Store Brands - March 2018 by ensembleiq

How convenience stores are utilizing private brands

Retailers using transparency to their advantage

Grab-and-go products a fine fit for own brands March 2018 | www.storebrands.com

Private brands are flourishing according to a recent Daymon study, but there are still retailers that need to take their store brand programs to the next level â&#x20AC;&#x201D; or else

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Volume 40 No. 3 March 2018

DEPARTMENTS 6

Editor’s Take

Viewpoint

Around the Industry

Getting Social

End Cap

CONTENTS

COVER STORY

CATEGORY INTELLIGENCE 42

Dips and spreads

Deli meats

Rice and grains

50 54

Honey and syrups OTC remedies

Wake-up call Private brands are flourishing according to a recent Daymon study, but there are still retailers that need to take their store brand programs to the next level — or else

FEATURES

34 FOCUS ON FRESH

26 TRENDING Food before fuel Convenience stores increasingly lure customers with their private-branded food and beverage selections

30 TOTAL STORE Clear intentions Retailers embrace transparency to earn consumer trust

26 34

Moving fast While grab-and-go foods are evolving, retailers have the chance to up their ownbrand offerings with convenient, on-trend and healthy foods

36 PACKAGING ‘Care’ packaging Consumers, retailers and manufacturers continue to embrace eco-friendly traits with private brands playing a major role

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 / March 2018 / www.storebrands.com

EDITOR’S TAKE Business Intelligence for an Evolving Market

8550 W. Bryn Mawr, Suite 200, Chicago, IL 60631 (773) 992-4450

Senior Vice President/Group Brand Director 917-859-3619

LIDL WILL PREVAIL

Katie Brennan

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EDITORIAL Editor-in-Chief

Lidl U.S. has been taking it on the chin in business news sectors — envision pro wrestler John Cena administering a flying drop kick landing squarely on the deep-discounter’s pie hole, sending the retailer to the hard canvas. Even Lidl’s head honcho Klaus Gehrig, CEO of the Germany-based chain, had unkind words for the retailer’s entry into the U.S., telling a German business magazine that Lidl’s debut was “a single disaster.” (Ouch! That hurts more than a Cena dropkick!) While Lidl’s entry into the U.S. last summer was marked by much fanfare in the trade and mainstream media, it has been criticized since for its poor selection of store locations, and stores that are too large and expensive to operate. And that’s not all. One industry analyst said he went into a Lidl store after all the fanfare had died down from its grand opening and remarked that “it was completely crickets.” Another analyst said sales at some Lidl U.S. stores were “frighteningly weak.” I recently spoke to Mike Paglia of market researcher Forrester to get his take on Lidl. Paglia watches Lidl closely and probably knows as much about the retailer as anybody. I asked Paglia if he thought Gehrig was worried Lidl might flop in the U.S. Paglia says the tough-talking Gehrig was just being himself. “I don’t think Gehrig is worried. He has a reputation for being very blunt in expressing his opinions,” Paglia says. I have heard that the ever-critical Gehrig would make a great Olympic judge. That said, Paglia says Gehrig was “spot on” with some of his comments. “Gehrig understands that there is a playbook to any market that Lidl enters into,” Paglia notes. “Lidl opens a series of stores and makes a very quick splash. And once Lidl learns more about the intricacies of the market, it adjusts and reinvents itself to better adapt to local market conditions. I think that is what we are seeing now.” Paglia has high praise for Lidl, calling the chain a “disruptor,” which is as fine a compliment as you can give a grocer. Paglia is especially impressed with Lidl’s 90 percent assortment of private brands. “Lidl is challenging the conventional notion of private brands, which is if you want to get low prices you have to be willing to sacrifice quality,” Paglia says. “That has been the unwritten rule of private label from a shopper perspective. Lidl is saying that doesn’t have to be the case. You can get both low prices and high quality.” Much of the news about Lidl has centered on its growth, which at first appeared to be furious but has slowed considerably. Lidl said last year it wanted to have 100 stores open by mid-2018, but that number will now be just under 70 stores for the entire year. Grocery pundits, including Store Brands, speculated that Lidl would open hundreds if not a few thousand stores in coming years. Now those same pundits are backtracking, which poses a negative light on Lidl. In fairness to Lidl, the retailer never announced how many U.S. stores it planned to open beyond 2018. If he was a teacher grading Lidl, Paglia says he gives the retailer a “solid B” for its U.S. entry. “Overall, I think Lidl is off to a good start,” Paglia adds. “But that doesn’t mean there isn’t room for improvement in the long run. And it’s important to understand that Lidl really does take the long view when it comes to setting up shop in a new market.” Something tells me that Lidl will find its legs. Something tells me Lidl will be a major player in U.S. grocery. It’s just a Lawrence Aylward, Editor-in-Chief matter of time. laylward@ensembleIQ.com

Lawrence Aylward

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laylward@ensembleIQ.com

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Carolyn Schierhorn

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Rich Mitchell, Dana Cvetan

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

Alan Glass

Chief Executive Officer

David Shankar

Chief Brand/Operating Officer

Richard Rivera

Chief Business Development Officer & President, Ensemble IQ Canada

Korry Stagnito

President and Executive Director Path to Purchase Institute

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President of Enterprise Solutions/ Chief Customer Officer Chief Digital Officer

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2015

Store Brands / March 2018 / www.storebrands.com

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VIEWPOINT

By Jordan Rost

Deep-discount grocers reaping benefits of robust store brand programs As channels continue to fragment and the fast-moving consumer goods (FMCG) landscape becomes more dynamic, the composition of households is changing too. Individuals are driving their own agendas, purchase decisions and preferences, and that means manufacturers and retailers need to analyze purchasing with more granularity. At a macro level, online continues to drive shopping occasions, leading growth in trips per shopper. That said, consumers are making 1 percent fewer trips at the individual shopper level than they were a year ago. This is primarily because of decreased traffic to pet and drug stores. In looking at e-commerce trends for these two areas, it’s likely that consumers are covering this gap — and possibly more — by making their purchases online. In addition to being open to new shopping channels, consumers are paying more attention to how they spend their money, particularly when it comes to store brands. While consumers will always be interested in getting the best price for the products they buy, the perceived quality gap between branded and private-branded products is fading. Notably, just under 74 percent of Americans say they believe store brand products are a good alternative to name brands. And we can see this sentiment come through in the sales data from the past few years. Private brands have posted a compound annual growth rate of 1.7 percent over the past four years, ahead of the 1.4 percent posted by branded products. One retail channel has built its growth strategy around private brands: discount grocery. Discount grocers (not including dollar stores) offer value and

Store Brands / March 2018 / www.storebrands.com

heavy discounts. For many retailers, but particularly deep-discount retailers, store brands play a strategic role in winning over shoppers from other channels. Compared to other major retail channels, deep discounters have more than twice the store brand share of dollars. The discount grocery channel continues to invest in private brands. With over half of dollar volume sourced by retailer-branded items, manufacturers seeking entrance into this channel need to vocalize the premium- or value-added differentiators of their offering. Or, like many manufacturers, they need to consider working with retailers on their private brand offerings. When it comes to deep discount grocery chains, store brands comprise a majority share of sales in three departments: dairy (72 percent), grocery (52 percent) and frozen food (53 percent). This is driven by both penetration and trips, with consumers making more trips to purchase store brand grocery, dairy and frozen products (up 3.3 percent, 5.7 percent and 3.7 percent in trips, respectively, compared to the prior year) than trips made for branded products from these departments. Deep-discount grocery retailers are certainly reaping the benefits of having a robust store brand presence within their stores. With consumers taking three times more trips including store brand purchases to deep-discount grocery stores compared to other channels, like mass merchandisers or dollar stores, opportunity for growth should only continue to rise. While deep discounters have significantly high store brand growth, there is still room for penetration growth across all retail channels. Whether a deep discounter, a traditional supermarket or an online channel, retailers should continue to keep store brand strategy front and center as a way to offer consumers the value and quality they’re looking for at price points that resonate with their wallets. SB Jordan Rost is vice president of consumer insights for Nielsen. His work explores emerging trends and shifting buying and media consumption behaviors and helps manufacturers and retailers make more informed business decisions.

AroundtheIndustry

Private brand sales soar in mass retail channel, according to Nielsen PLMA says sales for dollars and units are the highest on record Citing a study from market researcher Nielsen, the Private Label Manufacturers Association (PLMA) reports that store brand sales jumped nearly 10 percent last year in mass merchandisers, club stores and dollar stores, while the mass channel came closer than ever before to overtaking traditional supermarkets as the place where consumers buy their groceries. Total sales in the mass channel reached $305 billion versus $324 billion in supermarkets. Store brand sales in the mass channel increased in both dollars and units while national brands grappled with fractional declines, according to sales data collected by Nielsen. Dollar sales of private brands were up 9.3 percent, while unit sales rose by 9.1 percent. National 8” brands

declined 0.3 percent in dollar volume and 1 percent in unit volume. Thanks entirely to store brands, according to PLMA, overall sales in the mass channel during 2017 grew by 1.3 percent for dollars and 1 percent for units. Total store brand dollar sales were $54.9 billion, compared with $50.2 billion for the prior year, an increase of nearly $5 billion. In unit volume, store brands rose to 17.9 billion from 16.4 billion. Total sales for both dollars and units are the highest on record. As a result of their strong 52-week performance, store brands market shares in the mass channel soared. Dollar share saw a 1.3 percentage points gain to 18 percent; unit share advanced 1.6 points to 21.416” percent, also all-time highs.

SHORT TAKES Albertsons, Rite Aid merging Boise, Idaho-based Albertsons Cos., one of the nation’s largest grocery retailers, and Camp Hill, Pa.-based Rite Aid Corp., one of the nation’s well-known drugstore chains, announced an agreement under which privately held Albertsons will merge with publicly traded Rite Aid. The Albertsons-Rite Aid merger is expected to deliver annual revenue of $3.7 billion, according to a press release. The integrated company will operate approximately 4,900 locations, 4,350 pharmacy counters and 320 clinics across 38 states and Washington, D.C., serving more than 40 million customers per week. Most Albertsons pharmacies will be rebranded as Rite Aid, and the company will continue to operate Rite Aid stand-alone pharmacies. The companies say the combining of their own-brand portfolios — Albertsons’ $1 billion own brands, including O Organics and Lucerne, and its manufacturing and operating capabilities, with Rite Aid’s own brands in health and wellness, including B4Y and Daylogic, and its pharmacy expertise — will

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Store Brands / March 2018 / www.storebrands.com

AroundtheIndustry

allow the combined company to drive growth opportunities and efficiencies across its purchasing, marketing, manufacturing, and merchandising functions. The merger is expected to close early in the second half of this year.

Walmart introduces apparel private brands Walmart introduced four new apparel private brands for women, men and kids — Time and Tru, Terra & Sky, Wonder Nation and George. All are available in Walmart stores and on Walmart.com. Time and Tru is a brand for women with styles “that can be pulled together for women on the go and are on-trend with unexpected details and fabrics that make the classics feel modern and complimentary,” according to the Bentonville, Ark.-based retailer. Terra & Sky was created specifically for plus-size women. It offers on-trend styles that show off curves in comfortable, ultra-soft fabrics, according to Walmart. 8” Wonder Nation is Walmart’s first kid-

centric brand that lets kids take on all of their adventures in style. Built with fun, comfort and durability in mind, “Wonder Nation lets kids be kids while feeling and looking great wear after wear, wash after wash,” Walmart states. George is exclusively for men and “brings style, comfort and durability.” George keeps men looking good effortlessly with updated classics and relevant trends, according to Walmart.

