2019 State of the Industry
Hot private brands for barbecue
Packaging for e-commerce March 2019 | www.storebrands.com
It’s a
Industry
BUT WHERE WOULD TODAY’S STORE BRANDS BE WITHOUT THE PRIVATE LABEL MANUFACTURERS ASSOCIATION, WHICH CELEBRATES ITS 40TH ANNIVERSARY THIS YEAR?
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Volume 42 No. 3 March 2019
CONTENTS DEPARTMENTS 4
Editor’s Take
6
Viewpoint
8
Around the Industry
38
12
End Cap
CATEGORY INTELLIGENCE 30
Spices and Seasonings
32
Honey and Syrups
36
Vitamins and Supplements
COVER STORY It’s a wonderful industry But where would today’s store brands be without the Private Label Manufacturers Association, which celebrates its 40th anniversary this year?
FEATURES 17 2019 STATE OF THE INDUSTRY Premium private brands, premium growth Innovation and a millennial mindset are super-charging private brand sales
‘They are what they are’ Report advocates that many private label products and lines should be considered simply as ‘brands’
24 TRENDING Fire it up Retailers can leverage their private brands into big sales this barbecue season
28 PACKAGING Thinking outside of the box required Packaging for e-commerce comes a whole new set of instructions, but ones that need to be followed to ensure online success
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. www.storebrands.com / March 2019 / Store Brands
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EDITOR’S TAKE Business Intelligence for an Evolving Market
8550 W. Bryn Mawr, Suite 200, Chicago, IL 60631 (773) 992-4450
Vice President/Brand Director
ARE YOU ON A HEALTH KICK?
Eric Savitch
856-489-3336
esavitch@ensembleiq.com
EDITORIAL Editor-in-Chief
Lawrence Aylward
(330) 635-2586
laylward@ensembleIQ.com
Managing Editor
Gina Acosta
(813) 417-4149
gacosta@ensembleIQ.com
Digital Editor
Are we on the collective cusp of eating healthier diets? Yes, I’m talking about Americans who live life in the fast-food lane and, no, my question does not precede the punchline to a joke. I’m being serious here … as serious as a heart attack caused by eating too many fried foods (pun intended). I read the news and I hear the reports about how unhealthy we are — 40 percent of us are obese and one in three of us has high blood pressure — because of our poor diets. I believe the numbers. But while we are constantly being reminded how unhealthy we are because of our lousy eating habits, we are also being told that statistics show that we want to eat healthier — more of us are demanding food that contains less sodium, fat and sugar, and food that is free from artificial preservatives and other undesirable ingredients. I know it’s a bit bewildering — we eat poorly, but we say we want to eat healthier. I, for one, am living proof of that paradox. But something has happened on the way to the grocery store — and a lot of that “something” has to do with private brands. I’m notably impressed with what retailers are doing with their private brands to clean up labels to offer healthier foods. Consider Retail Business Services, the Salisbury, N.C.based services company of Ahold Delhaize USA. Last October, Retail Business Services said it was making “a landmark commitment” to make the private brand products it provides to all Ahold Delhaize USA banners (Food Lion, Giant Food, Giant/Martin’s, Hannaford, Peapod and Stop & Shop) free from a list of what many consumers have deemed “undesirable” ingredients by 2025, including synthetic colors, artificial flavors, artificial preservatives, artificial sweeteners, MSG and high-fructose corn syrup. Other retailers are making similar changes. They’re introducing own brand products that contain less of these undesirable ingredients. And they taste good! And then there’s the U.S. government, which is also on a health kick. I recently heard a talk by Susan Mayne, director of the Food and Drug Administration’s (FDA) Center for Food Safety, who made it clear that the government wants to team with the food industry to get Americans to improve their diets. Healthier Americans will mean a healthier economy. Less chronic disease also means less spending on Medicare and Medicaid. Mayne, who spoke last fall at the Private Label Manufacturers Association’s Washington Conference, made it clear the government is stepping up its efforts to get more Americans to eat healthier through FDA’s Nutrition Innovation Strategy, which promotes public health by empowering consumers to make better decisions about their diets. Retailers of store brands should keep a close eye on Washington, specifically Mayne’s department. She said the FDA has started a public process to redefine the “healthy” nutrient content claim for food labeling, which is 20 years old and needs updating. “We are also exploring the idea of having a ‘healthy’ icon,” Mayne noted. If I’m a retailer of private brands, I want to be the first one with products to abide by that new “healthy” definition so I can be the first retailer to sport that “healthy” icon on my products. Talk about a differentiator. Many retailers are already out in front of the eating-healthy push with their private brands. Now they need to stay out front.
Louisa Hallett
(904) 294-6764
lhallett@ensembleiq.com
Contributing Writers
Rich Mitchell, Dana Cvetan, Nevenka Jevtic
ADVERTISING & SALES Associate Brand Director (708) 565-5350
Maggie Kaeppel
mkaeppel@ensembleIQ.com
Senior Sales Manager
Judy Hayes
(925) 785-9665
jhayes@ensembleiq.com
CUSTOM MEDIA Director of Client Services, Enterprise Solutions Kaeli Elisco (224) 632-8221
kelisco@ensembleIQ.com
AUDIENCE ENGAGEMENT Director of Audience Engagement
Gail Reboletti
greboletti@ensembleIQ.com
Audience Engagemnet Manager (215) 301-0593
Shelly Patton spatton@ensembleIQ.com
List Rental
MeritDirect
847-492-1350, ext. 318
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Subscriber Services/Single-copy Purchases 978-671-0449
EnsembleIQ.com@e-circ.net
PROJECT MANAGEMENT/PRODUCTION/ART Vice President Production Derek Estey (877)687-7321 x 1004
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Creative Director
Colette Magliaro cmagliaro@ensembleIQ.com
Advertising/Production Manager (973) 607-1322
Pat Wisser pwisser@ensembleIQ.com
REPRINTS, PERMISSIONS AND LICENSING Please contact Wright’s Media at ensembleiq@wrightsmedia.com or (877) 652-5295.
EVENTS • MARKETING • DIGITAL • RESEARCH • CIRCULATION CORPORATE OFFICERS Executive Chairman - Alan Glass Chief Executive Officer - David Shanker Chief Financial Officer - Dan McCarthy Chief Operating Officer. - Joel Hughes Chief Innovation Officer - Tanner Van Dusen Ann Jadown – Chief Human Resources Officer Executive Vice President, Events & Conferences – Ed Several
Lawrence Aylward, Editor-in-Chief laylward@ensembleIQ.com
2015
4
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Store Brands / March 2019 / www.storebrands.com
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CTS Ad 2019 VF4 Store Brands.qxp_Layout 1 2/4/19 2:53 PM Page 1
PLMA’s 2019 Private Label Trade Show
Store BrandsMake Things Happen Wizards beware. PLMA’s 2019 Private Label Trade Show is coming. All the top supermarkets, drug chains, mass merchandisers, and specialty and online retailers. All the food, snack and beverage suppliers. Health, wellness, and beauty, household and kitchen. Plus, more organic and natural exhibitors than ever before. Find out more about how your company can take advantage of PLMA’s great annual event. Telephone (212) 972-3131 or email exhibit@plma.com.
Nov.17-19 • Chicago Presented by the Private Label Manufacturers Association Visit www.plma.com
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VIEWPOINT
By Jim Wisner
Jim Wisner is president of Libertyville, Ill.based Wisner Marketing Group, a firm that assists manufacturers, retailers and trade associations in developing and implementing solutions to complex marketing, merchandising and product development issues.
Why store brands are worth more than you think Building a successful store brand program is neither easy nor cheap. Retailers must invest heavily in branding, packaging, procurement, promotion and personnel to make it all work. And that doesn’t even consider the loss of lucrative trade spending from national brand manufacturers. While we all understand that store brands can deliver higher gross margin rates and per unit profits, is it really worth all the effort when you add it all up? In 2016, the Private Label Manufacturers Association (PLMA), in collaboration with Wisner Marketing Group, took a look at the real economics of store brands. Assessing syndicated data, published studies and other sources, PLMA demonstrated conclusively that the return on invested capital from store brands was more than twice what retailers realize from selling national brands that their shoppers can buy most anywhere. This past year we had a chance to take a deeper look at the issue in a project we are doing for the Food Marketing Institute (FMI) along with Information Resources Inc. (IRI) and the Competitive Promotion Report. With data from five retailers across 10 categories, here is what we learned: THE CONSUMER SAVES • On average, store brands cost 28 percent less than comparable national brands. • Extrapolating those savings using FMI and Bureau of Labor Statistics household purchase data, the average U.S. household is saving $761 per year from store brands. For a family of four, the figure rises to nearly $1,000. THE RETAILER PROFITS • Assuming the typical household re-spends just half of its savings ($380), this would result in $1.2 million in additional yearly sales generating a $282,000 increase in gross margin dollars. We call this the “residual sales and margin effect.” • In our sample, store brand margins were up to
6
66 percent higher than national brands, averaging 35 percent for store brands vs. 21 percent for national brands. Dollar margins were more than 7 cents higher per equivalent dollar of sales. • Comparing average costs, store brands create an industry-wide $17.1 billion in inventory investment that results from the lower cost of most store brand items.
