Store Brands - Feb 2018 by ensembleiq

Convenience: an intangible store brand

Retailers feeding on meal kits

Getting social with Steven Stallone February 2018 | www.storebrands.com

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CROWNING

Kroger

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Volume 40 No. 2 February 2018

DEPARTMENTS 6

Editor’s Take

Viewpoint

Around the Industry

Getting Social

End Cap

CONTENTS

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COVER STORY Crowning Kroger Behind Vice President of Our Brands Gil Phipps, the supermarket chain has achieved one of the top private brands programs in the country, a reason the grocer is our 2018 Retailer of the Year

CATEGORY INTELLIGENCE 39

Soup

Pasta

Packaged fruits and vegetables

Pet food

Vitamins and supplements

Oral care

PHOTOGRAPHY BY JOHN CARRICO/ALIAS IMAGING

FEATURES 27 FOCUS ON FRESH The meal kit ticket Own-brand offerings can help retailers differentiate while spicing up their assortments in the fresh category

27 34

31 TOTAL STORE Simplifying shopping To win over busy consumers, grocery retailers are leveraging convenience

34 FLAVORS AND INGREDIENTS A tasty opportunity The salty snack segment is on a flavor kick, allowing retailers to differentiate with private brands

Store Brands (ISSN-0190-9851; USPS # 0488-370) is published monthly by EnsembleIQ, 8550 W. Bryn Mawr, Suite 200, Chicago, IL 60631. 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 2018 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. 4

Store Brands / February 2018 / www.storebrands.com

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Inside Sam’s Club and BJ’s

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EDITOR’S TAKE Business Intelligence for an Evolving Market

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THERE IS NO ‘I’ IN ‘T-E-A-M’

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EDITORIAL Editor-in-Chief

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Contributing Writers

I tell Erin Sharp that I would be like a lost dog in a big city if I had to oversee just one of The Kroger Co.’s manufacturing plants. Sharp, Kroger’s group vice president of manufacturing, oversees 36 of the supermarket chain’s 38 plants around the country, which make dairy, bakery and other food products for the Cincinnati-based retailer’s Our Brands products. I ask Sharp, who has been in her role at Kroger for more than six years, how she does it. I mean, 36 plants! In answering the question, others might wax about what they learned over the years to get where they are now — positions of vast responsibility. And, considering their authority, I would welcome that. But Sharp answers the question in five words, speaking softly and humbly. “I have a good team,” she says. I don’t doubt that for a second, but a good team begins with good leadership, and a key to being a good leader is realizing it’s not about you. I spent about 90 minutes talking with Sharp recently when I visited Kroger’s headquarters to interview her and others for this month’s cover story on Kroger being our 2018 Retailer of the Year. Sharp didn’t talk much about herself, but she talked at length about the plants’ employees, whom she calls “associates.” Sharp empowers them to take charge, Erin Sharp (right) empowers even when it comes to suggesting new ideas for Kroger associates to take charge. Kroger’s Our Brands products. A few years ago, Sharp challenged the associates at a Kroger dairy plant in Winchester, Ky., which makes Kroger’s no-fat, high-protein CARBmaster yogurt, to come up with an idea for a new product to be made on an idle line in the plant. A team of associates got together, studied their options and came up with an idea to manufacture CARBmaster smoothies. The associates presented their idea to Gil Phipps, Kroger’s vice president of Our Brands. Phipps liked it. Soon, the idle line was making the CARBmaster smoothies. “The product idea was all plant-driven,” Sharp says. Sharp wants plant associates to know how vital they are to Kroger’s success, from innovation to quality to food safety. “They know that if our customers are not buying the products we manufacture, then we won’t need our plants,” she says. Her statement is not meant as a message to associates that they better do their jobs or else. It’s about letting them know how important they are to the process. Sharp visits about one plant a week. I ask her if she has a favorite plant that she likes to visit, and her response is a mixture of shriek and laughter. “I can’t answer that,” she says with wide eyes and a I-can’t-believe-you-asked-methat grin. “That’s like asking me who my favorite child is!” Sharp didn’t answer the question … but she did. It’s about the team, after all.

Rich Mitchell, Dana Cvetan

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

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Chief Brand/Operating Officer

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Chief Business Development Officer & President, Ensemble IQ Canada

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

2015

Store Brands / February 2018 / www.storebrands.com

Feeling The Pressure Of A Shrinking Delivery Window?

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VIEWPOINT

By Ryne Misso

Ryne Misso is the director of marketing for Market Track, a global provider of advertising and promotional tracking, brand protection and e-commerce pricing solutions. He can be reached at rmisso@ markettrack.com.

So how well did retailers promote their private brands in 2017? With so many momentous shifts in grocery retail in 2017, it’s difficult to pick just one development that characterized the industry last year. Many would point to Amazon’s acquisition of Whole Foods Market, which has and will continue to change the nature of grocery shopping for years to come. However, not lost in the shuffle was the ascent of store brands in 2017. It has become nearly impossible for grocers to differentiate their value on price alone, and more stores are exploring ways to expand and diversify their privatebranded offerings, knowing their store brands provide a unique value proposition to shoppers. Among the top developments in 2017 with regard to private brands was the launch of Lidl’s first stores in the U.S. market — a grocer whose product assortment hovers around 90 percent private brands. Likely in response to Lidl’s arrival, private brands titan Aldi announced plans to open hundreds of new store locations and renovate hundreds more. And even though Amazon captured 2017’s top grocery headline with its acquisition of Whole Foods, Amazon continues to expand its private brands assortment behind the scenes. Shoppers can now find dozens of Amazon private brands spanning categories from apparel to batteries to baby food to baby care. Will 2017 be remembered as the year that private brands became a central strategy for differentiation? Time will tell. For now, let’s review how grocers supported their food and beverage private brands. Market Track recently conducted a study that assessed in which categories private brands gained promotional share based on a review of print circular ads from the past two years. Here are the highlights: • Private brands share of all food and beverage circular promotions remained relatively flat in 2017 (19.9 percent) com-

Store Brands / February 2018 / www.storebrands.com

pared to 2016 (20.1 percent) despite the launch of Lidl and the planned expansion from Aldi. • Among the categories that saw the largest increases in private brand promotional circular support in 2017 compared to 2016 were frozen drinks (up 108 percent), ground pork (up 105 percent), condensed/evaporated milk (up 57 percent) and stuffing mix (up 57 percent). • Among the categories that saw the largest decreases in private brand promotional circular support in 2017 compared to 2016 were deli/general (minus 68 percent), frozen side dishes (minus 56 percent), coffee filters (minus 55 percent) and lighters (minus 47 percent). • Outside of the fresh bakery categories that are almost exclusively private brands, other categories in which a vast majority of circular promotions were for private-branded products include bottled/ canned mushrooms (89 percent), frozen fruit (80 percent), ice cream cones (79 percent) and dry beans/vegetables (76 percent). Below are the top 20 store brand categories that increased in promotional circulars from 2016 to 2017: CATEGORY

2017

2016

Frozen drinks Ground pork Condensed/evaporated milk Stuffing mix Breadcrumbs/batters Prepared/precooked meat Ice cream cones Dry beans Oriental foods Ground beef Gravy/sauce mixes Pancake mixes Ice cream toppings Dry grocery Ready-to-eat popcorn Applesauce Fresh chicken wings Refrigerated side dishes Relishes Fresh dessert toppings

54.6 54.8 36.2 22 33.1 19.5 79 76.2 43.6 32.6 17.2 19.3 12.9 31.8 22.8 31.7 21.3 13.6 36.5 37.6

26.3 26.8 23 14 23.9 15.3 62.4 60.4 34.9 26.7 14.2 16 10.7 26.5 19.1 27.5 18.5 11.9 32 33

% Change in Share

107.6 104.5 57.4 57.1 38.5 27.5 26.6 26.2 24.9 22.1 21.1 20.6 20.6 20 19.4 15.3 15.1 14.3 14.1 13.9

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AroundtheIndustry C OM M E N TAR Y

CVS deserves praise for taking transparent stand By Carolyn Schierhorn

Those of us in the journalism profession have long been aware of the potential ethical minefield of using Photoshop to artificially alter images. This issue came to light in late 1997 when Newsweek received much criticism for digitally whitening the teeth of then-famous Bobbi McCaughey, the mother of septuplets who appeared on the cover, while Time magazine left her teeth unaltered in its own cover image. But rather than leading to change, the incident has largely been forgotten. In the past two decades, photo retouching has become a ubiquitous practice — in publications, online and in our daily lives. Parents of school-aged children, for example, know that every year they can pay Lifetouch a few extra dollars to have all blemishes and wayward strands8”of hair

removed from their kids’ school photos. And instead of improving my own photography skills, I admit that I too often ask our creative director to color-correct my underexposed photos. But CVS Pharmacy’s recent announcement that it will move away from using digitally altered images to sell beauty products was a needed wake-up call. I’d never really thought about whether the beautiful models depicted in advertising and marketing materials had their “flaws” digitally deleted and even their body shape and skin color modified. This apparently routine practice is having an adverse impact on teens, who increasingly are suffering from eating disorders and depression. “The connection between the propa16” gation of unrealistic body images and

negative health effects, especially in girls and young women, has been established,” said Helena Foulkes, president of CVS Pharmacy. This year, CVS will stop using “materially altered” images in its own beauty product marketing communications and will label the unaltered images with a watermark indicating authenticity.

CVS provided the imagery to illustrate how a model’s photo was altered.

Let’s applaud CVS for this bold move to become more transparent in a product category known more for concealing than revealing. Just like when it stopped carrying cigarettes, the chain deserves kudos for championing consumer health potentially at the expense of sales and profits. SB

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Store Brands / February 2018 / www.storebrands.com

AroundtheIndustry Mandarin Orange Chicken rules again Product tops Trader Joe’s 2018 Customer Choice Awards Trader Joe’s announced the winners of its Trader Joe’s ninth-annual Customer Choice Awards contest, which focuses entirely on the retailer’s private brands. Once again, voters named the Monrovia, Calif.-based retailer’s Mandarin Orange Chicken as their Favorite Overall product. Runners-up in the Favorite Overall category are: Everything But The Bagel Seasoning, Unexpected Cheddar, Dark Chocolate Peanut, Butter Cups, Cookie Butter Here are the other category winners and runners-up: Favorite Bakery Winner: Almond Kringle Runners-up: Sliced French Brioche, Chocolate Brooklyn Babka, Sliced Sourdough Bread, Organic Baguette Favorite Beverage Winner: Spiced Cider Runners-up: Brewed Ginger Beer, Wine. All Of It, Sparkling Mineral Water, Triple Ginger Brew

Favorite Candy Winner: Dark Chocolate Peanut Butter Cups Runners-up: Scandinavian Swimmers, Dark Chocolate Covered Almonds, English Toffee, Dark Chocolate Covered Espresso Beans Favorite Cheese Winner: Unexpected Cheddar Runners-up: Double Cream Brie, Cheddar Cheese With Caramelized Onions, Smoked Gouda Pub Cheese Favorite Coffee Winner: Cold Brew Coffee Concentrate Runners-up: French Roast, Wintry Blend, Pumpkin Spice, Organic Fair Trade Sumatra

8”

Favorite Condiment Winner: Organic Ketchup Runners-up: Green Dragon Hot Sauce, Sweet Chili Sauce, Everything But The Bagel Seasoning, Organic Sriracha & Roasted Garlic BBQ Sauce Favorite Produce Winner: Bananas Runners-up: Avocados, Teeny Tiny Avocados, Riced Cauliflower, Brussels Sprouts Favorite Frozen Appetizer Winner: Spanakopita Runners-up: Spinach & Artichoke Dip, Chicken Gyoza Potstickers, Vegetable Bird’s Nests, Bacon Wrapped Scallops Favorite Frozen Dessert Winner: Hold The Cone! Mini Vanilla Ice Cream Cones

