Although caring about health and wellness, Dollar General’s millennial shoppers also appreciate

the chain’s low prices and additional opportunities to save such as with digital coupons, Pilkington adds. “Understanding the emergence of millennials as core consumers, we continue to provide value throughout our private brand portfolio, from options available through our Comfort Bay and Trueliving brands for home items to DG Baby and DG Kids for millennial parents,” she says. The interest in wellness also crosses all generations, according to Pilkington, who points to the strength of Dollar General’s Rexall Naturalist brand, which includes supplements and minerals. Dollar General has also reinforced its beautyrelated brands, helping cash-strapped consumers gain access to quality products at affordable prices, Pilkington stresses. “We recently expanded our private brand offerings in our health and beauty care lines, including DG Body, DG Beauty, DG Health and Rexall, to further deliver value to our customers,” Pilkington says. “These offerings, coupled with a satisfaction guarantee, give our customers an opportunity to purchase items or categories they may not otherwise purchase.” Dollar Tree Inc., in turn, has indicated that it might concentrate more of its private brand SKUs on healthful items with the hiring of Duncan MacNaughton as president and chief operating officer of Family Dollar. Besides being a former chief merchandising and marketing officer for Walmart, MacNaughton previously headed Supervalu’s Health and Wellness Division. “Mr. MacNaughton’s previous category focus could come in handy as health and wellness is a universal focus in retail these days,” says Carol Spieckerman, founder of Spieckerman Retail in Bentonville, Ark. Family Dollar’s current store brand lineup includes Family Gourmet (food products such as frozen potato puffs and pizza rolls), Family Chef (kitchen utensils, storage containers and more), Family Dollar (various household products) and Kidgets (baby diapers, wipes and lotion). The Dollar Tree banner, meanwhile, has dozens of private brands such as Home Collection (pot holders, kitchen towels, etc.), Garden Collection (gardening supplies) and The Home Store (cleaning supplies).

Dollar for dollar Despite everything being priced at $1, Dollar Tree stores are often found in fairly affluent communities and attract a higher-income demographic than Family Dollar and Dollar General stores do, says Thomas Vierhile, innovation insights director of Fairport, N.Y.-based GlobalData. The Dollar Tree banner seems to be pursuing “the suburban consumer who is bored and is looking at shopping as entertainment versus the Dollar

General and Family Dollar consumer, who is looking for a way to stretch either their paycheck or their public assistance,” he suggests. Many people shop at Dollar Tree to save money on party supplies and kitschy seasonal items, for example, so that they have more discretionary income for desired luxuries. Family Dollar and Dollar General, moreover, have a lower-income customer base than Walmart, according to a study conducted by Kantar Retail a few years ago. Nearly 40 percent of Family Dollar’s customers and roughly 35 percent of Dollar General’s

The Dollar Tree banner has dozens of private brands, from household cleaning and paper goods to personal care lines.

Top 10 priorities for dollar stores To prosper in a highly competitive market, dollar store chains must embrace the following strategies and goals, say retailing experts: 1

Increase same-store sales.

Develop own brands that resonate with millennials.

Focus more on better-for-you food items.

Use social media to engage with younger consumers.

Improve in-store ambiance to lure image-conscious younger shoppers.

Align stores with social causes specific to the local area or region.

With the potential risk of new tariffs on imported goods under the Trump administration, explore alternative sourcing possibilities.

Talk to existing customers, as well as employees, in a number of stores to find out what is working, what isn’t, and what should be done.

Keep abreast of research on consumer behavior, and conduct own market research in key communities.

Based on these findings, test new concepts in a sampling of stores and roll out the most promising ones chainwide.

www.storebrands.com / April 2017 / Store Brands

Cover Story

Debuting in 2016, Dollar General’s Heartland Harvest line offers better-for-you products, including snack foods.

had household incomes of less than $25,000 a year compared to 27 percent of Walmart shoppers. A recent study by Kantar Retail shows leading discount chains, including Dollar General, Family Dollar, Walmart, Aldi and Save-A-Lot, competing fiercely on price. Dollar General and Walmart tied for the least expensive overall basket at $27 each. Family Dollar has the lowest health and beauty aid sub-basket at $5

but the most expensive edible sub-basket at $16.81 (54 percent higher than the Save-A-Lot basket). “Private label products had a significant impact on overall basket pricing, with private label items comprising an average of two-thirds of any retailer’s basket,” states a summary of the study. “Family Dollar was the lowest at 52 percent, while Aldi was the highest at 96 percent.” A key advantage of dollar store chains, especially Dollar General, is their small store footprint, which enables them to be situated in rural towns and urban strip malls, Vierhile says. The 7,300-square-foot Dollar General store may be the only place in town to buy food and household goods. Dollar General is also experimenting with an even smaller convenience-store format in two cities, Nashville, Tenn., and Raleigh, N.C. The 3,400-square-foot DGX concept stores feature grab-and-go sandwiches, fresh coffee, a soda fountain and a more contemporary design to entice young adult city dwellers. The concept stores carry “a carefully assorted selection of private brand items tailored to the targeted demographics the stores serve,” Pilkington notes. “Items include products from a focused

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Cover Story

2014

2015

2016

Dollar Tree Inc.

+0.9%

+2.8%

+1.8%

+2.1%

+4.9%

Same-store sales growth at dollar store chains +4.3%

The leading dollar store chains need to address declining growth in enterprise same-store sales, emphasizes GlobalData’s Tom Vierhile.

2014

2015

2016

Dollar General Corp

selection of consumable food and grocery brands, including Heartland Harvest and Clover Valley, paper products from DG Home and Smart & Simple, and an expanded health and beauty section with products from Rexall and DG Health.” To Spieckerman, the concept sounds promising. “DGX is a more modern take on the traditional smallformat general store, one that veers into convenience store territory,” she explains. “The DGX concept may be more millennial-friendly and allow Dollar General to reach out to a new generation of shoppers. “If nothing else, it will be a great learning lab.”

Squaring off The Family Dollar banner includes several private brands such as Family Gourmet for food and Family Dollar for household products.

With $20.7 billion in net sales in fiscal 2016, an increase of 33.7 percent over fiscal 2015, Dollar Tree Inc. operates 14,334 stores across 48 states and five Canadian provinces. Dollar General, which netted $22 billion in sales during that period — an increase of 7.9 percent over fiscal 2015 — operates 13,320 stores in 46 states. Both chains are expanding rapidly. Dollar Tree, which beat out Dollar General to acquire Family Dollar in mid-2015, added a net new 483 stores over the past

Store Brands / April 2017 / www.storebrands.com

year, Vierhile notes. Dollar General grew even faster, opening 900 new stores and remodeling or relocating 906 stores, according to the chain’s fiscal 2016 financial results. (At press time, Dollar General revealed that it is acquiring the 323-store Dollar Express chain.) But Dollar General’s same-store growth increased only 0.9 percent in fiscal 2016 over the previous year, down from 2.8 percent in fiscal 2015 and 4.9 percent in 2014, according to the company’s financial reports. Dollar Tree’s enterprise same-store growth has also declined over the past two years, from a 4.3 percent increase in 2014 to a 1.8 percent increase in 2016. A strong fourth quarter in fiscal 2016, however, could bode well for Dollar Tree. Struggling before and right after its acquisition, Family Dollar saw earnings rise by 40.5 percent in the fourth quarter, and the banner posted a 0.2 percent comp gain instead of a loss in the period, reported the company on Feb. 25. “Our in-stocks, what our customer sees on the shelf, are certainly better than where we started 18 months ago,” said Dollar Tree CEO Bob Sasser during a conference call to discuss the financial results. “And our efforts to catch up on some of the deferred maintenance and cleaning and the basics that we need to run a full, clean, recovered store are in place.” Nevertheless, the market is only going to get more competitive, with Aldi planning to more than triple its U.S. store count by next year, from 650 to 2,000, Vierhile says. “Aldi has quietly been in expansion mode,” he observes. Lidl, meanwhile, is planning to open its first U.S. stores this summer, earlier than expected. “It’s going to be a free-for-all,” Vierhile predicts. “Dollar stores have a lot to be concerned about as Aldi, and now Lidl, get serious about the U.S. market,” echoes Spieckerman. “Aldi’s continued ramp-up of its organic offerings and Lidl’s testing of click-and-collect (in Germany with potential to migrate to the U.S.) should be of particular concern.” The proverbial elephant in the room is uncertainty over tariffs that could be imposed under President Donald Trump’s administration. A potential trade war could greatly harm the dollar store sector as “these stores tend to be heavily reliant on sourcing product from other countries,” Vierhile notes. “They tend to be less reliant on local product. So dollar stores may have more exposure than a regular supermarket chain would have.” In such an environment, dollar store chains need to be especially creative and relentless in their pursuit of market share and younger consumers. SB

A Burgeoning Category

While category continues to offer budding option for private brands, retailers need to do By Lawrence Aylward

hen asked if adding an organic tier to their private brands would be worth retailers’ time, effort and money, Daymon’s Carl Jorgensen didn’t have to think long before replying — answering the question faster than you can say Peter Piper picked a peck of pesticide-free peppers. “You would be investing in the fastest-growing part of private brands,” says Jorgensen, Daymon’s director of global thought leadership/wellness. “Sure there is a cost in starting a new store brand, but look at the opportunity.” According to “The Power of Private Brands,” a recent report from the Food Marketing Institute, Daymon and IRI, organic private brands represent a small but growing segment among supermarket chains and regional grocers. While organic represents only 6 percent of share of sales across private brand food and beverage, it gained a half share point in 2016 and growth is expected to continue. According to the report, private brands represent about 20 percent of overall food and beverage sales

Store Brands / April 2017 / www.storebrands.com

but 30 percent among all organic items. “There are retailers that have outperformed with their brands in organic, and they’re getting credit for it because the consumer is saying they trust these retailers to source the right products,” the report states. Store Brands’ recent 2017 State of the Industry Survey reveals that 72 percent of retailers/ wholesalers surveyed are offering organic/natural products as an emerging product line. Forty-six percent of retailers/wholesalers surveyed said they have increased their focus on the category. Several retailers have seized the store brand organic opportunity with success. Among large supermarket chains, Cincinnati-based The Kroger Co. has one of the top private brand organic programs in retailing. Kroger debuted its Simple Truth Organic line in 2012, and it has grown to be one of the largest-selling organic brands in the country. During a recent conference call to discuss 2016 earnings, Kroger CEO Rodney McMullen noted that Simple Truth “grew at an impressive rate again,” reaching total sales of $1.7 billion. “We still see more growth ahead,” he noted.