Private Brands (PB) Deliver More Profits More Efficiently PB Share ITEMS PB Share SALES PB Share PROFITS
12.9% 22.1%
31%
• Store brands accounted for 19.2 percent of sales in supermarkets and 28.2 percent of the total gross margin dollars. • Store brands were far more efficient than national brands accounting for 13 percent of items, 22 percent of sales and a 31 percent of margin dollars in our chain-chain analysis. • Adding this all up, the net gross margin return on invested capital was 53 percent for store brands vs. 24 percent for national brands even when costs of managing the program are included. Finally, research reports have confirmed that stronger store brand programs consistently generate more national brand trade funds than weaker programs. This makes sense since national brand manufacturers must compete more aggressively to maintain their market share. In addition, study after study has also demonstrated that store brand shoppers: spend more, are more loyal and are significantly more profitable. There are very powerful and compelling reasons to improve private brand performance and increase private brand penetration if you wish to compete successfully. The proof is in the numbers. SB
Store Brands / March 2019 / www.storebrands.com
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AroundtheIndustry ANALYSIS
Thanks, Warren Buffett Billionaire paints store brands in a positive light. Could his comments lead to investment? By Lawrence Aylward
Warren Buffett:
“Private label is getting stronger.”
Everybody’s favorite billionaire, Warren Buffett, made headlines last month for lauding the private brands industry. Buffett’s comments — including that private brands are winning over more customers — were not news to grocery industry insiders, but they may have caught the attention of investors. We all know that Buffett is one of the few people in the world who can make a stock sway one way or another with his buying actions and his words. In an interview with CNBC’s Becky Quick, the Berkshire Hathaway CEO talked about the problems with Kraft Heinz, Apple, the financial sector and his own investment strategy. Last month, Kraft Heinz lost more than a quarter of its value ($15 billion) follow8
ing the release of its fourth-quarter and full-year operating results. Buffett’s Berkshire Hathaway owns a significant portion of Kraft Heinz stock, which Buffett says his company overpaid for. Buffett basically acknowledged that Kraft Heinz and other national brands are taking it in the teeth from store brands sold by retailers, such as Costco Wholesale and Walmart, that offer a solid array of private brands just as good or better than the national brands and cost less than the national brands. Buffett noted that Costco, behind its Kirkland Signature private brand, does 50 percent more business than all of the Kraft Heinz brands. Interestingly, Berkshire Hathaway
also owns Costco stock, a much better investment than Kraft Heinz. Sales of Costco’s Kirkland Signature brand grew to $39 billion in 2018 from $35 billion in 2017. Kirkland Signature accounts for one-third of the Issaquah, Wash.based retailer’s sales. “When you’re going toe to toe with a Walmart or a Costco or maybe an Amazon pretty soon ... you’ve got the weaker bargaining hand than you did 10 years ago,” Buffett told CNBC. “So house brands, private label, is getting stronger. It varies by country around the world, but it’s bigger. And it’s gonna keep getting bigger.” Considering Buffett’s words, it makes you wonder if Wall Street, not to mention the millions of Joe and Jane Investors who buys stocks from their computers for $6 a transaction, will begin to watch the private brands industry a little closer. If they do, you can bet those investors will be studying grocers’ private brands portfolios, not to mention the public companies that manufacture in the many product categories where private brands have a presence. In addition, you can count on more people starting up their own companies in private brands. The industry is in the midst of an innovation revolution of which there is no ceiling. Store brands are growing, and almost every industry pundit says they will continue to grow. And now Warren Buffett has added his 2 cents’ worth on the matter (pun intended). If anything, Warren Buffett put the store brands industry in the national spotlight last month with his positive comments. The industry had to love that. SB Aylward is editor-in-chief of Store Brands.
Store Brands / March 2019 / www.storebrands.com
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AroundtheIndustry Amazon’s new grocery stores could be more private label driven, retail expert says Amazon is planning to launch a new grocery business that is separate from its current Whole Foods Market and e-commerce operations. Seattle-based Amazon plans to open its first grocery store in Los Angeles as early as the end of the year. It has already signed leases for at least two other grocery locations with openings planned for early next year, according to reports. The new stores are also separate from the retailer’s Amazon Go stores,
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a growing chain of grocery stores where technology requires no checkout. It is unclear whether the new stores would be bannered as Amazon stores. Amazon is now in talks to open the stores in shopping centers in San Francisco, Seattle, Chicago, Washington, D.C., and Philadelphia. The new stores will reportedly offer products at a lower price point. In an article for Forbes, McMillanDoolittle’s Neil Stern also said that the new chain could be more driven by privatebranded products.
“Amazon has continued to grow its private brand presence with roughly 7,000 products; however, less than 2 percent are food and beverage items, according to an analysis of Amazon’s private label offering by Coresight Research,” Stern, who specializes in strategic planning and new retail concept development, wrote in the article. “This new move allows an even greater focus on private label, with a greater focus on fresh. Milk and dairy products from Happy Belly (a core Amazon food private label) were launched just a few days ago.” Stern, a frequent speaker at events hosted by the Private Label Manufacturers Association, said that it’s clear is that “Amazon is fully committed to expanding its retail footprint.” That said, he added, “It is still Day 1 at Amazon, particularly as it concerns brick-and-mortar. SB
Store Brands / March 2019 / www.storebrands.com
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It’s a
Industry
BUT WHERE WOULD TODAY’S STORE BRANDS BE WITHOUT THE PRIVATE LABEL MANUFACTURERS ASSOCIATION, WHICH CELEBRATES ITS 40TH ANNIVERSARY THIS YEAR? BY LAWRENCE AYLWARD
f you are bullish on the store brands industry, you are in the majority. Private brands are thriving in consumer packaged goods. More grocery retailers are stocking more store brands on more shelves in more stores and there is room to grow, according to a recent report from market researcher Nielsen. “The growth trends we see are not cyclical,” Garett Chau, Nielsen’s senior vice president of professional services, said recently. “They are real and will continue.” While the current market share of private brands is only about 15 percent across total U.S. retail stores, Chau expects that number to soar. “Within the next decade, we will see private brands market share grow to 25 to 30 percent in the U.S.,” he added. Even everybody’s favorite billionaire, Warren Buffett, is
Milestones 1979 THE PLMA BY THE YEARS 12 12
Founding meeting, Chemist Club, New York
1980
First Private Label Trade Show, Ramada Inn, Chicago
Store Store Brands Brands // March March 2019 2019 // www.storebrands.com www.storebrands.com
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upbeat on store brands. “Private label is getting stronger,” Buffett, the chairman and CEO of Berkshire Hathaway, recently said in an interview with CNBC. “It’s going to keep getting bigger.” Which brings us to the Private Label Manufacturers Association (PLMA), which celebrates 40 years of existence in 2019. The PLMA, which began in 1979, has been the captain of the ship that is store brands, and has helped to steer the industry through good times and bad. The PLMA has overseen the creation, cultivation and expansion of the Private Label Trade Show. So as we laud the growth of store brands, we wonder what the industry would be like without the PLMA. And with all due respect to the many retailers that have helped make store brands great, we ask: Where would the store brands industry be without the PLMA? The question evokes the plot of the story told in Frank Capra’s magical 1946 film, “It’s a Wonderful Life.” In the film, we are left to witness a world without the troubled but honorable George Bailey, who tells his guardian angel Clarence that he wishes he had never been born. So Clarence uses his heavenly connections to show Bailey what life would be like in the fictional town of Bedford Falls, where Bailey lived and work, if he had never existed. As fans of the movie know, a Bedford Falls without the benevolent Bailey was a much less desirable place than a Bedford Falls with Bailey, whose positive impact resonated throughout the community and its people. So what if the PLMA had never been born? Where would the store brands industry be? Like a Bedford Falls without Bailey, some of the private label industry’s top icons say the industry wouldn’t be the same without the PLMA. “The PLMA has done wonders for the store brand industry in the U.S.,” says Nick Hahn, the former director of corporate brands for The Kroger Co., who spearheaded the success of one of the grocery industry’s top private brands programs in the country. “The PLMA gave both suppliers and retailers a voice that they never had.” Bob Anderson, who began Walmart’s Great Value private brand in 1992 and managed the retailer’s Sam’s Choice brand, says the PLMA was instrumental in bringing retailers and suppliers together to create quality private brands. “For 40 years, the PLMA has been the marketplace for growth and collaboration for manufacturers and retailers,” he adds. “One only needs to look at the advancement of private label products in areas of quality, innovation and packaging to see this.” Tom Ewing, director of retail channel businesses for T. Marzetti Co., which provides salad dressings, dips and other products for private brands, says the PLMA helped the store brands industry upgrade its image at a time when it needed to be upgraded. “The PLMA has fostered the improvement of quality, and it has fostered the development of premium private label products,” Ewing says.