Runners-up: New York Deli Style Cheesecake, Macaron Variés, Key Lime Pie, Sublime Ice Cream Sandwiches Favorite Frozen Entrée Winner: Mandarin Orange Chicken Runners-up: Joe’s Diner Mac ’n Cheese, Chicken Tikka Masala, Hatch Chile Mac ‘n Cheese, Kung Pao Chicken Favorite Health/Beauty Winner: Tea Tree Tingle Shampoo Runners-up: Coconut Body Butter, Honey Mango Shave Cream, Organic Argan Oil, Jojoba Oil Favorite Holiday Winner: Candy Cane Joe-Joe’s Runners-up: Mini Dark Chocolate Mint Stars, Dark Chocolate Covered Peppermint Joe-Joe’s, Jingle Jangle, Panettone Favorite Home Winner: Flowers Runners-up: Lavender Dryer Bags, Liquid Laundry

Detergent, Pop Up Sponges, Bath Tissue Favorite Meal on the Go Winner: Black Bean & Jack Cheese Burrito Runners-up: Cubano Seasoned Wrap, Tofu Spring Rolls, Joe’s Diner Mac ‘n Cheese, Southwest Salad Favorite Meat/Meatless Winner: Soy Chorizo Runners-up: Meatless Meatballs, Spatchcocked Lemon Rosemary Chicken, Carne Asada, Uncured Applewood Smoked Bacon Favorite Snack Winner: Peanut Butter Pretzels Runners-up: Organic Corn Chip Dippers, Roasted Plantain Chips, Cornbread Crisps, World’s Puffiest White Cheddar Favorite Pumpkin Winner: Organic Pumpkin Runners-up: Pumpkin Butter, Pumpkin Bread & Muffin Mix, Pumpkin Pancake Mix, Pumpkin Ice Cream

A LATTE.

www.storebrands.com / February 2018 / Store Brands

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GETTING SOCIAL

Q A with Steven M. Stallone Corporate Concept Chef/Own Brands, Southeastern Grocers

How did you come to the world of private brands? Private brands and grocery are actually quite new to me, but I am really enjoying my role with Southeastern Grocers. Previously, I worked as a corporate menu development chef for a private jet catering company. Describe the store brands industry in one word. Compelling. What do you like most about the industry? It is growing so rapidly that innovation and change is a top priority. I’m always trying to figure out what will be the next big thing.

As a chef, Steven Stallone says he is always trying to figure out what will be the next big thing.

What’s the industry’s biggest challenge? Customer loyalty can be a challenge, but it also poses the opportunity to consistently deliver quality. It’s so important to maintain the quality and consistency of your products, and the respect of customers throughout all stores. Who is your hero and why? I have two heroes — my sons Aidan and Evan. Their love, passion and generosity inspire me to be a better person. Evan is six and wants to be a chef. Aidan is seven and has already surprised me with a breakfast of toast, yogurt and hot cocoa. Soon I’ll have my own personal chefs! What trait in yourself do you attribute most to your success? Creativity has always allowed me to think outside of the box. When I get an idea in

Store Brands / February 2018 / www.storebrands.com

my head, I act on it right away. What is the biggest obstacle you have ever overcome? I started my culinary career at a very early age and graduated culinary school at 21. Working with great chefs in my early years allowed me to work my way up the leadership ladder quickly. I landed my first executive chef role when I was 22. However, that role came with challenges. Managing employees twice my age was very uncomfortable at times. Ultimately, I learned how to earn their respect by being a leader instead of a manager. What’s the best advice someone ever gave you? Never pass up on something that could be great just because it might be difficult. Its 5 o’clock (or later), what do you do for fun? I like building things using reclaimed pallet wood. I started this about a year ago and have already made several furniture pieces and home décor items. You have a week off. Where do you go and why? Hawaii, where I got married. It was one of the best times of my life. If you were born 100 years ago, what would you do for a living? I might have been an artist. What song do you love to crank up in the car? “Let You Down” by NF. What’s the best book you’ve ever read? Anthony Bourdain’s “Kitchen Confidential.” SB

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COVERCOVER STORY: COVER STORY STORY

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Kroger CROWNING

Behind Vice President of Our Brands Gil Phipps, the supermarket chain has achieved one of the top private brands programs in the country, a reason the grocer is our 2018 Retailer of the Year

You’ll never catch Gil Phipps muttering to himself during the workday that it’s 5 o’clock somewhere. Phipps, the Kroger Co.’s vice president of Our Brands, enjoys his job too much for that kind of contrary thinking. For Phipps the fun begins every morning around 8 o’clock when he shows up for work at the supermarket chain’s skyscraper headquarters in downtown Cincinnati. The inventive and enterprising Phipps gets down to business on concepts and strategies for Kroger’s Our Brands, the grocer’s impressive store brands program. “It’s the most fun thing you could do,” Phipps says of his role, which he has held for nearly six years. 14

Store Brands / February 2018 / www.storebrands.com

BY LAWRENCE AYLWARD

Through Kroger’s Our Brands, Gil Phipps simply wants to improve people’s lives. www.storebrands.com / February2018 / Store Brands

COVER STORY:

Gil Phipps (center) instructs members of Kroger’s Our Brands team to not be risk-averse. “I would rather people experiment and explore,” Phipps says.

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There’s pressure, but it comes with the territory of leading one of the nation’s largest grocery programs in private brands. But the pressure is a motivator; Phipps feeds on it like he would a bowl of Kroger-made Private Selection Pecan Pie Ice Cream. The enthusiasm that Phipps brings to his job is contagious and has caught on with other members of the Our Brands team. Phipps and his team are determined to bring not just the best store brands possible to the Kroger customer base, but store brands that customers can’t find anywhere else. “From a consumer standpoint, we want to improve people’s lives,” Phipps says. “If that’s our driving principle, people will embrace what we do.” Signs point to people doing just that. In Kroger’s 2017 third quarter, Our Brands made up 28.2 percent of unit sales and 25.6 percent of sales dollars, figures that exceed the national average. From 2011 to 2017, Kroger’s Our Brands grew from $15 billion to $20.5 billion in annual sales. In October, Kroger announced Restock Kroger, a plan to “redefine the food and grocery customer experience.” Restock Kroger will be fueled by capital investments, cost savings and free cash flow. The plan calls for Our Brands to play a pivotal role in the strategy. That was evident in January when Kroger said it was launching its largestever Our Brands customer-sales promotion. Behind Phipps, Kroger has achieved one of the top private brands programs in the country — the reason Kroger is our 2018 Retailer of the Year. KROGER IS THE nation’s largest supermarket chain and second-largest retailer behind Walmart with annual sales of $115.37 billion. Kroger operates about 2,800 stores in 35 states and Washington, D.C. Kroger-owned supermarket banners also include Matthews, N.C.-based Harris Teeter, Milwaukee-based Roundy’s and Compton, Calif.-based Ralphs. Kroger also owns 38 manufacturing plants, where it makes 40 percent of the products that comprise Our Brands (see sidebar on page 24). Kroger was founded in 1883 by Bernard “Barney” Kroger, who also began the retailer’s private brands. Barney made his own products such as bread, coffee and peanut butter and sold them from his store in downtown Cincinnati. His marching order for achieving the best customer experience was simple: “Be particular. Never 16

Store Brands / February 2018 / www.storebrands.com

KROGER’S CREDENTIALS The Kroger Co. was founded in 1883 in Cincinnati by Bernard “Barney” Kroger, who also began the retailer’s private brands. Barney made his own products such as bread, coffee and peanut butter and sold them from his store in downtown Cincinnati.

COVER STORY: sell anything you would not want yourself,” he said. That thinking is not lost upon Phipps, who has expanded on Barney’s motto. “It’s about creating a lasting emotional connection with our customers through innovation rooted in empathy,” Phipps says. Kroger’s Our Brands cover several tiers. The Kroger brand is the retailer’s mainstream and largest store brand line with about $13 billion in annual sales. In fact, it’s the largest brand sold in Kroger stores by eight times the next largest consumer packaged goods brand. The Kroger line consists of products across various categories, including grocery, meat, coffee, produce, deli, bakery, household essentials and personal care. Many mainstream private brand lines are billed as brand knockoffs, but Phipps wants none of that thinking. “Instead of having knockoffs of existing products, we want to have knockout versions of those products,” he says. Private Selection, a premium line featuring gourmet and artisan offerings, has annual sales of about $2 billion. Products include breads, cakes, cookies, beverages, dairy products, meats, sauces, pastas, spices and seasonings, rubs, hummus and other products. With Private Selection, Kroger aims to take premium tastes to the next level. ‘We know that people like eating foods from around the world,” Phipps says. “But there are more international flavors than just sriracha. We have introduced harissa (a Maghrebi spice), peri peri (an African bird’s eye chili spice) and aji amarillo (a Peruvian spice) in several of our products. So our customers go from not knowing what peri peri is to knowing what it is and then to loving its flavor.” Simple Truth and Simple Truth Organic comprise Kroger’s free-

KROGER’S CREDENTIALS Kroger is the nation’s largest supermarket chain and second-largest retailer behind Walmart with annual sales of $115.37 billion. Kroger operates about 2,800 stores in 35 states and Washington, D.C. Krogerowned supermarket banners also include Matthews, N.C.-based Harris Teeter, Milwaukee-based Roundy’s and Compton, Calif.-based Ralphs.

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Store Brands / February 2018 / www.storebrands.com

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COVER STORY: STORY

KROGER’S CREDENTIALS In Kroger’s 2017 third quarter, the retailer’s private brands, called Our Brands, made up 28.2 percent of unit sales and 25.6 percent of sales dollars, figures that exceed the national average. From 2011 to 2017, Kroger’s Our Brands grew from $15 billion to $20.5 billion in annual sales.

The ever-gregarious Gil Phipps likes to have fun at work. “Why shouldn’t it be fun?” he asks.

Store Brands / February 2018 / www.storebrands.com

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COVER STORY: from and organic line. Introduced in the fourth quarter of 2012, Simple Truth features more than 1,400 products across multiple categories. Kroger recently announced that Simple Truth had achieved $2 billion in annual sales. “Here’s Simple Truth in a nutshell: natural and organic foods that are affordable,” Phipps says. The success of Simple Truth and Simple Truth Organic has impressed Carl Jorgensen, director of global thought leadership/wellness for Stamford, Conn.based Daymon, a provider of retail strategies and services to help retailers grow their private brands. Jorgensen calls Simple Truth the most successful private brand launch in the history of the grocery industry. “The success of Simple Truth and Kroger’s other private brand programs is a testament to the fact that Kroger is thinking in a new way about private brands and treating them as actual brands,” Jorgensen says. Kroger’s HemisFares line is classified as an ultra-premium private brand. Created by Phipps and introduced in 2015, HemisFares is billed as “a journey of epicurean proportions.” The brand, which offers “a guided tour of the best tastes on Earth,” features authentic finds from Spain, Italy, Jamaica and Japan. Phipps and his team, including Brad Studer, brand and marketing director for Our Brands, have traveled abroad and searched like the raiders of the lost ark for those tastes. One of their finds came from Japan — a double-brewed soy sauce made by the same family using the same method for more than 1,500 years. Another product in the HemisFares line is Spanish Cornicabra Extra Virgin Olive Oil. “There are two places you can get cornicabra olive oil,” Phipps says. “There is a woman in Spain who owns all of the cornicabra olive trees. You can knock on her door and maybe she will give you some. Or you can get it at our stores.”

Store Brands / February 2018 / www.storebrands.com

KROGER’S CREDENTIALS Kroger owns 38 manufacturing plants around the country, where it makes 40 percent of the products that comprise Our Brands.

