FOOD MARKETING CONFERENCE PANEL SERIES: Private Label

Articles
May 12, 2009

FOOD MARKETING CONFERENCE PANEL SERIES: Private Label

In the 44th annual Western Michigan Food Marketing Conference, executive forum, the topic of discussion was leading and winning in the new economy. Moderated by Phil Lempert a panel of five key retailers exchanged insights in a discussion on consumers in the wake of turmoil and the challenges and opportunities the food industry is facing. In the third series of these discussions, the panel discusses what private label should be. The five experts on the panel were Jim Wright, Chairman, President and C.E.O of Tractor Supply, Mike Jackson President and Chief Operating Officer of Supervalu and Chairman of NGA, Mark Batenic, Chairman, President and C.E.O of IGA USA, Alex Miller President of Daymon Worldwide, and Craig Sturken, Executive chairman of Spartan stores. Phil Lempert: Let’s talk about Target and food. If you look at everything they’ve done with their own brand with Archer Farms, has that helped them or hurt them?. Alex Miller: I think that the Archer brand program is pretty good, and they’ve actually innovated on a lot of products. But I don’t know as overall if you’re going to establish a price image with private label. They are some items that you might be able to . They’re might be 50-100 items that are really critical, but for the most part you’re going to establish that price image with national brands. I just don’t feel that Target has that price image that Walmart would have, because generally Target is priced higher and the consumer understands that. Phil Lempert: I talk to a lot of consumers who don’t even realize that Target has a private label. Did they do too good of a job marketing it away from their brand? Would they have been more successful if they put the bullseye on a hundred SKUs? Alex Miller: I think that’s generally a big debate. We really believe, and one of the things we work with our customers on is that we believe there is tremendous synergy and marketing power with putting the name of the store on the product. So, in that case they probably did miss out. I think Archer Farms is a little bit of a cute packaging, a cutesy idea. And they might have been better off with something that was more focused on Target and the Target name because certainly they do have a great image. But I think that they were perhaps trying to start their program by launching more of a premium program, more upscale products or unique products along the lines of their cheap sheik to try and create products that were going to help them with a more premium image. And five years ago that image probably worked great for them. That was probably the right image to have. Unfortunately in the last couple of years, they haven’t had the right brands to handle the value orientation of the economy as fast as other retailers have.

In the 44th annual Western Michigan Food Marketing Conference, executive forum, the topic of discussion was leading and winning in the new economy. Moderated by Phil Lempert a panel of five key retailers exchanged insights in a discussion on consumers in the wake of turmoil and the challenges and opportunities the food industry is facing.

In the third series of these discussions, the panel discusses what private label should be.

The five experts on the panel were Jim Wright, Chairman, President and C.E.O of Tractor Supply, Mike Jackson President and Chief Operating Officer of Supervalu and Chairman of NGA, Mark Batenic, Chairman, President and C.E.O of IGA USA, Alex Miller President of Daymon Worldwide, and Craig Sturken, Executive chairman of Spartan stores.

Phil Lempert: Let’s talk about Target and food. If you look at everything they’ve done with their own brand with Archer Farms, has that helped them or hurt them?.

Alex Miller: I think that the Archer brand program is pretty good, and they’ve actually innovated on a lot of products. But I don’t know as overall if you’re going to establish a price image with private label. They are some items that you might be able to . They’re might be 50-100 items that are really critical, but for the most part you’re going to establish that price image with national brands. I just don’t feel that Target has that price image that Walmart would have, because generally Target is priced higher and the consumer understands that.

Phil Lempert: I talk to a lot of consumers who don’t even realize that Target has a private label. Did they do too good of a job marketing it away from their brand? Would they have been more successful if they put the bullseye on a hundred SKUs?