1981
First PLMA Gallup Report, “What America Thinks About Private Label”
1986
First World of Private Label Trade Show, Paris
1988
First Private Label Trade Show to reach 1,000 booths, Rosemont Convention Center, Chicago
www.storebrands.com / March 2019 / Store Brands
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HUMBLE BEGINNINGS In 1979, America was plunged into recession. There was double-digit inflation and interest rates soared to 20 percent. Consumer confidence was in the pits. But that didn’t stop a group of about 50 industry suppliers from meeting in New York to set the stages for forming an association for private label products. And in 1980, that group staged its first Private Label Trade Show in the basement of the Ramada Inn near O’Hare Airport in Chicago. Marvin Benjoya, who spent his career in the private label industry in the non-foods sector, recalls the PLMA’s humble beginnings. He was one of the PLMA’s early supporters who felt an association and an annual trade show could help advance the industry. “The first show featured about 40 vendors, who displayed 40 small tables,” Benjoya says. “Most of the vendors sold health and beauty aid products.” But the vendors were more interested in educating retailer attendees, not selling their products, says Benjoya, who retired in 2003 as vice president of the Perrigo Co., which provides over-the-counter pharmaceutical private label products. “We weren’t competing with our products as much as we were trying to sell a concept to the majority of the retail trade,” Benjoya says of the vendors. “It was not an accepted premise that private label was an inherent part of merchandising that was necessary.” The association struggled early on, as did its trade shows. “You had enormous resistance from people in the food industry because they [belonged] to other associations and didn’t think they needed another trade show,” Benjoya says. But PLMA’s members, which had grown to about 200 in 1980, kept knocking on the door and reiterating the message to retailers that store brands could offer them quality products to increase their profit margins. Benjoya and other PLMA members also realized they needed help. They were busy in their regular jobs and needed a full-time employee to operate the association daily. They needed someone they could count on to lead them.
1990 First PLMA Washington Conference
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1995
First PLMA trade show to reach 1,500 stands, World of Private Label, RAI Exhibition Center, Amsterdam
A PIVOTAL HIRE In 1981, the PLMA hired Brian Sharoff to lead the association as its president. Sharoff had been leading a trade association in New York that represented retail department stores such as Macy’s. Benjoya says Sharoff ’s hiring led directly to the association’s success. “I don’t think anybody you talk to who was part of the association and the board of directors during those early years would say anything different,” Benjoya adds. “Brian created an avenue of constant communication and interaction.” In two years, Sharoff will celebrate his own 40 years with the PLMA. Under his leadership, the PLMA has grown from 200 member companies to about 4,200 member companies. Benjoya says Sharoff is an accomplished leader, with a
2001
First PLMA Executive Education Program, St. Joseph’s University, Philadelphia
2003
First Private Label Trade Show to reach 2,000 booths, Rosemont Convention Center, Chicago
Store StoreBrands Brands// March March2019 2019// www.storebrands.com www.storebrands.com
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de
0
Brian Sharoff (center), longtime president of the PLMA, confers with Don Spellman of the Eppens, Smith Co. and one of the founding members of the PLMA, during an event. A scene from the Private Label Trade Show in its early days.
natural ability to organize and manage people and concepts. He calls Sharoff a “straight shooter who gets things done.” “Brian is 100 percent responsible for what has happened with the growth of PLMA,” Benjoya says. Sharoff oversaw tremendous expansion of the association and the Private Label Show throughout the 1980s when the industry began to gain some clout. In 1988, the Private Label Trade Show featured 1,000 booths, an increase of 2,400 percent from 1980. “Somewhere in the late 1980s is when we actually started selling and competing for business — and were able to stop selling the concept of private label because by then it was acceptable,” Benjoya says. “Retailers understood and wanted private-branded programs.” Kroger’s Hahn began attending the Private Label Trade
2004
First Salute to Excellence Awards for Store Brands
2006
Founding of Private Label Industry Hall of Fame
Show annually in the late 1980s after being put in charge of Kroger’s procurement department. He credits the show for helping Kroger’s procurement team work successfully with hundreds of suppliers. “We developed some great working relationships with suppliers that enabled us to develop new products,” he says. “Every year I went to the show, I always found a new product or a new supplier.” Anderson also made key connections with suppliers at the show. Without it, he says Walmart’s Great Value brand might not have become one of the nation’s most popular store brands. Anderson recalls on many occasions getting together with suppliers over coffee, sharing a few laughs and getting down to business about how to make Walmart’s store brands the best they could be. “The suppliers that brought into our program kind of
2007
First PLMA trade show to reach 3,000 stands, World of Private Label, RAI Exhibition Center, Amsterdam
2009
PLMA Launches PLMALive! Video Newsdesk
www.storebrands.com / March 2019 / Store Brands
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The Private Label Trade Show attracted more than 11,000 attendees in 2018. became our own manufacturers,” Anderson says. Hahn and Anderson, who both retired in 2007, watched the show change dramatically in the late 1990s and the following decade. The show focused heavily on offering retailers the chance to gain national brand equivalent products in the 1980s, which are still important, Hahn says. But in the mid2000s, more suppliers began offering innovative products to help retailers differentiate with their own brands. “Now the emphasis is on unique and different,” Hahn says. “When a retailer goes to a supplier, the retailer doesn’t ask for something that resembles Cheerios.”
GOING STRONG Even though he retired 15 years ago, Benjoya is still involved with the PLMA and still attends the annual trade show. He is astonished at what the show, which attracted 2,770 exhibit booths with 1,440 exhibiting companies last November, has become.
2011
PLMA Launches Store Brands USA for Consumers
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2015
First PLMA trade show to reach 4,000 stands, World of Private Label, RAI Exhibition Center, Amsterdam
“You walk around with your mouth open,” he says. Benjoya, who was chairman of the PLMA in 1989, is proud to have been part of what the industry has become under PLMA. “I don’t think you could ever conceive today’s private label marketplace 40 years ago,” Benjoya says. “There was no way to conceptually understand what was going to happen. But for private label to be as broadly accepted as it has been and for it to be an integral part of every retailer’s marketing plan … you can’t be in the business without store brands because they are such a huge part of your bottom line.” When Ewing attended his first Private Label Trade Show in 1986, he noticed an industry that “was in its infancy.” Today, Ewing is “amazed” at what the show has become. “The booths are much larger and more sophisticated,” he says. “And there are also the international pavilions. The show is pushing all four walls, no doubt about it.” The show has been held at the Donald E. Stephens Convention Center, formerly the Rosemont Convention Center, for more than 35 years. Because of its growth, the show is running out of room. “It just keeps taking up more and more space,” Hahn says. But the more space it takes up, the more ideas are generated for private brands. Hahn, who is also still involved with the PLMA and still attends the trade show, is wowed at the products and product lines born out of the show, including the natural and organic store brands developed by many retailers. “What they are doing today is better than anything anybody has done before,” Hahn says of suppliers and retailers. “They are taking private label to a new level.” With 40 years in the books, Anderson says the key to success for the next 40 years is relatively the same. “My hope is that manufacturers and retailers can continue this climb by working together and learning,” he adds. Lord knows where the store brands industry will be in 40 years, let alone five years. But without the PLMA, it’s evident the industry wouldn’t be where it is today. SB Aylward, editor-in-chief of Store Brands, can be reached at laylward@ensembleiq.com.