Kroger reaches $1 billion in organic produce sales The Kroger Co. said its organic produce business has achieved $1 billion in annual sales. According to market researcher IRI, U.S. organic produce reached $5 billion in 2016 and growth continues. Kroger operates about 2,800 stores in 35 states and Washington, D.C. Kroger said it offers one of the largest organic produce departments in America. Kroger’s top-selling organic produce includes bananas, apples, strawberries, blackberries, blueberries and bagged salads.

Costco and other club stores are benefitting from increased private brand sales. The mass channel is an ongoing store brands success story, according to PLMA. Since 2015, annual store brand dollar sales in the sector have increased by $7.5 billion, a gain of 15.8 percent. The results in the mass channel for 2017 pushed Nielsen’s store brands figures to positive territory across all outlets combined, despite weak performances for private brands in supermarkets and drugstores. For total outlets, dollar sales for store brands were up 2.7 percent and unit volume rose 1.4 percent. Store brand dollar market share in all outlets gained half a point: up to 18 percent, while unit share increased 0.6 points to 21.7 percent. During 2017, store brand sales across all outlets measured by Nielsen came in at $122.3 billion, up from $119.1 billion. SB

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www.storebrands.com / March 2018 / Store Brands

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GETTING SOCIAL

Q A with Bekah Swan Vice President of Private Brands, Supervalu

How did you come to the world of private brands? I’ve been at Supervalu for 18 years, and this is my second stint in private brands with the company. It has been exciting to see the evolution that has occurred in the world of private brands and have the opportunity to be part of the development of our portfolio of brands, including Wild Harvest, Culinary Circle and Essential Everyday. We get to create and bring to market exciting new products that not only taste great and are affordable but that are on-trend and in demand by shoppers. Describe the private brands industry in one word. Dynamic.

Bekah Swan (right) likes to spend time with her family, including (from left) granddaughter Emme, daughter Sarah and husband Harry at at her favorite place — Pipe Lake, Wis.

What do you like most about the industry? I love that I work in an industry that is such a key part of everyday life. Our products feed communities and families, and that is very exciting to me. What one great thing does the industry have going for it? We have this amazing opportunity to be a part of people’s lives because food is so relevant to everyday life. Food not only nourishes us, it brings us together and connects us to others like nothing else. What is the industry’s biggest challenge? A challenge that will always exist is the ever-changing consumer. We need to continue to push ourselves to understand and reflect consumers’ changing needs by offering great products that not only meet but exceed their expectations.

Store Brands / March 2018 / www.storebrands.com

If you could create one private brand product, what would it be? I love cheese so I would create a specialty flavor for our Culinary Circle brand. Who is your hero and why? My mom is my hero because she taught me at a young age that hard work pays off. What trait in yourself do you attribute most to your success? Not only hard work but also smart work. What is the biggest obstacle you have ever overcome? From a professional standpoint, rebuilding and building teams. During my career, it has been so rewarding to bring together people with different skill sets and personalities and get them to mesh in order to create a high-performing team. What’s the best advice someone ever gave you? Two come to mind. First, be present. It’s easy to get caught up in all of the meetings and emails. Focus on the task at hand and be present with people by actively listening and engaging in meetings, calls and interactions. Second, don’t sweat the small stuff. It’s 5 o’clock (or later), what do you do for fun? Enjoy a delicious meal with my family made from our private brand products. You have a week off. Where do you go and why? To our lake home in Wisconsin to enjoy good food and time with family. What song do you love to crank up in the car? Anything from Tom Petty.

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W KE up

STATE OF T

INDUSTH E RY

CALL

2018

Private brands are flourishing according to a recent Daymon study, but there are still retailers that need to take their store brand programs to the next level — or else

TOP TO BOTTOM Jim Holbrook, Daymon CEO

Dave Harvey, Daymon’s vice president of global thought leadership Nicole Peranick, Daymon’s director of global thought leadership/culinary

About Daymon’s ‘Private Brand Intelligence Report 2018’

Stamford, Conn.-based Daymon, a retail services company that specializes in private brands, recently released its “Private Brand Intelligence Report 2018,” a state of the industry for store brands. For this month’s cover story, Store Brands Editor-in-Chief Lawrence Aylward spoke with Daymon analysts to provide background on some of the study’s findings. Daymon, a subsidiary of Advantage Solutions, culled research for the report from a proprietary survey of more than Carl Jorgensen, 2,000 U.S. shoppers in late 2017 as well as from its 2017 “From Shopper to Advocate: The Power of Participation” study. Daymon’s director The report also features category research and insights from Daymon experts, as well as statistics from a range of other of global thought sources including Nielsen, PlanetRetail RNG, The Hartman Group and several business news outlets. The study can be leadership/wellness downloaded at www.daymon.com. Store Brands / March 2018 / www.storebrands.com

JIM HOLBROOK, DAYMON CEO

f there is a resounding message from Daymon’s “Private Brand Intelligence Report 2018,” it is that store brands are as popular among consumers as they have ever been. However, there is clearly a case of the haves and have-nots regarding the success of retailers’ store brands programs. Daymon estimates that in-store and online sales of private brands from traditional grocers, deep discounters, mass merchandisers, convenience stores and other retailers increased 4 percent in 2017, eight times more than national brand sales. Private brands contributed an estimated $50 billion in margin to retailers’ sales in 2017, an increase of $2 billion since 2016. The haves, which Daymon calls best-in-class retailers innovating on many facets of store brands, are flourishing and achieving an average of 32 percent in private brand share of total dollar sales. But when the have-nots — retailers content with simply offering national brand equivalent and lesser store brands — are added to the equation, the industry average of private brand share of total dollars sinks to 17 percent. Jim Holbrook, Daymon’s CEO, says private brands have entered a renaissance period and that Daymon’s survey of more than 2,000 consumers reveals how much store brands have gained favor with them in the past few years. According to Daymon: • 85 percent of consumers say they trust private brands at least as much as national brands. • 84 percent of consumers say the quality of private brands is at least as good as national brands. • 81 percent of consumers buy private brands on every or almost every shopping trip. • 61 percent of consumers say they purchase more private brands than two years ago. • 61 percent of consumers say private brand quality has improved in the last few years. • 53 percent of consumers say they shop at a store specifically for its private brands. But not all retailers are experiencing a renaissance in private brands. Holbrook says that on average private brands account for about 15 percent of shelf space. But the retailers deemed best in class — based on consumer perception of private brands, shopper loyalty, breadth of store brand assortment and other factors — have almost double the penetration rate compared to the retailers lacking the designation. “The best-in-class retailers have figured out something that [other retailers] haven’t figured out,” Holbrook tells Store Brands. “It comes back to differentiation.” Retailers need to build categories based on their offering of private brands and then fill in the gaps with brand-name products, not the other way around, Holbrook explains. The best-in-class retailers, of which there are about a dozen, are doing this but other retailers are not. “The retailers that want to hang on to the emulation products and the national brand equivalents will not only fall further behind, they will go out of business,” Holbrook says. “This really is a defining moment. We believe that you can evaluate a www.storebrands.com / March 2018 / Store Brands

PROGRESS CHART According to Daymon’s ‘Private Brand Intelligence Report 2018,’ consumers are embracing private brands for many reasons. Here are some key findings from the report:

81% OF CONSUMERS BUY PRIVATE BRANDS ON EVERY OR ALMOST EVERY SHOPPING TRIP

61%

61% OF CONSUMERS SAY THEY PURCHASE MORE PRIVATE BRANDS THAN TWO YEARS AGO

OF CONSUMERS SAY PRIVATE BRAND QUALITY HAS IMPROVED IN THE LAST FEW YEARS

85%

OF CONSUMERS SAY THEY TRUST PRIVATE BRANDS AT LEAST AS MUCH AS NATIONAL BRANDS

53% OF CONSUMERS SAY THEY SHOP AT A STORE SPECIFICALLY FOR ITS PRIVATE BRANDS

84% OF CONSUMERS SAY THE QUALITY OF PRIVATE BRANDS IS AT LEAST AS GOOD AS NATIONAL BRANDS

Store Brands / March 2018 / www.storebrands.com

PRIVATE BRAND SALES INCREASED

ACROSS OMNICHANNEL RETAIL CHANNELS IN 2017 — EIGHT TIMES MORE THAN NATIONAL BRAND SALES

retailer’s overall health just by looking at its private brands. If it has a weak private brand offering, [that retailer is] in trouble.” Store brands have become and should become vital to a retailer’s overall health for three reasons, Holbrook says. First, national brands are cutting back on trade spending and innovation. “When national brands are providing fewer resources to the retailer, then the retailer has to find [those resources] somewhere else and private brands are the answer,” Holbrook says. Second, consumers are becoming less loyal to national brands, Holbrook notes. Today’s consumers don’t want to purchase what their parents purchased, and they are buying more niche brands. “Consumers are buying things they aren’t suppose to be buying,” Holbrook says. “They want better solutions.” Third, retailers can make twice the margins off private brands than they can with national brands, Holbrook stresses. Retailers can also give their customers the products they want through better use of analytics and marketing. “So why shouldn’t they create and curate their offerings?” Holbrook says. “Also, private label manufacturers have gotten better. They are smarter and more innovative.” The resurgence of private brands is not a fad, Holbrook contends. The fact that consumers are embracing private brands in an upbeat economy — not just in dour financial times as in previous eras — is evidence that store brands are being viewed for their quality, innovation and exclusivity, not just their low prices. Holbrook references the statistic that 61 percent of consumers say they purchase more private brands than two years ago, which he says reinforces the notion that consumers are becoming less loyal to national brands. “I think people are looking to be disloyal,” Holbrook adds. “The national brands aren’t doing themselves any favors by cutting back on research and development and advertising to help keep their margins up. So it opens the door for private label — niche brands, specialty brands and local brands — to be more innovative and appealing.” Holbrook understands that retailers must make a substantial investment in their private brands programs to keep them relevant, and he knows there is risk. Consider the retailer that offers a national brand equivalent as its highest tier and is making a good margin on selling those products, Holbrook says. And now that retailer is being told it will have to invest in new product formulas, packaging and on other fronts to take its private brand program to another level to stay competitive. “It’s a daunting task,” Holbrook says. But it’s a task that requires deep consideration from the retailers that are not adapting to the changing dynamics of private brands. “Our intent is to provide a bit of a wakeup call,” Holbrook says of the report, “and to get retailers to realize that the status quo just isn’t that great.” SB

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ADDING

Daymon analysts elaborate on findings in ‘Private Brand Intelligence Report 2018’

insight

Daymon’s “Private Brand Intelligence Report 2018” reveals an industry that is robust, evolving and ripe with challenges that equate to opportunities for store brands across the retail sector. Several findings in the report left a positive impression on Daymon analysts. While those findings bode well for the industry, the Daymon analysts maintain that retailers and manufacturers must embrace the challenges in front of them to further the development of private brands. Dave Harvey, Daymon’s vice president of global thought leadership, says a statistic from the report that impressed him is that 53 percent of the more than 2,000 consumers Daymon surveyed for the report say they shop at a retailer specifically for its private brands — a telling sign that exclusivity is beginning to infuse the industry. “It shows consumers understand that products exclusive to a retailer matter,” Harvey adds. “Having your own exclusive products is one of the most important considerations in your strategy.” Harvey was also impressed that 74 percent of consumers say private brands are a better value for the money, a statistic he does not attribute to just low prices. “There are other markers of value that are becoming important in private brand programs,” he says, noting that quality, product customization, transparency and sustainability are factors adding value to private brands. Sixty-one percent of consumers say quality has improved in private brands, a statistic that caught the attention of Nicole Peranick, Daymon’s director of global thought leadership/culinary. “It’s really incumbent on retailers and manufacturers to elevate their quality standards, as consumers are having greater expectations in this area,” she adds. “In order for them to be successful, they need to have a continuous quality improvement process in place to keep up and even over-achieve in certain areas.” Sixty-one percent of consumers also say they purchased more private brands in 2017 than they did two years ago, a statistic that Harvey and Peranick expect to rise. “Consumers are gaining confidence in the quality of private brands, but more importantly they understand that retailers are coming to the table with unique offerings,” Harvey says. Peranick notes that consumers have more channels from which to purchase private brands, citing Walmart-owned Jet.com’s de-

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FOOD FOR THOUGHT

According to Daymon’s ‘Private Brand Intelligence Report 2018,’ retailers should keep the following points in mind as they move forward with their store brand programs: PRIVATE BRANDS PREFERRED - Consumer skepticism of corporations and big food, coupled with trendforward innovation in private brands from retailers like Trader Joe’s, have fueled a reconsideration of brand choice in favor of private brands. RESTORING THE CENTER STORE - Research shows that consumers spend 18 percent of each shopping trip in the center of the store, but the average supermarket still devotes more than 80 percent of its floor space to center store aisles. Retailers, challenged to make better use of what has become under-performing selling space, can bring the center store forward through solutions-focused planogramming; repurposing space for discovery; seamless integration with digital; shopper interaction and personalization; and blurring boundaries between fresh and center store. INNOVATION THROUGH ACQUISITION - Consumer demand for fresh, healthy, local, authentic and ethical products has put enormous pressure on retailers and brands to innovate. To deliver on these needs quickly while balancing fiscal responsibilities, acquisitions and strategic investments are rapidly replacing innovation from within and this trend shows no signs of slowing down.