What Kroger has done with organic is not food science, or rocket science, for that matter. Kroger listened to its customers, who told the Cincinnati-based retailer that organic labels can be confusing and that they equated organic as being more expensive. So Kroger made labels on organic products easier to read and is selling the products at an affordable price. Lakeland, Fla.-based Publix Super Markets debuted its organic store brand, Publix Green Wise, in 2003. Publix is growing the line carefully and strategically. In 2016, Publix introduced about 50 new products to the line, and about 100 new products will be added this year. Karen Hall, Publix’s director of emerging business and private brands, says there their homework is a “concerted effort” to expand the line. “I don’t know if it will always be 100 percent growth [annually],” Hall says. “We shouldn’t have products in every subsection; that’s not the strategy. I also don’t know when we will get to the point of saturation.” In December, ShopRite, which operates more than 270 stores in the eastern U.S., launched Wholesome Pantry, a new own brand of organic and free-from products that will include a mountainous 300 products in nearly every aisle by the time the roll out concludes in a few months. “We’re committed to the brand and committed to growing it over time with as many items as needed based on what consumers are looking for,” says Loren Weinstein, ShopRite’s director of private label. “We think this is what our consumers want, and we think we can deliver to them what they want.” Jorgensen says organic growth hasn’t come close to hitting its growth ceiling, his reason being it only has a 5 percent penetration rate among all retailers, including national and own brands. “That gives you an idea of how much white space there is,” he adds. But Jorgensen believes the organic category has become mainstream. “Anybody who still thinks of

organizing their merchandising around it being a niche category is way behind the times,” he adds. “Three out of four consumers are purchasers of organic foods. That’s not niche, that’s mainstream.” Organic private brands have benefitted from a lack of dominating national organic brands. But Jorgensen says most large consumer packaged goods continue to study the organic segment and some, like Campbell’s, are investing in it. In 2013, Campbell’s acquired Plum Organics, and in 2015 Campbell’s introduced an organic soup line. Jorgensen says it’s more efficient and makes more financial sense for larger CPG companies like Campbell’s to enter the category by acquisition rather than through research and development. Here’s the funny thing about “organic”: Plenty of consumers don’t understand fully what the term means. “Organic has this halo of goodness, but it’s amazing to the degree to which it is still misunderstood, even by some industry professionals,” Jorgensen says. Colin Stewart, senior vice president for Acosta, says a recent consumer survey by the Jacksonville, Fla.-based consumer packaged goods marketing agency revealed confusion among consumers as to exactly what “organic” means. “There’s the population that knows exactly what organic is, but it’s a smaller segment,” he says. The good thing, Jorgensen and Stewart agree, is that even though consumers might not know exactly what “organic” means, they do view organic food and beverages as being healthier for them. “The word organic resonates with many consumers who associate it with higher quality, more purity and generally a better-for-you proposition,” Jorgensen adds. However, more consumer education is needed,

Growing organically

Organic private brands represent a small but growing segment of the industry, according to the Food Marketing Institute. Among categories, organic private brands grew 0.5 percent in 2016 — more than value and mainstream — and now represent 6 percent of dollar share in store brands.

www.storebrands.com / April 2017 / Store Brands

A Burgeoning Category

Photo courtesy of Walmart

Walmart has made certified organic an integral part of its offerings.

which will only benefit consumers and most likely spur more organic product sales. There is plenty of opportunity for retailers to educate consumers on what “certified organic” means, whether it’s through quick hits on labels, store signage or through social media and websites. The simple message to convey

can be summed up in short phrases, such as: l Produced without the use of synthetic fertilizers, genetic engineering or irradiation. l Free from artificial preservatives. l National organic standards require that organic growers and handlers be certified by third-party organizations accredited by the USDA. “I think there is a lot of unused and untapped opportunity to educate,” Jorgensen adds. Kroger has dedicated an entire website to its Simple Truth line (www.simpletruth.com), which explains the meaning of “organic” in detail and lists the products that Kroger offers under its organic tier. While many consumers aren’t exactly sure what “organic” means, Jorgensen says some consumers are also skeptical of organics, much like they are of big government and big business. Some consumers believe that retailers use “organic” as simply a way to charge more for products without understanding the systematic regulatory system that underpins the category, says Jorgensen, who spent more than eight years running a USDA-accredited organic certification agency and is well aware of the regulatory framework behind organic certification.

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A Burgeoning Category While private brand organic products may cost more, the key is to promote them as a solution, which then magnetizes their value, Jorgensen stresses. With organics, the solution is simple: It’s providing consumers who want them with betterfor-you products, Jorgensen says. Consumers are also looking for value, which is distinctly related to providing solutions, Jorgensen adds. “Value is more than price,” he stresses. “If you combine the solutions that the product offers — the story behind the product, the quality of the product and its price — you come up with value.” The organic consumer has also changed since 10 years ago when buyers were largely driven by a small part of the population who purchased products mainly for environmental reasons, Stewart says. “They were shopping at a Whole Foods Market or an independent natural foods outlet,” he adds. Today, millennials, who are interested in product transparency and eating healthier, are driving organic sales. But it’s not just millennials who are driving the growth; it’s also baby boomers and others who perceive organic products as healthier, Stewart notes. Jorgensen says there have been “massive attitudinal changes across generations” toward

The most-favored fare among private label organic products in order are fresh produce, milk and eggs. No surprise there. But No. 4 on the list, according to research from Daymon, is a bit of an eye-opener — it’s canned organic vegetables. Carl Jorgensen, Daymon’s director of global thought leadership/ wellness, says canned organic beans are especially popular. “The perception among wellness consumers is that canned beans are more convenient than soaking and cooking dry beans,” Jorgensen says. Organic snacks, cereal, coffee and frozen vegetables/fruits are also growing in volume, Jorgensen says. And anything to do with infants, from organic baby food to organic baby lotion, is also driving the segment’s growth. Organic pet food and pet care products are also surging.

Store Brands / April 2017 / www.storebrands.com

organics in the past 10 years. “When you talk about consumer engagement with organics, there isn’t that much difference across generations,” he adds. Despite the buzz surrounding organics in private label, Kurt Jetta, a consumer researcher who studies data about multinational corporations through his firm Shelton, Conn.-based TABS Analytics, advises retailers not to rush into the category and introduce an army of products. He advises them to do their homework and to consider what organic products in what categories might work in their regions. Jetta has seen retailers fail with organics. He believes more national brands don’t offer organics because the demand isn’t there. He also says that Austin, Texas-based organic retailer Whole Foods Market, which has suffered six consecutive quarters of declining comparable store sales, is taking it on the chin because organic demand is not what it is cracked up to be. Jetta says if the organic segment was “truly strong, vibrant and robust,” there would be growth in all channels. Whole Foods cited an increasingly competitive marketplace for its string of bad quarters. When Whole Foods debuted in 1980, organic products were not widely available. Today, of course, they are sold at the nation’s largest supermarket chains and retailers. Whole Foods, which has nearly 450 stores, has also been chided for its high prices — “whole paycheck” — on organic items. Jorgensen says analysts should think twice before counting out Whole Foods. Consumer trust for Whole Foods’ own brands is very high, he notes. Whole Foods is also in the midst of opening new lower-price-point supermarkets called 365 by Whole Foods. “Consumers look at more than price when they consider value, which is where Whole Foods’ strength lies,” Jorgensen says. Despite what he believes is a burgeoning category, Stewart also stresses that retailers take a cautious approach with organics, whether they are adding it as a new tier or adding products to an already-existing tier. “Think about optimum assortment and SKU rationalization,” he advises. But Stewart’s organic outlook remains bullish. “Retailers are looking for profitable growth, and organic is a growing part of the business,” he says. “Organics can also build trust and loyalty among shoppers. What better way is there for [retailers] to do that than by offering them products to help them live healthier lives?” SB Aylward, editor-in-chief of Store Brands, can be reached at laylward@ensembleiq.com.

Ethnic Trends

Tough sell

Multiculturals question the quality of private brands, among other things. So what’s the key to getting this growing population to buy in on store brands? n By Lawrence Aylward ike kids often do with Brussel sprouts, many multiculturals are turning their noses up at private branded food and beverage products. According to a recent report from Nielsen, private brands have a lower buying share among the top multicultural segments — Hispanics, Asian-Americans and African-Americans — when compared to white consumers. Nielsen reports that buying rates of store brands are particularly lower among Asian-Americans and African-Americans, who spend 22 percent less and 18 percent less annually when compared to whites. These multiculturals question the quality of store brands and their “poor” packaging and perceive such products as being for people on “tight budgets,” according to Nielsen, a global consumer research and data company. Private brand manufacturers and retailers, of course, have been trying to shed these negative perceptions, which they have done to a large degree. The recent rallying cry has been to offer

store brands that are better and more distinguished than the national brands. While consumers are getting the message that manufacturers and retailers are elevating private brands, that notion may not be resonating as much with multiculturals. While multiculturals are growing in the United States, whites still comprise 61.6 percent of the population, according to 2015 U.S. Census figures.

Multiculturals increase buying power u Total buying power in the United States reached $13.9 trillion in 2016 and is predicted to hit $16.6 trillion by 2021, with minority groups making the fastest gains. u U.S. Hispanic buying power totaled $1.4 trillion in 2016, an increase of 181 percent since 2000. u African-American buying power, estimated at $1.2 trillion in 2016, will grow to $1.5 trillion by 2021. u Asian buying power has grown 222 percent to $891 billion since 2000, the biggest percentage increase of any U.S. minority group. Source: University of Georgia’s Terry College of Business

www.storebrands.com / April 2017 / Store Brands

Ethnic Trends Hispanics/Latinos comprise 17.6 percent, African Americans 13.3 percent and Asians 5.6 percent. But the white population declined 2 percent between 2010 and 2015 and will continue to decline while the U.S. population becomes more diverse. Multiculturals are also gaining more buying power. According to a Multicultural Economy Report from the University of Georgia’s Terry College of Business, the nation’s total buying power — the total personal income of residents that is available for spending after taxes and not including money that is borrowed or saved from previous years — reached $13.9 trillion in 2016 and is predicted to hit $16.6 trillion by 2021, with minority groups making the fastest gains. U.S. Hispanic buying power totaled $1.4 trillion in 2016, an increase of 181 percent

since 2000 and larger than the gross domestic product of Mexico, according to the study. AfricanAmerican buying power, estimated at $1.2 trillion in 2016, will grow to $1.5 trillion by 2021, making it the largest racial minority consumer market. Asian buying power has grown 222 percent to $891 billion since 2000, the biggest percentage increase of any U.S. minority group. By contrast, the buying power of whites increased 79 percent since 2000. “As America grows more diverse, minority groups are reaping great economic dividends, and business owners would do well to pay attention,” says Jeff Humphreys, author of the report. “Minority buying power is growing at a faster pace than the white consumer market for a number of reasons, such as demographics, increases in educational attainment and entrepreneurial activity.” Regarding private brands, questions need to 30

Store Brands / April 2017 / www.storebrands.com

be asked: As the population diversifies, will even more multiculturals become skeptical of store brands? And what do private branded retailers and manufacturers need to do to gain the trust of multicultural consumers and get them to purchase more store brands?