2016
PLMA launches University Outreach
Store Brands / March 2019 / www.storebrands.com
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Premium brands, premium growth Innovation and a millennial mindset are super-charging private brand sales
By Gina Acosta
E T A STF T H E
Y R T S U D IN O
o understand the state of the private brand industry today, one must understand bras and panties. Or rather, why Target is taking on Victoria’s Secret by launching three new lines of millennialfriendly private brand lingerie. Just this past February, Minneapolis-based Target announced it would be introducing three own brands called Auden, Colsie and Stars Above of women’s bras, underwear and pajamas that it predicts will hit more than $1 billion in sales in a year, according to the Wall Street Journal. Target executives told the Journal that all of the new bras will cost less than $22, include wire-free and body inclusive styles, and offer varying degrees of customization options. The news from Target, which has launched more than 25 new private brands since 2016 encompassing food and nonfood categories, follows similar launches from Walmart, Amazon and other retailers who are trying to seize on the surging differentiation factor in private brands. These retailers are stepping up their own brand offerings to give customers a better reason to shop exclusively with them. Yet private brands in 2019 are not just about exclusivity; they are also about meeting the needs of today’s consumers. “We’ve witnessed over the last two years a complete resurgence and growth in the private label industry in the U.S. driven by retailers wanting to be more relevant to their customers, and a shift from a need to focus on having the right price point to establishing private brands that are top of mind to consumers and build intimacy with consumers,” said Bahige El-Rayes, a partner in the consumer and retail practice of A.T. Kearney, a global
www.storebrands.com / March 2019 / Store Brands
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strategy and management consulting firm. Store brands such as Target’s new lingerie line offer value, quality and personalization, which are all key to meeting the needs of the new private brand consumer. And understanding that consumer is critical to seizing the opportunities in private brands in 2019, says market research firm Information Resources Inc. (IRI), which publishes a report on private label trends every year. According to IRI’s most recent study, “2018 Private Label Report,” eight in 10 Americans bought private label products frequently or occasionally in 2018. And many of those shoppers were younger consumers who tend to be driven more by product benefits than by brand name. According to the report, 92 percent of millennials are turning to store brands to save money, compared to 86 percent of Generation Xers, 81 percent of baby boomers and 77 percent of seniors. But it’s not just about penny-pinching: Younger consumers tend to be less brand loyal because they’re more inclined to buy the product that best suits their needs rather than being driven by the brand name that’s on the product label. Younger shoppers also care more about whether a product aligns with their belief systems (i.e., inclusivity, transparency, environmentally friendly, sustainable, etc.) than previous generations. “The increased likelihood of younger consumers turning to private labels really bodes well for the retail brand sector of the industry,” said Susan Viamari, vice president of thought leadership for IRI. “It’s truly a testament to the success private label
innovators have had in bringing to market the solutions that fulfill high-demand shoppers’ needs and wants.” In an interview with Store Brands, Viamari said private brand sales now account for 17 percent of dollars and an all-time high of 22 percent of units sold in retail. In 2018, private brand dollar sales increased 5.8 percent compared to 1.5 percent for national brands. In addition, private brand unit sales increased 3.8 percent compared to national brand unit sales decreases of 0.2 percent. During 2018, grocery private brands performance underperformed compared to the industry average, with dollar sales growth of 1.2 percent and unit sales declines of 1.7 percent, according to IRI. Within grocery, though, some retailers are showing momentum, such as Fred Meyer and Jewel Osco. “We expect private label sales to keep growing for various reasons, including the fact that some retailers are getting better at understanding their customers,” Viamari says. “And then the fact that millennials and Gen-Zers are less focused on brand names.” She said she’s seeing a lot of the momentum in the private brand sector tied to targeted innovation and development opportunities. “There’s a lot of innovation in the area of premium private label, such as private label natural and organic food products. But there’s also premium private label innovation on the non-food side, with anti-aging products or targeted innovations such as a fast dissolve painkiller,” Viamari says. Target is obviously leveraging a lot of that innovation momentum in private brands with its launches. For its new
Younger and lower-income consumers are more likely to turn to private brands to save money SHOPPING BEHAVIOR, BY INCOME
SHOPPING BEHAVIOR, BY GENERATION
77%
Buy private brands to save money
80% 87%
92%
Buy private brands to save money
86% 80%
88%
65%
Try new, lowerpriced private brands to save money
71% 78% 79% ■ >$100K ■ $35K - $54.9K ■ $55K - $99.9K ■ <$35K
18
77%
82%
Try new, lowerpriced private brands to save money
84% 73% 57% ■ Millennials ■ Gen X
■ Boomers ■ Seniors
Store Brands / March 2019 / www.storebrands.com
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Premium brands, premium growth
‘They are what they are’ Report advocates that many private label products and lines should be considered simply as ‘brands’ With its new lingerie line, Target is aiming to differentiate by meeting consumers’ personal needs.
lingerie brands, Target plans a marketing campaign featuring women with diverse bodies, ages and ethnicities. The company said it is also avoiding airbrushed images, as it has previously done with its swimwear advertising. Target will also be adding bra fit studios to stores and a “find your fit” tool to its website. These are the kinds of innovations that keep today’s private brand consumer loyal, according to IRI. In fact, the latest IRI Consumer Connect Index further highlights how consumers continue to embrace store brands even though the economy has stabilized. Sixty-nine percent of consumers surveyed say private label quality is as good as national brands, and 68 percent say private label offers better value than national brands. Millennials, in particular, have very favorable views of private labels, with 76 percent saying the quality is as good, and 73 percent saying the value is better. “What we’re seeing is millennials want everything. They want experience, they want the best product and they want it free-from,” El-Rayes says. “They want all of those things, but they still are price sensitive. So they’re not willing to pay huge premiums on some products. That’s why private label offerings resonate the most with them.” Yet, despite all of this private brand excitement and growth, especially among younger shoppers, Viamari says there’s still a lot of challenges ahead for retailers. “Some of the challenges we see for private brand retailers are that you can’t innovate everywhere. While national brand manufacturers need to keep pace in a finite number of categories, retailers are trying to compete across the entire store. And so there’s really a need for them to focus on high potential opportunity areas where are they going to innovate,” Viamari says. “So they should dedicate those innovation dollars to the areas within their store, within their banner that have the highest potential for serving their client base.” Viamari does see opportunities for private brands to get ahead by innovating to leverage key niche opportunities. The key for retailers, she says, will be to keep track of own brand competitors and focus on innovation not just in product quality but also with the right promotions and merchandising mix to market that innovative product. “So, for example, all water isn’t growing. Certain areas of the water category are growing. Private label manufacturers and retailers need to be innovating in those areas. So, again, really focusing in tightly on innovation and really striking the right balance to provide good value to their shoppers through a solid mix of private label and national brand solutions,” Viamari says. SB 20
By Lawrence Aylward
e call them private label products. We also call them by other names — private brands, store brands, own brands and corporate brands. But grocery industry expert Don Stuart believes it’s time to refer to many products and product lines in private label simply as “brands.” Period. Late last year, Cadent Consulting Group, the Wilton, Conn.-based consulting firm where Stuart is managing director, issued a report called “The Branding of Private Label.” In the report, the word “brand” is defined as “the elements, both tangible and intangible, that identify and differentiate a product from the competition.” The report mentions that a brand “is a promise of good value” and “a promise to consumers that it will consistently deliver the quality expected of its product at an acceptable price.” The report also stresses that brands can enact positive consumer emotions that kindle shopper loyalty. The point is that many private label products and lines offer value and quality to consumers while helping retailers to differentiate and attract consumer loyalty, Stuart says. So why not just refer to them as brands, he asks. Consider The Kroger Co.’s Simple Truth, the largest-selling natural and organic line in the country with more than $2 billion in sales. Cincinnati-based Kroger is making Simple Truth available to consumers not just through its more than 2,700 bricks-and-mortar supermarkets, but through online channels around the U.S. and in China. Considering the breadth of Simple Truth, not to mention its popularity, should it still be considered a private label line or should it be regarded as a branded line? Take Trader Joe’s, which offers mostly private label products. The Monrovia, Calif.-based retailer, which has about 500 stores, has built its reputation on private label. But they are known by its shoppers as “Trader Joe’s brands,” not private label products. And Trader Joe’s customers are proud to shop there and like to tout on social media that they are doing so, even posting photographs of the
Store Brands / March 2019 / www.storebrands.com
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Elevate Your Brand. Sustainable Coffee. Sustainable Packaging. Coffee is more than a commodity, its an experience. Coffee buyers are motivated by quality, price and service.