Alex Miller: I think that’s generally a big debate. We really believe, and one of the things we work with our customers on is that we believe there is tremendous synergy and marketing power with putting the name of the store on the product. So, in that case they probably did miss out. I think Archer Farms is a little bit of a cute packaging, a cutesy idea. And they might have been better off with something that was more focused on Target and the Target name because certainly they do have a great image. But I think that they were perhaps trying to start their program by launching more of a premium program, more upscale products or unique products along the lines of their cheap sheik to try and create products that were going to help them with a more premium image. And five years ago that image probably worked great for them. That was probably the right image to have. Unfortunately in the last couple of years, they haven’t had the right brands to handle the value orientation of the economy as fast as other retailers have.

Phil Lempert: I’d like to stay on private label for a minute and build on that.  Because as you’re talking, I’m thinking about what A&P did with Masters Choice now twenty-five to thirty years ago where they really tried to be one or two levels above the national brand.  They had their own magazine. They were going that whole route and it didn’t work out all that well for them. What should private label be? Should it be the banner of the store on that product to build that relationship? Should it be better, should it be more quality? Should it be sexier? What should private label be in this economy and probably for the next five years? Who wants to take a stab at that?

Mark Batenic: We’ve just gone through at IGA major rebranding effort for private brand, and we feel very strongly that the name of the stores belongs on the label and belongs on the product. And we‘ve prominently redone our labels to reflect that. We think there’s a value that goes along with that. It’s not just the price. It’s the quality of the product, the service in the store, the community efforts that go on at IGA that the consumer associates with all of that. And then we have it in the pantry at home or in the refrigerator, the image is reinforced constantly: where they shop, what they’ve been doing, what that store means to them and what that means in the community.  And as consumers stay close to home and make fewer trips, it’s more important than ever to keep your image in front of them. That’s what we’re doing with the IGA brand.

Phil Lempert: And if they like that product they can’t get it elsewhere.

Mark Batenic: Exactly. It’s a point of differentiation that you can’t buy it anywhere else but an IGA store.

Phil Lempert: Mike, you’ve got a whole variety of store brands from great value to great recipes.

Mike Jackson: Yes, our program is really a three-tier program. We have the up-scale, top of the line, the Wild Harvest, the Culinary Circle.  Then we have a mid-tiered, and that is really our store brands. It’s the label of the marketplaces whether it’s Cub Foods, Acme or Shaw’s, whatever it might be. And then we have an entry price point too, and that is Shopper’s Value and that is common across the entire company. There are probably 200 SKUs in that particular line. So, we’ve got a full range of offerings for consumers and they’re marketed for different levels depending upon the store, the local demographic, the banner and we’re trying to accomplish, but it’s really a three-tiered program.

Phil Lempert: Could I ask which one is doing the best right now?

Mike Jackson: The mega-brands, and that’s really where the focus is right now. That’s really the bread and butter and the larger share of the volume. So, it’s the mid-tier, which is really targeted as national brand equivalent. That’s really where the tonnage is.

Phil Lempert: Craig, what are your thoughts about store brands?

Craig Sturken: Well, we have a three-tier program too, and it’s working very well for us. But, the workhouse really is our Spartan brand. To Mike’s point, our stores really don’t always say Spartan out front.  But our Spartan brand has worked fabulously for us because of all the support we give it and effort we put forward. The interesting thing about the Spartan brand is the retailers that we supply. In our corporate stores, our private label penetration is a very nice number. We’re very proud of it, and it continues to grow. In our retailers we see such diversity in private label penetration, and is really based on the heart of the storeowner.  And we have some retailers that actually exceed our own corporate stores private label penetration. And of course we have many retailers that are just not achieving that. So there’s a lot more to it than just the name, and it’s really about the dedication to providing that value to the consumer.

Mike Jackson: In our younger days, I used to try to steal customers from Craig and I never could because of the private label. It’s just too strong. It was always a problem.

Phil Lempert: And, Jim? Private label in your world?

Jim Wright:
Today it’s about 50% of our business. We aspire to about 23% of our business. Most of it is not Tractor Supply brand. We do have that. We continue to the debate about what do we want to put our name on. We put a tremendous amount of effort in establishing the brand of the company, and how that translates necessarily to the product and where should it be used, for example. But we do have a pretty wide portfolio of major brand alternative private brands in animal feed, pet food, tools and power equipment.

Check in next week as the panel discusses the smaller store format.