Considering the due diligence Phipps and his team must conduct to secure the products, HemisFares only has about 40 SKUs. But it’s growing. “We have some cool things coming out,” Phipps says. WHILE LEADING A TOUR of the Our Brand offices on the 15th floor of the Kroger building, Phipps points to photographs of Kroger stores from another era. Phipps, Studer and the rest of the Our Brands team, totaling about 35 people, have not only transformed Kroger’s private brands to the present era, but they are already gearing up for the next era by leveraging customer insights provided by 84.51°, a wholly owned subsidiary of Kroger. 84.51° brings together customer data, predictive analytics and marketing strategy to drive sales growth and customer loyalty. Through 84.51°, Kroger can navigate complex data to reveal relevant customer trends so it can offer more personalized products and services. With 84.51°, Kroger wants to take innovation to another level. “Many companies use innovation in a very broad sense,” Studer says. “But the true definition of it in our model is to create something that has never been created before … something that will change people’s lives. To innovate to that level is extremely challenging, but we are doing it.” While 84.51° is a tremendous asset, Phipps is not afraid to develop a product because he has or someone on his team has a “gut feeling” that it will succeed. “There’s a trend across the country toward Nashville hot chicken,” Phipps relates. “So what if we made a potato chip that tasted like fried chicken with Nashville hot seasoning on it?” Phipps and his team had a gut feeling the chip would succeed as a store brand, so they developed Nashville Style Kettle Cooked Hot Chicken Potato Chips

KROGER’S CREDENTIALS Kroger’s Our Brands cover several tiers. The Kroger brand is the retailer’s mainstream and largest store brand line with about $13 billion in annual sales. Private Selection, a premium line featuring gourmet and artisan offerings, has annual sales of about $2 billion. Simple Truth and Simple Truth Organic comprise Kroger’s free-from and organic line and also recently achieved $2 billion in annual sales. HemisFares is classified as an ultra-premium private brand. Billed as “a journey of epicurean proportions,” the brand’s products offer “a guided tour of the best tastes on Earth.”

www.storebrands.com / February2018 / Store Brands

COVER STORY:

‘PLANTED’ IN PRIVATE BRANDS The Kroger Co. owns 38 plants that manufacture approximately 40 percent of its private brands, including about 60 percent of its center-store items. Nineteen plants are dairy, 10 are bakery (including two that also manufacture deli products) and the remaining make grocery items. The plants are strategically spread across the country and located near Kroger’s divisions. Kroger operates all of the plants except two meat plants — one in Colorado and one in Southern California, both of which it owns but outsources operations. Manufacturing its own private brands is a competitive advantage for Kroger for several reasons, one being that it provides the company with “incredible sourcing power,” says Erin Sharp, Kroger’s group vice president of manufacturing. The bigger the buy, the better leverage the company has. “By manufacturing our own products, we lower our costs and pass the savings on to our customers,” Sharp says. “We constantly monitor our costs to ensure we are delivering high-quality products at a competitive price.”

All the dairy plants are 100 percent vertically integrated, which allows Kroger to be faster to market with products. “We put a huge emphasis on the freshness of our products, particularly in dairy,” Sharp says, noting that the dairy plants continue to invest in processing technology to improve shelf life. “We guarantee our customers 10 days of milk freshness, which is nearly a 40 percent increase in the last 10 years.” When Sharp joined Kroger about six years ago, she says all plants operated in “several siloes,” something she wanted to change. Her goal was to get the plants operating as one network. Sharp implemented a set of management practices called HPWS (high performance work system) across all plants to create an environment where employees have greater involvement and responsibility. It has been a cultural transformation, but Kroger’s 8,000 plant employees, whom Sharp calls “associates,” are now well-connected to the manufacturing goals, and Sharp empowers them to be more involved in operations. “I challenge our plant leaders to walk a store with their teams and look at what we are not producing and could be producing,” Sharp says. “It’s all about making us more competitive and relevant for the future.” Kroger outsources 60 percent of its private brands for manufacturing, including all items for non-food private

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Kroger continues to invest in technology at its dairy plants to improve product shelf life.

brands. One of Kroger’s suppliers is Ontario, Calif.based Niagara Water, which manufactures 90 percent of Kroger’s bottled water. Niagara has plants across the country and can aptly serve Kroger’s distribution centers. In addition, Niagara is constantly improving its plant technology in the sector, Sharp says. “It just made sense for us to partner with them,” she adds. In determining potential suppliers, Kroger studies the players in the particular product landscape and decides if it will need one or multiple partners, and if they can effectively deliver to Kroger’s distribution centers. Food safety and quality are the most important steps in the vetting process, which Sharp calls rigorous. “They don’t even get in the mix if they don’t meet certain food safety standards,” Sharp says. Improving sustainability is a constant goal for all

plants. Thirty-three of the 36 plants that Kroger operates are now zero waste to landfill, and Sharp expects that number to climb to 35 by the end of the year. A reduction in packaging material is another goal. Last year, Kroger launched a new lightweight gallon milk jug that uses less plastic. While the new jug is made of the same 100 percent recyclable high-density polyethylene as the old jugs, its unique design allows Kroger to use about 10 percent less plastic. The new jugs will soon be used in 17 of Kroger’s 19 dairy plants. Sharp’s team works closely with Gil Phipps, Kroger’s vice president of Our Brands, and his team. “They develop the strategy, and we are the enabler either through our manufacturing or with our sourcing team,” Sharp says. —Lawrence Aylward

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COVER STORY: under the Kroger brand. The chips debuted late last year. “We tasted them and said, yep, this will be a winner,” Phipps says. “People are looking for flavors they aren’t getting anywhere else.” Phipps instructs his team to not be risk-averse. So he’s OK if a product introduction sometimes doesn’t succeed. “I’ll take some misses if we are trying things that nobody has ever tried before,” Phipps says. “If you expect everyone to know the answer of everything, everyone will know the answer of everything. I would rather people experiment and explore.” Studer says: “It’s the art and science of food, and we are playing with it. What I’ve found is you must have diverse thinking and be comfortable with it.” Kroger is also investing in other areas of private brands such as apparel and floral. In October, Kroger opened its own restaurant, Kitchen 1883, which features a fresh take on new American comfort food. There are also the intangible store brands, which can help any retailer better its image through the customer experience. Kroger offers home delivery and curbside pickup. This year, Kroger will roll out its Scan, Bag, Go technology to 400 stores, allowing shoppers the convenience to scan and pay for their purchases without traditional checkout lanes. Last year, Kroger unveiled Zero Hunger/Zero Waste, aimed at ending hunger in the

communities it calls home and eliminating waste in the company by 2025. Kroger didn’t introduce Zero Hunger/ Zero Waste for good public relations, but consumers who learn of it will be impressed by Kroger’s altruism. “MASSIVE.” THAT’S THE WORD that Kroger CEO Rodney McMullen uses to describe the potential of Kroger’s Our Brands. Grocery pundits won’t argue with McMullen, considering Kroger’s track record with its private brands. But just like other retailers, Kroger faces challenges with its store brands in the market place. Competition is fiercer than ever and some retailers are driving down price, using their private brands as leverage. McMullen says Kroger won’t lose on price, but it also won’t try to lead the market down on price. He also says Kroger views anyone who sells food as competitors. Phipps is aware of the challenges and the role that Kroger’s private brands play in combatting them, but he’s a bring-it-on type of guy. So Phipps will keep showing up for work at 8 o’clock every morning to do what he does best — working with his team to take Kroger’s Our Brands to another level and then to another level after that. And he’ll have plenty of fun doing it. SB Aylward, editor-in-chief of Store Brands, can be reached at laylward@ensembleiq.com.

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Store Brands / February 2018 / www.storebrands.com

FOCUS ON FRESH

THE

MEAL KIT Own-brand offerings can help retailers differentiate while spicing up their assortments in the fresh category By Lawrence Aylward

n their seemingly ceaseless quest to provide timestarved consumers with easy-to-prepare options for meals, more grocery retailers are introducing private-branded meal kits. Featuring pre-measured food ingredients and recipes for consumers to prepare their own meals at home in a short time, meal kits are just the latest offering to refresh the growing fresh category, whether retailers are offering them in-store, for click and collect, or for online ordering and delivery. And meal kits are moving. According to a March 2017 study from consumer market researcher Nielsen, one in four adults had purchased a meal kit (in-store or for delivery) in the previous year and a whopping 70 percent of those purchasers said they plan to buy meal kits again. Consumer market researcher Packaged Facts recently reported that the meal kit business has “mushroomed” to $5 billion in sales. “This space is the most striking example of the movement toward greater convenience in getting fresh foods to the consumer,” says David Sprinkle, research director for Packaged Facts, in the report. “And new approaches to fresh food groceries are what consumers are most interested in, and what will determine the winners and losers of the current food industry re-set.” New approaches to fresh food groceries are also exactly what retailers are looking to capitalize on with private brands.

When The Kroger Co. rolled out its Prep+Pared Meal Kits last year, the Cincinnati-based supermarket chain made it as clear as a bottle of privatebranded water that the new offerings were part of its own brands, which Kroger calls Our Brands. In a store in Newport, Ky., the Prep+Pared Meal Kits were merchandised in a stately and easy-to-spot kiosk toward the front of the store. In a press release, Kroger’s Senior Vice President of Merchandising Robert Clark said Prep+Pared Meal Kits are a growing part of Kroger’s Our Brands portfolio. The Prep+Pared Meal Kit ingredients are fresh, seasonal, prepped and measured to precisely provide customers with only what is needed for each recipe. Cooking time for each meal kit is about 20 minutes. The meal kits feed two adults and range in price from $14 to $20. Gil Phipps, Kroger’s vice president of Our Brands, says food and packaging waste is a concern for consumers, and Prep+Pared addresses that issue. “[Each meal kit contains] only what you need to feed two people a meal,” Phipps says. “There is very minimal packaging and no wasted product.” Kroger began testing Prep+Pared in May 2017, and the retailer says customers have responded favorably. That’s not surprising. “From a culinary standpoint, this is not rocket science,” says Jim Wisner, a private brands consultant and president of Libertyville, Ill.-based Wisner Marketing Group. www.storebrands.com /February 2018 / Store Brands

FOCUS ON FRESH

Wegmans Foods Markets launched Power Meals in early 2017 to provide well-balanced meals.

While Wisner doesn’t believe that meal kits will be a huge revenue generator for retailers, they will certainly make retailers enough money to justify them as a worthy investment. “From a margin standpoint, I would anticipate that retailers will target a return in the range of other prepared food offerings,” Wisner says. The barriers to entering the category are low, including from a financial standpoint, Wisner adds. “You don’t have to be a prime manufacturer to do this in private label,” Wisner says. You don’t need manufacturing. You need assembly.” Meal kits also allow retailers to differentiate through innovation, which is the calling card these days for private brands. Consider Kroger’s Prep+Pared Meal Kit offering that features Vietnamese-inspired spicy lemongrass pork with coconut rice and cabbage salad. Talk about distinct. “Meal kits allow [retailers] to do things to differentiate themselves from the competition in a very significant way,” Wisner says. “They [allow retailers] to customize what meal offerings are down to an individual store level.” And meal kits provide flexibility. If a recipe is not selling, a retailer can switch it out quickly and offer something different, Wisner says. Retailers can also take a value or convenience or premium approach to meal kits.