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products they purchased there. “They feel a badge of honor,” Stuart says of Trader Joe’s shoppers. “They think the quality is better and the value is better, and that shopping at Trader Joe’s defines them as smart shoppers.” So you can see why Stuart considers Trader Joe’s products as a brand, not private label. Other retailers have also earned the distinction with their private label products, Stuart says, including Whole Foods Market with its 365 Everyday Value line, Albertsons Companies with its O Organic line, and Costco Wholesale with its Kirkland Signature line. “They all have common denominators,” Stuart says. “[Their products] have a look and feel that is consistent. And they offer quality and value. But it’s not just about making better products, it’s about making products to meet the needs of more people.” There’s another reason why Cadent Consulting and Stuart believe some private label lines should just be called brands. Baggage. According to Cadent’s research, many consumers still think “cheap” when they hear the term “private label.” In fact,
like a “brand,” consumers will increasingly trust its quality, according to Cadent’s report. To that point, Cadent’s research also reveals that 67 percent of consumers say private label products “offer a good value and quality for the price,” which is how many of today’s retailers want their private-branded products to be perceived. “The people who are taking over the lion’s share of shopper spending are really thinking about private label more from a value perspective that integrates both price and quality,” Stuart adds. In Cadent’s report — and other respective reports — it’s mentioned that sales of private brands are growing about three times as fast as nationally branded products, a trend that Stuart says is sustainable. It’s another reason they should be considered as brands, he says. Another reason is that retailers offer products that are exclusive to them. And at places like Trader Joe’s, Whole Foods Market, ALDI, Walmart and other national retailers, consumers can purchase the retailers’ store brands across the country. “The irony of store brands’ rising competitiveness with national brands is the increasingly national availability of strong private label products,” according to Cadent’s study.
Consumer attitudes toward private label products
“They think the quality is better and the value is better, and that shopping at Trader Joe’s defines them as smart shoppers.”
37%
40%
They are close competitiors with other major brands
They are cheap, no frills alternatives to major brands
Cadent’s research revealed that 40 percent of consumers still believe that such private label products “are cheap, no-frills alternatives to major brands.” Sixty-seven percent of consumers consider private brands as a “lower cost option” to national brands, according to Cadent. It’s a negative connotation that continues to linger, thanks to the bad old days of generic products, Stuart says. “But we’re starting to see the emergence of private brands that are true brands,” he adds. Retailers’ own premium products, including organic and natural products, have helped drive that distinction and level the playing field between national and private label products, Stuart notes. As private label increasingly acts 22
67%
67%
They offer a lower cost option
They offer a good value and quality for the price
And now some retailers are making their store brands available in other places, as in outside their normal realms. For instance, Kroger recently struck with Deerfield, Ill.-based Walgreens to sell its private brands in 13 of the drug chain’s locations as part of a pilot program called “Kroger Express.” Think about that: Another consumer packaged goods retailer, which offers its own private label CPGs under its Nice! line, is selling Kroger’s private label CPGs inside its bricks-and-mortar walls. Does that still classify Kroger’s products as private label or as branded products? Retailers are also selling their store brands on third-party e-commerce sites. Kroger is selling Simple Truth to Chinese consumers on an e-commerce site owned by Alibaba Group
Store Brands / March 2019 / www.storebrands.com
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Millennials attitudes & behaviors toward private label
60%
believe their retailer’s store brands are better than others
54%
Holding Ltd. Last year, Albertsons Companies launched O Organics Market, an Instacart grocery delivery service-powered virtual store where customers can find organic, natural, and other better-for-you foods, beverages and grocery items. O Organics is Albertsons’ popular organic private label that recently achieved $1 billion in sales. Albertsons Companies is also selling its Open Nature private label on the site. As Cadent’s “The Branding of Private Label” report points out, the growth of the fresh department in grocery stores is also providing opportunity for retailers that offer their own labels for meats, dips, salads and other meal solutions. “The ‘national’ element of name brand products may actually hurt goods in the categories of fresh
say their choice of retailer is influenced by store brands
48%
expect to purchase more store brands this year
food/produce, dairy and meat/seafood,” the report states. “If consumers know a ‘fresh’ brand is national, they may actually seek out a store brand that boasts ‘local,’ ‘natural’ or ‘organic’ because these options feel less processed, preserved and transported than the national name brands.” Stuart expects private label sales and penetration to grow in coming years and to reach a market share of 25 percent in the next decade. Some traditional grocers have already achieved that number, including Kroger and Albertsons Companies. Their private labels are pillars to their businesses, which is even another reason why Stuart believes they should be considered as brands. “We don’t have to get too complicated with descriptions,” Stuart says. “They are what they are.” SB
You can download Cadent Consulting Group’s “The Branding of Private Label” at http://cadentcg.com/publication/the-branding-of-private-label/
www.storebrands.com / November 2017 / Store Brands
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XXXXXXX TRENDING
Retailers can leverage their private brands into big sales this barbecue season B Y G I N A A C O S TA
Beach days and barbecue parties might seem like months away for many U.S. consumers, but spring is the real beginning of the grilling season for retailers, as outdoor furniture and bags of charcoal start appearing at the front of the store. In fact, the sound of fires crackling and the aromas of chargrilled meat and vegetables are already palpable in many parts of the country where warm temperatures arrive early. So March is the perfect time for retailers to embrace America’s love of barbecue by leveraging their private brands to create new grilling value propositions that cater to consumers’ changing palates and unique needs, says Nicole Peranick, senior director of retail transformation at Stamford, Conn.-based Daymon, which provides private brands development. The summer barbecue season presents a great opportunity for retailers to tie in many private brand categories, from meat, center store and dairy to bakery, wine and produce. And to win the grilling season with private brands, retailers should be taking a threepronged approach: new cross-merchandising tactics, innovative promotions and bold flavor assortments. “The summer barbecue evolution is taking on the forms of flavor innovation, redefining the center of the plate, and curating assortments around solutions to create one-stop shop destinations for today’s always-on shopper,” Peranick says. “To address shopper lifestyles that are becoming ever more urban and on-the-go, retailers are also bringing forth more relevant seasonal solutions through their private brands by creating connectivity across departments.” When it comes to the grilling season, all of this is coming to life in-store through new cross-merchandising strategies that more thoughtfully curate products to simplify the shop, Peranick says. For example, retailers such as Greensboro, N.C.-based The Fresh Market are putting their store brand Asian barbecue sauces and accompaniments in the meat and seafood department with signage on grilling to create a more complete seasonal narrative. Retailers are also leveraging the condiment and seasonings aisles by cross-merchandising private brand pulled pork sauces next to the sandwich buns in the bakery, or putting a cooler full of store
24
brand pork ribs next to the fresh corn on the cob in the produce department. “In addition to new merchandising approaches, retailers are expanding their assortments of own brand ready-to-cook grilling items, such as stuffed burger patties, kababs with meat and vegetables, pre-marinated chicken or pork, pre-made jalapenos with cream cheese and bacon, to name a few, to cut prep time out for the consumer and solve [the question of] ‘what’s for dinner?’ ” Peranick says. At Carlisle, Pa.-based GIANT Food Stores, the goal is to elevate these products and solutions for customers in ways beyond the typical on-shelf placement. “We leverage off-shelf, custom display units, barges and end caps to merchandise products to both inspire our customers and make it easier to find the items they’re looking for and need,” says Ashley Flower, manager of external communications and community relations at GIANT Food Stores. “We’re innovating with flavors, offering value-added items that save our customers time (baby back pork ribs), and adding something a bit more premium to the table (private brand Taste of Inspiration buns).” Beyond merchandising, retailers are also leveraging their private brands in promotions that highlight store brands for the grilling season that are high quality yet low cost. “Take Target’s Made by Design housewares line. It includes many sleek, stylish, on-trend, yet affordable grilling items like a steel gas grill smoker box, steel grill topper pan, grill trivet, and stainless steel grill basket. Target gives the line prime merchandising placement,” says Carol Angrisani, author of a food shopping e-newsletter and video series at StoreBrandsUSA.com. Minneapolis-based Target is a good example of a retailer that creates big, colorful in-store displays of private brands that stop the shopper, Angrisani adds. Retailers such as Issaquah, Wash.-based Costco Wholesale, with its summer assortment already in stores, could focus on creating similar summer grilling displays in-store with an array of its best-selling private brand products for the grilling season. Digital tools offering recipes, how-to videos and giveaways are another good promotional tool for retailers looking to showcase their outdoor cooking private brand products. “As innovations in everything from 3-D
Store Brands / March 2019 / www.storebrands.com
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XXXXXXX
Above, The Fresh Market in South Tampa, Fla., leverages its private brand charcoal in the meat and seafood department. At right, Costco Wholesale has begun its summer grilling promotions.