PEOPLE POWER - Consumers today demand more than product innovation. They seek experiences, not “stuff,” with 78 percent of millennials claiming experiences are more important than products. Despite a heightened focus on leveraging technology to replace humans, progressive companies view the upskilling of their workforces as a competitive advantage. Expect more retailers to invest in their people to improve the customer experience. CONSUMERS AS CREATORS - Consumers have moved from passive buyers to active co-creators, articulating their opinions to help brand owners and retailers solve for their more individualized needs. 2018 will see the growth of crowdsourcing technologies to allow shoppers to directly participate in innovation efforts. THE ENVIRONMENT IS GOOD FOR BUSINESS - Faced with a sea of choices — products, brands and shopping channels — consumers are prioritizing social responsibility and transparency to help them filter through the noise. The impacts of their buying behavior focus on food and packaging waste, sustainability and climate change. More retailers and manufacturers realize that being bolder in communicating and delivering on these needs is good for business. Expect retailers to get more aggressive in sustainable sourcing, authentic storytelling and touting their alignment with social and environmental responsibility.

Store Brands / March 2018 / www.storebrands.com

but of its Uniquely J line, which features an array of private brands from coffee to household cleaners sold exclusively on Jet.com’s website. According to Daymon’s report, wellness brands are the fastest-growing segment in private brands, including free-from, organic and non-GMO products. It’s an area of which private brands need to continue to push forward, says Carl Jorgensen, Daymon’s director of global thought leadership/wellness. “Retailers of private brands are taking a hard look at their portfolios and seeing not only where they can reduce sugar and sodium but where they can reduce other ingredients that consumers object to,” Jorgensen adds. But it’s vital that retailers communicate wellness messages through products, he stresses. “There is emerging marketing language — ‘a hint of salt’ or ‘gently sweetened’ — that implies these products still taste good even though much of the salt and sugar has been removed,” Jorgensen states. “The whole job of reducing sodium and sugar is getting easier for ingredient manufacturers. They are innovating with new ingredients and techniques to keep

the level of flavor, texture and mouth feel of products where they need to be.” The increased popularity of wellness products is closely associated with transparency, an area featured in the report and another area where private brands can capitalize, Jorgensen states. Customers want to know where products were made, how they were made and the traditions behind any special ingredients they contain. By providing this information, private brands can gain loyal customers. “This is a huge opportunity for private brands,” Jorgensen adds. The fresh department is closely aligned with wellness products, and the opportunity for retailers to define themselves with private brands on the store’s perimeter is significant, Harvey notes. “There is high private brand perception in fresh department categories where national brands really don’t dominate,” he adds. “[Fresh-prepared products] aren’t easy to outsource so they lend themselves to being produced in the store. By their nature they would be private brands.” Jorgensen says consumers judge a retailer’s excellence and to what degree that retailer cares about consumers’ health by its fresh program. “Fresh has become the marker of health and wellness at retail,” he adds.

While it has been challenging to merchandise produce products as private brands, progress is being made in that area, Jorgensen notes. “One of the transitions the industry is making is in the transition from PLU to UPC codes on produce,” he adds. “And what that does for private brands is make those private brand sales easy to track so retailers can begin quantifying their private brands performance in fresh. This is a tangible example of the kinds of investments retailers are making to add more of a private brand presence in fresh.” Data from Daymon’s “From Shopper to Advocate: The Power of Participation” study is also featured in its “Private Brand Intelligence Report 2018,” and reveals that 59 percent of U.S. consumers seek out engagement when they shop. According to the study, “Six in 10 shoppers crave experiences to stimulate the senses. That is, these shoppers want interaction in the retail experience, want to feel included, and want to provide opinions and ideas to retailers and brands to make their mark.” Peranick says “co-creation” — shoppers wanting to provide direct input to improve products and services and even co-design new products — can positively impact a retailer’s private brand program. According to Daymon, 2018 will see the growth of

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crowdsourcing technologies to allow shoppers to directly participate in innovation efforts. Concepts like online gamification, pop-up retail spaces and virtual innovation labs will be employed to test new products and services in real-time to accelerate speed to market. “[Co-creation] offers white-space opportunities both from an in-store perspective and a marketing perspective to create breakthrough innovation,” Peranick says. While there is room for innovation in private brands, some retailers and manufacturers remain skittish because of the investment risk, Peranick notes. “So how do you mitigate that risk? You do that by engaging your shoppers through things like cocreation,” she adds. “You get feedback early on in the process so you not only mitigate the risk but also secure loyal followers when a product is on the shelf and commercialized.” A segment of Daymon’s report focuses on price checks, and the agency’s analysis reveals that while 83

HOT PRODUCT CATEGORIES According to Daymon’s ‘Private Brand Intelligence Report 2018,’ the following categories bode well for store brands: Single-serve coffee and tea Cheese Frozen appetizers Vitamins Bacon Deli dips Deli entrees/salads

Salty snacks Specialty milk Frozen pizza Frozen seafood Value-added meat Bakery cookies

percent of retailers are running price checks on key value items — those items that are consistently on promotion and purchased by price-sensitive shoppers on a frequent basis — only 60 percent of those checks include private brands. Daymon says that key private brand value items are being undercut by national brand promotions an average of 12 weeks a year. “If private brands aren’t price competing with national brands, why even have them on the shelf?” Daymon asks in the report. “An effective solution is to run private brand promotions at the same time as the national brand to reduce being undercut.” Data shows that retailers can generate a better lift running two promotions at the same time versus the combined lift retailers get from running two independent promotions. “However, we found that this tech-

Store Brands / March 2018 / www.storebrands.com

nique is rarely used — as only 17 percent of retailers are employing a price protection program,” according to Daymon. “The other 83 percent? Well, they lost $147 million in private brand sales last year due to undercuts.” If retailers offer private brands of quality and value, they need to communicate this to their customers, Harvey says. But if those retailers are undercutting the prices of those private brands with national brands, then those messages will not be conveyed. “So it’s damaging to a retailer’s [private brand] strategy,” he adds. The ever-increasing competition among retailers is another challenge. Daymon says in the report that German-based deep-discount retailers Aldi and Lidl, which continue to expand in the U.S., will force the entire grocery industry “to be more efficient and more engaging.” “Through the sheer force of these stores, many traditional players are set to become casualties to the discount channel, projected to be the food industry’s fastest-growing channel through 2022 with 5.8 percent in growth,” the report states, noting that 65 percent of retailers saw at least a 10 percent increase in dollars lost to deep discounters in 2017. The report also notes that “shoppers will come to expect high-quality private brand items at super-low prices no matter where they are.” Will this be a good thing for private brands? “It’s kind of both,” Harvey says. “But I would say it’s more about opportunities [for retailers] than challenges.” High-quality private brand items at low prices could lead to more innovation and new product offerings in categories that might have been traditionally dominated by more expensive national brands, Harvey states, allowing private brands to capture more momentum. “Of course the danger is retailers offering products at lower prices but without delivering the quality,” he adds. Daymon, in partnership with Nielsen data, also found that the higher degree of uniqueness that a retailer has in its private brand assortment, the more loyal its shoppers are. “Not only do private brands build on a retailer’s value proposition with high-quality items at an affordable price, but they can offer authentic solutions to make consumers’ lives easier,” the report states. “Private brand products that cater to consumers’ needs are well-positioned to drive sales and loyalty.” While offering low prices on private brands is essential, according to Daymon, Jorgensen cautions against going too low, which can erode a retailer’s profitability. “Ultimately, it’s a zero-sum game,” he adds. “What we are seeing is consumers’ perception of value extends beyond price.” SB

TRENDING: CONVENIENCE STORES AND PRIVATE BRANDS

FOOD BEFORE

FUEL Convenience stores increasingly lure customers with their private-branded food and beverage selections BY CAROLYN SCHIERHORN

Although mainly consisting of fresh-prepared food items, Maverik’s own BonFire brand also includes packaged snack chips.

As of Dec. 31, 2017, the United States is home to 154,958 convenience stores — a 423-store increase over the prior year, according to NACS, an association of conve-

nience stores and fuel retailers. Extremely competitive, this industry has been characterized by significant merger-and-acquisition activity in the past few months, including the recent purchase of 1,030 Sunoco stores by 7-Eleven and The Kroger Co.’s sale of its entire portfolio of convenience store holdings to U.K.-based EG Group. While consolidation is making the biggest convenience store chains even bigger — No. 1-ranked 7-Eleven (a subsidiary of Japanese-owned Seven & I Holdings Co.) now has approximately 9,700 stores in the United States and Canada — the top 10 convenience store chains still make up less than 27 percent of the U.S. store total and the top 100 chains less than 65 percent, according to the Top 100 research report compiled in mid-2017 by Convenience Store News (CSN), a sister publication to Store Brands. This means that smaller regional chains and independent operators have the opportunity to grow and thrive, and many have strong brand identities in the marketplace. When it comes to private brands, a retailer’s size has everything to do with its approach. A chain like 7-Eleven can justify investment in a much wider as-

Store Brands /March 2018 / www.storebrands.com

sortment of own-brand consumer packaged goods (CPGs), notes industry consultant Steven J. Montgomery, president of Lake Forest, Ill.-based b2b Solutions. Significant but much smaller convenience store chains tend to carry a limited number of store brand food and beverage CPGs, instead differentiating themselves through their private-branded foodservice offerings and their “total store” brand, which encompasses such factors as customer service, touch-screen ordering, loyalty program discounts and store ambiance. Though perhaps best known for its private brand Slurpee slushed ice drinks and Big Gulp fountain beverage line, 7-Eleven began to amp up its store brand CPG offerings with the launch of 7-Select during the Great Recession. As 7-Eleven CEO Joseph DePinto explains, consumers were “ultra price-conscious” when the chain first rolled out 7-Select, which then consisted of 32 SKUs, in November 2008. At the time, 7-Eleven observed that manufacturers were reducing the quality of products and packaging to cut costs. “We decided that manufacturers weren’t hearing what we were saying, and we would have to go it alone,” recounts DePinto in an interview with Convenience Store News after his induction into CSN’s Hall of Fame this past November. While the brand initially

focused on packaged snacks, 7-Eleven continued to expand it with many new products, including non-food items. A turning point came in mid-2015, when the company added two premium food lines to the brand: 7-Select Go!Yum, which contains indulgent items such as Sea Salt Caramels and Jalapeño Cheddar Popcorn, and 7-Select Go!Smart, which focuses on healthful snacks. These new lines were designed to captivate qualityand price-conscious foodie millennials. “Millennials love private label,” DePinto says, emphasizing that 7-Select will be a $1 billion business within the next year. 7-Select added 280 new SKUs in 2017 and today includes more than 800

Takeaways 1 Most convenience store chains don’t have the volume to support a large selection of private brand CPGs. 2 Many c-store retailers are emphasizing their foodservice offerings and view themselves as competitors to quickservice restaurants. 3 Popular own-brand packaged items at c-stores include bottled water, snack chips, trail mix and motor oil. One excellent merchandising tactic is differentiation through packaging. 4 Convenience stores could do more to cater to busy millennial moms and their children.

items, ranging from cold-press juices to premium toilet tissue. In fall 2017, 7-Eleven introduced the Trojan Horse white wine label, the first of the retailer’s wines to feature vintage dating. The company even recently launched a cosmetics line called Simply Me Beauty, an assortment of 40 items for on-the-go young women.