ZEROING IN

While brand agnosticism is a trend among consumers in general according to industry experts, it has not penetrated the multicultural segment. “We know from research that multicultural consumers and ethnic consumers are historically brand loyal,” says Courtney Jones, vice president of multicultural growth and strategy for Nielsen. Jones says that introducing a successful private label product into a branded category that already has strong multicultural consumer loyalty is a challenge. A few years ago, Nielsen conducted a study in the beauty category and learned that African-Americans used the same branded bar soap, laundry detergent and lotion for generations. It’s a similar case with AsianAmericans and Hispanics, she adds. “They use the products they grew up with,” Jones notes. Private brands need to zero in on the distinct wants and needs of multicultural consumers and reach them in a way that leaves a connected and lasting impression, Jones says. That can begin where private label is already strong: the fresh department, including meat, produce, deli and bakery. According to Nielsen, multicultural shoppers spend $40 billion on fresh products annually and devote 21 percent of their annual food spend to fresh products. They also spend 4 percent more on fresh products than whites. Retailers can help their cause by adding more products to the fresh aisle that appease to multiculturals, such as more root vegetables favored by Hispanics. They can also feature more meats favored by ethnic segments, such as pork belly, a popular Asian cuisine. Taking it a step further, retailers can introduce certain products, including hummus and cheeses, fused with ethnic flavors favored by multiculturals, Jones adds. Jones also points out that retailers and manufacturers shouldn’t give up on a product segment if it doesn’t resonate with multiculturals. For example, multiculturals may spend less on value-added produce, such as pre-cut and prepackaged product, and prefer to prepare produce in their own kitchens. But stocking value-added

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Ethnic Trends items that fit their lifestyles and creating messaging around them that resonates presents an opportunity for private brands, she says. In consumer packaged goods, multiculturals favor brands geared toward them by smaller manufacturers, such as Goya and Glory Foods. “These smaller brands are filling their needs,” she adds. But Jones believes retailers and manufacturers can sway multiculturals to switch to private branded CPGs. A big key is getting multiculturals to sample such products through in-store sampling or couponing. “Then, [retailers and manufacturers] can prove that the quality is the same or better, if that is indeed the case,” she adds. But Jones cautions against selling the products only on low price, as that is a reason that

multiculturals have shunned them. It’s more about offering a quality and diversified product portfolio with true ethnic flavors. Some retailers are doing that. ShopRite, which operates under Keasbey, N.J.-based Wakefern Food Corp., offers its own brand ShopRite Autentico to Hispanics at its stores located throughout the Northeast. ShopRite says the line consists of “authentic Hispanic food items that are high in quality and true to their heritage.” Less than two years ago, Cincinnati-based The Kroger Co. debuted its HemisFares own-brand line. Initially, the line focused on on “authentic” Italian products. Last year, Kroger added “The Taste of Spain” to the line, which includes seasoned chorizo, smoked paprika garlicky shrimp and saffron-flavored paella. Kroger says it will add new ethnic flavors to the HemisFares line in the future. 32

Store Brands / April 2017 / www.storebrands.com

Monrovia, Calif.-based Trader Joe’s, famous for its private brands, offers an array of items geared toward multiculturals and mainstream Americans, such as Latin-Style Black Bean Soup, Organic Red Lentil Sedanini and Organic Moroccan Mint Green Tea.

DOING WHAT THEY’RE DOING

Meeting the culinary needs of multiculturals fits in with what many retailers and manufacturers of store brands are already trying to do by offering products that are exclusive and personalized, says Susan Viamari, vice president of thought leadership at Information Resources Inc. “Private label manufacturers and retailers have a great opportunity here, but they have to get out of the box,” she adds. “Ethnic foods provide a fantastic opportunity to differentiate and to offer more upscale products that will bring in bigger margins.” But retailers must understand the distinctions of the ethnic customers who shop their stores. “Your store on Main Street is going to be different than your store on Elm Street,” she says. “So you can’t take a one-size-fitsall approach. That means that product assortment, packaging sizing and pricing must be determined on a store-by-store basis or among a clustering of stores.” It’s also vital to recognize multiculturals who are acculturated and unacculurated, Viamari says. For instance, unacculturated Asians who frequent an urban store may avoid retailers’ offerings of ethnic-style prepared foods to try to get them to eat on the go, preferring to buy products to prepare homemade meals. But acculturated Asians, who have lived in the United States longer and adapted to the U.S. lifestyle, may prefer ethnic dishes when offered as prepared foods. “With ethnic groups, it’s understanding their culture, what is important to their culture and where they are on the acculturation spectrum,” Viamari says. The good news for retailers and manufacturers of private brands is that shopper data on consumers, including multiculturals, continues to grow by the day. But Viamari stresses that the information must be used wisely. “We have so much information about shoppers and what makes them tick,” she says. “But at the same time, we need to discern what is the most important information.” SB Aylward, editor-in-chief of Store Brands, can be reached at laylward@ensembleiq.com.

Packaging

Investments in sustainable packaging solutions could help retailers connect with a growing number of environmentally conscious consumers n By Kathie Canning etailers that question the value of private brand-related sustainability initiatives might want to think again. According to “2017 State of Sustainability in America,” a February report from the Harleysville, Pa.-based Natural Marketing Institute, U.S. consumers are “more interested than ever in aligning their personal values with the brands they buy, raising the bar for companies to clearly define and articulate their values.” And product packaging is, perhaps, the most visible definer and articulator of those values. More than half of consumers (64 percent) say packaging recyclability is an important driver for food and beverage purchases, says the Bellevue, Wash.-based Hartman Group in its “Sustainability: Transparency 2015” report. Other top purchase drivers include biodegradability, recycled content and minimal content. (See figure on page 36.) “Sustainable packaging is growing in relevance at an accelerated rate,” notes Clay Dockery, division vice president of corporate brands for Portsmouth, Va.-based Massimo Zanetti Beverage USA. “Consumers, particularly millennials, are fully committed to environmental issues, and certainly packaging that is sustainable is a key.” He adds that sustainable packaging is particularly critical for private brand organic lines, “as the

intersection of better-for-you products and betterfor-the-planet packaging can make or break the consumer proposition.” Retailers seeking out more sustainable packaging solutions will find viable options across numerous product categories. On the single-cup coffee side, Massimo Zanetti recently introduced PURPOD100 pods. Certified by the Biodegradable Products Institute, the 100 percent compostable single-serve coffee pods help reduce the amount of waste material going to landfills. The pods are made with all biomaterials and were recognized among the top 12 food and beverage concepts in Store Brands’ 2016 Editors’ Picks awards program. “The 100 percent certified compostable PURPOD100 is compatible with all K-Cup brewers but is designed to go back into the land, not the landfill,” Dockery says. “That’s great news for coffee drinkers and even better news for the environment.” B.O.V. Solutions also is aiming to up the sustainability quotient of coffee packaging. The Hernando, Fla.-headquartered company recently debuted the world’s first shelf-stable coffee featuring Bag-On-Valve technology and using 100 percent recyclable aluminum. As a bonus, the technology preserves product quality. “Coffee can now retain its taste from first cup to www.storebrands.com / April 2017 / Store Brands

Packaging

Source: Sustainability/Transparency 2015 report

Method Products has been able to reduce transportation costs and its supply chain carbon footprint thanks to its relationship with Amcor Rigid Plastics. 34

the last, regardless of how long it has been since you purchased it,” says Paul Hertensen, the company’s CEO and founder. “No more concern about short shelf life, and no refrigeration is required, allowing retailers to position it in non-refrigeration areas.” Laundry detergent, meanwhile, was a recent sustainable packaging project for Amcor Rigid Plastics, part of Melbourne, Australia-headquartered Amcor Ltd. Last May, DuPont named the company a Diamond Finalist award winner in its 2016 Awards for Packaging Innovation competition for the development of a polyethylene terephthalate (PET) bottle that contains 100 percent post-consumer recycled PET resin while boasting an ergonomic design that allows for easy gripping and pouring. The bottle, created for Method Products, is the first liquid laundry bottle to be made of postconsumer recycled PET, according to Amcor. Charlie Schwarze, global sustainability manager for Amcor Rigid Plastics, notes that an additional sustainability boost is realized through an on-site manufacturing facility Amcor Rigid Plastics operates at Method Products’ Chicago plant to create the bottles. Like all of the other manufacturing facilities Amcor runs on customer sites (20 thus far), the site reduces both transportation costs and the brand owner’s supply chain carbon footprint. “It also allows us to have a more intimate relationship with the customer and have a greater response time to fix any issues if we have them,” he adds. Amcor also recently worked with Coca-Cola’s Glaceau Vitamin Water brand to reduce the amount of material in the base of its bottles, leveraging its PowerStrap lightweighting technology. The brand owner not only

Store Brands / April 2017 / www.storebrands.com

pays for less material, but also realizes lower shipping costs — without compromising the integrity of the bottle, Schwarze says. Meanwhile, Performance Packaging of Nevada, Las Vegas, introduced a non-bio-based additive that is entirely biodegradable and conforms to ASTM standards for a wide range of substrates going across numerous product categories. The non-OXO-degradable additive allows for the same barrier properties and shelf life associated with traditional film, something that is difficult to achieve with bio-based materials. Moreover, the cost typically is only 10 to 15 percent more than that of traditional materials, notes Robert Reinders, the company’s president. “One of the oddities about bio-based packaging that people really do not understand is that in order to make that product, the manufacturer must first take a fully biodegradable product — corn, sugar cane, etc. — and create the molecular chain for a polymer which is now not biodegradable,” he says. “It is compostable, but it has to be composted in commercial composts.” Looking ahead, retailers should expect the sustainability push only to strengthen and would be wise to stay abreast of further advances there. Dockery expects to see a significant increase in commercial composting — “far and away the most efficient and earth-friendly approach to tackling food waste in landfills” — over the next five to 10 years. That reality would call for an increase in compostable packaging. But Reinders begs to differ, at least when it comes to traditional composting.

Packaging

Source: Sustainability/Transparency 2015 report

“The percentage of packages that make it into a commercial compost is far lower than even recycling percentages,” he says. “With our biodegradable additive, the percentage is virtually 100 percent, as the additive will activate in a variety of environments and elements.” Ecommerce also will become more of a sustainability focus, Schwarze predicts. Packaging companies and brand owners need to optimize packaging to promote less breakage and less spoilage throughout the supply chain. “One of the things that we’ve seen from our look into the supply chain is that as consumers start to buy more grocery-type items online, the bottleclosure relationship becomes even more important to reduce the amount of spoiled product,” he says. “The majority of the environmental impact, depending on what the product is, is with the product itself. So you want to protect that product and make sure you’re investing in the right packaging to make that happen.”

Amcor Rigid Plastics recently worked with CocaCola’s Glaceau Vitamin Water brand to reduce the amount of material in the base of its bottles. 36

Store Brands / April 2017 / www.storebrands.com

Schwarze also points to an even more significant focus, going forward, on the use of post-consumer materials, something in which Amcor is investing heavily. Such materials not only are readily available, but also resonate with consumers. “We’re also making early investments in the biomaterial chain because we see that some of the biomaterials do have advanced properties that allow for better barriers of materials,” he says. “In the future, as petroleum prices continue to go up — and we think they will go up over the long-term — biomaterials will be an advantage economically.” Cost often is viewed as an obstacle to the introduction of sustainability-minded packaging. But that extra cost likely can be justified if it translates into sales. To gain those sales, however, retailers need to effectively communicate the sustainability advantages of own-brand packaging. For recyclable packaging, retailers could leverage the Sustainable Packaging Coalition’s How2Recycle next-generation recycling label, Schwarze says, as well as invest in the infrastructure needed to recycle that packaging for consumers who don’t have access to curbside recycling programs. Retailers also could take advantage of the various sustainability-related certifications and logos currently available, and “display them prominently” on store brand packaging, Dockery says. “I would also suggest that understanding the benefit of your packaging and communicating through romance copy is an opportunity to better connect with the consumer,” he adds. “One of the oldest packaging components, tinplate steel, is not only recyclable, but is infinitely recyclable. This type of communication not only informs the consumer, but also [shows] them that you share a common interest that is center to their purchase decision-making.” SB Canning is a freelance writer from Libertyville, Ill.