26
TRENDING
imaging to algorithms that drive recommendations continue to improve, perhaps the biggest ‘merchandising’ opportunity exists in the digital space” says Carol Spieckerman, a retail and brand thought leader, speaker, strategist, trainer and author. When it comes to non-food, retailers should be integrating their own brand grilling tools and accessories into seasonal assortments for a true end-to-end solution for shoppers. “The Kroger Co. not only has a variety of better-for-you foods and beverages under its Simple Truth store brand, but also non-food grilling accessories like its Simple Truth 100% natural hardwood lump charcoal,” Angrisani says. “Another way retailers are differentiating is by offering products that make grilling easier and more convenient. Kroger, for instance, has instant light charcoal briquettes under its Kroger brand. The briquettes are ridged for fast lighting without the need for lighter fluid,” . While the meat department remains the star of the grill, Peranick says she is seeing retailers rethink grilling through the lens of veg-centric. “Progressive retailers are translating these broader consumer shifts into new seasonal solutions,” Peranick explains. “Think pre-cut and seasoned cauliflower and avocado steaks, pulled jackfruit, portabella burgers and plant-based patties. Expect to see the continued influence of plant-centric on private brand innovation across not only the seasons
but also the store overall.” As meat lovers fire up the grill this season, they are also increasingly looking for non-traditional cuts, new flavor profiles, regional sauces and ethnic barbecue ingredients. “On the flavor front, we are seeing two trends converge to bring new taste experiences into private brand grilling assortments: global fusion and regional distinction,” Peranick notes.” For example, barbecue sauces and rubs from around the world, such as Korean, Moroccan and Peruvian, or paying homage to specific profiles across the U.S., namely Kansas City, [Mo.], Memphis and Texas. Flavor innovation is also extending beyond food to create dynamic pairings with complementary grilling products, like infused charcoal briquettes that impart notes of hickory or mesquite to dimensionalize flavor.” According to Flower at GIANT, the grocer’s top barbecue flavor trends for 2019 include: • Regional flavors (Kansas City, Memphis, North Carolina). • International influences (Korean, Asian, African). • Alcohol-infused (bourbon, stout). • Specific trending ingredients in barbecue sauces: honey, ginger, mustard, smoke, unique peppers .
“We find that grilling, outdoor eating and summer entertaining are universal trends that transcend generations,” Flower says. “Millennials, foodies, everyone is excited about experimenting with new flavors and combinations. We aim to provide them the products and inspiration they need to win at the grill.” Flower says the retailer is also expanding the definition of “grilling season” into the “off-season” by educating its customers how to use these flavors and sauces across various cooking methods to provide them solutions year-round. “Moving forward, it is incumbent upon retailers to constantly challenge themselves to get ahead of the changing shopper who continues to abandon conventions,” Peranick adds. “Grilling is a perfect example. Interest in grilling is no longer reliant on the calendar. Consumers are shifting the script and embracing grilling as a year-round cooking solution. Retailers can use that to their advantage to create a more differentiated private brand narrative around grilling to enhance exclusivity.” SB Acosta, managing editor of Store Brands, can be reached at gacosta@ensembleiq.com.
Store Brands / March 2019 / www.storebrands.com
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PACKAGING
pr ju
Think ng outside of the box required
th w
na su
in it an
in ca on in
Packaging for e-commerce comes with a whole new set of instructions, but ones that need to be followed to ensure online success
of in th
By Lawrence Aylward
pa Is it really any surprise that Amazon has summoned some consumer packaged goods (CPG) brands to overhaul their packaging to be greener, sturdier and cheaper to ship? Not really. That’s the state of e-commerce packaging for you. And retailers and manufacturers of private-branded CPG products should take notice. “The growth in online purchasing is not only forcing retailers of private-branded consumer packaged goods to embrace e-commerce, it’s driving change at all stages in the manufacturing process, from product design to packaging changes to picking to fulfilling and to shipping,” says Robert Tupta, product manager for Twinsburg, Ohio-based Mold-Rite Plastics, which manufactures packaging for CPGs. While a typical product on a store shelf may be handled five or six times, a product in the e-commerce channel can be handled 20 to 30 times before a customer receives it, Tupta notes. “Our experience has been that retailers and manufacturers of private-branded CPGs understand the need to have a robust online presence, but need guidance regarding optimizing packaging designs for e-commerce,” Tupta adds. The challenges with packaging are threefold: Packages need to have greater durability to prevent product damage, be lightweight to minimize shipping costs and contribute to sustainability, he explains. A significant issue for e-commerce packaging formats is the added cost of ensuring survivability through the distribution chain because most primary packaging in the private brands CPG space is optimized for brick-and-mortar environments, says John Wilson, market manager at Neenah, Wis.28
based Bemis, which manufactures flexible packaging products and pressure-sensitive materials. “The predictable nature of the traditional distribution chain allows for upright shipping and multiple inspection points until the consumer inspects it one last time and puts the product in the cart,” he adds. “In e-commerce, primary packaging can be reinforced with additional materials designed to ensure the package stays intact. If the package does leak, the additional packaging ensures that it doesn’t damage other packages.” Another point to consider is that packaging engineers have designed their products in cases to survive distribution for traditional retail environments, typically six, 12 or 24 counts of product, Wilson notes. “But in the e-commerce environment, the focus is on ‘eaches’ and a single unit becomes the primary item in transit earlier in the distribution process,” he adds. “All of these changes can equal higher costs for the additional packaging, the required corrugate containers and the last-mile distribution.” The forward-thinking retailers have embraced the best packaging possible for e-commerce and realize how important that is to their businesses and private brands, Wilson says. “There is certainly a growing realization that excellent e-commerce packaging can be a differentiator in consumer perception of the product and ultimately drive higher sales,” he adds Even though it might be just a delivery package, it still has to be engaging, says Taylor Buckthorpe, director of sales and marketing for Colordyne Technologies, a Brookfield, Wis.-based manufacturer of high-speed, high-resolution label and tag digital color
Store Brands / March 2019 / www.storebrands.com
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PACKAGING printers. In fact, the day is soon coming where blasé brown boxes just don’t cut it because they don’t differentiate. “Eventually, that brown box packaging will be elevated,” Buckthorpe adds. “You will be looking at processed colored packaging, which means more consumer engagement.” Labels will also play a role, as they can be etched with the brand name of the store brand product, Buckthorpe says, noting that such labels can also differentiate and engage consumers. “Tailored customer packaging is on the horizon,” he adds. More manufacturers of private-branded CPGs are switching to digital printing of product labels for several reasons — it helps improve label quality, allows for quicker turnarounds and helps reduce costs, Buckthorpe adds. For instance, manufacturers looking to become more efficient in the supply chain are utilizing labeling to do so by no longer carrying a year’s worth or a six-month supply of product labels on their balance sheets — rather, they are going on-demand and investing in digital printing to do so, Buckthorpe adds. Manufacturers are simply seeing value in digital printing of labels, which is why Colordyne Technologies is seeing more investment from suppliers of private brands as well as brands than ever before, Buckthorpe says. Just like packaging in-store, Tupta stresses that e-commerce packaging needs to offer efficiencies.
“Packaging that is hard to open, is unattractive or results in damage to the product will have a negative impact on the online customer,” he states, noting the importance of packages that are easy to open and close, and easy to hold and carry. And even though they ordered their products online and they are being handled more frequently, consumers still want them showing up at their homes without scuffs on them, Buckthorpe adds. From a product packaging design standpoint, Michael Duffy, the creative director for Chicago-based Equator Design, says the key is to maintain the tone and experience the package delivers in-store. “Is there a different way to design for product packages sold online compared to those sold on the store shelf?” Duffy asks. Currently, the answer is “no,” mainly because retailers and manufacturers don’t want to take on the added cost of another packaging design. “I don’t think they accept dual costing for design for online packaging anytime soon,” Duffy adds. That said, Duffy believes in the “design of the packaging around the packaging,” considering it’s an important touch point. “It’s a new opportunity to connect with the consumer,” he says. “You want to stand out from the next box and get to that point of difference.” SB
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www.storebrands.com /November 2017 / Store Brands
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CATEGORY INTELLIGENCE SPICES & SEASONINGS
GOING GLOBAL
DO create seasoning blends that cater to customer preferences.
DON’T just mirror the national brands. Innovate.