WHY MEAL KITS MAKE SENSE

Meal kits are simply an extension of meal solutions or what’s-for-dinner programs that retailers began offering in the 1990s. “What has changed is that technology has enabled new forms of competition,” says David Bishop, a partner with Brick Meets Click, a Barrington, Ill.based firm that offers consulting and retail advisory services for grocery. That technology is in the form of online meal kit providers such as Blue Apron, Chef ’d and others, which have made it clear that consumers have embraced meal kits, Bishop says. But something has happened while those meal kits were in transit via FedEx to consumers: Brickand-mortar retailers have realized that meal kits are a segment that they can easily and quickly capitalize on, Bishop says. In the second quarter of 2017, a Bricks Meet Click shopper research revealed that supermarkets’ share of online spending for groceries was about 31 percent. Online meal kit providers accounted for about 9 percent of spending. Supermarkets looked at that 9 percent and asked themselves how they could get that share, which has sparked them to introduce meal kits, Bishop says. Supermarkets and other retailers also realized the weaknesses associated with online meal kit providers — and they are pretty big weaknesses. First, online meal kit providers lack proximity to physical customers because they don’t have brickand-mortar stores, Bishop points out. Second, brickand-mortar retailers can do meal kits cheaper and perhaps fresher. “Now you see retailers like Kroger offering their versions of meal kits at much affordable prices,” Bishop says, noting that Brick Meets Click expects

WHY CONSUMERS LIKE MEAL KITS According to a recent Harris Poll, 25 percent of adults purchased a meal kit in 2016 and 70 percent of meal kit buyers continue to actively purchase meal kits. The top reasons consumers buy meal kits are:

46%

Save time on meal planning

45%

short prep and cook times

37%

save time on grocery shopping

36% try new recipes

34% healthy recipes

Source: Harris Poll of 2,015 U.S. adults aged 18 and over who were surveyed online between Dec. 27 and Dec. 29, 2016. 28

Store Brands /February 2018 / www.storebrands.com

FOCUS ON FRESH physical grocers to soon “own” the meal kit category. From the beginning, Wisner says, online meal kit providers posed a concept that “did not have a consequential barrier to entry.” “The cost of the subscription model that a Blue Apron has is extremely high relative to what a retailer is going to have to incur,” Wisner says. “So there is an economic disadvantage for the Blue Aprons of the world to continue over the long haul.” Wisner says meal kits can be serviced more effectively on a local basis. Consumers can decide if they want a meal kit “today” on the local level rather than ordering from a mail provider for a meal kit that they will receive a few days later. “Ultimately, [retailers] provide a more affordable option and a more convenient option,” Bishop adds.

RETAILERS GETTING ON BOARD

Kroger isn’t the only retailer that has recognized the potential of meal kits as a store brand. Last November, Publix Super Markets rolled out Slow Cooker Meals under its own brand with the tag line stating, “All the prep work is done. Delicious meals, made easy.” Last May, Lakeland, Fla.-based Publix introduced pre-bagged meal kits to a few stores featuring pre-measured ingredients available in three levels of preparation: simplest (heating the food), simpler (up to four steps of preparation) and simple (up to six steps of preparation). Eden Prairie, Minn.-based Supervalu Inc. recently launched Quick & Easy Meals, a line of meal solutions including meal kits, at its retail banners and the 3,000-plus independent grocery stores served by the company’s wholesale business. “Originally, a grocery store only needed to have the components to make the meal,” says Anne Dament, Supervalu senior vice president of retail, merchandising and marketing. “Now we need to have the full solution available to time-starved customers at our stores, or delivered to their homes, whether it is ready to eat, heat and eat, or prepare at home.” West Des Moines, Iowa-based Hy-Vee Inc. announced recently that it plans to build a $64 million production facility in Ankeny, Iowa, that will house the West Des Moines-based chain’s prepared foods commissary, central bakery and meal kit division. Other retailers are partnering with third-party branded vendors. Williamsville, N.Y.-based Tops Friendly Markets Tops recently struck a deal with Chef’d to sell its meal kits in dedicated displays. And then there is Boise, Idaho-based Albertsons Cos., which acquired the meal kit service Plated last September. Plated will operate as a subsidiary of Albertsons, but might Albertsons turn the business into an own brand over time? “That depends on how [Plated] continues to fair under the online subscription model,” Wisner says. “But [the acquisition] launches Albertsons forward a lot quicker without it having to do the legwork.” Retailers will likely market and merchandise meal kits in-store and online, but it’s vital they communicate that meal kits can be ordered online and picked up in-store, ordered online and delivered, and purchased in-store, Bishop stresses. Regarding in-store merchandising, Bishop says retailers should locate meal kits toward the front of the store where there is high traffic and visibility, preferably on a refrigerated end cap where they can also cross merchandise other items such as wine or desserts.

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FOCUS ON FRESH The current availability of meal kits among grocers is still low, but Bishop expects this to change quickly. “Retailers are testing the waters to figure out what will work for them,” he adds. Acceptability will depend on quality and price, Bishop says, noting that retailers are likely to be spot on with both factors. “It really comes down to [retailers’] selection of meals and recipes, and how they can adapt those and broaden attractiveness,” Bishop says. With packaging, Wisner says retailers can get away with it not being high cost. “But you don’t want the package to be unattractive,” he adds. “Yes, it can be in a cardboard box, but you want a more nicely printed box that doesn’t look like standard case packaging.” The audience for meal kits is predominantly composed of small families “who don’t want to burn out their pocketbooks” by eating out and who want to eat something healthier than fast-casual food, Wisner says. Others include urban dwellers and consumers looking to replace more processed frozen-prepared entrees with fresh items that are low in salt and free from other ingredients. Meal kits also provide families the opportunity to prepare meals at home, albeit in a shorter time because

they already have the recipe and ingredients, to provide family members with healthier meals, Bishop adds. With 60 percent of Americans using diet to help prevent ailments, the inclusion of fresh foods and easy-to-follow recipes makes meal kits a simple option for those looking to manage their health and diets, according to Nielsen’s report. To that point, Rochester, New York-based Wegmans Foods Markets launched a line of refrigerated Power Meals, priced from $8 to $15, early in 2017. In developing the heat-and-eat line, Wegmans’ meal development team consulted the company’s nutritionists to set the parameters that each offering needed to meet to provide well-balanced meals. Wisner says the category “has legs for the long haul,” but it will level out over time and there will be shrink. Meal kits won’t dominate retailers’ fresh food sections, but they will become an important component of their offerings. “[Retailers] will find their own solutions for what works well with their particular store formats and what works well with their particular customer bases,” Wisner states. SB Aylward, editor-in-chief of Store Brands, can be reached at laylward@ensembleiq.com.

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Store Brands /February 2018 / www.storebrands.com

TOTAL STORE

SIMPLIFYING

SHOPPING To win over busy consumers, grocery retailers are leveraging convenience BY CAROLYN SCHIERHORN

SUPERMARKET CHAINS AND MASS MERCHANTS

are finding that they must leverage convenience to win over time-strapped shoppers, especially younger consumers who have grown up in the digital age and are not used to waiting for anything. Today, 61 percent of adults younger than 35 live without a spouse or partner, according to the Pew Research Center, with millennials often residing alone in urban centers and foregoing or at least delaying car ownership. They favor omnichannel grocery shopping and make smaller and more frequent trips to brick-and-mortar stores, the Food Marketing Institute reports. Because it’s impractical for single apartment dwellers to buy in bulk, packaging size and ease of closure play a major role in their perception of convenience. But consumer convenience extends beyond the shopping experience, the transport of the groceries home, and the consumption of the products. Retailers today need to learn as much as they can about their customers’ everyday challenges and preferences and then offer tailored solutions, experts advise.

Managing choice for customers

On the “About us” page of its website, Arlington, Va.-headquartered Lidl U.S. emphasizes the convenience factor after high quality and low prices: “Hassle-free shopping that gets you in and out,” as the chain puts it. Indeed, the first two of six bullet points describing Lidl’s philosophy and operating procedures focus on streamlining the shopping experience. “Instead of offering a myriad of brands in every category, our stores offer carefully curated selections that are top-quality and best-prices,” Lidl states. “So your precious time is not spent sifting through endless versions of products you don’t want.” For Asheville, N.C.-based Earth Fare, a natural and organic grocery chain founded in 1975, building consum-

ers’ trust is a big way to save them time in the store, says Frank Scorpiniti, the company’s CEO. Because the retailer sells only fresh, fresh-prepared and minimally processed products and has a comprehensive food philosophy and “boot list” of banned ingredients and chemicals, customers know they can count on Earth Fare to do the rigorous vetting and legwork for them, he notes. Unlike many supermarkets with natural and organic sections and scattered clean-label items, Earth Fare limits itself to clean food, which is reassuring to shoppers, Scorpiniti maintains. “When I go to other retailers’ stores and see customers who want to eat clean, they commonly have their iPhone in one hand and a box in the other hand and are looking things up online,” he observes. “They are scrutinizing all of the containers, which turns shopping into a job. At Earth Fare, in contrast, we have a saying: ‘We read the label so you don’t have to.’ “If you look at our food philosophy and you believe in it, you could literally shop Earth Fare blind-folded and know that nothing you put in your basket is ever going to contain the ingredients you are trying to avoid.” With an average store size of under 25,000 square feet, Earth Fare and Lidl also have significantly smaller footprints than conventional supermarkets and mass merchants, which help customers find products faster and leave sooner. Smaller-format stores additionally enhance convenience by their ability to be situated closer to customers such as in dense urban neighborhoods and on college campuses, points out Jacque DeBuse, a spokeswoman for Minneapolis-based Target, which today operates approximately 60 such stores out of a total of 1,834. Of the 32 stores Target opened in 2017, the majority were small format, she says, noting that the company is on track to operate 130 smaller-footprint stores by the end of 2019. The smaller stores vary in size but are typically around half the size of Target’s 135,000-square-foot www.storebrands.com /February 2018 / Store Brands

TOTAL STORE products normally carried by hardware stores. Having strategically located smaller stores is also beneficial for Target’s growing e-commerce business, DeBuse adds. “Order pickup is available at all the small-format stores,” she says. “You can go onto Target.com and place an order and pick it up in a store later that day.”

Speeding up returns

Top: Target’s smaller-format stores provide SKUs that are relevant to particular neighborhoods. Bottom: Walmart’s new Mobile Express Returns program allows customers to initiate the returns process on a mobile app before bringing the item back to the store.

conventional store layout, and they carry a customized selection of categories and products. “These stores have a curated product assortment that really makes the shopping experience relevant to the neighborhood,” DeBuse emphasizes. “The assortment may include things like smaller pack sizes that are easier for guests to carry home, especially for those who live in large cities. Or a store might have categories that guests in that locale really want or need like fresh food or home décor.” Before opening a new smallerfootprint store, it’s essential to not make assumptions but rather survey neighborhood residents to see what they really want and what the product and service gaps are in that community, DeBuse notes. For example, in response to feedback from local consumers, a Target store that opened recently in San Diego has a large assortment of tools and other 32

Store Brands /February 2018 / www.storebrands.com

Of all of the possible hassles involved in the shopping experience, whether in store or online, returning items that don’t meet expectations can be the most irksome. Bentonville, Ark.-based Walmart is striving to streamline the process with its new Mobile Express Returns initiative. Currently available only for online items shipped and sold from Walmart.com, Mobile Express Returns debuted in November 2017. The program allows consumers to start the return process on their mobile devices through the Walmart app. At their nearest Walmart store, customers then can “fast-track” through the Mobile Express Lane at the customer service desk by pulling up a Quick Response (QR) code on a card reader, scanning the displayed QR code with the Walmart app, and handing the item to be returned to the associate. “We are looking at all aspects of the shopping experience and how we can make it quick and easy for our customers,” says Walmart spokeswoman Erin Hulliberger, who notes that lines for returns are among the “pain points” the retailer has been addressing. “We just really want to make those experiences that may have been a bit tedious in the past even a little bit enjoyable by allowing customers to use their smart phones to shoot through lines using our Mobile Express Lanes.”

Click-and-collect expands

As more and more retailers have discovered, flexibility is the key to customer convenience. When perishable and other groceries are ordered online, supermarket chains and mass merchants increasingly provide more than one way to unite customers with their purchases. Home delivery within a specific, usually two-hour time window remains an attractive choice for many people. But for some on-the-go households, especially families with children who have multiple activities and appointments, click-and-collect may be a more desirable option. Walmart has joined a growing number of grocery chains in providing what is generally known as “curbside pickup.” Walmart’s Online Grocery Pickup (OGP) program is rapidly expanding, points out Molly Blakeman, another Walmart spokesperson. “We ended 2015 with 100 OGP locations, 2016 with 600 locations and 2017 with 1,100 locations,” she says. “And next year we will add another thousand.” Customers who place orders through the Walmart Grocery app or on Walmart.com\grocery can use the service if an OGP location is nearby. In most cases, the specific pickup points are in a section of the Walmart parking lot. “You would go up to a designated parking spot and check in there with your mobile app or call a special number that would be on the parking spot for you to locate really easily,” Blakeman explains. “Then when the shoppers know that you’re there, they’ll bring the order out and put it right in your car for you.” SB Schierhorn, the managing editor of Store Brands, can be reached at cschierhorn@ensembleiq.com.