Category Intelligence: Water, Juice and other RTD Beverages

Quench their thirst To boost sales of ready-to-drink beverages, retailers will want to invest in healthful options and unique flavors By Kathie Canning

use social media to promote RTD beverages.

hether it’s a carton of juice to complement breakfast or a bottle of water to accompany a post-workday run, a readyto-drink (RTD) non-alcoholic beverage spells convenience for millions of thirsty Americans. Today, however, consumers’ RTD beverage occasions are less likely than in past years to include carbonated soft drinks, paving the way for further growth in RTD juices/ juice drinks, dairy beverages, bottled water and other RTD options. In fact, 2016 per-capita consumption of bottled water consumption reached 39.3 gallons in the United States, surpassing that of carbonated soft drinks for the first time, according to New Yorkbased Beverage Marketing Corp. Retailers that want to grow sales of store brand RTD beverages will want to approach product development with consumers’ wants and needs in mind. Drew Erickson, category manager for beverages with TreeHouse Foods Inc. in Oak Brook, Ill., says today’s consumers are seeking out healthful, clean-label choices boasting fewer ingredients, product transparency and convenience. Moreover, they want more than the removal of undesirable

ingredients — benefits such as naturally sourced added protein and added nutrients are in high demand. Sandy Gott, executive vice president of Shelburne, Ontario-headquartered Ice River Springs, agrees that the overlying trends within the category are value-added and better-for-you products. On the bottled water side, consumers want such options, but without any artificial ingredients added to the product. “Consumers are also concerned about what’s not in their water,” she says. “For instance, they prefer sodium-free water.” Casey Beard, general manager and chief operating officer with sparkling juice manufacturer Kristian Regále Inc. in Allendale, N.J., notes that fewer calories and a lower sugar content are important within the RTD beverage sector, too, but taste is still critical. “If the calories and sugar are coming from a natural and recognizable source, I think consumers would be willing to sacrifice ‘no calorie’ for ‘lower calorie,’” he adds. Outside of the health and wellness realm, retailers will also want to note trends toward specific types of offerings. For example, sparkling water is a fastgrowing subcategory. “People are getting away from soda pops, but they still want the texture of bubbles,” Gott explains. “And, by the way, they want flavor — creative, unique flavors.” Flavor is a hot topic on the juice drink side, too, Beard points out. Here, “hyperspecific” flavors present line extension opportunities, especially for those that mix an approachable ignore the ingredient with a very importance specific varietal — for of packaging, example, Meyer orange which should or Valencia lemon. convey style and “The more local/ sustainability. craft/specific, the better,” he says.

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Store Brands / April 2017 / www.storebrands.com

Category Intelligence: Water, Juice and other RTD Beverages Also spelling opportunity is the addition of caffeine to RTD beverages such as bottled water and juice, Beard suggests. Premium products, too, are on trend. Much like their craft beer-aficionado cousins, a growing number of consumers are seeking out beverages “built with extra care and process,” Erickson says. “Traditionally, beverages are sought for refreshment and then otherwise for a treat. A major

trend is seeing these beverage ‘treats’ become less about desiring an unhealthy indulgence and more about a premium experience,” he says.

Dress it up To succeed within the own-brand RTD beverage space, retailers also will need to take a fresh look at packaging. Erickson points out that many premium single-serve beverages are an “accessory”

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Category Intelligence: Water, Juice and other RTD Beverages to consumers — accompanying them to work, social events and other occasions — and should be packaged to reflect that reality. “With these premium products, give your customers something they would be proud to carry around and start a conversation about,” he advises. “Become a permanent fixture in their life by adapting your brand to what they need. Be fun;

be edgy; talk to your customers and take risks.” The right on-pack messaging also goes a long way to attract the sale. Erickson recommends that retailers not only ensure the top one to three messages — “product type, flavor, benefit, etc.” — are clearly visible, but also remember that “less is more.” In addition, retailers will want to communicate,

Water, juice and other RTD beverage category performance Refrigerated Juices/Drinks

Dollar Sales (in millions) Change vs. Year Ago

Shelf-Stable Bottled Juices

Bottled Water

Private Label

All Brands

Private Label

All Brands

Private Label

All Brands

$590.1

$6,031.2

$858.6

$5,582.4

$3,194.0

$10,915.0

-2.9%

-1.3%

+0.9%

+1.3%

+7.7%

Dollar Share

9.8%

100%

15.4%

100%

29.3%

100%

Unit Sales (in millions)

220.3

2,029.7

362.9

2,304.9

1,897.3

5,210.0

Change vs. Year Ago

-3.6%

-1.5%

+1.3%

+0.9%

+10.9%

+6.2%

Avg. Price Per Unit

$2.68

$2.97

$2.37

$2.42

$1.68

$2.09

Source: IRI, a Chicago-based market research firm. Total U.S. supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending Feb. 19, 2017.

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on or off pack, any manufacturer-related packaging sustainability initiatives tied to own-brand RTD beverages. Such initiatives resonate with a growing number of consumers. For example, Ice River Springs operates a closed-loop recycling facility, Gott points out. “We buy bales of post-consumer plastic, which we then purify and re-use in food-grade 100 percent recycled PET bottles. We then bottle these 100 percent recycled bottles in our fully automated and vertically integrated plants,” she says. Ice River Springs also owns a furniture company that transforms other types of plastics it receives into high-quality Adirondack chairs, Gott adds. “Our goal is zero waste to landfill,” she says. Packaging format is worth a second look, too. Beard says kid-specific pouches are becoming more common within the market for juices. Once associated with one brand and a high sugar content, these pouches now include all-natural and no-sugar-added options. “Not only do kids love the pouches, but they are also light and easy to ship,” he says. And retailers should consider a variety of sizes in addition to the half-liter case-pack size for bottled

water — 4-gallon bottles for coolers, 1-/1.5-liter options and 8- or 10-ounce single-serve bottles all can be profitable, Gott says. In addition, case packs that are larger than the traditional 24-pack are becoming more popular for pantry loading.

Get the word out When it comes to marketing store brand RTD beverages, Beard recommends that retailers take to social media. “From the retailers’ perspective, it is a relatively low-cost opportunity to build brand awareness and increase sales for their lines,” he says. Erickson agrees, particularly for launches within newer categories. He also recommends that retailers offer in-store demos and coupons, as well as “clearly articulate the product story and benefits.” Above all, Erickson recommends that retailers innovate and test within the RTD beverage arena. “Trial innovative products with clean labels, simple ingredients and premium perceptions to show your customers you care about their well-being and are willing to offer category excitement.” SB Canning is a freelance writer from Libertyville, Ill.

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Category Intelligence: Salty Snacks

Salty snack attack Sales of private brands are up, and the potential for increased sales looks promising By Lawrence Aylward

consider offering salty snacks made with alternative ingredients .

rivate brands and salty snacks go together well. Think chips and dip, or pretzels and beer. According to market research company IRI, sales of own-brand salty snacks soared more than 8 percent in 2016 from 2015, topping more than $1.1 billion. Scott Carpenter, president & CEO of Reading, Pa.-based Savor Street Foods, is not surprised. “Retailers are getting more sophisticated in managing their own labels — delivering higher quality products with more intriguing ingredients, using better packaging designs and merchandising in more prominent locations,” Carpenter says. According to a recent report from Packaged Facts, a market researcher of consumer packaged goods, the U.S. snack food industry is stronger than ever. Sales of salty name brand and store brand snacks, including potato chips, pretzels and popcorn, have displayed growth potential or at least remained steady over the past five years. Market research firm Mintel reports the overall salty snacks category grew 29 percent from 2010 to 2015, reaching $10.2 billion, with sales projected to climb an additional 22 percent to $12.4 billion by 2020.

Sales drivers Kim Cornelius, a senior food scientist for St. Francis, Wis.-based Wixon, which manufactures flavors and seasonings for salty snacks, says two of the biggest trends in the category are the same trends impacting other food segments: clean label and a focus on providing healthier options for consumers. Cornelius

Store Brands / April 2017 / www.storebrands.com

notes that many new products contain ingredients that provide higher protein or fiber, as well as ingredients like ancient grains, seeds and vegetables. “These types of ingredients also are more labelfriendly, as they are viewed as real food ingredients by consumers, which supports clean-label expectations,” she adds. Carpenter, whose company manufactures pretzels, popcorn and extruded snacks for private label, says more of his customers are requesting gluten-free and organic products in addition to more products made with specialty grains for flavor and nutrient enhancements. “Allergens are another concern,” Carpenter adds. “For example, our facility is peanut- and tree-nutfree, which is important to a growing number of customers looking to ease their fears of potential cross-contamination from handling allergens. [This would also allow retailers] to eliminate the back panel statement [on packaging] that reads, ‘Processed in a facility that also handles peanuts and tree nuts.’” In its recent study, “Snack Food Nutrition Trends: Pulses, Vegetables and Grains in Salty Snacks and Crackers,” Packaged Facts says a push toward healthier snack formulations has created a thriving market for alternative ingredient snacks made using pulses, alternative vegetables and grains such as chickpeas, sweet potatoes, kale and spinach. discount the The Packaged Facts report importance of states that the strong growth of keeping up with sales of alternative vegetableflavor trends. based snacks, particularly salty snack versions, was the largest

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Category Intelligence: Salty Snacks factor contributing to the category’s rise in sales in 2016. According to IRI, sales of salty snacks were $17.4 billion in 2016, an increase of 3 percent from 2015. Packaged Facts estimates that alternative-ingredient snack sales grew nearly 7 percent in 2016. In its study, Packaged Facts also learned that the percentage of all adults who usually only snack on healthy foods grew from 24 percent to 30 percent from 2006 to 2016. “Looking at both present trends and towards the future, alternative ingredient snack sales are going to continue moderate to strong growth over the next few years, building on the larger healthier-foryou trend affecting the overall snack market and on the unique flavors and textures consumers are also craving,” says David Sprinkle, research director for Packaged Facts. Mintel found that of the 94 percent of consumers who purchase salty snacks, 74 percent of them are interested in healthier salty snacking options. Also, 61 percent of consumers agree that salty snacks have too many artificial ingredients, and 58 percent agree that it’s important to buy salty snacks that contain only a few ingredients. Mintel’s research also reveals that salty snacks are becoming the new comfort food among consumers. Sixty-two percent of consumers say they eat salty snacks as a stress reliever, and 30 percent eat them when they are bored, according to Mintel, which also found that 33 percent of salty snackers eat them away from home, and 26 percent eat them at work. “Consumption of salty snacks is largely driven by emotion, including stress and boredom,” says Amanda Topper, Mintel’s senior food analyst. “Consumers are looking for ways to manage their well-being, and the impact of food on emotional and mental health is becoming more important. Our research reveals this

Salty snack category performance Total salty snacks

Dollar Sales (in millions) Change vs. Year Ago

Potato chips

Private Label

All Brands

Private Label

All Brands

$1,109.8

$17,418.8

$448.0

$5,730.3

+8.2%

+3.2%

+5.1%

+0.6%

is especially true among parents, with the majority agreeing that salty snacks relieve stress.” The latest flavor trends are also impacting salty snacks. Carpenter says he is getting a broad range of flavor requests that are equally split between sweet (i.e., salted caramel) and savory (i.e., garlic and parmesan). AnnMarie Kraszewski, Wixon’s industrial division lab manager, says Asian flavors with a twist are popular in salty snacks. “These can include Japanese 7 spice, gochujang, wasabi and tangerine,” she adds. “It’s also important to understand the ingredients or flavors that are unique to a certain region and translate them into a seasoning.” Kraszewski also stresses that while robust, spicy flavors and ethnic profiles continue to be popular with consumers, it’s important to pay close attention to the type of base being used to achieve these taste profiles. “With the increased inclusion of seeds, vegetables, ancient grains and protein in salty snack bases and the inherent taste these ingredients impart to the snack, the overall taste experience will be different,” she says. “This must be taken into consideration during the product development process to ensure a nicely balanced consumer taste experience is achieved.”