Destination food

In March 2017, NACS released a study showing that consumers increasingly select a fuel station based on the quality of the associated convenience store’s food offerings. Although a majority (51 percent) of American drivers still said that gas price was the main reason they preferred a specific store or chain, that figure represented a 6 percentage-point drop from two years prior. Because of the greater emphasis on food and beverages at c-stores, 42 percent of drivers who fueled up went inside the store — a 7 percent increase from two years earlier. Of those customers going inside, 45 percent said they bought a beverage and 35 percent said they bought a snack, NACS reported. Overall, 8 percent said they bought a sandwich or meal, a proportion that jumped to 13 percent for consumers aged 18 to 34. But NACS’s national statistics don’t begin to explain the huge fan base of certain regional c-store chains such as Media, Pa.-based Wawa and Altoona, Pa.-based Sheetz, which are commonly described as having a “cult following.” According to a Jan. 6 Business Insider article, Wawa wows with the high quality of its own-brand made-toorder hoagies, paninis and other fresh sandwiches, while Sheetz impresses with its snazzier store interiors that have ample seating, larger variety of prepared food items and unique walk-in “Soda Cave.” “Chains like Sheetz, Wawa, Rutter’s and RaceTrac in particular have a massive focus on food,” notes Stephen Young, vice president of strategic business development for Bakkavor, a manufacturer of private brand fresh-prepared food such as a hummus and burritos. “They are really becoming destinations for their sandwiches and other food offerings. And while you’re there, you might also pick up some gas.” Young notes that convenience store retailers prefer to focus on foodservice because the margins for sandwiches and burritos, and especially for the accompanying soda pop and chips, are much higher than for gasoline. “The c-store industry has constantly evolved to meet the changing needs of its customers,” Montgomery adds. “Convenience stores have changed from being places to go for replacement or fill-in grocery items to being sources of refreshment and foodservice.” Many of the most food-focused c-store retailers are based in Pennsylvania, and that’s no coincidence, according to Steve Hartman, president and CEO of Rutter’s, a York, Pa.-headquartered chain. For many decades since the ending of Prohibition in 1933, Pennsylvania restricted the sale of wine, beer and spirits to statecontrolled stores. Prevented from selling beer, a longstanding staple of U.S. convenience stores, Pennsylvania c-stores differentiated themselves through their standout fresh-prepared food and private-branded nonalcoholic beverages, Hartman explains. Equally important, several Pennsylvania convenience store chains, including Wawa and Rutter’s, began as dairies. So fresh own-brand milk and other dairy items formed the foundation of www.storebrands.com /March 2018 / Store Brands

TRENDING: CONVENIENCE STORES AND PRIVATE BRANDS these retailers’ product assortments. At Rutter’s, which has about 70 stores that carry roughly 15 percent private brands, customers order custom-prepared food at touch-screen kiosks. Given the huge number of ingredients the kitchens stock, “we actually have over a billion combination of items you can order in our stores,” Hartman maintains. These range from crab cakes to spareribs to a wide variety of salads. To win over millennials and other health-conscious consumers, the chain offers many fresh items and seeks out and identifies products that are non-GMO and clean label. “In January, we hired a full-time category manager for fresh and local food,” Hartman adds. “I think we’re the first c-store chain in the country to do that.”

Strategic rebranding

Based in North Salt Lake, Utah, Maverik is c-store chain with more than 300 stores across 10 western states. A few years ago, the retailer decided to rebrand itself, shedding its former Wild West theme for an adventure theme that would better resonate with millennials and the sports enthusiasts who visit the Rocky Mountain region. “Our goal when you walk into a Maverik is that you feel you’re walking into the great outdoors,” says Aaron Simpson, the company’s chief marketing officer.

The retailer has a small selection of private brand CPGs, including Glacier Rain bottled spring water and Tracker Snacks candy, each in packaging that reflects passion for the outdoors. “We look at categories where we have an opportunity to offer better prices to the consumer,” Simpson notes. “We don’t have many private label products.” Maverik’s main food focus is in the fresh realm. The retailer’s own BonFire brand consists primarily of many fresh-prepared offerings, including a particularly robust selection of hearty grab-and-go sandwiches that can be taken on a rock-climbing excursion or fishing trip, for example. The BonFire brand also includes snack chips and a few other shelf-stable snack products. To cater more to health-conscious consumers, Maverik stores also carry a lot of salads and fresh fruit. “We try to have a healthy selection for those who want it,” Simpson says.

All things to all people

Despite the retailer’s outdoor-adventure brand positioning, Maverik, like other convenience stores, has to be all things to all people, according to Simpson. A large proportion of c-stores’ core customers are still blue-collar

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individuals who come in to pick up beer and cigarettes. “We service 99 percent of the American public,” echoes Hartman. “People still want tobacco. People still want gasoline. People still want unhealthy items.” Bakkavor’s Young, for one, believes that c-stores could do more to address the needs of millennial parents. “If you want to grow the market, you actually have to focus on busy moms,” he says. “You not only have to meet her needs but those of her kids, or she’ll go someplace else.” Healthful grab-and-go snacks and meals aimed at children would help bring in these customers, Young says.

Move over, QSRs

At a time when supermarket chains are looking to simplify and speed up shopping for customers, convenience stores have a distinct advantage: Their considerably smaller size allows customers to get in and out much faster. This is true even though c-stores are getting bigger in order for retailers to expand their foodservice and seating areas. The average convenience store

In 2015, the 7-Select private brand added the Go!Smart healthful and Go!Yum indulgent lines. today is around 3,500 square feet, Hartman estimates. Rutter’s largest store under construction will be 10,800 square feet. Rutter’s and other food-oriented c-store chains not only compete with one another but also see quick-service restaurants (QSRs) as major competitors. “We can sell hamburgers and French fries that we think are better and quicker and more convenient, and we can also give you 650 beverage choices,” Hartman notes. “QSRs can’t do that.” C-stores are evolving and transforming the fast-casual dining landscape, according to Hartman. “We are really much more of a disruptor than a disruptee,” he says. SB

www.storebrands.com / March 2018 / Store Brands

TOTAL TOTAL STORE STORE

TransparencyIQ 2018 Sponsored by

Ensemble IQ and Label Insight, TransparencyIQ 2018 will take place May 14-15 at the Hyatt Lodge in Oakbrook, Ill. For more information, visit www.transparency-iq. com/home.

CLEAR INTENTIONS Transparency has become more important than ever before for retailers, given that consumers have grown skeptical of corporate claims, fearful of food additives and increasingly concerned about environmental impact. Indeed, consumer trust in the major institutions of business, media, government and non-governmental organizations (NGOs) has been declining worldwide, with people today more likely to be influenced by their peers than experts, according to Jay Porter, the president of public relations agency Edelman Chicago, who gave a presentation titled “Why Transparency Matters” at the TransparencyIQ conference, co-sponsored by Store Brands’ parent company, Ensemble IQ, and Label Insight last fall in Rosemont, Ill. But the news isn’t all bad for business, as Porter observed. The 2017 Edelman Trust Barometer, an online survey of more than 33,000 adults in 28 countries, revealed that the majority (52 percent) of respondents do trust business, while just 43 percent trust the mainstream media and 41 percent trust government. The positive takeaway for retailers and manufacturers of consumer packaged goods, Porter stressed, is that “consumers are more trusting than ever of your attempts to tell your own story.” Retailers today are finding that they can forge stronger connections with their customers as well as brand identity through transparency, and they are telling their stories in many ways. For example, if their store brand produce or dairy products are locally or regionally sourced or USDA-certified organic,

Store Brands /March 2018 / www.storebrands.com

Retailers embrace transparency to earn consumer trust By Carolyn Schierhorn

they can introduce shoppers to the farmers who produce these products — through in-store signage, website videos and even possibly scheduled appearances at stores. With private brand packaged goods, retail chains can use packaging to share stories about how and where ingredients are sourced. And retailers that have embraced sustainability practices can offer store tours that point out food waste reduction strategies, energy-efficiency measures such as the use of solar panels, and related initiatives. Although driven largely by millennials’ desire to learn everything they can about anything they consume, the transparency movement is not just about sharing product data in a meaningful way, although that’s important, Porter said. It’s also about demonstrating genuine commitment to the values that consumers increasingly hold dear, including the elimination of artificial ingredients and preservatives in food, ingredient traceability, environmental sensitivity, animal welfare, fair trade and the equitable treatment of one’s own employees. The way retailers and vendors convey their transparency message is also critical, Porter stressed. “It can be very easy to default into a very rehearsed dialogue,” he explained, warning his audience that “we live in an age where the spontaneous speaker, the one outspoken voice, is more credible.”

Helping shoppers make healthful choices

For Michael Teel, owner and CEO of Raley’s, transpar-

TOTAL STORE

At Earth Fare stores, abundant signage and product labels emphasize the retailer’s commitment to cleanlabel food.

ency means communicating clearly with customers and helping them make sense of the plethora of product data available today. To that end, the West Sacramento, Calif.-based supermarket chain launched a new Shelf Guide system last August that combines color-coded shelf tags indicating specific health attributes with an extensive, easy-tonavigate online product database developed in partnership with Label Insight, a Chicago-based data science company focused on the packaged food industry. The purpose of the Shelf Guide system is to cut through food-labeling and package-claims clutter to enable customers to immediately see whether specific products at Raley’s meet their dietary priorities, whether they are seeking vegan, clean label, low-addedsugar, gluten-free or nutrient-dense items. In addition, the Shelf Guide’s online capabilities allow consumers to build shopping lists that meet particular criteria. “Label Insight provided us with access to product information for more than 400,000 items and helped us analyze the data,” said Teel, who also spoke at the TransparencyIQ conference, noting that the available pool of data includes information on thousands of attributes, from ingredient origin to the manufacturer’s sustainability practices. “This allowed us to create a custom set of attributes that generated specialized shelf labels for more than 13,000 items. Every item has at least one icon.” Working on the project for more than a year before the launch, Raley’s created new definitions to serve as standards for whether products are “minimally processed” (M shelf icon), “nutrient-dense” (N icon) or have “no added sugar” (S icon); these were combined with more established dietary attributes, including

Store Brands /March 2018 / www.storebrands.com

“organic” (O), “vegan” (V), “kosher” (K), “gluten-free” (GF) and “non-GMO” (G). “If the general shopper wanted to find an item that was minimally processed using our standard, it would take hours without the support [of the Shelf Guide],” Teel said. “We have made it much easier for our customers to find minimally processed packaged food.” But the goal of Raley’s is not just providing product attribute data in an easy-to-access fashion. The Shelf Guide is just one step in the retailer’s overarching mission “to change the way the world eats one plate at a time,” as Teel told his TransparencyIQ audience. For Raley’s, fulfilling this wellness mission meant giving up cigarette sales years ago and, more recently, not selling candy or cold soda pop as impulse items in the checkout area. Teel would like the Shelf Guide to encourage average consumers to make more healthful choices and, ultimately, spur more and more food companies to make products that are less-processed and free of questionable ingredients. “All I want to do is effect change somewhere else, which will effect change somewhere else,” he says. “It’s going to multiply.”