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INGREDIENTS AND FLAVORS

OPPORTUNITY The salty snack segment is on a flavor kick, allowing retailers to differentiate with private brands BY LAWRENCE AYLWARD

he salty snacks category is where private brands go to differentiate. Retailers and manufacturers have discovered that salty snacks provide them a canvas to capitalize on consumers’ ever-evolving palates to try new flavors and ingredients. Consider Spud Crunchies Potato Snacks, a recent introduction from Monrovia, Calif.-based Trader Joe’s, which the retailer describes as “salty, crunchy, shelf-stable French fries made from just three ingredients: U.S.-grown Russet potatoes, expeller pressed canola oil and salt.” And then there’s The Kroger Co.’s new Nashville Style Kettle Cooked Hot Chicken Potato Chips, sold under Kroger’s mainstream store brand tier. As far as capturing the taste of all-the-rage Nashville-style chicken, these chips are spot-on. Batavia, Ill.-based Aldi is also differentiating in the salty snack category with products like its Sweet Chili Brown Rice Crisps, which are sold under its LiveGfree store brand. So is Seattle-based online grocer Amazon, which offers roasted and salted plantain chips under its Wickedly Prime brand. Pete Pyeatt, director of product development for DairiConcepts, a Springfield, Mo.-based provider of ingredients for salty snacks and other foods, says many private brands have moved beyond just copying what a lot of national brands are doing in the salty snack category. “It is wide open; there’s no ceiling on it,” Pyeatt says of potential innovation in the category, which generated more than $27.5 billion in retail sales from February 2016 through February 2017, according to market researcher Nielsen. “There’s an endless combination of the types of flavors [for private brands] to come up with.” Barbara Moreno, director of marketing for City of Industry, Calif.-based Snak King, which manufactures salty

Store Brands /February 2018 / www.storebrands.com

snacks for private brands, says retailers are looking to differentiate with private-branded salty snacks made with unique ingredients and innovative, on-trend flavors. “We monitor the pulse of the industry to help our partners be first to market with new concepts,” Moreno adds. Jeff Sutton, business unit director of center store for Elk Grove Village, Ill.-based Topco Associates, which provides innovation and knowledge management solutions for its food industry members including grocery retailers, says, “If you can differentiate and hit the trend, you’ve got something shoppers can’t get anywhere else.” INNOVATIVE INGREDIENTS Potatoes and corn have been salty snack pillars for years and will continue to be so, but the category is adding new base ingredients to give salty snacks a healthier image, Pyeatt says. A recent report from market researcher Packaged Facts states that salty snacks are benefiting from an influx of health formulations that better fit the nutrition-centered lifestyles of many of today’s consumers. “This push towards healthier snacks has created a thriving market for alternative ingredient snacks made using pulses and alternative vegetables and grains such as chickpeas, sweet potatoes, kale and spinach among other novel elements,” according to Packaged Facts, which estimates the salty snack segment carried the alternative-ingredient snack market in 2016 with growth of almost 7 percent. Packaged Facts says that younger people are driving the alternative-ingredient salty snack market, and that there is “a very large gap in the percentage of millennials and Gen-X adults who eat these snacks compared to those who are 50 and older.” Moreno offers a list of healthier base ingredients she

INGREDIENTS AND FLAVORS expects will be popular this year and beyond such as alternative vegetables, whole and ancient grains, seaweed, pulses, peas, lentils, beans, nuts and seeds. “Ancient grains, specifically, offer a number of essential nutrients such as fiber, protein and other important vitamins and minerals,” Moreno adds. “Additionally, as consumers look for increasing their intake of plant-based proteins and gluten-free options, the following ancient grains fit the bill: quinoa, chia, sorghum and amaranth.” Katie Waeltz, senior director of shopper insights and analytics for Topco, says seaweed is an emerging trend in salty snacks that Topco is watching closely. “We’ve seen a number of new seaweed snack products launched in the past year and a half,” she says. “It’s being featured as a snack itself, as a chip or crisp, in stick form and as a featured flavor.” Because consumers are snacking more often and eating smaller meals, they want convenient, portable snacks with ingredients they can feel good about, Sutton says. “These healthier ingredients are often combined with richer, more decadent flavors,” Sutton adds. “Many of these

Store Brands /February 2018 / www.storebrands.com

Trader Joe’s latest salty snack offering is made from just three ingredients.

nutrient-rich snack ingredients are also gluten-free, which continues to be popular among consumers.” Pyeatt expects the demand for natural and free-from salty snacks to continue, including non-GMO products. “That is one trend I see that has been going for awhile, but it keeps getting stronger in salty snacks,” he adds. While it is challenging to create products with fewer ingredients, Pyeatt says DairiConcepts is keeping up with demand. The challenge comes in replacing disfavored ingredients with others that might not be fully developed yet or in great supply. FLAVOR ADVENTURES “Hot is hot” in salty snacks, says Gerry Tarpey, Topco’s associate sourcing manager. “Today’s consumers are becoming more adventurous and spicy flavor profiles — hatch chiles, jalapeño, sweet jalapeno and sriracha chile — continue to be on-trend,” he adds.

INGREDIENTS AND FLAVORS Waeltz expects sour flavors that suggest fermentation and pickling — such as dill pickle and salt and vinegar — will continue to be popular for the near term. Millennials are looking for a flavor adventure, and Moreno expects to see continued growth from new introductions associated with ethnic and spicy flavors in 2018. “Bland is out and bold is in,” she says, noting that market researcher Mintel recently revealed that one in four consumers are eating spicy foods more often than in the past. Pyeatt says DairiConcepts receives many requests to create ingredients combining certain meats with other flavors. Chicken and bacon are popular meat flavors that are being combined with hot flavors like peppers and chilies. Dairy flavors such as butter and sour cream are also popular. There is also more interest in specialty cheese flavors. A combination of sweet and hot flavors also remains on-trend. Pyeatt stresses that product developers should be careful not to mask base ingredients such as ancient grains with strong flavors that could overwhelm the taste they bring to salty snacks. In a recent study, market researcher Nielsen took to the salty snack aisle to see which flavors have the most appeal, putting 25 new flavors into non-traditional ingredients and sweet-heat pairings, and then putting them to the test with consumers to discover which flavors have the most potential for further development. “In terms of uniqueness, the study found that jerky chips made from meat infused with global flavors topped the charts,” accord-

ing to Nielsen. “Both lamb chips with feta and goat meat chips with curry ranked significantly higher than all other flavors in uniqueness, but they didn’t score as well in terms of need and desire, suggesting that the average consumer may not be running to the store for these flavors.” UP TO THE CHALLENGE The salty-snack category is getting more challenging for product developers, who are not only faced with coming up with new base ingredients and flavors but also with replacing certain ingredients. While challenging, Pyeatt welcomes it. He likes stretching the boundaries while searching for new base ingredients and flavors, which he also considers a learning experience. “The new requests give us new opportunities to try different things and different ingredients,” says Pyeatt, who has worked in product development for 20 years. “We find such [undertakings] very exciting to work on.” While Pyeatt says the salty snack category is prime for innovation, he advises product developers to not get too far off the tracks. “You can get to a point where a flavor profile is just not going to work. Yes, the sky is the limit with innovation, but some ideas that sound good on paper just don’t translate to salty snacks,” he says. SB Aylward can be reached at laylward@ensembleiq.com.

Put your mind in the Tropics! Subscribe to the iTi Innovation blog for recipes, infographics, and more.

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Store Brands /February 2018 / www.storebrands.com

CATEGORY INTELLIGENCE SOUP

A CUP OF STRATEGY Heating up private brand soup calls for clean-label products with a focus on convenience When it comes to comfort food, you can’t beat a cup of soup. But food that tastes good is not always good for you. Packaged soups, in particular, have gotten a bad rap for a long time due to their long list of processed ingredients and high levels of sodium. According to Mintel Group’s June 2017 report titled “Soup – US,” a majority of consumers agree that soup made from scratch is healthier than packaged soups. And yet, only a third of soup buyers surveyed prepare their own soup at home, perhaps due to time constraints. For retailers looking to grow their private brands in soup, the message is clear: Serve up soups that feature fewer ingredients and cleaner labels, and are packaged with consumer convenience and flexibility in mind.

Hot and trendy

Given the enormous size of the overall soups category (see chart), private brands’ nearly 12 percent dollar share seems puny by comparison. But a closer look at the data shows positive developments. Dollar sales of private brands grew 9.6 percent and unit sales also grew almost 10 percent for the 52 weeks ending Nov. 5, 2017. Growth opportunities are popping up in a few up-and-coming trends. These trends include bold flavors and clean-label products made without artificial ingredients that also feature fewer ingredients and all real ingredients, says Tom Lavan, chief executive officer of Riverbend Foods in Pittsburgh. Millennials, in particular, view eating as an experience and are on the hunt for products that have exotic and ethnic twists, Lavan says. Examples of these flavor combinations across various categories include cold-brew coffee varieties, turmeric bourbon, mango habanero, Moroccan ginger, Korean barbeque and vegetarian chorizo, he adds. While trends in flavors come and go, clean labels and the overall commitment to eating better is one trend that will last for a long time, says Bob Sewall, executive vice president of sales and marketing for Blount Fine Foods in Fall River, Mass. But healthy soup offerings still need to taste great, says Mark Fields, vice president of store brands for Wornick Foods in Cincinnati. “While shoppers are seeking better-for-you ingredients, there’s not a desire to abandon the fact that soup should taste great and reflect that homemade experience,” he adds.

Grab and go

According to Mintel, consumers actually indicated minimal interest in the soup innovation options measured in the report. Instead, tasty flavors and convenient packaging that allow for a multitude of uses are much more likely to ring a bell with shoppers. “We’re existing in an on-the-go culture, and we have a generation of consumers who’ve never experienced a kitchen without a microwave,” Fields says. “At the same time, we’re more aware that convenience cannot be delivered at the expense of great taste — or good for you.” Tetra packaging, for example, is a portable and convenient delivery form especially for premium ready-to-serve soups. According to Lavan, it is even suitable for e-commerce given it’s lightweight and has a smaller footprint versus conventional cans. Other features include recyclability, cost efficiency and being bio-friendly.

Soup central

When it comes to promoting store brand soups, some retailers can fall into the trap of being too price-focused. “Oftentimes, promotion is only associated with temporary price reduction,” Fields says, “and I think that can be a trap for private brand programs.” He suggests lending private brand soups their fair share of secondary display to reinforce the value that they give to shoppers, adding that this type of promotion is critical for new assortments and especially

DON’T forget that consumers want healthy soup, but good-tasting healthy soup.

DO consider merchandising soups with other meal components such as salads and sandwiches.

www.storebrands.com www.storebrands.com/November /February 2018 2017 / Store Brands

CATEGORY INTELLIGENCE SOUP

new product and flavor innovation. Sewall agrees. “The most successful programs are a destination place,” he says. “They have that ‘wall of soup’ or have that section of the store carved out where it becomes a destination place versus having a couple of flavors here and there.” To further entice customers into the store, consider small trial Tetra box soup samples that can be shipped to new online customers, Lavan suggests. “E-coupons for store brand product sent directly from retailers to their customers combined with soup-of-the-day demos at retail stores are two great ideas for merchandising and promoting store brand product,” he adds. Sewall recommends retailers offer combo meals like those consumers enjoy at restaurants. “You want to be able to do that in your deli since you already have sandwiches, salads and soup,” he says. “Combine soups with other parts of the meal because people are already condi-

Soup Private Brands

All Brands

Dollar Sales (in millions)

$655.1

$5,654.9

Change vs. Year Ago

+9.6%

+0.6%

Dollar Share

11.6%

100%

Unit Sales (in millions)

528.6

4,152.8

Change vs. Year Ago

+9.9%

-0.6%

Avg. Price Per Unit

$1.24

$1.36

Source: InfoScan Review, 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 Nov. 5, 2017.