Higher costs, but still room for growth The category is not without its challenges. Kraszewski says the increased consumer desire for clean label, real food ingredients and healthier options will drive up costs. “Depending on the label requirements of the finished product, the raw materials used to make both the seasoning blends and the snack bases will likely be higher cost items,” she adds. “The availability of some of these raw materials needed to meet all the desired label claims is somewhat limited for the time being. Over time, as the clean label movement continues, there certainly will be more growers and suppliers of the necessary ingredients.” While private brand sales of salty snacks grew in 2016, Pretzels own brands comprise only 6.4 percent of dollar share in Private All the category, according to IRI. Label Brands There’s definitely room for $163.2 $957.2 growth, especially considering -1.8% -1.1% the demand to differentiate 17.1% 100% with alternative ingredients and 74.7 352.4 bolder flavors. SB

Dollar Share

6.4%

100%

7.8%

100%

Unit Sales (in millions)

571.0

6,940.6

251.0

2,570.2

Change vs. Year Ago

+8.8%

+2.8%

+7.7%

+0.7%

-5.8%

-1.5%

Avg. Price Per Unit

$1.94

$2.51

$1.79

$2.23

$2.19

$2.72

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 salty snack subcategories.

Store Brands / April 2017 / www.storebrands.com

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

Category Intelligence: Meat and Poultry

A cut above Clean label and organic trends having major impact on category By Carolyn Schierhorn

leverage the all-natural and organic trends.

he meat packing and processing industry has long prided itself on efficiency: “We use everything but the oink” and “We use everything but the moo” were traditional refrains. But consumers today care more about producers’ refraining from using hormones and antibiotics. And they expect processed meat and poultry to be clean label and free from artificial preservatives. “There is a continued trend toward natural and minimally processed products,” notes Jami Edgington, brand manager for Cincinnati-based SugarCreek, which manufactures a variety of private label meat and poultry items. A $48 billion category, fresh meat and poultry boasts 96.1 percent household penetration and remains a leading determinant of where consumers shop for food, according to the 2017 edition of “The Power of Meat,” a report published annually by the Food Marketing Institute (FMI) and the North American Meat Institute (NAMI). Historically, price per pound has had the greatest impact on the purchase decision, but “younger shoppers place greater value on preparation time and ease of use,” the report states. Indeed, millennials’ preferences have begun to transform both the fresh and processed meat and

Store Brands / April 2017 / www.storebrands.com

Don’t

poultry segments. First, millennials tend to snack throughout the day neglect crossrather than eating three merchandising square meals, and they are opportunities. often on the go. Although meat isn’t always at the center of their plates, most millennials appreciate that meat is an excellent source of protein. “There is a great emphasis on convenience,” says Dave Gerle of Battistoni Brands in Buffalo, N.Y. He notes, for example, that small slices of pepperoni used to be regarded mainly as a pizza topping. No more. “People are buying sliced pepperoni as a snack and are using it on salads,” Gerle shares. Retailers have asked the company to make single-serve packages of pepperoni for grab-and-go snacks. Consumers are also requesting packaging that is easier to open and close, he says. Fully cooked bacon, which is growing in popularity, is another example of a convenient ready-to-eat or heat-and-eat meat product. “Our fully cooked Turkey Bacon is shelf-stable and ready in just three seconds in the microwave,” points out Ron Godshall, chief operating officer of Godshall’s Quality Meats in Telford, Pa. To enhance convenience for consumers and retailers alike, SugarCreek more than a year ago added large-scale sous-vide capabilities. The French word for “under vacuum,” sous-vide is a technology popular in Europe that involves placing meat sealed in airtight plastic bags into a temperature-controlled water bath for considerably longer-than-usual cooking times. Sous-vide products are not shelf-stable but can be stored for three to four weeks in a refrigerator, according to the USDA. “At retail, we are using sous-vide in the development of private label products that meet unique challenges for back-of-house deli operations,” Edgington says. The advantages include improved product consistency and food safety, labor savings and reduced shrink, she emphasizes. SugarCreek also manufactures private brand “packaged proteins” for consumers using the sousvide process — products that are quick and easy to prepare, according to Edgington. Millennials also like to try new ethnic-inspired flavors as well as unusual combinations of familiar ingredients.

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Category Intelligence: Meat and Poultry Springdale, Ark.-based Tyson Foods, for one, recently started making private brand Chipotle Seasoned Boneless Chicken Thighs for Walmart. Godshall’s, in turn, produces its new fully cooked and sliced All Natural Turkey Breast in five intriguing flavors: Cuban Spice, Peppercorn Honey, BBQ Seasoning, Maple Apple Cinnamon and Cranberry. More and more consumers have a “really adventurous palate,” Godshall explains. This has prompted the company to experiment with unique blends of sweet and savory and exotic new spices. “There’s more room to appeal, more interest in finding new favorites,” Godshall notes. “We’re excited to present combinations like Mango Sriracha, Teriyaki Pineapple and Bulgogi (Korean BBQ).” SugarCreek is encouraged by consumers’ ongoing craving for protein and growing enthusiasm for trying new cuisines. “Millennials, along with the general population, are demanding products that satisfy a more sophisticated palate,” Edgington says. “It is evident everywhere you look — the increased interest in food — from the diversity we see in restaurants to the proliferation of information and attention food receives in print, online and broadcast media.”

The 2017 edition of “The Power of Meat” notes that consumers rank their reasons for purchasing natural or organic meat and poultry as follows: 1 Free of substances they wish to avoid. 2 Better health/treatment of the animals. 3 Positive long-term personal health effects. 4 Freshness. 5 Better taste. 6 Less of an environmental impact. 7 Better nutritional value. 8 Prefer to purchase it for their family.

pepperoni, which contains no added nitrites or nitrates, he notes. Godshall’s, which manufactures mostly turkey bacon products, has fielded a surge in inquiries about clean label items. “On the clean label side, we see a broad demand for all-natural and uncured [products], meaning no nitrites or nitrates except those naturally occurring in sea salt and celery powder,” Godshall says.

Clean bill of health

Beef up merchandising

Although interest in health and wellness spans all generations, millennials are particularly concerned about what they perceive to be harmful chemicals in food. The nitrites and nitrates in processed meat count among this generation’s most-feared preservatives. Responding to these concerns, Battistoni Brands has expanded its line of organic Italian meats, which do not include artificial flavors, colors, monosodium glutamate or gluten, Gerle says. Demand has also increased for the company’s uncured beef

It’s important to creatively merchandise innovative and value-added meat and poultry products, Godshall maintains. Bacon, in particular, is a segment that is soaring in sales and inventiveness, he says. “Make way for new ways to present and display the next generation of bacon,” Godshall advises. “Fully cooked, shelf-stable bacon may not be familiar to every consumer. Putting it in [the] refrigerated [case] may not help to convey that this is a shelf-stable product, one of its bigger selling points.” Cross-merchandising and plenty of signage should be used to indicate that products are clean label, free of added nitrates and nitrites, and featuring any other health- or sustainability-related characteristics. When product is locally produced or organic, the packaging and display should tell a story to engage consumers, Gerle recommends. “The Power of Meat” suggests that retailers capitalize on the allure of meal kits when merchandising meat and poultry. Recipes and the components of a delicious meal should be placed near portion-controlled cuts of meat. “Meal kits and meal solutions surrounding meat/ poultry, and featured in the meat department, may also be a good way for retailers to win back or create new meal occasions,” the FMI-NAMI report states. “Offering grab-and-go, ready-to-prepare dinner solutions featuring fresh meat/poultry draws interest.” SB

Meat and poultry category performance Refrigerated uncooked meats (no poultry)

Dried meat snacks

Private Label

All Brands

Private Label

All Brands

Frozen/ refrigerated poultry Private Label

All Brands

$2,102.9

$4,455.4

$1,211.5

$4,252.6

$113.1

$1,362.1

Change vs. Year Ago

-7.6%

-2.1%

-2.3%

-6.5%

-11.9%

+6.2%

Dollar Share

47.2%

100%

28.5%

100%

8.3%

100%

Unit Sales (in millions)

338.6

685.3

186.1

722.5

23.2

384.3

Change vs. Year Ago

+0.9%

+7.6%

1.0%

-4.6.%

-8.1%

+9.3%

Avg. Price Per Unit

$6.21

$6.50

$6.51

$5.89

$4.87

$3.54

Dollar Sales (in millions)

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 Jan. 22, 2017. Note: Does not include all product subcategories.