Reinforcing the message

To be truly transparent, grocery retailers need to reinforce the messaging about their values and not assume that all consumers are familiar with their priorities. At Raley’s, having well-trained associates who can explain the chain’s mission and the Shelf Guide system is a crucial component of the retailer’s commitment to transparency, notes Emmie Satrazemis, a registered dietitian nutritionist, whose title at the company is “wellness evangelist.” “We have a wellness champion in every single store, and they are led by district wellness champions,” she elaborates. “These are team members who are very passionate about our program and interact with our customers on a daily basis.” Founded in 1975 as a natural and organic retailer, Asheville, N.C.-based Earth Fare has needed to refine its food philosophy and refresh its message over the years. But the company’s mission has remained the same. “Earth Fare was founded on the premise that eating healthy, clean foods helps people live healthier, happier, longer lives,” says Frank Scorpiniti, the chain’s president and CEO. He describes Earth Fare’s food philosophy as follows: “Under no circumstances would we ever allow anything in our store that has added hormones, antibiotics, artificial fats and trans fats, artificial sweeteners, high-fructose corn syrup or artificial

TOTAL STORE colors, flavors or preservatives. In addition, all of the flour we use in our bakery is organic, and it can neither be bleached or bromated.” Earth Fare, furthermore, has a “boot list” of hundreds of chemicals it doesn’t allow in its 46 stores. To keep itself accountable, the company relies on a “boot patrol” of associates who make sure that nothing they see on the shelf has any of those banned chemicals. “We also depend on our customers,” Scorpiniti adds. “We acknowledge that an accident could happen and tell our customers, ‘If you find anything in our stores that contains a chemical on our boot list, let us know and we’ll give you $50 on the spot.’ Fortunately, that doesn’t happen very often.” Despite its longstanding commitment to healthful, minimally processed food, Earth Fare has not been resting on its clean-label laurels. In fact, just over a year ago, the company received a startling wake-up call when the National Center for Health Statistics published some data that Earth Fare found appalling. “For the first time in decades,” notes Scorpiniti, “Americans’ lifespan actually went backwards, even though we’re the richest nation in the world.” Recognizing the need to broaden its reach among consumers,

the chain debuted the “Live Longer with Earth Fare” marketing campaign in January 2017. In all Earth Fare stores, prominent signage explains the retailer’s strict food philosophy. What’s more, the retailer’s new quarterly magazine, The Clean Plate, champions healthful, clean eating while introducing customers to new Earth Fare products, including store brands. Earth Fare also feels strongly that nutritious, minimally processed food should be affordable. “So we decided to put our money where our mouth is and launched a program we call ‘clean food security,’ ” Scorpiniti says. “We can feed a family of four dinner seven nights a week for $70, or $2.50 a person each night.” These fresh-prepared, grab-and-go ready meals take little time to prepare. As Scorpiniti emphasizes, financially struggling families are typically busier than affluent ones and often erroneously consider drive-thru fast-food restaurants to be their best option. “We believe that clean eating is not a privilege,” he says. “It’s a right.” SB Schierhorn, the managing editor of Store Brands, can be reached at cschierhorn@ensembleiq.com.

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FOCUS ON FRESH

While grab-and-go foods are evolving, retailers have the chance to up their own-brand offerings with convenient, on-trend and healthy foods By Lawrence Aylward

Cleveland-based Heinen’s Grocery Store has a stellar reputation for its fresh department, including a bountiful offering of grab-and-go foods. But Chris Foltz, Heinen’s chief innovation officer, wants to improve on stellar. He realizes the abundant opportunity within the category, with grab-and-go foods playing a major role. Heinen’s, a regional chain with 22 stores located across northeast Ohio and Chicagoland, began in 1929 and has always focused on leadingedge solutions, says Foltz, who has been with the grocer for about 16 years. On a recent day Foltz stood in a center-store aisle at a Heinen’s location, envisionHeinen’s Chris ing what the future holds for grab-and-go products. Foltz sees the fresh department Foltz realizes the center store is struggling and needs to shrink. He sees the fresh department growing into the growing into center store and center store with an array of protein and side dishes as grab-and-go offerings. offering more “A refrigerated case could go here with 10 protein grab-and-go selections and 20 side dishes,” he says. “Next to the case products. could be a graphic about how to mix and match the proteins and side dishes.” Then customers can not only visually see what is available, but also they can imagine what proteins to pair with what side dishes. “One of the things we’re working on is the store of the future,” Foltz says. “Down the road we’re going to have more refrigeration and perishables and less dry goods. It’s just the way the world of grocery is changing.” Indeed, retailers can differentiate with grab-and-go products. Heinen’s current offerings are a testament to that. In its service case, Heinen’s offers several prepared proteins featuring on-trend flavors such as parmesancrusted scallops, garlic-grilled shrimp, nut-crusted

Store Brands / March 2018 / www.storebrands.com

tilapia, parmesan-crusted orange roughy, teriyaki pepper steak and sundried tomato chicken breast as well as several prepared side dishes, including bleu cheese potato pancakes and grilled asparagus. On a refrigerated shelf nearby there are prepared packages of stuffed cabbage, chicken tenders, turkey meatloaf, pulled rotisserie chicken, beef stew and other products. In addition, there is a comprehensive salad bar with differentiated offerings, including roasted cauliflower and Maryland-style crab salad. Heinen’s also sells smaller-portion packages of cookies, cakes and other sweets. Foltz says the service case was dominated by traditional prepared salads (such as pasta and potato) when he began working for the grocer about 16 years ago. But Heinen’s decided to incorporate more prepared meal components around the what’s-for-dinner theme in the service case and moved the salads to the salad bar. “People architect their meals around proteins — animal, fish and vegan — not around salads, although salads are very important,” he says. Regarding fish, Foltz sees a great opportunity in grab-and-go foods with prepared seafood, a reason why Heinen’s service case offers several seafood items. While Heinen’s offers an attractive selection of raw seafood, it’s the prepared seafood that really gets consumers’ attention.

FOCUS ON FRESH

Foltz believes many customers are fearful to cook seafood, afraid they will ruin it. “So we want to have a lot of grab-and-go seafood that is cooked perfectly,” he adds. Foltz is well aware of consumer eating trends, especially among younger shoppers who love to snack and don’t often eat three square meals a day. Snacks are also convenient, another driving factor in eating trends. According to a recent report from market researcher Nielsen, U.S. consumers are reaching for snacks to satisfy their hunger cravings between meals, and some are using them to replace meals entirely. “Fifty percent of eating occasions evolve around snacking,” Foltz says. Scanning the service case, Foltz remarks that Heinen’s needs to offer healthier selections. “One of the things we realize is we have to be relevant in health and wellness,” he says. “It’s something we are investing heavily in. We believe the grocery store really needs to be the health care clinic of the future.” Health and convenience are two factors driving innovation at Expresco Foods, which manufactures fully cooked and ready-to-eat proteins for retailers. The Montreal-based company offers artisanal and convenient grilled protein meal and snack solutions to be sold as grab-and-go products under private brands. Its offerings include hand-made grilled skewers and strips.

“These are the types of foods that people are looking for — high-protein on-the-go options that are fun to eat,” says Michael Delli Colli, marketing manager for Expresco Foods. Delli Colli says the company is also hitting on consumers’ requests that are free from a growing list of undesirable ingredients. “Consumers are more educated and smarter than ever so they also have higher expectations [regarding ingredients],” he adds. To help it up the ante in healthier offerings, Heinen’s recently opened a new 60,000-square-foot manufacturing plant in the Cleveland area and will cook many of its grab-and-go products utilizing sous vide, a cooking technique that uses precise temperature control. Food is sealed in plastic bags and cooked in a temperature-controlled water bath or steam. Cooking in a sealed film results in a high-quality product that retains its moisture, flavor and texture. Product is also cooked consistently and shelf life is improved without additional preservatives and additives. Food safety is also improved — because nobody touches the food once it goes in the bag, several potential sources of contamination are eliminated. Consumers simply need to “retherm” the products while in sousvide cooked bags and/or finish them with a sauce or condiment, Foltz explains. “It’s a wonderful way to cook,” he adds. “We can control the process better.” Foltz believes sous vide will have a tremendous positive impact on Heinen’s grab-and-go offerings. The taste and quality of the products will have consumers coming back for more. While Foltz says what Heinen’s offers in the grab-and-go category is relevant, he says the retailer wants to keep with its history of offering leadingedge solutions. That means not just cooking differently, but keeping up with and even creating flavor trends in the category, which help differentiate. Clearly, Heinen’s does that with offerings like bruschetta asiago chicken and broccolini with fried garlic. Delli Colli is not afraid to try new flavors in Expresco Foods’ products. He advises retailers to capitalize on taste in their regions and offer limitedtime offerings according to seasons and even sporting events. “We have received requests for coffee- or expresso-infused flavors for proteins,” he adds. “It’s important to offer consumers items that they can’t get every day.” Another factor that’s important is marketing and merchandising — simply getting consumers to envision the possibilities for meal solutions and snacks through grab-and-go products. Heinen’s does that well. On its website, Heinen’s offers a tasty solution for picnickers: “A great addition to any picnic is an easy-to-make baguette sandwich. All you need is a baguette from the bakery, a bit of flank steak or beef tenderloin from prepared foods, a touch of blue cheese spread from the gourmet cheese department and some fresh arugula from the produce department. Cut the baguette into six even pieces, then slice slice each piece in half length-wise. Cover one side of each piece with cheese spread, then layer on some arugula and meat, put the other half of the baguette on top and enjoy!” With summer around the corner, Heinen’s verbiage is enough to get consumers pining for picnic season. SB Aylward, editor-in-chief of Store Brands, can be reached at laylward@ ensembleiq.com.

www.storebrands.com /March 2018 / Store Brands

PACKAGING

Care

PACKAGING Eco-friendly packaging continues to be an opportunity for private brands to differentiate across many product categories — and to do the right thing in the process. As concerns about the environment continue to build momentum, the connection between sustainability and consumer purchase decisions has never been more important, says Mark Lutgens, vice president of new product development and innovation for Ardagh Group, Glass/North America, a Luxembourg-based packaging company. “Today’s consumers are embracing the role of packaging and how it can help improve our environment and benefit them personally from a health and wellness perspective, resulting in a wide demand for sustainable packaging,” Lutgens adds. Joseph Barbara, national sales director of Baldwinsville, N.Y.-based Giovanni Foods, which manufactures sauces, marinades and other products, says U.S. consumer demand for eco-friendlier packaging has been steadily on the rise and the consumer packaged goods (CPG) industry has responded with lighter weight, ecosustainable packaging across many CPG segments. “There are consumers that desire responsible, ecofriendly packaging across all categories, so clearly they are the fuel that feeds the fire,” Barbara says. Scott Byrne, environmental specialist for Tetra Pak U.S. and Canada, says a 2017 survey of U.S. consumers about the environment shows that the number of U.S.