Our palates regularly crave new or different flavors and taste combinations. Enter spices and seasonings. The sight, taste and smells that they bring to a dish whet our appetites but can be healthy for us. Savvy store brand retailers know that investing in own brand spices and seasonings is the ticket to keeping consumers engaged and can benefit other categories as well. “Consumers are wanting to experience a variety of cuisines and cultural foods as they have more exposure to recipes online,” says Amy Jungk, executive vice president of corporate strategy for Old World Spices & Seasonings in Overland Park, Kan. She notes that Asian-inspired flavors, in particular, are finding their way into home kitchen repertoires. Using a play on the Japanese word “umami,” which means pleasant savory taste, Trader Joe’s Mushroom & Company Multipurpose Umami Seasoning Blend offers an earthy mushroom flavor. It uses porcini and white button mushrooms to enhance the kosher salt base. Other ingredients include onion, mustard seed, red and black pepper, and thyme. Some spices are finding new applications outside the typical recipes. “Chili peppers from around the world are being used as new ways to flavor more traditional dishes,” Jungk adds. “Smoked sea salts are being substituted for seasoning blends laden with [monosodium glutamate] MSG, fillers and artificial ingredients.” Brett Cramer, co-founder of The Spice Lab in Pompano Beach, Fla., notes that demand for superfoods is shaping spices and seasonings as well. These foods are nutrient dense and contain high levels of antioxidants and vitamins. “Herb and spice blends made with rosemary, thyme, oregano, ginger, turmeric, cinnamon and many others
Salt/Seasoned Salt/Salt Substitute Private Brands
All Brands
Dollar Sales (in millions)
$92.6
$543.4
Change vs. Year Ago
11.0%
0.9%
Dollar Share
17%
100%
Unit Sales (in millions)
75.4
285.9
Change vs. Year Ago
1.2%
-1.6%
Avg. Price Per Unit
$1.23
$1.90
Source: Market Advantage; IRI Liquid Data, 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. 30, 2018. 30
— all are rich in compounds that are beneficial to one’s health, as well as being delicious,” he explains. A growing interest in Middle Eastern cuisine is bringing spices such as sumac, cardamom and saffron to the forefront. With so many different options, no one spice and seasoning strategy will work for every retailer. The best store brand opportunities in spices and seasonings can be found in creating seasoning blends that cater to customer preferences. “Regional and ethnic tastes vary so store brands should capitalize on this and create custom seasonings for their market,” Cramer explains. Private brand retailers should also consider eating occasions that their consumers regularly enjoy when formulating their blends. “With the rising interest in healthy eating and barbecue as a backyard hobby,” explains Jungk, “seasoning blends with a healthy protein focus are a strong opportunity.” The many varieties of organic and non-GMO blends remain more expensive, but should keep their shelf space as consumers become more educated on how diet effects health. “Many of the larger chains will offer a premium organic line of seasonings side-by-side with a lower cost traditional lineup,” Jungk says. When considering methods for merchandising and promoting store brand spices and seasonings, you really are talking about the entire store brand program. There is no shortage of opportunities to cross promote. In the produce section, retailers could consider displaying seasoning with produce like taco seasoning with fresh tomatoes, onions and avocados, Cramer adds. “Secondary displays in the produce and meat departments are the perfect placement for private label seasonings to be showcased,” Jungk notes. “Consumers who are eating healthy shop the perimeter of the store, so pairing a private label seasoning with fresh foods is more convenient.” Placing spices and seasonings in and around the food they serve to enhance is necessary. It’s the surefire way to make the food/spice connection for shoppers. But the overall design of the product plays a big role. too. “Well-designed labels and packaging where the consumer can view the seasoning blend is always important,” Cramer explains. “Store brands do not need to look like ‘store brands’.” SB
Store Brands / March 2019 / www.storebrands.com
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CATEGORY INTELLIGENCE HONEY AND SYRUP
NATURAL FITS It is a sweet time to be merchandising natural sweeteners like honey and syrup, considering that a large base of health-conscious consumers seek nutritious alternatives for sweetening foods. Indeed, sugar and sweetener sales are forecast to fall 29 percent from 2013 to 2023, with just a small portion of consumers (less than 20 percent) admitting they are not avoiding such products, states market researcher Mintel in its December 2018 “Sugar and Alternative Sweeteners US” report. “Sweetener limiters are chiefly motivated by health, notably longer-term health concerns that are unlikely to dissipate,” Mintel notes. “Even more challenging for the category, innovations that address those concerns fall largely in the realm of artificial sweeteners, and consumers are seeking to avoid artificial ingredients.”
DO promote recipe ideas and usage suggestions to help increase sales.
HONEY’S HEALTH HALO Mintel found that “clearly, honey users are motivated by an interest in natural.” Mintel research found that two-thirds of consumers who use honey as a sweetener indicate that they avoid artificial sweeteners. “However, honey’s appeal likely extends beyond even those attributes,” Mintel reports. “Honey launches in recent years have also capitalized on consumer interest in environmentally friendly products.” The perception of honey as a healthier sweetener is likely to be particularly appealing to younger
DON’T forget to use messaging on packages that reinforces the natural origins of honey and syrup.
32
shoppers, a group that expresses a keen interest in limiting sugar consumption for dental or aesthetic reasons, Mintel notes. “Sugar alternatives that can address these issues and, ideally, also leverage ‘natural’ attributes, (which resonate strongly with younger consumers), would likely appeal to this group,” Mintel states. While honey merchandisers indeed benefit from their products’ health halo, there also is a positive trend toward items that display a greater degree of authenticity and purity, such as raw honey, organic honey and even unprocessed honeycomb, says Phil de Vooght, chief commercial officer at Sweet Harvest Foods, a Rosemount, Minn.-based honey processor. In addition, there is greater interest in flavored honeys, and particularly spreadable versions, because of the strong growth over the last few years in nut butter spreads, which typically are adjacent to spreadable honey on store shelves, he states. While de Vooght notes that more private brands suppliers are sourcing honey from outside the U.S. because of lower product costs and strong quality protocols, local-origin honeys also are attractive to the many shoppers who view the items as more authentic, says Margaret Lombard, CEO of the Longmont, Colo.-based National Honey Board. “Retailers should consider stocking a wide selection of honey varieties while making it clear where the honey was sourced from,” she notes, adding that brands will further benefit from package messaging that reinforces the natural origins of honey. “Consumers want to feel confident in where and who their honey comes from,” adds Lisa Hansel, vice president of sales and marketing for the Sioux Honey Association, a Sioux City, Iowa-based honey production co-op. “Transparency is becoming increasingly important.” Enhancing product visibility with greater promotions, meanwhile, can generate more store brand revenues, de Voight says, stating that methods can include endcap placements, the use of display shippers and situating products in various areas of the store. Retailers can further spur interest in private brand selections by demonstrating different usage occasions and relaying how honey use extends beyond biscuits and teas, says Tony Landretti,
Store Brands / March 2019 / www.storebrands.com
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CATEGORY INTELLIGENCE HONEY AND SYRUP CEO of Local Hive Raw Unfiltered Honey by Rice’s Honey, a Greeley, Colo.-based supplier. “Drizzling honey on top of ice cream, using it in a salad dressing or dipping pizza crust in it provides consumers with a number of new ideas to help increase interest,” he notes. A major retailer challenge, meanwhile, is educating consumers on the distinctions between the various honeys on store shelves, he states. “Not all honey is the same, but many consumers think they are,” Landretti says. “It is important to get the word out about the differences in order to help consumers make better food decisions.” The issue is likely to become even more significant as the number of honey SKUs are increasing, Lombard states, noting that retailers can effectively convey product differences and attributes with in-store signage and by posting information online and on product labels. She adds that it also is crucial for retailers to make honey displays more visible to shoppers. “Honey is not an especially large category and, as a result, is often not given primary consideration during the development of retail shelf schematics,” Lombard states. “This can lead to such situations
Shelf-Stable Honey
Private Brands
All Brands
Dollar Sales (in millions)
$297.1
$657.6
Change vs. Year Ago
-1.1%
1.0%
Dollar Share
45.2%
100%
Unit Sales (in millions)
59.0
113.9
Change vs. Year Ago
-0.6%
-0.8%
Avg. Price Per Unit
$5.03
$5.77
Maple Syrup
Private Brands
All Brands
Dollar Sales (in millions)
$233.6
$688.4
Change vs. Year Ago
2.2%
0.2%
Dollar Share
33.9%
100%
Unit Sales (in millions)
72.0
191.8
Change vs. Year Ago
1.7%
-0.1%
Avg. Price Per Unit
$3.24
$3.59
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. 30, 2018.