Store Brands / February 2018 / www.storebrands.com

tioned to buy it that way at restaurants.” And it when it comes to flavors, retailers should not just replicate flavors because a big brand has them, Lavan says. Limit assortment to high velocity SKU’s and expand cautiously, he advises. Above all, never cut corners when it comes to quality ingredients, flavor or packaging. “We often forget that cult classics in private brands weren’t established just because the product was more affordable,” Fields says. “Rather, it’s because that product delivered an amazing eating experience at a superior value.”

Looking ahead

Private brand soups are undoubtedly heating up as gains are being made in the various subsegments and the overall potential for the category has yet to be fully realized. Clean labels and good-for-you ingredients and formulations will continue to be in demand. And packaging that caters to on-the-go consumption and convenience will lead the charge for new trends in packaging innovation. “We’ll continue to observe packaging trends that foster convenience consumptions, and I think that menu trends and global influence will exert pressure on innovation,” Fields predicts. Functional health-focused products, according to Lavan, are likely to become more common, as well as soup designed for specific diets. For example, he notes that heartier soups containing more protein can be a meal option when formulated in tempting flavors for the mature population. “Soup is a comfort food classic, so true innovation will continue to be delivered as we continue to listen to shoppers, collaborate with retailers and deliver new programs with speeds, great pricing and, of course, great eating experiences,” Fields says. SB Jevtic is a freelance writer from Schaumburg, Ill.

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CATEGORY INTELLIGENCE PASTA

WELLNESS IS THE WAY Retailers have an opportunity to boost a stagnant pasta sector by offering healthier private brands in addition to conventional alternatives

DO work closely with suppliers to create the most pertinent products. DON’T discount the importance of offering organic pasta.

While still popular with different demographic groups, pasta, like many other traditional mainstream foods, is facing backlash from the growing base of consumers who are focusing on health and wellness. That said, pasta manufacturers are addressing the issue with healthier alternatives. “A general trend in the U.S. toward natural, healthier and higher-protein products as well as onthe-go snacking has brought increased competition from other products for share of stomach,” consumer market researcher Euromonitor notes in its December 2017 “Rice, Pasta and Noodles in the U.S. Country Report.” The U.S. compound annual growth rate (CAGR) for pasta also was flat between 2011 and 2015, with 41 percent of consumers perceiving rice and grains to be healthier than pasta, reports global market researcher Mintel in a May 2017 report on the worldwide pasta sector.

Spaghetti/Macaroni/Pasta (No Noodles) Private Brands

All Brands

Dollar Sales (in millions)

$528.4

$1,893.3

Change vs. Year Ago

-2.1%

-1.6%

Dollar Share

27.9%

100%

Unit Sales (in millions)

432.2

1,422.7

Change vs. Year Ago

+0.5%

-0.4%

Avg. Price Per Unit

$1.22

$1.33

Private Brands

All Brands

Dollar Sales (in millions)

$66.4

$257.2

Change vs. Year Ago

-0.9%

-1.7%

Dollar Share

25.8%

100%

Unit Sales (in millions)

39.5

127.7

Change vs. Year Ago

+4.5%

+0.8%

Avg. Price Per Unit

$1.68

$2.01

Noodles

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 Nov. 5, 2017.

“The trend for gluten-free and lowcarb diets and the vilification of wheat as a contributor to a variety of ailments, including weight gain, have contributed to the flat and declining sales of pasta in many key markets,” notes Mintel’s Jodie Minotto in the report. On the up side, wellness concerns are triggering the launch of healthier pasta options. In 2016, for instance, 28 percent of new U.S. shelf-stable pasta products were organic, while 20 percent had a low, no or reduced allergen claim and 17 percent were gluten-free, Mintel states. Wheat-free, gluten-free and better-for-you selections are now part of the standard pasta range, Minotto notes, adding that consumer demand for natural, unprocessed foods “has contributed to the rise in popularity of organic pasta.” Indeed, organic pasta is increasingly appearing in the main pasta section of supermarkets, says Liz Housman, director of marketing for Dakota Growers Pasta Co., a Carrington, N.D.-based pasta supplier. In addition, gluten-free pasta with blends of corn and rice and pastas made from lentils and chickpeas are becoming more popular, she states. A segment of consumers also is seeking pastas that are fortified with additional healthy ingredients, Housman says, including products with vitamins from vegetables or vegetable puree. To develop the most pertinent products and effective merchandising strategies, retailers should work closely with their suppliers and leverage the strengths of each party, says Mike Cunningham, Dakota Growers’ director of private label. “When combining the manufacturer’s strength of category expertise and product research and development with the retailer’s consumer and analytic insights and the power of the marketing team, the retailer is in position to be the brand leader and bring innovative products that consumers can only find at their stores,” he states. To further spur sales of store brands, Cunningham says it is important that retailers concentrate on private brands and not lose focus because of the opportunity to receive promotional funding from the national brands. “This takes a plan and commitment to that plan,” he states. “Pasta is a heavily promoted category and sometimes brand dollars are the main driver.” SB Mitchell is a freelance writer from Wilmette, Ill.

Store Brands / February 2018 / www.storebrands.com

CATEGORY INTELLIGENCE PACKAGED FRUITS & VEGETABLES

MAKE IT MEMORABLE Retailers can make private brand packaged fruits and vegetables more alluring by developing and spotlighting convenient and novel selections

DO devote at least 70 percent of shelf space to store brand packaged vegetables and fruit.

Supermarket shoppers are flocking to fruit. Greater consumer interest in healthful snacks is boosting fruit sector revenues with annual sales surpassing $50 billion, up 19 percent from 2012, reports global market researcher Mintel. Such gains are occurring despite declines in some areas of the sector. Indeed, fresh fruit is generating more than 90 percent of sector revenues as sales of canned and jarred fruit fell 7.5 percent from 2012 to 2017, Mintel states in its June 2017 “Fruit – U.S.” report. Because many consumers believe that canned fruit and fruit cups are overly processed and high in sugar, the segment is set for further declines, Mintel notes, adding that 21 percent of consumers say they don’t even consider the items when buying fruit. In response to such attitudes, brands can position packaged items as convenient snacks, particularly as one-third of the large base of millennials say that they struggle to fit enough fruit in their diets, Mintel states. Opportunities also exist for new fruit products as many shoppers are seeking a range of alternatives, including selections packaged in juice and freeze-dried options, Mintel notes. Stressing the healthful attributes of fruit on package messaging, meanwhile, particularly non-GMO claims,

DON’T use pillow bags for frozen fruit because they often look messy. 44

Store Brands / February 2018 / www.storebrands.com

will help boost activity as “consumers are still relatively skeptical of genetically modified fruits,” Mintel adds.

Position vegetables as versatile

Fresh options also are dominating the vegetable sector. While total vegetable revenues grew 13 percent from 2011 to 2016, the non-fresh segment is languishing, with many shoppers perceiving the items to be heavily processed and less convenient, Mintel notes in its May 2017 “Vegetables – U.S.” report. Non-fresh brands, however, can emphasize convenience by offering multiple-sized packages, as well as sealed portions for increased freshness and flexibility, Mintel notes. “Shelf-stable vegetables struggle not only with a reputation for being too processed and bland but also with use occasions,” Mintel states. “Perceived versatility may be enhanced by communicating specific use occasions in meal types and through recipe suggestions, especially those that feature bolder flavors.” With about 40 percent of consumers seeking vegetables that are easy to snack on, private brands also can benefit by developing ready-to-eat products in convenient, portioned and portable packaging, Mintel reports. “Consumers are very busy and are looking for healthy eating and snacking options that take little time to prepare,” says Isabelle Chartrand, marketing director for Nature’s Touch Frozen Foods, a Saint Laurent, Quebec-based supplier of frozen fruits and vegetables. That includes millennials who are seeking healthy and convenient options for their children, including organic and all-natural varieties and different-size packages, as well as aging baby boomers who are giving greater attention to healthy recipes, she states. While retailers can highlight store brands with colorful packaging, many private brand merchandisers still are hampering sales by using pillow bags, which have designs that make it difficult for shoppers to identify items, Chartrand states. “Because the bags do not hold up on shelves, the frozen fruit section can easily look messy if there are no merchandising tools or display-ready boxes to keep the products organized,” she says. Indeed, developing a consumer-friendly frozen food

aisle and educating consumers about the advantages of frozen over fresh are keys to maximizing segment sales, she states. Merchandisers also will create interest by having a frozen produce section where they can display fruits and vegetables together and by leveraging such tools as instore signage and e-newsletters to highlight products and describe attributes, Chartrand adds.

I M PERI A L

FROZ EN FOOD S

Frozen Broccoli Private Brands

All Brands

Dollar Sales (in millions)

$196.6

$413.6

Change vs. Year Ago

+1.2%

Dollar Share

47.5%

100%

Unit Sales (in millions)

115.3

214.5

Change vs. Year Ago

+0.7%

+0.3%

Avg. Price Per Unit

$1.70

$1.93

Frozen Prepared Vegetables Private Brands

All Brands

Dollar Sales (in millions)

$6.9

$233.3

Change vs. Year Ago

+15.4%

-11.8%

Dollar Share

3.0%

100%

Unit Sales (in millions)

3.5

122.4

Change vs. Year Ago

+18.2%

-11.7%

Avg. Price Per Unit

$2.01

$1.91

FROZEN FRUIT AND VEGETABLES YOU WILL LOVE

Canned/Bottled Peaches Private Brands

All Brands

Dollar Sales (in millions)

$146.5

$419.1

Change vs. Year Ago

-2.3%

-2.4%

Dollar Share

35.0%

100%

Unit Sales (in millions)

96.0

226.0

Change vs. Year Ago

-0.8%

-1.4%

Avg. Price Per Unit

$1.53

$1.85

Quality you can see

Leading Supplier of Grade A Conventional & Organic Frozen Fruits & Vegetables

919.435.0459 | www.imperialfrozenfoods.com www.storebrands.com /February 2018 / Store Brands

CATEGORY INTELLIGENCE PACKAGED FRUITS & VEGETABLES In addition, it is essential that store brand product development, which has been lagging over the past 18 months, keeps pace with national brand activity, says Alex McIntosh, vice president of sales for Imperial Frozen Foods, a Wake Forest, N.C.-based supplier of frozen fruits and vegetables. “Many retailers are caught up in red tape which severely slows the speed to market,” he says. “They need to make sure their product, price and promotional activity is on point. Packaging should be updated and on-trend with a clear concise message and photography.”

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Retailers also need to offer the packaging sizes that meet consumer demands, he states, noting that “if you are using packaging that is less than 16 ounces, your sales are suffering.”

Keep store brands in the spotlight

To further strengthen the awareness and popularity of store brands, retailers should devote at least 70 percent of shelf space to private brand selections, McIntosh recommends. “There is very little consumer loyalty to brands within frozen fruit and consumers are happy to enjoy the value proposition of the store’s own brand providing that the product, pack size and quality are on point,” he states. That includes offering unique fruit or fruit and vegetable blends, particularly for use in homemade smoothies, McIntosh says. More consumers also are seeking larger bags of frozen fruit because of greater consumption and interest in value, as well as snack packs which offer portion control, exact sizes for specific smoothie blends and convenient on-the-go snacking, he notes. Among the roadblocks to maximizing private brand sales, however, is competition for merchandising space between proponents of national and store brands, McIntosh states. “The grocery team that focuses on slotting and rebates takes a very shortsighted approach to sales and margins,” he says. “Private label within frozen fruit will drive revenue and margin from the freezer and will generate higher returns in the long run versus a heavily branded merchandised set. There is a huge opportunity for continued growth.” SB Mitchell is a freelance writer from Wilmette, Ill.