Store Brands /March 2018 / www.storebrands.com

Consumers, retailers and manufacturers continue to embrace eco-friendly traits, with private brands playing a major role By Lawrence Aylward

consumers who avoid a particular product or brand for environmental reasons has grown to 68 percent, which is nearly a 30 percent increase from the first time the company asked the question in a 2005 survey. Rachel Kirkpatrick, product commercialization manager for Portsmouth, Va.-based coffee manufacturer Massimo Zanetti Beverage USA, says consumer demand is growing significantly for any coffee product that offers a sustainable message of which packaging is an important component. “Recyclability is critically important while we are seeing continued awareness of compostable packaging,” she adds. “Building eco-friendly packaging into the brand identity plays into the authenticity of the brand, making it more believable.” Although consumers of all ages are concerned about the environment, the focus seems to always turn toward millennials, says Lutgens, noting that business media company Forbes reports that millennials prefer to do business with corporations and brands with sustainable manufacturing methods. Kirkpatrick says product quality and sustainability are factors that affect millennials’ loyalty to a brand. “Both should be present for the brand to win,” she adds. Barbara says it’s easy to see that millennials lead the charge on many fronts when measuring consumer analytics on various factors. “However, reducing waste and doing the sensible thing for the environment isn’t a behavior practiced by one group,” he adds. “It touches

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PACKAGING consumers of all ages and all consumer segments.” Retailers are no different from anyone else when it comes to caring about the environment, but they are in a great position to make a positive impact through private brands with eco-sustainability, Barbara says. Retailers are anxious to capture new customers and keep their loyal customers on a variety of scales. “It would be a mistake to assume retailers are not thinking about having eco-friendly packaging solutions for their private brand portfolios,” Barbara adds. “Their customers expect the same if not better quality on private label items versus national brands.” Many retailers, including some that aren’t generally considered pioneers in eco-innovation, have implemented specific environmental criteria for the products they stock, Byrne says. “The focus is often on sustainable sourcing, end-oflife recovery and optimization of packaging design,” he adds. “Many retailers are making a real push to ensure their own private label brands meet or exceed certain environmental benchmarks.” Clay Dockery, vice president of retailer brands for Massimo Zanetti Beverage USA, says eco-friendly packaging has to serve two needs: product protec-

Store Brands /March 2018 / www.storebrands.com

tion and true environmental benefit. “While the packaging does cost more than conventional packaging, this is a huge opportunity within private brands given that you can offer differentiated and improved packaging while just managing a slight narrowing of price gap to national brands,” he adds. “Progressive retailers are looking for differential advantages in their own brands, and offering better packaging options is a differential advantage.” Sandy Gott, co-owner and executive vice president of Shelburne, Ontario-based Ice River Springs, a provider of store brand bottled water, says retailers are incorporating socially responsible practices into their merchandising and operational strategies to not only meet a growing consumer demand but also to demonstrate to their stakeholders that what is good for the planet is also good for business. There are challenges, though. In the markets it serves, there is stronger interest in eco-friendly packaging from private brands and smaller specialty brands looking to differentiate themselves, says Joel Schmidt, director of market development for Neenah, Wis.-based packaging manufacturer The Outlook Group. But Schmidt says cost is an issue.

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PACKAGING “For the most part, brand owners and consumers still are not willing to pay more for sustainable options, and many of the more sustainable options do cost more,” he adds. Barbara believes consumers by-and-large want to do right by the environment, and there are consumers who will pay a premium for some eco-friendly packaging. “The first challenge is controlling cost, especially in the private brand space,” he says. “The second challenge is continuing to create innovative packaging that is not only eco-friendly, but also doesn’t require the consumer to have to stray too far from the core attributes of why they like the product in the first place.” Lutgens says a recent Nielsen study suggests that consumers are increasingly willing to pay more for socially responsible products. He notes that Iceland Foods, a British supermarket chain, has pledged to remove plastic packaging from its private brands by 2023 and began making changes in February. Iceland Foods says 80 percent of its customers say they would support a supermarket that decided to go plastic-free. “Iceland is demonstrating the possibilities of private label brands to engage with this trend, so they are not left behind by upcoming legislation or increasingly

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engaged consumers who choose to make purchases that align with their values,” he adds. Another challenge is that “eco-friendly” is a broad term that encompasses many different aspects, including recyclable, compostable, bio-based and down gauge, Schmidt says. Many consumers and brand owners are unclear on what each of these terms means and which aspect of eco-friendly is most important and most viable for their particular application, he adds. Kirkpatrick says since eco-friendly packaging is not as far along in its development life cycle; it sometimes doesn’t offer the same level of durability and strength. Dockery adds that eco-friendly packaging has to deliver against several issues including recognizable environmental benefit, modest difference in cost and functionality in manufacturing. “If any of those components are missing, little progress can be made,” he states. Gott says the challenge for retailers and suppliers is to educate shoppers on the additional social benefits of sustainable packaging while delivering a great consumer experience. SB Aylward can be reached at laylward@ensembleiq.com.

CATEGORY INTELLIGENCE DIPS AND SPREADS

FRESHENING UP Dips and spreads thrive with new flavors and better-for-you versions

DO create clean label dip and spread varieties.

Snacking remains a beloved and permissible indulgence. The numbers do more than hint at it. Across several major categories of dips and spreads, dollar and unit sales are up, in some cases by double digits, according to Chicago-based market research firm IRI. Store brands performed especially well in refrigerated dips and refrigerated spreads over the course of 2017. Dollar sales rose 17.2 percent and unit sales were up 9.9 percent for private brand refrigerated dips. Dollar sales increased 20.5 percent and unit sales rose 19.6 percent for store brand refrigerated spreads. Shelf-stable dips, while they represent a smaller market, were no slouches either. While overall dollar sales were up 1.6 percent and unit sales rose 0.9 percent in 2017, private brand shelf-stable dip dollar sales increased by 40 percent and unit sales were up 92.2 percent. And while the American passion for healthy, clean eating continues apace, the chips and dips category is on a solid growth track, consumer market researcher Mintel Group notes in its February 2017 report “Chips and Dips – U.S.” Total category sales of chips and dips grew 19 percent between 2011 and 2016 to reach $16.8 billion, Mintel reports, forecasting another 18 percent rise (to $19.8 billion) by 2021. Dollar sales of dips shot up by 28 percent over the five-year period. Mintel credits the category’s success to a widening availability of flavors, ingredients and varieties, specifically guacamole, queso and Greek yogurt.

Drawing consumers in

Creating inventive new flavors and formats, while keeping up with the movement toward all-natural and fresh ingredients, will keep the category growing and accelerate sales, Mintel says. In this spirit,

DON’T neglect to add new on-trend flavors to your refrigerated lineup. 42 42

Store Brands Brands // March March 2018 2018 / www.storebrands.com Store

many retailers are looking for new and innovative ways to expand their existing assortment of dips, notes Todd Mullane, vice president of private label for Dakota, Ill.-based Berner Food & Beverage. “Right now, many (retailers) have cheese dips and salsa con queso in their private brands portfolios,” Mullane says. “They are looking to add flavors such as French onion, ranch or spinach to those programs. And due to consumer demand, retailers are also looking for clean label and better-for-you products. Many dips are being reformulated to remove coloring agents, as well as MSG.” Ancillary products seem to be variants that retailers are increasingly interested in as they seek to drive incremental dollar sales into the category, adds Kirby J. Harris, Berner’s chief commercial officer. This can be accomplished, he says, either by bringing new users to the category or bringing in incremental purchases from the category’s existing consumers who are willing to try something different.

Blossoming trends

The healthier and better-for-you trend will continue to grow, Mullane emphasizes. “You currently see it in the salty snacks being offered at store level,” he says. “I also think fresh dips will continue to grow, and using processes like HPP (high pressure processing) to extend the shelf life of these products will continue to be on the rise as well.” Many retailers will continue to diversify their portfolios and add more organic and non-GMO products to their assortments. Mullane expects this to occur in the dip category as well. Also, packaging changes and innovations will maximize shelf space and drive additional purchases for different occasions. What’s more, restaurant trends will continue to impact retail sales of dips and spreads. For example, the chocolate-hazelnut spread widely known by its popular branded version, Nutella, is showing up on more menus, according to market researcher Packaged Facts in its June 2017 report titled “Food and Beverage Flavor and Ingredient Trends: Culinary Trend Tracking Series.” Menu penetration rates for the spread have climbed steadily, according to Packaged Facts, from 0.4 percent in 2007 to 3.9 percent in 2015, and 4.7 percent year-to-date in 2017. “You know that when McDonald’s introduces a “Nutella Burger” — granted, it’s in Italy — that’s a

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CATEGORY INTELLIGENCE DIPS AND SPREADS product that’s got legs,” writes the report’s author. Packaged Facts lists U.S. “menu sightings” for the spread such as the first Nutella Café in the United States, which opened in March 2017 in Chicago; Cheesecake Factory’s Chocolate Crunch Hazelnut Cheesecake (chocolate hazelnut cheesecake topped with hazelnut crunch and Nutella) and Steak and Shake’s Nutella Milkshake.

Exclusivity and innovation

Exclusivity will always be important for retailers building their own brands by leveraging their proprietary formulas or recipes, Harris points out. “I think retailers, as they work directly with a supplier to develop an item, know and understand that for a short time they will be first to market with their formula.” Innovation, especially in flavors, is something that always drives a category, Mullane says. “Retailers are always watching what will be next by seeing different flavors of chips in the category,” he notes. “Cleaner labels and organic (ingredients) are trends that also could also be considered innovative.”SB Cvetan is a freelance writer in Barrington, Ill.

Shelf-Stable Dips Private Brands

All Brands

Dollar Sales (in millions)

$22.0

$517.1

Change vs. Year Ago

+40.0%

+1.6%

Dollar Share

4.3%

100%

Unit Sales (in millions)

11.8

167.0

Change vs. Year Ago

+92.2%

+0.9%

Avg. Price Per Unit

$1.87

$3.10

Private Brands

All Brands

Dollar Sales (in millions)

$159.4

$950.0

Change vs. Year Ago

+17.2%

+11.9%

Dollar Share

16.8%

100%

Unit Sales (in millions)

49.8

305.2

Change vs. Year Ago

+9.9%

+7.3%

Avg. Price Per Unit

$3.20

$3.11

Refrigerated Dips

Source: InfoScan Reviews, IRI, a Chicago-based market research firm. Total U.S. supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending Dec. 31, 2017. Note: Does not include all dips and spreads subcategories.

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CATEGORY INTELLIGENCE DELI MEATS

NO MATTER HOW YOU SLICE IT Consumers are demanding healthier and more convenient options in the deli meats category

DO use sampling to drive customers to store brand deli meats. Don’t fail to offer options that are uncured, low-sodium, and antibiotic- and hormone-free.

Consumers today, especially millennials, are demanding less-processed, more natural food, which is having a tremendous impact on private brand deli meats. Many customers also seek out premium-quality artisan products such as Italian specialty meats. Busier than ever, shoppers additionally are insisting on more convenient options. “The main consumer trend we see is a move toward packaged deli,” says Ron Godshall, chief operating officer of Telford, Pa.-based Godshall’s Quality Meats, which manufactures packaged sliced, seasoned all-natural turkey breast in several flavors. “Whether a retailer replaces a slicing deli counter or augments it with a more around-the-clock option, prepackaged deli meats are becoming more popular.” Grocery retailers are seeking pre-sliced meat for their delis because of the labor savings, notes Mark Battistoni, vice president of sales and marketing for Buffalo, N.Y.headquartered Sahlen Packing Co., which is building a plant that will produce high-pressure pasteurized sliced deli meats for improved safety and shelf life. “The deli business in general has become for many store chains almost debilitating with labor,” Battistoni says. Besides wanting pre-sliced turkey, salami, ham, roast beef and chicken, supermarkets are looking to their deli meat suppliers for other value-added services such as merchandising, Battistoni adds.