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Category Intelligence: Condiments and Dressings

A dose of zip Injecting excitement into this mature, saturated category could boost it By Dana Cvetan

considerable majority of users — nearly two-thirds — say they like trying new condiments and dressings. Additionally, more than three-quarters agree that condiments and dressings are a good way to explore new flavors and cuisines. That’s the good news. However, weak condiment sales and slow growth in dressings pose a challenge, according to “Condiments U.S.,” a recent report from global market research firm Mintel. Among Mintel’s findings, condiments sales rose slightly more than 3 percent to reach $7.2 billion for 2015 and 2016 combined. But a less than robust performance during the previous three years meant that the category registered just a 1 percent sales gain over the five-year period ending in 2016. Sales of the three most popular condiments — ketchup, yellow mustard and mayonnaise — have been flat to declining, even though at least 40 percent of households report using them weekly and more than 80 percent of consumers reported using them in the past three months, Mintel reports. The dressings category achieved a 5 percent sales jump from 2011 to 2016 to reach $2.6 billion, but much of that growth came in 2012. While strong consumer interest in eating fresh and healthy foods like salads could be seen as positive news for the category, in reality, shelfstable dressings are not benefitting as much as the refrigerated varieties that are often sold next to fresh produce, the report notes. Still, brands that cater to the hunger for flavor exploration and on-the-go snacking, as well as the desire to eat fresher and healthier foods, could create meaningful opportunities for their condiments and dressings to succeed, the report concludes.

develop out-ofthe-ordinary condiments and dressings.

at much lower rates, according to Mintel, which advises using sampling and trial-size packaging strategies to expand the categories. Taste Elevated LLC, a specialty manufacturer and retailer based in West Castroville, Texas, promotes its gourmet products for use in adventurous pairings. The company’s mustards, spreads, chutneys and salsas fulfill consumer desires for eclectic snacking and dining, says Lori Krieger, Taste Elevated’s founder. “We are very specialty-oriented. Our customers are looking for products that are different and stand out from the normal, ordinary, everyday products,” she says. Nearly half of consumers appear to favor the familiar when it comes to condiments and dressings, but a significant segment is game to experiment, according to the results of an online Lightspeed/Mintel survey of 1,961 adults who use condiments or dressings. While 47 percent said they stick to familiar condiments and dressings and 35 percent said they

Don’t

forget that consumers today are eschewing artificial preservatives.

Beyond the familiar There is growth potential for out-of-the-ordinary condiments and dressings. While consumers use a wide variety of them, they use non-mainstream products www.storebrands.com / April 2017 / Store Brands

Category Intelligence use a few favorite condiments on a wide variety of foods, 19 percent said they are using a wider variety of condiments and dressings than they did a year ago. In descending order of popularity, survey respondents said they used on a weekly basis: ketchup, dressing, mayonnaise or mayonnaise-type dressing, yellow mustard, pickles or relish, hot sauce, brown/Dijon/deli mustard, hot peppers, flavored ketchup, meat sauce and Sriracha.

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Consumers have “less and less tolerance for preservatives because they are so much better informed,” Krieger says. Clean labels are not just requested now, “It seems like they are demanded,” she adds. In general, people want to eat fresher and healthier foods and want to explore new culinary avenues, whether they are sitting down to a meal or doing some on-the-go-snacking, Krieger observes. As far as private labeling goes, Krieger says retailers “really want to elevate their brand and take it to a new level” with high quality, clean ingredients. “The clean product demand will remain,” she adds. ‘We will always face it from this point forward.” Cleanliness is important in packaging as well, Krieger adds. “Packaging is a big deal in this category. Our packaging is very clean and elevated,” Krieger notes. The old-style, handmade, mom-and-pop type of (artwork and graphics) seems to be going away. The modern, clean, sophisticated labeling and packaging resonates with today’s consumers, she says.

Target marketing Appealing to different types of consumers makes sense in this category, Krieger says. She suggests product development that caters to vegans, vegetarians and those who follow gluten-free diets, and utilizing labeling to broadcast their appeal to their intended audiences. Generational tastes also matter, Krieger adds. “You have to find a way to appeal to all age demographics. I know what

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the senior citizens are most interested in. I know Generation X and what they are looking for. The people who are foodies, who love to entertain at home, the Food Network viewers,” all have their preferences too, Krieger adds. The farm-to-table, slow food, sustainable movement appeals to most everyone, Krieger says. Going as local as possible to procure ingredients,

responsibly creating and packaging products, recycling and keeping the carbon footprint as small as possible “is a huge deal.” “Consumers are becoming more and more informed and will expect us to comply with certain standards,” she adds. SB Cvetan is a freelance writer based in Barrington, Ill.

Condiment and dressing category performance Mustard and Ketchup

Ketchup

Mustard

Private Label

All Brands

Private Label

All Brands

Private Label

All Brands

Dollar Sales (in millions)

$247.3

$1,224.6

$143.3

$764.9

$103.9

Change vs. Year Ago

+0.4%

-0.1%

+1.3%

+0.1%

-0.8%

Dollar Share

20.2%

100%

18.7%

100%

Unit Sales (in millions)

172.4

575.3

87.8

333.7

Change vs. Year Ago

+0.2%

-1.2%

+0.3%

Avg. Price Per Unit

$1.43

$2.13

$1.63

Salad Dressing/ Refrigerated Salad

Dressing/ Shelf Stable

Private Label

All Brands

Private Label

All Brands

$432.9

$6.3

$402.0

$293.8

$2,064.7

-0.6%

-21.7%

+4.3%

-0.3%

-0.9%

24.0%

100%

1.6%

100%

14.2%

100%

84.6

237.8

2.5

112.6

161.7

827.1

-1.1%

+0.2%

-1.6%

-15.6%

+4.0%

+0.9%

-0.9%

$2.29

$1.23

$1.82

$2.52

$3.57

$1.82

$2.50

www.storebrands.com / April 2017 / Store Brands

Category Intelligence: Breads, Rolls and Dough

Goodness rules Whether rustic, upscale, exotic, pure, worldly, wholesome or just plain comforting, bread seduces By Dana Cvetan

ith its vast array of forms, bread is hardly a homogenous category, yet its appeal is nearly universal. That said, bread is facing challenges among a populace that considers it a high-carbohydrate, high-calorie dietbuster, according to “Packaged Bread U.S.,” a recent report from global market research firm Mintel. Sales are weak in the category’s largest segment, loaf bread, as consumers opt for products they view as fresher, more healthful or tastier.

Beyond the pan

offer private label portioncontrolled bread products.

In the past five years, consumers have continued to show a preference for foods that are simple, fresh, free from additives, of local origin, safe and trustworthy, says David Sheluga, director of consumer insights for Denver-based Ardent Mills. Consumers want less-processed, hearty breads with clean labels, Sheluga adds. He advises retailers to emphasize product attributes such as: farm-to-table, simple ingredients, pesticide-free, natural sweeteners and ancient grains. If you can show that your production methods protect bees, so much the better, he adds.

Store Brands / April 2017 / www.storebrands.com

Don’t

Consumer preferences are changing, but not in any one fail to recognize clear way, says Paul Da Re, vice the growing president of sales and marketing for Furlani’s Food Corp. in demand for clean Mississauga, Ontario. “Some are label and glutenseeking extreme value, others free breads. healthful alternatives; still others seek comfort food. Great category plans will cater to all these needs through a segmentation strategy and some risk-taking,” Da Re adds. Entry-level private label retailers continue to seek good products at good prices and are less sensitive to clean labels, says Michel Saillant, president of Lachine, Quebec-based Boulart. However, premium private label buyers are looking for unique products and will spend more to get trendy bakery items in funky flavors made with organic or non-GMO ingredients, he adds. And freshness, Saillant emphasizes, “is a big deal. Freshness and quality [are] the new optimal consumer experience.” Hot bread from the oven is a noteworthy trend, adds Courtney Wilman, marketing manager for Rise Baking Co. in Minneapolis. Rise’s Take & Bake products enable consumers to pop partially baked artisanal bread in the oven for a few minutes and get convenient, fresh, hot bread at home. Retailers, Wilman adds, are looking for differentiated, high-quality products such as single varietal wheat flours, new artisanal bread shapes and sandwich carrier breads like ciabatta rolls, batards and demi baguettes for gourmet sandwiches. “We’ve seen a lot more variety and innovation in private label requests. It used to be: ‘Give us a replica of what’s selling.’ Now, it’s more common to hear: ‘What can you give us that no one else has? What’s interesting? What’s the next big thing?’” says Tim Lotesto, director of national retail key accounts for Chicago-based Alpha Baking Co. Private labels in the U.S. are not afraid to launch completely new products, observes David Goron, export manager for La Fournée Dorée in La Mothe Achard, Vendée, France. “Taking risks is more natural to Americans. If they believe in your idea and in the product, they do not always need a proven track record. They will also take greater reward for this,” Goron adds.

Category Intelligence: Breads, Rolls and Dough “French Brioche in the U.S. is moving from being a niche item five or six years ago among very premium retailers to becoming a full-fledged category in the U.S. bakery mass market today, as more mainstream retailers stock it.” Consumers are more willing than ever to try breads, buns and rolls with stronger flavors and different textures, Lotesto adds.

Health-forward breads

Innovative, multifunctional bakery products that are good for the body — high in protein and fiber, but low in sugar and sodium — are marketplace winners, says Sylvain Deslauriers, president of Montreal-based Sda Sales Solutions, a consulting services firm serving the Canadian food market. Deslauriers advises using high-quality, nutritious ingredients such as quinoa and chia as well as re-sealable, controlled atmosphere packaging that Total Fresh Bread All Other Fresh Rolls/ Hamburger and provides as much as 30 days and Rolls Buns/Croissants Hot Dog Buns of fresh shelf life. An application of creativity Private All Private All Private All Label Brands Label Brands Label Brands can help consumers notice Dollar Sales (in millions) breads that were already $3,249.7 $13,011.2 $508.7 $2,046.6 $781.2 $1,944.1 tasty and healthy, says Change vs. Year Ago -5.5% 0.0% +0.4% +2.4% -7.5% -1.5% Amy Schmitz, director of Dollar Share 25.0% 100% 24.9% 100% 40.2% 100% marketing for Klosterman Unit Sales (in millions) 2,072.3 5,625.2 206.0 709.3 610.3 1,098.9 Baking Co., a 125-year old Change vs. Year Ago -5.7% -1.1% +1.1% +0.9% -4.9% -1.3% fourth-generation family Avg. Price Per Unit $1.57 $2.31 $2.47 $2.89 $1.28 $1.77 bakery in Cincinnati. For Source: Infoscan Reviews, IRI, a Chicago-based market research firm. Total U.S. supermarkets, drugstores, mass market retailers, instance, enrobing bread military commissaries and select club and dollar retail chains for the 52 weeks ending Jan. 22, 2017. Note: Does not include all fresh bread and rolls subcategories. with bran, oats and/or

Bread, roll and dough category performance

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Category Intelligence seeds showcases the healthfulness and heartiness of the bread in a way inclusions cannot, Schmitz says. The demand for glutenfree bakery items continues to grow, says Jerry Colburn, sales manager for Ener-G Foods in Seattle, which has been making gluten-free baked goods for people on restrictive diets since 1962. Ener-G offers 87 shelf-stable, vacuumpackaged items that stay fresh for one year with no added preservatives. It’s generally more expensive to eat gluten-free, Colburn says, so Ener-G has introduced an affordable line of certified organic gluten-free breads. One reason the gluten-free market is thriving is because the products have improved, says Linda Fitzerman, founder of Local Oven, a dedicated gluten-free bakery in Farmers Branch, Texas. Fitzerman started her company when she discovered it was difficult to find gluten-free products that tasted good. She decided to create gluten-free baked goods that she could enjoy, and went into business 5½ years ago. Local Oven offers 36 SKUs and vacuum seals its products, which are made without preservatives. The company also offers portion-controlled packaging so consumers can avoid waste. Klosterman offers portion-controlled product as well, in its half-loaves of rye bread, popular in the Cincinnati area. This allows the company to market effectively to empty nesters, singles and other small households, Schmitz says. Ken Rudd, business development leader for Innovative Bakery Resources, a Tualatin, Ore.-based division of Ardent Mills dedicated to the art and science of artisanal bread making at scale, says the company is expanding its investment in heirloom grains and partnering with farmers to expand organic wheat crops. “As we strive to nourish consumers, Ardent Mills has a goal to make healthier bread choices more affordable,” Rudd explains. The consumer shift toward cleaner ingredient decks and consumption of whole grains reflects increased interest in healthy eating, adds Scott Dillingham, manager of Innovative Bakery Resources. “In the bigger picture, consumer demand for local, sustainable and pure foods speaks to the demand for enlightened eating,” he says. SB Cvetan is a freelance writer based in Barrington, Ill.