Store Brands / February 2018 / www.storebrands.com

CATEGORY INTELLIGENCE PET FOOD

A MAN’S BEST FRIEND Consumers increasingly treat their dogs and cats as they treat themselves, which bodes well for private brands The cultural shift that transformed pets into “fur babies” and pet owners into “pet parents” has had a profound influence on how humans feed their beloved canine and feline companions. That familial-like bond “continues to be a key catalyst for growth in the pet industry,” according to consumer market researcher Packaged Facts’ December 2017 report, “Pet Food in the U.S., 13th Edition.” “Humanization in the pet market has grown from a trend to a given, with more and more pet owners treating their pets more and more like people,” the report states. “Pet owners are increasingly demanding products for their pets that are on par with, and sometimes even higher quality than, the products they purchase for themselves. Many of the pet foods entering the market today are directly reminiscent of human fare, no doubt appealing to the pet owner as much as the pet.” In a possible boost for private brands, Packaged Facts reports that some consumers, still wary about the economy, are cutting their overall spending. Four recent surveys by the firm show that 30 to 34 percent of consumers say they’ve reduced spending on their pets for this reason. But the outlook for pet food remains solid, bolstered by online sales and millennial shoppers. Growth will likely come from higher prices, products geared toward older pets and an increase in the pet population, the report states. Packaged Facts estimates that pet food sales will grow about 4 percent yearly through 2022 to reach $32.5 billion.

Nutritionally forward

Private brand sales are expected to rise in most pet food categories, says Steven Mills, senior vice president of consumer brands and co-manufacturing for American Nutrition Inc., a family-owned, full-service private brands pet food manufacturer based in Ogden, Utah. “For years, retailers have wanted the ability to stock pet food brands only offered in pet specialty stores. And now with Blue Buffalo and other brands moving to FDM [food, drug and mass retailers], they have what they wanted,” Mills says. “This provides retailers the opportunity to develop their own-brand offerings to include upscale, super-premium products. These national brands will come to FDM with high marketing budgets, which will attract consumers, and retailer brands that offer similar quality formulas at a lower price will benefit.” Retailers are looking for pet foods that are on trend

with today’s consumer, says Scott Jorgensen, private label manager for Carnivore Meat Company in Green Bay, Wis., a maker of raw frozen and freeze-dried pet food and treats. “The humanization trend for pet food purchases continues to be strong, where consumers seek out products for their cats and dogs that match their own diets,” Jorgensen explains. “They are looking for healthier options that closely reflect their own food choices. Private brands can deliver that with custom formulations.” Innovation around proteins has been another growing trend. Consumers are seeking protein-forward diets for themselves and their pets, Jorgensen says. High protein content, single-protein foods as well as exotic proteins like wild boar, rabbit and duck are generating interest among consumers, he adds. Nutrient-rich boosters made from meat, bone and organs, which Carnivore makes to be mixed into other pet foods, should also benefit from this protein-forward trend, Jorgensen adds.

Health concerns

Retailers should target consumers whose pets have specific nutrition needs and address issues related to age, weight, size, allergies or other chronic health conditions, Jorgensen advises. “Products that offer preventive benefits or are functional have experienced an uptick in recent years, and we’re seeing an increase in requests for these types of foods. Functional pet foods are expected to keep growing in demand at above-average rates in response to these consumers,” Jorgensen says. In the United States, 50.5 million cats and 41.9 million dogs are overweight or obese, according to a 2016 survey conducted by The Association for Pet Obesity Prevention (APOP) and published in February 2017. This amounts to 58.9 percent of cats and 53.9 percent of dogs. APOP founder Ernie Ward, a veterinarian, called obesity the biggest health threat to pets, according to Packaged Facts. Consumers are becoming more sensitive

DON’T fail to develop products that address the specific health issues of aging dogs and cats.

DO recognize the growth potential of functional ingredients. www.storebrands.com /February 2018 / Store Brands

CATEGORY INTELLIGENCE PET FOOD Dry Dog Food Private Brands

All Brands

Dollar Sales (in millions)

$763.5

$5,079.9

Change vs. Year Ago

-3.0%

-0.0%

Dollar Share

15.0%

100%

Unit Sales (in millions)

54.6

389.3

Change vs. Year Ago

-5.4%

-0.5%

Avg. Price Per Unit

$13.99

$13.05

Private Brands

All Brands

Dollar Sales (in millions)

$197.7

$2,316.2

Change vs. Year Ago

-3.8%

-0.3%

Dollar Share

8.5%

100%

Unit Sales (in millions)

31.3

297.2

Change vs. Year Ago

-5.2%

-1.7%

Avg. Price Per Unit

$6.31

$7.79

Dry Cat Food

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to the need to provide healthy food options for their pets, Jorgensen notes. “Regardless of age or life stage, consumers today demand foods made with ingredients that are easy to understand [so] they know exactly what they are feeding their pets. Single-source proteins, limited-ingredient diets and foods that deliver functional benefits are quickly taking center stage,” Jorgensen adds. Millennials especially value information about the products they buy, Mills notes. “They are also interested in the company that produces and sells that product, its quality and food safety record,” he says. A relatively new category in pet food that’s been getting a lot of exposure within the industry has been pet treats and supplements containing cannabidiol (CBD), Jorgensen says. CBD is a chemical in the cannabis sativa plant, also known as marijuana. According to the U.S. Food and Drug Administration, because CBD has been studied as a new drug, products containing CBD are not defined as dietary supplements. But there are still products labeled as dietary supplements on the market that contain CBD. CBD oil has been recognized as a natural or holistic supplement with advocates touting its benefits for pets, Jorgensen says. “As this type of ingredient becomes more mainstream, we anticipate it will gain popularity in the pet food category.” SB

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CATEGORY INTELLIGENCE VITAMINS AND SUPPLEMENTS

COMING ON STRONG Consumer efforts to maintain health and to feel and look good are bolstering vitamin and supplement sales High healthcare costs have compelled consumers to pay more attention to preventive care. As a result, they are more willing to spend increasing amounts on vitamins and dietary supplements to support their health, according to Patricia Jones, sales-general manager for Miami Lakes, Fla.-based Mason Vitamins. As Jones notes, there are other factors supporting category growth as well: an aging population, increasing consumer engagement with health and wellness, new product launches and improved product accessibility through various distribution channels. Both dollar and unit sales of private brand vitamins and supplements have grown in the past year, according to Chicago-based market research firm IRI. In a sign that the market may be maturing, the category’s growth began to slow slightly in 2017, consumer market researcher Mintel reported in September 2017. According to “Vitamins, Minerals and Supplements US,” Mintel estimated 4 percent growth and $23.3 billion in sales for the category in 2017. The challenge, according to Mintel, is to guide consumers in their purchases while convincing them that products are worthy of their claims. Shopping for vitamins, minerals and supplements can be confusing and overwhelming. Consumers

DO realize that condition-specific products are poised for growth.

DON’T ignore the enormous potential of prebiotics. 50

Store Brands / February 2018 / www.storebrands.com

can be skeptical about product efficacy as well as doubtful about whether products are worth their price, according to the Mintel report. In an online survey of 1,876 adults conducted for Mintel by Warren, N.J.-based digital data collection specialist Lightspeed, 44 percent agreed that vitamins, minerals and supplements are part of a healthy lifestyle. Twenty-seven percent consider the products expensive, 23 percent said they were skeptical about product claims, and 23 percent said they think all brands of vitamins work similarly. Most shoppers (53 percent) research products online before shopping in-store, according to the survey. More than a third (37 percent) find shopping for such products overwhelming. Also, 42 percent said shopping for the products is easier online, and 32 percent expressed a preference for online purchasing. Mintel advises retailers to grow the category by creating online platforms that expand their assortments and increase consumer awareness of the products.

Offering solutions

Condition-specific products such as turmeric and coconut oil, which have multiple therapeutic applications, are poised for further growth, Jones says. Probiotics for digestive health, women’s supplements, personalized supplements and products targeted at Hispanic consumers will drive growth in the nutritional supplements market, according to Packaged Facts’ November 2016 report “Nutritional Supplements in the U.S., 7th Edition.” The popularity of probiotics (substances that stimulate the growth of microorganisms, especially those with beneficial properties in the intestinal flora,) continues to increase, according to Packaged Facts. The potential for products aimed at women, particularly prenatal and pregnancy supplements, is “tremendous,” Packaged Facts notes. Products that promote beauty from within by claiming to support the function and structure of the skin, relieve menopause symptoms and strengthen bones are also selling well, Jones notes. “Products that meet women’s top health challenges, specifically diet, fatigue and stress, are seeing

thletes perform best when they are prepared, and more than ever before, that preparation begins and ends with pre- and post-workout supplements. As your business grows to meet this demand, you need a packaging partner who can keep pace with you while protecting the quality and reputation of your product. Our wide range of sports nutrition packaging includes HDPE and PET jars and canisters ranging in size from 8 ounces to 2 gallons. With seven North American manufacturing locations and one in Europe, we can minimize the shipping costs to get these bottles to your ﬁllers, and help you keep shelves stocked. Whether you deliver supplements in powder, tablet, liquid or gummy formats, Alpha Packaging has the stock product solutions to help your brand perform. We can also engineer custom packaging solutions or set your brand apart with custom colors that help it compete on retail shelves. Be a winner in sports nutrition with plastic packaging from Alpha. For more information, visit www.alphap.com/markets/sports-nutrition.php.

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CATEGORY INTELLIGENCE VITAMINS AND SUPPLEMENTS growth and will continue to see success,” Jones points out. Personalization in the form of supplements aimed at, for instance, athletes or people with heart issues follows a trend at play in nearly every industry, Packaged Facts reports. There is “enormous untapped potential” in marketing nutritional supplements to Hispanic and African-American consumers, whose use of supplements continues to be lower than the national average, according to Packaged Facts.

Focus on the gut

Private Brands

All Brands

Probiotic nutritional supplements are the largest condition-specific category and one of the fastest growing, according to Packaged Facts. Prebiotics, non-digestible food ingredients that promote the growth of beneficial microorganisms in the intestines, is a new offshoot generating “enormous potential,” the report adds. Stress, overuse of antibiotics, less-than-optimal diet and aging can contribute to decreases in our bodies’ “good” bacteria, Jones points out. “Scientists are discovering the significant influence of our ‘microbiome’ on overall health and well-being. Most agree that we must ensure we each have the proper microbial symbiosis (healthy balance of bacteria) in our gut to achieve optimal health,” Jones adds. Innovative studies and new breakthroughs regarding both probiotic products and delivery systems continue to capture the attention of consumers and industry leaders, Jones says. “As researchers continue to study the beneficial effects of probiotics, the potential for finding even more applications increases exponentially,” she notes. “The more applications there are, the more likely it is that the product/ingredient segment will continue to grow … (even) beyond the scope of digestive health, (and) into everything from sports nutrition to women’s health.”

Dollar Sales (in millions)

$1,167.9

$3,606.0

Change vs. Year Ago

+3.0%

+2.6%

Offering help

Dollar Share

32.4%

100%

Unit Sales (in millions)

130.4

309.6

Change vs. Year Ago

+3.5%

+1.0%

Avg. Price Per Unit

$8.96

$11.65

Private Brands

All Brands

Dollar Sales (in millions)

$304.1

$1,810.1

Change vs. Year Ago

+4.4%

+2.5%

Dollar Share

16.8%

100%

Unit Sales (in millions)

43.4

177.3

Change vs. Year Ago

+0.3%

-0.6%

Avg. Price Per Unit

$7.01

$10.21

Vitamins Private Brands

All Brands

Dollar Sales (in millions)

$1,943.3

$7,093.2

Change vs. Year Ago

+3.6%

+3.1%

Dollar Share

27.4%

100%

Unit Sales (in millions)

250.2

709.1

Change vs. Year Ago

+3.6%

+1.1%

Avg. Price Per Unit

$7.77

$10.00

Mineral Supplements

Multi-Vitamins

At least half of adults make an effort to adopt healthful habits, according to Mintel’s October 2015 report “Healthy Lifestyles – US.” To strengthen consumption and penetration and increase sales, Mintel advises retailers to promote vitamin, mineral and supplement usage as healthy behaviors. Retailers can use their websites to drum up online engagement, and they can incorporate unique sections on their sites to further promote their private brand vitamins and minerals and engage the consumer, Jones says. It is vitally important for retailers to keep up with the trends and understand how merchandise moves on shelves in order to accurately predict what drives sales and create corresponding marketing plans, she adds. Whether retailers merchandise and promote their private brand vitamins and supplements as a premium brand or position these products as a value/substitute brand by pricing below national brands, capturing web search data will help determine the optimal mix of branded and private brand products, Jones notes. SB Cvetan is a freelance writer in Barrington, Ill.