Refrigerated sliced lunch meat Private Brands

All Brands

Dollar Sales (in millions)

$971.0

$5,370.4

Change vs. Year Ago

+0.2%

-2.2%

Dollar Share

18.1%

100%

Unit Sales (in millions)

243.4

1,592.5

Change vs. Year Ago

+3.2%

-1.1%

Avg. Price Per Unit

$3.99

$3.37

Store Brands / March 2018 / www.storebrands.com

“The biggest trend we are seeing is clean label,” shares Jeffrey Saval, president of Baltimore-based Deli Brands of America, which debuted a new line of all-natural deli meats called Honest to Goodness in 2017. Available for private branding or co-branding, the line includes uncured corned beef, uncured pastrami and natural roast beef. The pastrami and corned beef have no nitrites or nitrates added except those naturally occurring in sea salt and celery powder. In addition, the 100 percent beef products are free of growth hormones, antibiotics, monosodium glutamate and artificial colors and preservatives, and they are 97 percent fat-free. “We are definitely seeing a trend toward healthier, better-for-you products,” echoes John Kreilich, founder and CEO of St. Louis-headquartered Naked Bacon, noting that this means less sodium, no nitrates or other added chemicals, and gluten-free to most consumers. “That goes across the board whether it’s bacon or sausage or lunch meat.” Millennials are also seeking bolder flavors in this category, according to Kreilich, who points out that Naked Bacon offers both jalapeño and chipotle sugar-free bacon and will be rolling out new flavors this year. Because they research everything on the internet, millennials in particular are knowledgeable about product-quality attributes and have sophisticated tastes regarding deli meats, says Battistoni, who notes that the market is growing for premium-quality deli meats such as the ham, bologna, turkey and other products produced by Sahlen Packing Co. For entertaining, consumers are increasingly interested in creating or purchasing pre-made charcuterie boards that include a variety of artisan sliced meats such as finocchiona and other Italian specialty meats, ham, bacon and sausage, states “What’s In Store 2018,” a trends report by the International Dairy Deli Bakery Association (IDDBA). “The charcuterie board, which was once considered foodie-centric is something the mass public is now accepting as standard entertainment food,” notes the IDDBA report. The key to better merchandising deli meats, especially premium products, is sampling. “If you’re proud of your private label brand,” emphasizes Godshall, “get it on a toothpick and win over your shoppers.”SB Schierhorn, the managing editor of Store Brands, can be reached at cschierhorn@ensembleiq.com

CATEGORY INTELLIGENCE RICE AND GRAINS

NUTRITIOUS VERSATILITY Functional and healthy attributes of today’s rice and grains can make store brand center store the latest hot spot for meal solutions Few things are as simple and satisfying as rice or grain dishes. They are the cornerstones of nearly every culture and cuisine. And as consumers continue to accept a wider range of ethnic foods, sales of grains and rice in new and exciting flavors and forms will increase. Private brand retailers will need to push the flavor envelope to capitalize on these opportunities. According to market researcher Mintel Group’s April 2016 report “Grains and Rice – U.S.,” unflavored dry rice and oats are both wellestablished and incredibly versatile. New growth opportunities will come instead from other types of rice and grain products. But the rice category in general does not change very quickly, says Gary Reifeiss, vice president of sales and marketing/North America for Producers Rice Mill Inc. in Little Rock, Ark. He encourages retailers of store brands to capitalize on current and up-and-coming trends to keep up with consumer interest. The ongoing better-for-you trend is shaping the way shoppers navigate a retailer’s center store and that is especially true for rice and grains, says Mark Fields, vice president of store brands for Cincinnatibased Baxters Food Group for North America. “Whether it’s simplification in ingredient statements, a source of origin story, organic certification or the inclusion of value-added grains in blend formats, consumers are seeking subtle ways to increase the benefits of what they’re consuming in

each meal,” he explains. Just look at the growth in organic rice, for instance. “Many people assume that brown organic rice would be preferred because consumers classified as more health-conscious would be more likely to prefer brown rice,” says Meryl Farr, CEO of Kennedy Rice in Mer Rouge, La. “However, we have found that as organic products become increasingly more mainstream, the traditional product preferences are coming to the surface.” Don Trouba, senior director of Go-To-Market for Specialty Products at Denver-based Ardent Mills, sees a lot of potential with mixing rice and an array of ancient grains. “For instance, since last March when we launched Great Plains Quinoa, we have made great strides in learning what makes this particular variety of quinoa unique, and we have found that this variety has distinct sticky qualities, which are due to its higher amylopectin levels,” he explains. The stickiness quality makes it an ideal rice substitute in sushi applications, he adds. Within the crowded snacks segment, trends are also being driven by the need for a point of difference, says Mike Veal, vice president of marketing for Ardent Mills. “Unique grains in crisped forms can complement or replace the rice used in bars and other snacks, providing new product narratives and bumping up nutrition,” he says.

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Store Brands / March 2018 / www.storebrands.com

CATEGORY INTELLIGENCE RICE AND GRAINS

Trouba sees huge opportunities with barley and rice mixes. “Barley is an underappreciated grain, and we feel it’s time for it to shine,” he says. Barley’s FDA-approved health benefits can be used on packaging to better educate consumers on its fiber-rich benefits, he adds. “Beyond approved claims, other benefits of fiber in intact forms include adding flavor, textural or culinary appeal,” Trouba notes. “For example, we offer a number of colored barleys — purple, blue and black — that provide a unique burst of color in traditionally beige-colored foods.”

Rice Private Brands

All Brands

Dollar Sales (in millions)

$347.9

$2,318.9

Change vs. Year Ago

+9.8%

-0.2%

Dollar Share

15%

100%

Unit Sales (in millions)

135.4

1,021.5

Change vs. Year Ago

+1.1

-1.3

Avg. Price Per Unit

$2.57

$2.27

Source: Infoscan Reviews, IRI, a Chicago-based market research firm. Total U.S. supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending Dec. 31, 2017.

Convenient sides

Flavors from around the world are showing up in the types of rice and grains being found on store shelves. But today’s consumer remains pressed for time. In order to enjoy these authentic dishes quickly and easily, microwave pouches and other convenient packaging are in demand. “The unique capability that Baxters Food Group has in producing 90-second rice and grain blends in microwaveable formats is that we can leverage these ingredient trends with the added benefit of convenience,” Fields says. According to Veal, rice bowls are expanding their presence to the grocery store. “Bowls continue to be the trending new format for rice, with rice bowl adoption moving from food trucks to casual dining and now with a growing presence in retail grocery frozen and deli departments,” he says. As their popularity continues, we can expect to see rice bowls being replaced with quinoa, heirloom wheat berries and other nutritious and interesting grains, Veal adds.

Center store hot spot

Center store growth will remain challenging, as foot traffic typically gravitates toward the perimeter. But store brand retailers should remain encouraged that they have successful merchandising and promotion tools at their disposal. “Strong merchandising programs with in-store signage and displays, as well as good

package design, make a stark difference in retail sales,” Farr says. Fields agrees, noting that it may be necessary for retailers to push center store out a bit. “End-cap placement near the perimeter and even secondary display in produce, deli and even the meat and seafood sections is an excellent way to expose shoppers to rice and grain solutions, as well as inspire meal time,” he says. Be sure to incorporate packaging that educates. The Mintel report notes that while rice and grains tend to get credit for being healthful, few consumers have a good understanding of the nutritional qualities of rice or other grain products. Reifeiss believes manufacturers have put too much emphasis on smaller-size packaging. The overall look is clean, but leaves little space to promote features and benefits of the product or rice or grain type, he notes.

Healthy value

Rice and grain products are perfectly positioned to capitalize on today’s latest trends, but perhaps no trend is bigger than better-for-you foods or healthy eating. “Classically speaking, eating better has always been associated with the idea that the consumer needs to pay more, even beyond national brand pricing,” Fields says. The value that store brands offer extends beyond just price. For retailers, delivering affordable and versatile rice and grain product offerings that are on trend will only enhance their profiles. SB Jevtic is a freelance writer from Schaumburg, Ill. www.storebrands.com / March 2018 / Store Brands

CATEGORY INTELLIGENCE HONEY AND SYRUPS

NUTRIENT-FORWARD

Sugar-shunning consumers look to healthier, natural sweeteners to meet their needs

DO play up the origin of private brand honey varieties.

Vitamins, minerals and antioxidants are good for the body. Refined sugar doesn’t have any of those, but honey and maple syrup do. Heightening their appeal, these inherently cleanlabel, made-by-nature sweeteners also offer a variety of appealing flavors and intensities that are well-suited to adventurous palates. Giving up sweeteners altogether may not be an option for consumers — but opting for healthier ones appears to be. Sugar sales declined 16 percent from 2011 to 2016, as 84 percent of U.S. adults reported limiting their sugar intake, according to market researcher Mintel Group’s December 2016 report “Sugar and Sweeteners – U.S.” Meanwhile, honey sales grew 57 percent from 2011 to 2016, according to Mintel. Sales of shelf-stable honey rose significantly in 2017, especially for private brands, according to Chicago-based market research firm IRI. Dollar sales were up 5.8 percent overall and 8.8 percent for store brands. Unit sales of honey increased 5.6 percent overall and 7.2 percent for private brands. Honey benefits from its perception of healthfulness, Mintel reports. Three-quarters of those surveyed consider honey to be healthy, according to an online survey of 2,000 adults conducted for Mintel by Warren, N.J.-based digital data collection specialist Lightspeed Category observers agree — when it comes to honey, consumers want it pure and organic, they want varieties from different floral sources, and they want to know where it comes from. Shoppers’ desire for pure, natural foods has continued to benefit the honey category, says Don Ladhoff, retail program director for the Longmont, Colo.-based National Honey

DON’T fail to consider innovative packaging that makes maple syrup easier to dispense. 50 50

Store Brands Brands // March March 2018 2018 / www.storebrands.com Store

Board (NHB), an industry-funded agriculture promotion group that educates consumers about the benefits and uses of honey and honey products. Organic honey’s growth is strong, with volume up 23 percent in 2017, Ladhoff notes, citing Nielsen data. Demand is growing for organic pure maple syrup as well, especially in Grade A Dark Robust and in large sizes such as 32-ounce jugs, says Arnold Coombs, director of sales and marketing for Brattleboro, Vt.based Bascom Maple Farms. Associating the evidence of health benefits with syrup will help the category continue to grow, says Nadia Attia, director of innovation for Subco Foods in West Chicago. Consumers continue to shun highfructose corn syrup, Attia points out. Specialty honey derived from unique floral sources and variety packs of honey “present an opportunity to increase consumer engagement by demonstrating the breadth of colors, textures and flavors that can be found in pure honey,” says Phil de Vooght, chief commercial officer for Rosemount, Minn.-based Sweet Harvest Foods. Honey consumers have “hot buttons,” observes Jill Clark, vice president of sales and marketing for Lancaster, Pa.-based Dutch Gold Honey, a member of the True Source Honey program, which promotes pure, traceable honey in the marketplace. “Some are looking for regional honeys, some for raw honey, some for organic honey and others for a unique floral variety such as orange blossom,” Clark says. “And one overarching point of interest is knowing where the honey comes from.” The next trend Coombs sees gaining prominence is infused maple syrups such as maple bourbon barrel-aged. To further raise consumer awareness about honey and provoke impulse sales, retailers should focus on packaging and shelving, Ladhoff advises. Attractive packaging that can be displayed on a countertop rather than hidden in a cupboard could have a significant impact on consumption, he adds. Merchandise honey in a logical, organized manner at “reach level” to maximize interest, Ladhoff recommends. “A prominent shelf set, with strong presentation of private brands [which account for 55 percent of unit sales] will pay big dividends in driving category growth,” he says. Honey pricing has taken an unusual turn, as the