www.storebrands.com / April 2017 / Store Brands

Category Intelligence: Wet Wipes

Small but mighty Wet wipes are the rising star of the household paper products category By Dana Cvetan

address sustainability concerns in the chemical formulation, packaging and disposal of wet wipes.

hile constituting only 3 percent of the total household paper products category, hand and face moist towelettes and flushable wet wipes scored significant sale gains between 2013 and 2015, market intelligence agency Mintel reports. Capitalizing on increasing consumer interest in disinfection and convenience, hand and face moist towelettes’ sales increased 12.2 percent during the period, garnering a minimal market share gain, according to Mintel’s February 2016 report “Household Paper Products — U.S.” During the same period, flushable wet wipes’ sales increased 11.5 percent and the segment notched a slight increase in market share. Consumers view the product as a value-added one that provides comfort and better cleaning ability than dry paper counterparts, the report states. “We see continued growth in the personal care wipes segment among retailers who recognize wipes as the optimal delivery system for personal hygiene,” observes Herb Baer, executive vice president, consumer division, for Orangeburg, N.Y.-based Nice-Pak Products. Quality and efficacy are high priorities in this segment, perhaps more than price point, and that trend is growing, says Juan Carlos Perez, sales

Don’t

manager for Miami-based Excelcare Products LLC. forget that In this increasingly comconsumers petitive category, retailers are desire gentle looking for flexibility in product offerings as well as the best but strong wet value, not necessarily the lowest wipes made price, says Mauricio Menache, with superior CEO of Los Angeles-based moisturizers. GoodFibers. Consumer wish lists for their wet wipes include products that are softer, stronger, gentler, made with superior moisturizers and free of parabens and other controversial preservatives, says Mike Fitzgerald, vice president of Ashkelon, Israelbased Albaad. Retailers are more precisely defining the specifications and performance they require in their store brand wet wipes, says William Lutz, vice president of sales and marketing for Hauppauge, N.Y.-based Premier Care Industries. “They are trying to achieve something better than the national brand if they can. National brand equivalent (NBE) isn’t necessarily good enough anymore.” “Some retailers are asking for better-than brands; some are asking for NBE. Each retailer has a different quality target,” says a spokesperson for Brentwood, N.Y.-headquartered U.S. Nonwovens Corp. “But that means the retailer ultimately wants flexibility and attention to details and specifications.”

Environmentally friendly Sustainability is a big concern as well as a challenge in the category, experts say. Retailers are asking for greener wipe solutions, Menache notes. “There’s a growing demand for wipe products made with 100 percent plant-based fibers,” he says, noting that compostable and biodegradable nonwovens are becoming more prevalent. Nearly three-quarters of North American consumers — the highest level in eight years — say they are searching for greener products, Baer adds, citing Shelton Group’s 2016 Eco Pulse report. Manufacturers are undertaking a more energyefficient approach to production and a more sustainable approach to material, such as using cotton cloths and bamboo packaging, Perez says. “Sustainability and energy efficiency will be goals going forward,” Perez notes. Manufacturers 58

Store Brands / April 2017 / www.storebrands.com

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Category Intelligence: Wet Wipes should strive to create clean and safe products using methods that are as environmentally friendly as possible, he suggests. “As an industry, we should be focused on reducing the impact that our products have on the environment,” says Menache. “GoodFibers would like to see flushable and biodegradable wipe alternatives grow in popularity, as well as greener

Wet wipe category performance Baby Wipes Private Label

All Brands

Moist Towelettes Private Label

All Brands

$486.3

$1,230.2

$281.1

$639.9

Change vs. Year Ago

-2.0%

-1.9%

+19.4%

+20.3%

Dollar Share

39.5%

100%

43.9%

100%

Dollar Sales (in millions)

Unit Sales (in millions)

117.4

310.8

94.0

193.6

Change vs. Year Ago

-3.9%

+0.6%

+15.4%

+10.2%

Avg. Price Per Unit

$4.14

$3.96

$2.99

$3.30

packaging options. We also hope that the market continues to trend away from the plastic canister format, which produces a lot of waste.” On the packaging front, new recycle-ready packaging film technologies are under development, Menache adds. Retailers are asking for more postconsumer recycled materials, Fitzgerald adds. Another environmentally friendly packaging advancement has been in multi-packs. Adhesive labels are now replacing overall poly-bag coverings, saving packaging material and the energy required to produce it, Fitzgerald says. “The market is continually asking for packaging that is 100 percent biodegradable to support the environment,” Lutz notes. “This is a goal, but very difficult, given all the different elements that make up a wet wipe package.” Another challenge is flushability, particularly for personal care wipes. “Increased media attention and public concern have led the industry to create guidelines for flushable products and have spurred the development of wipes that disperse more readily when flushed,” Baer says. SB Cvetan is a freelance writer from Barrington, Ill.

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Category Intelligence: Incontinence Care

Opportunity knocks Retailers could grow sales of store brand incontinence care products by catering to consumers’ desire for technology advances and discretion. By Kathie Canning

ccording to a 2014 report from the Centers for Disease Control and Prevention, more than half of Americans aged 65 or older suffer from some form of bladder or bowel incontinence. Although incontinence also impacts a sizeable subset of non-seniors (primarily women), the market for incontinence care products is expected to post particularly strong growth as the U.S. population continues to age. The U.S. adult incontinence care product category posted retail value growth of 8 percent at current prices to reach $2 billion in 2016, according to London-based Euromonitor International in its February “Adult Incontinence in the US” report. The market research firm expects sales of such products to reach $2.9 billion by 2021.

Meet their demands

offer incontinence care products in trial sizes.

Retailers will find ample opportunity for store brand product development within the incontinence care space. But they need to deliver on consumer expectations. “Consumers are demanding a much more discreet product, comfortable fit and breathable materials they can trust,” explains Erin Margerum, vice president of North American and European Union Sales for Haso USA Inc. in Peachtree Corners, Ga.

Store Brands / April 2017 / www.storebrands.com

Don’t

She notes that many consumers of adult incontinence products are still very active. neglect the They need assurance that such importance products will protect them from of secondary leaks and not make them feel placement when self-conscious about usage. merchandising Retailers could also reach the category. out to younger women in new product development efforts. According to “Feminine Hygiene and Sanitary Products — US,” a March 2016 report from global market research firm Mintel, bladder leakage carries the stigma that the condition happens only to older people, so younger women suffering from bladder leakage are less likely to purchase a product made specifically for incontinence care. They may opt instead to purchase sanitary pads or liners. “Perhaps brands could be more successful among younger women by promoting technical features and how the product offers protection to distinguish incontinence products as the ideal format for bladder leakage,” Mintel states. “Brands could target new moms specifically, letting them know they are not alone in experiencing light bladder leakage after childbirth and providing them solutions.” Retailers also will want to think beyond national brand equivalent (NBE) when it comes to product development. “The flexibility to offer new technologies [is] a large opportunity for private label,” Margerum says. On trend are thinner, flexible products with a “breathable, cotton-like” top sheet and back sheet, adds Tony Harrington, category director/HBC program management, for Topco Associates LLC in Elk Grove Village, Ill. “Another growing area in incontinence care is gender-specific products that feature customized benefits for men and women,” he says. And retailers should think beyond daytime remedies as well. Harrington notes that overnightcare products are in high demand. “We are actually in development of extensions of our core business that are targeted specifically for overnight,” he says. Targeting the look and feel of real underwear, too, is important. Even though consumers’

embarrassment in relation to the use of incontinence care products is on the decline, “their expectation for use and comfort and the impact on their daily living” has increased,” Harrington states. Margerum notes that Haso is introducing disposable underwear with a replaceable pad system “that is far more discreet than leading brands and products on the market.”

Attract the sale Harrington points out that private brand suppliers that produce Topco’s own-brand incontinence care products already possess a wealth of product knowledge and manufacture products of extremely high quality. “Own-brand incontinence care products cost, on average, about 30 percent less than NBE, so once we gain trial, we tend to have a huge repeat purchase rate,” he says. But retailers could take additional steps to lure shoppers to own-brand incontinence care products. On the packaging front, boxes instead of film packs are leading the way for premium products, Margerum notes. Larger pack counts, too, have the potential to attract sales for caregiver shoppers, Harrington says. Trial sizes also could spur sales of own-brand

incontinence products, Margerum suggests. “Consumers are being asked to spend roughly $12 each time they want to try a new item,” she notes. “Offering a trial package for $2 to $4 is a great way to encourage new trial without the commitment of the larger spend.” Promotional vehicles, too, could go a long way to boost sales of store brand incontinence care products, particularly when it comes to caregiver shoppers, Harrington points out. Those shoppers aren’t necessarily shopping for such items in supermarkets, for example. But when private brand incontinence care products are on promotion, caregivers could be tempted to stock up. Secondary placement also is critical, he adds, especially since many retailers dedicate a relatively small shelf section to incontinence care items. “They don’t have the space to support promotions in the aisle, so we are encouraging retailers to merchandise adult incontinence [products] off shelf, in corrugated floor displays and in secondary locations,” Harrington says. “This creates awareness and holding capacity for promotions.” SB Canning is a freelance writer based in Libertyville, Ill. SP ON SOR ED CON TE N T

U.S. Alliance Paper, On a Roll For 20 Years

elebrating 20 years since its founding in 1997, U.S. Alliance Paper has grown into one of the largest private label manufacturers of household paper products in the U.S. From humble beginnings, with a single converting machine and handassembly lines, the company has expanded to over a million square feet of manufacturing and warehousing space in New York and Arizona, with computerized, state-of-theart manufacturing lines to take any paper grade from ‘parent roll’ to virtually any packaging configuration imaginable. “20 Years of success as a family-owned and operated company is a milestone for us,” said John Sarraf, President. “Our growth and expansion are a testament to the hard work and commitment of our employees nationwide and to our private label retailers. We strive to be their preferred supplier by excelling in quality, flexibility and service. But more than just putting their label on our products, we work with them to consistently fulfill the quality/value promise to their consumers while increasing their margins in the paper aisle.”

quality tier from traditional, mid-tier, to premium. And we can deliver custom product bundles, such as multi and club packs, as well as pre-packaged end caps and display units.” The introduction of TAD (Through Air-Dried) technology has allowed U.S. Alliance Paper to effectively produce value products for the premium end of the spectrum. In the TAD process, virgin fiber is dried with extremely hot air to develop a soft and airy structure, rather than pressing and flattening the fiber, giving consumers the “fluffier”, stronger, and more absorbent attributes they are looking for. “What sets our company apart, our true metric of success, is 100% reliability in everything we do,” continued John Sarraf. “As a result, we have been able to foster an expectation of excellence with our customers. That’s a theme we plan to build on for the next 20 years.”