34
as the placement of honey on the top shelf over peanut butter, jams and jellies or in lower-traffic sections like the baking aisle.” Not only is honey underpromoted, but the category is often overlooked by the large base of consumers who primarily shop the perimeter of stores for what they perceive as fresher and healthier foods, Hansel says. “Honey can sometimes be missed in the center store and would benefit from secondary placements and special displays to boost sales,” she notes. “Showing recipe ideas and usage suggestions helps increase sales as well.” In addition, brands will benefit from messaging on packages that reinforces the natural origins of honey and “shares the story of honey’s journey from flower to hive to table,” Lombard notes. SYRUP SALES UP FOR PRIVATE BRANDS While the honey sector is experiencing healthy growth, sales for syrup, another natural sweetener, are flat. Sector revenues totaled $743.6 million, an increase of less than 1 percent, for the 52 weeks ending Dec. 30, 2018, reports IRI. However, private brand revenues, grew 2.9 percent to $244 million. There are other good signs. Bruce Bascom, who operates Alstead, N.H.based Bascom Maple Farms, one of the largest producers of maple syrup in New England, says in a recent blog that he remains confident about the future of the maple syrup industry. “There continues to be rapid changes in equipment technology, which increase sap production and efficiency in your sugar house,” says Bascom, whose company offers products for private brands. While the 2018 maple syrup crop was down from the previous, it was still a large one for the U.S., Bascom says. “We had our best ever year,” he adds. “We remain optimistic that for at least the next few years a better balance can be reached between expanding production and expanding market consumption.” Merchandisers’ demand for maple syrup “remains very good” and is gradually increasing in North America, states the Spencerville, Ontariobased International Maple Syrup Institute in a 2018 report on the sector. “Use of real maple syrup in a variety of food products is growing and is noticeable in retail outlets both in the United States and Canada,” the IMSI states. “Profit margins, however, are thin in some circumstance and the marketplace is very competitive. Prices for packaging are increasing significantly.” SB
Store Brands / March 2019 / www.storebrands.com
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CATEGORY INTELLIGENCE VITAMINS AND SUPPLEMENTS
SIGN OF THE TIMES
DO consider offering products in more indulgent, fruity or exotictype flavors.
Wellness concerns are resulting in a sales wallop for vitamin and supplement merchandisers. With more shoppers focusing on healthy living, category revenues, which include minerals, were up about 5.1 percent in 2018 to an estimated $24.5 billion, following similar increases in the three previous years, reports market researcher Mintel. Activity is set to remain strong with revenues forecast to reach $30.7 billion by 2023. Store brands are a major segment sales driver, with 61 percent of adult users in a June 2018 Mintel online survey indicating that they usually purchase private label selections, Mintel states in its September 2018 “Vitamins, Minerals and Supplements US” report. The most active private brand buyers are persons between the ages of 18 and 24, with 73 percent stating that they usually favor store brands. Next are shoppers 25 to 34 (68 percent) and 35 to 44 (65 percent). The younger consumers are more likely to purchase private brands because of the lower price, Mintel states. Store brand activity, meanwhile, is also set to increase as product acceptance by younger consumers should grow as they age, Mintel notes. Among all users, 68 percent admit to taking vitamins, minerals or supplements for general wellbeing; 38 percent note that they do so for nutrient
DON’T forget to spotlight unique benefits of products to help them stand out.
36
deficiencies; 35 percent for increased energy; and 34 percent for general piece of mind. With younger consumers also more likely to try new brands, merchandisers should spotlight the unique benefits of their offerings to help the products stand out in the crowded sector, Mintel states. Among the attractive supplement attributes are protein for satiety, omega-3s for brain health and probiotics for gut health, says Emily Ross, account manager-beverage for Agropur Ingredients, an Eden Prairie, Minn.-based supplement ingredient supplier. Vitamins can better stand out by also containing multiple elements, such as collagen for hair, skin and nail health and caffeine for an energy boost, she states. In addition to greater product functionality, there is a shift away from traditional tastes and growing consumer interest in more indulgent, fruity or exotic-type flavors, says Jeff Reget, Agropur’s sales manager for sports nutrition. Along with an expanding shopper focus on healthy living, vitamin consumption is increasing because of more consumers entering the category, says Patricia Jones, general manager of Miami Lakes, Fla.-based Mason Vitamins. “However, the market is flooded with a lot of brands and product offerings with similar claims that is overwhelming.” To call attention to their selections, private brand merchandisers should educate consumers on product benefits both online and in-store, she notes. “Retailers have an opportunity to connect with their audience and provide the assistance they need to make an informed decision, which includes having trained and knowledgeable staff available and informative merchandising materials,” Jones states. Supplement merchandisers, meanwhile, are benefitting from an aging population that is responding to their health needs, along with the large wave of millennials entering the market who are more preventive and proactive in enhancing their well-being and less reactive, says Jose Torres, Mason Vitamins’ marketing manager. “Anti-aging supplements have grown naturally as the population continues to age, however, newer antiaging supplements will be targeted towards younger consumer as preventive solutions,” adds Brianne Vaskovardzic, director of marketing for Newnan, Ga.based Norax Supplements. “This effectively expands the market and increases product demand.”
Store Brands / March 2019 / www.storebrands.com
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CATEGORY INTELLIGENCE VITAMINS AND SUPPLEMENTS Cannabidiol (CBD) nutraceuticals are among the hottest supplements on the market, and hemp-based CBD is set to have greater sales and interest, she states, noting that nutrient-rich desiccated liver and dietary supplements that focus on the keto diet also are increasing in popularity. “CBD nutraceuticals have the strongest growth potential of all product categories,” Vaskovardzic says. “But as a relatively new ingredient, there is still a great deal to learn about its usage and benefits.” Packaging also is playing an increasingly important role in making vitamins and supplements more appealing, with many options containing bold colors and labeling that easily distinguishes conditionspecific treatment options, says Bob Tupta, product manager at Mold-Rite Plastics, a Plattsburg, N.Y.-based manufacturer of rigid-plastic packaging components. In addition, he notes that it is critical for store brands to incorporate cleaner packaging that easily identifies the products. “With so many consumers self-medicating and using supplements on a regular basis, it is important that the package speaks to them and stands out,” Tupta says. “Improvements in manufacturing
processes and digital printing are helping to accomplish this. More colors, package shapes and custom designs are appearing on store shelves.” Among shopper segments, older consumers more often seek packaging that is easy to open and close, which can include flip-top dispensers, while many millennials prefer containers that fit their busy onthe-go lifestyles, such as items that are easy to hold and grip, he states. SB
1 & 2 Letter Vitamins
Private Brands
All Brands
Dollar Sales (in millions)
$476.3
$1,271.4
Change vs. Year Ago
7.4%
2.6%
Dollar Share
37.5%
100%
Unit Sales (in millions)
73.9
164.3
Change vs. Year Ago
4.1%
-0.3%
Avg. Price Per Unit
$6.45
$7.74
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. 30, 2018.
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ititropicals.com/blog www.storebrands.com / March 2019 / Store Brands
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CATEGORY CLOSEUP
Wipes
14,000 $309.3 MILLION
Sales of privatebranded wet wipes, which account for 45% of retail market share, for 52 weeks ending May 20, 2018. Sales increased 3.5% during the period. Source: IRI
$3.5 BILLION
The estimated size of the U.S. market for wet wipes by 2023. The compound annual growth rate for wet wipes in the U.S. through 2023 is estimated to be 5%. Source: Smithers Pira
38
The number of consumer wet wipes that are used every second worldwide.
22
Source: The Guardian
MILLION
The number of Americans who use wet wipes 31 times or more every week. Source: The Guardia
QUOTABLE “Many consumers, who were slow to adapt to the wet wipe trend in the past, are now finding the convenience factor and experience of using wet wipes beneficial and time-saving. In addition, consumers are now placing cleaning wipes in more rooms of the house.” — MICHAEL WETTSTEIN, VICE PRESIDENT OF SALES FOR CONTRACT MANUFACTURER KLEEN TEST PRODUCTS
“Fatberg.”
The name given by the media to congealed masses of wet wipes and other products that block sewer systems when flushed down the toilet.
The year the first pre-moist ened napkin was produced in Manhattan by cosmetics pioneer Arthur Julius, who later convinced Harland Sanders that his chicken would sell better if eaters could clean up with the Wet-Nap he had trademarked. Kentucky Fried Chicken has since given away more than 1 billion wipes.
Store Brands / March 2019 / www.storebrands.com
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