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CATEGORY INTELLIGENCE HONEY AND SYRUPS gap between certified-organic and conventional honey closes, de Vooght says. “The organic honey segment has been performing particularly well, growing more than 25 percent last year and [it] now represents about 10 percent of category sales. With the sharp price increases for [U.S.] honey, consumers are finding they can purchase certified-organic honey at prices that are the same or even less than conventional honey.” Syrup packaging innovations that offer easier dispensing and no-spill features are promising and poised to hit at retail, says Coombs. Chris Olney, vice president of sales and marketing for Onsted, Mich.-based HoneyTree, a True Source Honey member company, expects consumers to also clamor for honeys that are ethically sourced. The honey category will continue to grow as consumers seek more natural, healthier alternatives, says Greg Mohr, vice president of business growth for Winnipeg, Manitoba-headquartered Bee Maid Honey, which is owned by Canadian beekeepers and a True Source Honey member company. “Honey is well-positioned to fill the growth, and many retailers are seeing honey as an item that is consistently growing each year,” he says. SB

Store Brands / March 2018 / www.storebrands.com

Shelf-Stable Honey Private Brands

All Brands

Dollar Sales (in millions)

$300.1

$649.4

Change vs. Year Ago

+8.8%

+5.8%

Dollar Share

46.2%

100%

Unit Sales (in millions)

59.3

114.6

Change vs. Year Ago

+7.2%

+5.6%

Avg. Price Per Unit

$5.06

$5.67

Maple/Pancake and Waffle Syrup Private Brands

All Brands

Dollar Sales (in millions)

$228.6

$688.3

Change vs. Year Ago

-0.1%

+0.4%

Dollar Share

33.2%

100%

Unit Sales (in millions)

70.7

192.5

Change vs. Year Ago

-1.6%

-0.9%

Avg. Price Per Unit

$3.23

$3.58

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Call 800-421-4772 or visit online at www.alphap.com.

CATEGORY INTELLIGENCE OTC REMEDIES

HEALTHY DOES IT Innovative delivery systems and premium packaging will propel store brand OTC remedy growth We are all in search of a cure when something ails us. Reliable remedies get us back to good health so that we can get back to our busy lives. Luckily for today’s consumer, private brand overthe-counter (OTC) remedies are dependable and effective options. Category performance within the cold/allergy/flu and OTC pain-management segments remains steady, but challenges to growth persist. In the case of OTC cold and allergy remedies, the market is mature. According to consumer market researcher Mintel Group’s April 2017 report titled “Cough, Cold, Flu and Allergy Remedies – U.S.,” innovation that appeals to changing consumer preferences will be the key to future growth. But that is easier said than done when you consider the consumer tendency not to treatpharma at all.PLMA ad18.pdf 1 3/6/18 10:52 AM trifecta

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Young adults, in particular, are the most willing to skip OTC medication when sick, the report states. Add to that a sizable number of parents and other caregivers who forgo traditional children’s medication in favor of natural remedies, and you have a real challenge. Offering products with free-from claims like dye-free would appeal to consumers seeking more natural remedies without giving up effectiveness. The availability of delivery-system options is another up-and-coming trend, says Mark B. Bolling, the president of the consumer division of Piscataway, N.J.-based PuraCap Pharmaceutical. He notes a big push for differing types of delivery systems in self-medicating pain relief and in upper respiratory, whether it be in cough-suppressant or cold and flu formulas. “A lot of people are looking for the portability aspect like the single-dose application,” he explains. “The products are not at home in the medicine cabinet with the 8-ounce bottle of liquid.” According to Mintel’s June 2017 report titled “OTC Pain Management – U.S.,” newer painrelieving formats are still somewhat limited in use but have unrealized potential. These products include medicated patches and wraps and transcutaneous electrical nerve stimulation (TENS) devices. Pain sufferers are willing to try these new options to get their long-sought relief. Innovative packaging is also increasingly in demand, Bolling notes. Unique graphics, gear wheel caps for arthritic patients, foil packaging and pearlescent packaging are some examples, he says, emphasizing that packaging that looks premium can help private brand OTC products compete with or even beat national brands. “The store brand definitely doesn’t take the back seat,” Bolling explains. “[Retailers] are looking to the store brand suppliers to come first to market in innovation whether that be in packaging or formulation.” For example, PuraCap Pharmaceutical is launching a two-count soft gel in all of the national brand-equivalent (NBE) formulas, which is innovative because it has not previously been available for store brands. Clear communication between suppliers and

CATEGORY INTELLIGENCE OTC REMEDIES Cold/allergy/sinus liquid/powder Private Brands

All Brands

Dollar Sales (in millions) Change vs. Year Ago

$397.4 +7.7%

$1,325.0 +7.7%

Dollar Share

29.9%

100%

Unit Sales (in millions)

61.2

156.5

Change vs. Year Ago

+4.2%

+3.9%

Avg. Price Per Unit

$6.50

$8.47

Private Brands

All Brands

Dollar Sales (in millions)

$150.3

$596.7

Change vs. Year Ago

+9.2%

+10.9%

Dollar Share

25.2%

100%

Unit Sales (in millions)

26.5

72.6

Change vs. Year Ago

+3.2%

+6.3%

Avg. Price Per Unit

$5.67

$8.22

Cough syrup

www.storebrands.com / March 2018 / Store Brands

CATEGORY INTELLIGENCE OTC REMEDIES

Cold/allergy/sinus tablets/packets Private Brands

All Brands

Dollar Sales (in millions)

$1,477.8

$4,753.2

Change vs. Year Ago

+2.1%

+4.4%

Dollar Share

31.1%

100%

Unit Sales (in millions)

188.4

480.2

Change vs. Year Ago

+1.9%

+2.6%

Avg. Price Per Unit

$7.85

$9.90

Source: IRI, a Chicago-based market research firm. Total U.S. supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar retail chains for the 52 weeks ending Dec. 31, 2017. 18_0101_AD_H_Store Brands Mag.pdf 1 1/10/18 4:05 PM

NBE Private Label Oral Care

retailers is essential to meeting the goal of NBE or national brand-better OTC products. Together, retailers and vendors can propel store brand OTC remedies to the top of the category in terms of innovation, according to Bolling. “A lot of the store brand manufacturers are leading the way on Rx-to-OTC switches,” he says, “and are first to market with a lot of leading OTC remedies for cough, cold and pain suite management.” SB Jevtic is a freelance writer from Schaumburg, Ill.

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Store Brands / March 2018 / www.storebrands.com

ADVERTISER INDEX A DV ER TO R I A L ADVERTISER NAME

PAGE#

180 SNACKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29, 55 AFP Advanced Food Products, LLC . . . . . . . . . . . . . . . . 43 Alpha Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Ardagh Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Ardent Mills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Getting Products to Market Faster and Better Superior Pack Group Offers Single-Source Contract Packaging

Bascom Family Farms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Berner Food & Beverage . . . . . . . . . . . . . . . . . . . . . . .10-11 CaseStack . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Catania Oils . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Colordyne Technologies . . . . . . . . . . . . . . . . . . . . . . . . . 38 Commercial Bakeries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Dishaka . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Fiere Di Parma Spa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Furlani’s Food Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Giovanni Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Global Tissue Group . . . . . . . . . . . . . . . . . . . . . . . . . . .IFC-3 Godshalls Quality Meats Inc . . . . . . . . . . . . . . . . . . . . . . . 47 International Dairy Deli Bakery Association . . . . . . . . . . 13 ITI Tropicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 LB MAPLE TREAT INC . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Massimo Zanetti Beverage USA . . . . . . . . . . . . . . . . . . . . 39 Mother Parkers Tea & Coffee . . . . . . . . . . . . . . . . . . . . . 17 Old Fashioned Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Private Label Manufacturers Association . . . . . . . . . . . . 19 Pure Sales Organics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Red Gold, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .BC Request Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Snack Innovations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

When it comes to packaging, Superior Pack Group has it covered. The full-service, single-source contract packaging company helps manufacturers get the package they want and need with the quickest turnaround, in order to deliver optimum quality and shelf appeal to the consumer. Based in Harriman, NY, Superior Pack Group provides top quality packaging solutions to get products onto shelves quickly, accurately and cost effectively. “We have experience in all types of copacking and can cover everything – with over 100 pieces of equipment in our facility we service a wide array of companies in the food and CPG industries,” reports company president Israel Schiff. In addition to its turnkey packaging solutions and stateof the- art technology, Superior Pack Group offers warehousing, distribution and fulfillment as well as ingredient sourcing, bulk purchasing and fully automated inventory control systems, among other services. Continually striving to offer the best and most updated services to manufacturers, the company maintains with pride the Safe Quality Food (SQF) certification and is now both Kosher and Organic certified. Because of its extensive system of equipment and its end-to- end services, Superior Pack Group is able to help companies develop custom packaging according to their standards and needs. “We understand that packaging is a very important part of their business. Once we help customers design their package, we work with them closely to put the product on the shelves, with a quick turnaround,” Schiff says.

For more information, visit http://superiorpackgroup.com, call 845-534-1015 or email sales@superiorpackgroup.com.

Superior Pack Group . . . . . . . . . . . . . . . . . . . . . . . . . .57,IBC The Fremont Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Tower Laboratories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Trifecta Pharmaceuticals USA . . . . . . . . . . . . . . . . . . . . . 54 US Alliance Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Wonder Natural Foods . . . . . . . . . . . . . . . . . . . . . . . . . . 44 www.storebrands.com / March 2018 / Store Brands

CATEGORY CLOSEUP

Tea

Not just a cup Historically on-trend TEA IS NEARLY

5,000 years

OLD. IT WAS DISCOVERED IN 2737 B.C. BY CHINESE EMPEROR SHEN-NUNG, AKA “THE DIVINE HEALER.”

TEA IS THE MOST WIDELY CONSUMED BEVERAGE IN THE WORLD NEXT TO WATER, AND CAN BE FOUND IN ALMOST

3.8

billion gallons. That’s how much tea Americans consumed in 2017. About 86 PERCENT of all tea consumed was black tea and 13 PERCENT was green tea.

79%

of U.S. adults drink tea — 60 PERCENT drink ready-to-drink options, and 49 PERCENT drink bagged/loose-leaf varieties.

80%

of tea consumed in America is iced.

80%

Source: Tea Association of the U.S.A.

OF ALL U.S. HOUSEHOLDS. Source: Source: Tea Association of the U.S.A.

TEA SALES

TEA SHARE OF SEGMENT

52 weeks from October through October

PRIVATE BRANDS IN MILLIONS

ALL BRANDS IN BILLIONS

2011-12

390.8

5.29

2011-12

6.9

93.1

2012-13

379.4

5.36

2012-13

6.6

93.4

2013-14

388.2

5.55

2013-14

6.5

93.5

2014-15

413.5

5.92

2014-15

6.5

93.5

2015-16

403.3

6.13

2015-16

6.2

93.8

BY YEAR

A spot of steady sales Dollar sales of tea were projected to reach $8 billion in 2017. The market has continued steady dollar sales growth, increasing 24 percent from 2012 to 2017, according to market researcher Mintel.

Source: Nielsen

Store Brands / March 2018 / www.storebrands.com

BY YEAR

Source: Nielsen

PRIVATE BRANDS IN MILLIONS

ALL BRANDS IN BILLIONS

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