U.S. Alliance Paper covers the full spectrum of paper grades and quality tiers to flexibly develop customized paper programs for its retailers. Added Steve Saraf, Vice President of Sales, “We help our customers to quantify product movement, identify opportunities for margin improvement, and develop specific value alternatives to national brands. We have the flexibility to manufacture products in custom sizes and sheet counts, including super-sized rolls, in any paper grade – mixed, recycled, CFP® certified, and TAD – and

www.storebrands.com / April 2017 / Store Brands

Category Intelligence: Shave Care

Smoothing the way With potential growth in private brand sales, category merits more attention and creativity By Carolyn Schierhorn

develop more specific shave care products.

n its latest comprehensive report on shaving and hair removal in the United States issued in October 2015, global market research firm Mintel noted stagnant sales and predicted “minimal gains through 2020.” But more recent data from Chicago-based IRI paint a rosier picture, at least for private brand shave care products. Take razors, a more than $530 million subcategory. During the 52 weeks ending Jan. 22, private label razors increased by 45.3 percent in sales compared to a 16.3 percent gain for the entire category (see table, page 65). Given that store brands constitute just 7.7 percent dollar share in this segment, its potential for expansion is evident. In the same reporting period, three other subcategories — blades (cartridges), blades (disposables) and shaving cream — experienced declines overall but significant growth for private brands. For example, store brand blade cartridges, which account for 3.5 percent dollar share, increased nearly 65 percent in retail sales. And in the disposable blade segment, of which private brands already command a 17.5 percent share, store brands scored a more than 23 percent gain in sales. Why the disparity in growth between private brands and national brands? Shaving tends to be chore, an onerous activity rather than pleasurable one. So this is a category in which convenience and value reign

Store Brands / April 2017 / www.storebrands.com

supreme, even though safety and performance are also priorities. In each segment of the category, IRI reports a considerably lower unit price for private brands. “Creating a challenge for branded products, private label products offer value-driven shoppers an affordable option with features that resemble some of the newest or most notable claims in the category,” Mintel emphasized in its U.S. shaving report. What are some of these notable features? Among both men and women, more than 70 percent use or are interested in razors with pivot head technology, while almost 65 percent prefer razors that can be used without shaving cream or other shaving preparation products, according to Mintel.

Demographic distinctions Because men shave more frequently than women, shave care is by and large a men’s grooming category. And it’s a category that’s being upended by male millennials, half of whom use shaving subscription services such as Dollar Shave Club due to convenience, compared to just 20 percent of men age 55 and older. In its shaving report, Mintel pointed out that 62 percent of men age 18 to 34 use — or are interested in trying — razors designed for specific body areas, while only 26 percent of baby boomer men have this predilection. In addition, 63 percent of young men use or are curious about products that bundle a razor with shaving cream, as opposed to 35 percent of boomers. And half use or would like to try masculine-scented razors, compared to just 17 percent of the boomer generation. Across all categories, millennials and younger demographic groups prefer products that seem designed to meet their specific needs and tastes, and shave care is no exception, observes Simon Yi, a regional account manager for Cerritos, Calif.-based United Exchange Corp. (UEC). He recommends that retailers introduce private brand shave kits and products that address particular challenges or target certain demographic segments. UEC recently developed a shave kit aimed at teenage boys with acne that includes an electronic shaver, shaving cream and a moisturizer containing salicylic acid, an ingredient that helps unclog pores and prevent lesions. “When you shave with acne, it can be a very scary experience, as you can imagine,” Yi says “You’re

Don’t

talking about putting a razor over a pimple and To increase private brand shave care sales even potentially cutting it by accident.” more and appeal to millennial men, Yi suggests that ignore the Rather than a close shave, safety is of utmost retailers get creative with their product development concern to acne sufferers. “An electronic shaver allows and merchandising. “The package design itself should importance of for less agitation and skin irritation,” Yi explains. pop off the shelf,” he adds, “and tell a story that storytelling. As a group, millennial men are more likely to be connects emotionally with the intended audience.” SB “masters of the messy look” and forgo shaving every day, states Mintel’s “Men’s Personal Care — US” Schierhorn can be reached at cschierhorn@ensembleiq.com. report, published in October 2016. But that doesn’t mean they’re using fewer shaving and personal care products than Blades Blades Shaving older generations use. Razors (cartridges) (disposables) cream On the contrary, “although younger men may be more likely Private All Private All Private All Private All to have facial hair, they still want Label Brands Label Brands Label Brands Label Brands to make a good impression and Dollar Sales (in millions) $41.0 $530.6 $39.8 $1,146.1 $186.8 $1,066.3 $38.1 $496.8 carefully maintain their facial Change vs. Year Ago +45.3% +16.3% +64.9 -11.0% +23.3% -7.2% +23.3% -1.6% hair,” the report points out. Dollar Share 7.7% 100% 3.5% 100% 17.5% 100% 7.7% 100% In fact, “manscaping” is a Unit Sales (in millions) 7.2 53.1 6.5 63.3 59.3 200.7 21.3 180.7 major trend among young men, Change vs. Year Ago +36.4% +11.1% +26.0% -9.5% +33.9% -3.2% +22.1% -2.8% who are more apt to trim bushy Avg. Price Per Unit $5.70 $9.99 $6.09 $18.11 $3.15 $5.31 $1.78 $2.75 eyebrows and ask a significant other to shave off unwanted back 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 Jan. 22, 2017. Note: Does not include all shave care subcategories. hair than older generations are.

Shave care category performance

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

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Ad Index ADVERTISER NAME

PAGE#

Berner Food & Beverage . . . . . . . . . . . . 14, 15 Chelten House Products, Inc . . . . . . . . . . . 26 DS Services of America, Inc . . . . . . . . . . . . .41 Daymon Worldwide . . . . . . . . . . . . . . . . . . . . 13 Deep Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Deiorio Foods, Inc . . . . . . . . . . . . . . . . . . . . . 57 Delgrosso Foods, Inc . . . . . . . . . . . . . . . . . . 53 Dishaka . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Disposable Hygiene . . . . . . . . . . . . . . . . . . . . 61 Envi Reusable Bags . . . . . . . . . . . . . . . . . . . 20 The Fremont Company . . . . . . . . . . . . . . . . 52 Furlani’s Food Corporation . . . . . . . . . . . . 55 Global Tissue Group . . . . . . . . . . . . IFC, 3, BC Godshalls Quality Meats inc . . . . . . . . . . . . 49

ADVERTISER NAME

PAGE#

IDDBA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 IGPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ITI Tropicals, Inc . . . . . . . . . . . . . . . . . . . . . . 43 Ice River Springs Company . . . . . . . . . 39, 40 Lidestri Food & Beverage . . . . . . . . . . . . . . 35 Massimo Zanetti Beverage USA . . . . . . 7, 42 Nepa Carton & Carrier Company . . . . . . . . . 12 Optima Machinery Group . . . . . . . . . . . . . . 59 Private Brands Consortium . . . . . . . . . . . .IBC Red Gold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Snak King Corporation . . . . . . . . . . . . . . . . 47 Snack Innovations . . . . . . . . . . . . . . . . . . . . 23 US Alliance Paper . . . . . . . . . . . . . . . . . . 5, 63 US Nonwovens Corp . . . . . . . . . . . . . .13, 21, 37 www.storebrands.com / April 2017 / Store Brands

NewProductConcepts ALL PRODUCTS LISTED NOW AVAILABLE FOR PRIVATE BRANDING.

Natural dust-free clumping cat litter SmartCat All Natural Clumping Litter is entirely made of grasses grown in the United States and is 99 percent dustfree, according to the manufacturer, Cedarburg, Wis.-based Pioneer Pet Products. The litter clumps on contact and will continue to harden and dry until all urine is absorbed, thus minimizing odor. Available for private branding, the product comes in 5-, 10- and 20-pound bags. www.PioneerPet.com

Roast coffee in store Consumers increasingly are becoming coffee connoisseurs who expect not just fresh-ground coffee but fresh-roasted coffee. Java Master provides retailers with a convenient and compact way to roast coffee in the store and, in the process, create a fun experience for consumers. The Java Master roaster — which is 17 inches wide, 25 inches deep and 70 inches high — enables retailers to roast 1- to 5-pound batches of coffee on-site in less than 10 minutes. Electrically powered, the Java Master roaster uses convection technology to ensure a uniform roast, says the company, noting that the hot-air roasting process not only yields delicious coffee but also removes bean husks and chaff as the beans roast. www.JavaMasters.com

Organic fruit chews Manufactured by Chicago-based Primrose Candy Co., Organic Fruit Chews are made with natural fruit and vegetable juices and flavors and are available in multiple sizes and formats. They are also glutenfree and certified kosher. The company also makes sugar-free candy and a variety of other confections for private label. www.PrimroseCandy.com

Cold brew coffee Steep 18 Cold Brew Coffee is sourced from high-quality 100 percent Arabica beans and steeped for 18 hours, resulting in smooth, robust flavor without the bitterness and acidity of hot-brewed coffee, according to the manufacturer, Oak Brook, Ill.-based TreeHouse Foods. The product comes in several flavors, including Classic, Donut Blend and Mocha. www.TreeHouseFoods.com

Grain-free dog treats Phoenix-based Leclerc Pet Care now makes grain-free organic dog treats for private label that contain no artificial colors, flavors, wheat, corn or soy. Packaged in a 10.6-ounce box, Elsa’s Grain-free Luv Bites come in three flavors: bacon cheeseburger, coconut and peanut butter. https://leclercpetcare.us

Single-serve espresso capsules New Café Turino single-serve espresso capsules are said to bring the taste of Italy to consumers’ homes, according to the manufacturer, Little Chute, Wis.headquartered Trilliant Food, Beverage & Nutrition. The capsules are Nespressocompatible and come in several profiles for private branding. The company also makes single-serve cup tea and bagged coffee. Trilliant offers flexibility in package size and has low minimums. www.TrilliantFood.com

Personal lubricant Fredonia, Wis.-based Guy & O’Neill manufactures a personal lubricant that is comparable to K-Y Jelly but is made of allnatural ingredients and is free from preservatives and paraben, according to the manufacturer. The company states that it champions environmental stewardship during all phases of the manufacturing process. www.GuyandOneill.com

Clean label dips Dakota, Ill.-based Berner Food & Beverage Inc. offers a new line of clean label dips that are gluten-free and have no artificial colors, flavors or preservatives. Packaged in glass jars, the shelf-stable dips come in a variety of flavors, including White Salsa Con Queso, French Onion, Stadium Style Cheddar, Bean & Bacon, and Caramelized Onion. www.BernerFoods.com

Vendors with new products to share should email descriptions and high-resolution images to Carolyn Schierhorn at cschierhorn@ensembleiq.com. 66

Store Brands / April 2017 / www.storebrands.com

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