Store Brands / February 2018 / www.storebrands.com

CATEGORY INTELLIGENCE ORAL CARE

PRIVATE BRANDS HAVE TEETH

DO use signage and online channels to educate consumers about excellent oral care habits.

With 97 percent of adults in the United States brushing their teeth regularly, the oral care category in this country is mature but is nonetheless “projected to continue growing slowly but steadily,” notes consumer market researcher Mintel in its June 2017 report “Oral Care – US.” Given that millennials are more brandagnostic than other generations of adult consumers and that traditionally only the toothpaste and, to a lesser extent, the mouthwash segments of the category have garnered intense brand loyalty, private brands have significant potential for growth in this space. Indeed, in every segment but mouthwash, private brand oral care products have been experiencing proportionally greater dollar sales gains than the national brands, according to Chicago-based market research firm IRI. For example, in the $480.9 million power toothbrush subcategory where private brands have a 7 percent share, store brands increased 16.3 percent in dollar sales compared to 1.2 percent for all brands in the 12 months ending Nov. 5, 2017. In the dental accessories subcategory where private brands have a 15.6 percent share, store brands increased 6.8 percent in dollar sales in that period versus a 1.9 percent rise for all brands. And in the $2.8 billion toothpaste subcategory where private brands have just a 0.4 percent share, store brands rose 8.3 percent in dollar sales compared to a 2.4 percent gain for all brands. Greater consumer interest in health and wellness has benefited the category, says Greg McCormick, senior vice president for global innovation at Grand Rapids,

DON’T be reluctant to introduce unique products in addition to national brand equivalents.

Store Brands / February 2018 / www.storebrands.com

Mich.-based Ranir, a manufacturer of private brand oral care products. “There is more of a focus now on better oral health,” he notes. “Many scientific studies have shown a direct link between good oral health and good overall body health.” The tooth whitening segment, in which store brands already claim a 16.4 percent share, represents an ongoing opportunity for private brands because of robust demand from millennials, McCormick says. The aging of the baby boomer generation, in contrast, bodes well for other segments such as sensitive toothpastes and denture products. “Baby boomers are very focused on sensitivity because as you get older, you lose some of the enamel on your teeth and your gums recede a little bit,” McCormick explains. “So sensitivity is a much bigger issue for us as we age, and it’s an area we’re looking at from a store brand perspective.” But McCormick is especially excited about the potential of the power toothbrush segment, where store brands can match the quality but provide a better value than the leading national brands. Ranir makes power toothbrushes and replacement brush heads that are national brand equivalents to Philips Sonicare and the Oral-B oscillating system. “We invest a lot in technological development in the power category,” McCormick notes. “We know — and the science proves it — that if you use a power toothbrush, you’re much more effective at reducing gingivitis and plaque than you are if you are using a manual toothbrush.” Still, the manual toothbrush segment — with $828.5 million in sales for all brands in the IRI reporting period and a 4.3 percent gain in sales for store brands— remains much larger than the power segment. Many people favor the ease of use, affordability and simplicity of manual toothbrushes; and with the right design they can be even more effective at cleaning teeth, contends Andy Kossowsky, the inventor of the patentpending Vertex Toothbrush. During what he describes as his “creative phase,” Kossowky observed that he often held a traditional toothbrush vertically so he could brush both his upper and lower teeth at once, but he noticed that he had to hold the handle horizontally to reach the back of his teeth. After much experimentation in his kitchen — “cutting the heads off standard toothbrushes, shaping them down, melting them back onto the handles

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CATEGORY INTELLIGENCE ORAL CARE sideways, and bending the handles” — he determined that a T-shaped head is optimal for “reaching every nook and cranny.” In addition, Kossowky found that a grooved, rounded handle allows for a better grip and more control, while an angled toothbrush neck helps deliver toothpaste to hard-to-reach areas.

Power toothbrushes Private Brands

All Brands

Dollar Sales (in millions)

$33.6

$480.9

Change vs. Year Ago

+16.3%

+1.2%

Dollar Share

7.0%

100%

Unit Sales (in millions)

4.5

51.3

Change vs. Year Ago

+7.9%

-0.6%

Avg. Price Per Unit

$7.52

$9.38

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 Nov. 5, 2017. Note: Does not include all oral care subcategories. 18_0101_AD_H_Store Brands Mag.pdf

1/10/18

NBE Private Label Oral Care

4:05 PM

Now available commercially for private branding and distributed by White Plains, N.Y.-based Product Launchers, the Vertex Toothbrush “prevents users from missing any part of their teeth and gums,” Kossowsky maintains, encouraging retailers to view a demonstration of his toothbrush online at https://www. youtube.com/watch?v=nclNMfxQzKg. To better merchandise the oral care category and engage consumers, retailers need to drum up some excitement by setting up displays that let customers hold and feel different toothbrushes, especially in the power segment, McCormick suggests. Retailers should also do more to educate consumers about optimal oral care habits both in store and online. South Jordan, Utah-based OraTech, a supplier of private brand mouthwash, toothpaste and toothwhitening products, stresses the need for retailers to point out the value proposition as well as the high quality of store brand oral care products. “Buy one, get one free” offers are a great way to entice first-time buyers to try private brand oral care products, the company states. SB Schierhorn, the managing editor of Store Brands, can be reached at cschierhorn@ensembleiq.com.

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Store Brands / February 2018 / www.storebrands.com

ADVERTISER INDEX ADVERTISER NAME

PAGE#

180 SNACKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,36 Almark Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Alpha Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 American Nutrition, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Ardagh Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Bascom Family Farms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Berner Food & Beverage . . . . . . . . . . . . . . . . . . . . . . . . . 10-11 Blount Fine Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 CaseStack . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Catania Oils . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover tip Delgrosso Foods Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Furlani’s Food Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BC Ghigi Usa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Giovanni Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Global Tissue Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IFC-3 Godshalls Quality Meats Inc . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Great Lakes Cheese Co . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 IGPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

ADVERTISER NAME

PAGE#

Imperial Frozen Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 ITI Tropicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Lidestri Food & Drink . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Mold Rite Plastics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Old Fashioned Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Oratech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Private Label Manufacturers Association . . . . . . . . . . . . . . . 5 Red Gold, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IBC Request Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Riverbend Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Safety Quality Food Institute . . . . . . . . . . . . . . . . . . . . . . . . . 26 Scarlett Pet & Animal Feeds . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Seneca Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Sentry Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Snak King Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 The Fremont Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Tower Laboratories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Westrock Coffee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 57

ADVERTORIAL

WHAT DOES FULL TRACEABILIT Y FROM ORIGIN TO SINGLE SERVE CUP LOOK LIKE TODAY?

If you’ve observed the direct response from consumers to your certified single serve products (i.e. Organic, Fair Trade, Rain Forest Alliance, etc.), you know that consumers are requiring more answers from your brand each day. Technology has driven consumers’ curiosity behind current coffee offerings on the shelf. This response has further illuminated the need for full traceability in the coffee supply chain. Westrock Coffee Company is the largest privately-owned, vertically-integrated coffee company in the world today. Their fully-integrated business model allows them the flexibility to craft custom coffee products and offer value pricing on their coffee beans that are sourced honestly, and directly. Westrock Coffee Company has the ability to pack over 250 million single serve cups annually at their 57,000 square foot facility.

Blend Traceability

Westrock Coffee Company operates according to a collaborative supply chain sourcing model to confidently support their traceability claims. The model mobilizes farming communities into organized groups that are supported by single export partners. Farmer access to credit, training, and resources establishes financial transparency at household level over time.

Financial transparency at the household level is not only needed for long-term impact, it is an immutable requirement for traceability. Coffee farmer in Rwanda, Jean De Dieu Kayinamura’s story is just one example of the origin needs that are often overlooked when coffee is being produced and sourced on behalf of private label coffee brands: Jean (36) grew up watching his parents struggle to process their own coffee beans. They would harvest their coffee to be sold at the beginning of the purchase season regardless of climate changes affecting the rate in which their coffee grew. They would also process their coffee at home to in turn receive less money per pound due to processing defects. When Jean started his own farm, he found a wet mill that would process his cherries for him. He believed this would help him overcome the issue he saw in his parents’ business, but he soon discovered that the local washing station owners used an unfair scale to cheat farmers out of their harvests. Regardless of the coffee’s quality, he would receive substantially less money for his coffee. As you can see, the corrupt position described through Jean’s story is one that leaves very little options for the farmer. Unfair and untraceable business practices in the coffee industry compromises the ability for coffee brands to be reactive to growing trends in coffee taste profiles. When coffee production is slowed, its affects are realized in the process of blend matching, and ultimately in the end consumer’s daily cup.

Sourcing Standards

Companies like Westrock Coffee Company are the example of traceability due to their unwavering standard to affect last change in the lives of farmers and their entire communities. As an example, in 2015, Westrock Coffee Company began financing a washing station in Jean’s community. With a new standard of business implemented at farmer level Jean has been able to receive a fair price for his coffee based on its quality. Jean’s coffee is sold from the washing station to their owned and operated export partner, who then is able to sell the coffee at it’s true value to private label customers. At the roaster, expert sourcing is paired with expert blend creation, leveraging the intrinsic value in each coffee’s taste profile to stand out among other coffees sold at a similar price. Traceability to add value to your single serve product starts with the coffee farmer at household level and ends with the consumer.

www.storebrands.com /February 2018 / Store Brands

CATEGORY CLOSEUP Spices/Seasonings

Cooks in the kitchen

88%

Pep it up

71%

of all cooks say spices and seasonings make a dish unique. 94 PERCENT of cooking enthusiasts say that.

In its 2018 food trends, market research firm Packaged Facts says that cracked pepper is the new sea salt. “Calling out black or cracked pepper in chips and crackers says you’re more than conventionally serious about [adding] flavor,” Packaged Facts said. “Pepper is also flexing its flavor muscle in artisanal foods, including for dessert.”

of all cooks say they tend to use the same spices and seasonings compared to 65 PERCENT of cooking enthusiasts. Of those that use the same spices and seasonings, most rely on the mainstays — salt and pepper.

THE GLOBAL SPICES/ SEASONINGS MARKET IS EXPECTED TO HAVE A COMPOUND ANNUAL GROWTH RATE OF

4.7% THROUGH 2026.

Source: Fact.MR, 2017

TRENDING In its 2018 Flavor Forecast, McCormick & Co. states that East Africa’s signature seasonings are being discovered across the globe. One of those is berbere, Ethiopia’s most popular seasoning. Berbere is a blend of spices including paprika, allspice, coriander, cardamom, ginger, cinnamon and red pepper. Berbere’s hot, sweet and citrusy flavor complements several foods, according to McCormick, which calls East Africa “a treasure trove of flavor.”

Source: Lightspeed/Mintel

Spices/Seasonings Sales

Spices/Seasonings Share of Segment

52 weeks from October through October

PRIVATE BRANDS IN MILLIONS

ALL BRANDS IN BILLIONS

BY YEAR

PRIVATE BRANDS IN BILLIONS

ALL BRANDS IN BILLIONS

2011-12

544.9

2.76

2011-12

16.5

83.5

2012-13

598.2

2.85

2012-13

17.3

82.7

2013-14

610.5

2.93

2013-14

17.2

82.8

2014-15

621.2

3.04

2014-15

16.9

83.1

2015-16

673.3

3.21

2015-16

17.3

82.7

BY YEAR

Source: Nielsen

Store Brands / February 2018 / www.storebrands.com

Source: Nielsen

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