From The MNB Archives

CHICAGO – The medium, for the moment, may be the exhibit floor at the Food Marketing Institute (FMI) Show here. But the message is being heard elsewhere. For example…

The Grand Rapids Press reports that major grocery chains in West Michigan are adding more and more private label products "to their shelves regularly, saying private labels build customer loyalty and retailers keep more of the profits."

According to the Press, "No longer relegated to a few products in drab, black-and-white packaging tucked away in the 'generic' aisle, private-label products command a significant portion of shelf space, rubbing shoulders with Del Monte, Kellogg and Bird's Eye."

And the New York Times reports on the private label strategy being used by Publix, which it says is "striking" because "instead of echoing brand-name designs, Publix's products have their own look: clean, clever and — with lots of white space and simple but crisp typography — vaguely upscale."

The Times writes: "Tim Cox, director of the company's in-house creative-service department, says Publix's house brands used to mimic the look of national brands; the problem was that imitation made the private-label stuff blend in. A breakthrough came with the conclusion that similarity was no longer necessary."

Which is exactly the message that the private label industry wants to get out there.

One of the real innovations at this year's FMI Show has been the creation of a private label-driven educational track and exhibit center, both designed to give retailers a better sense of the power of this growing segment of the industry. To gauge its success and import, MNB conducted an exclusive e-interview with Peter Brennan, president of Connecticut-based Daymon Worldwide.

MNB: This is the first year that private label as a category is getting this kind of attention at a show traditionally focused on branded CPG companies. Is this a little like going into the belly of the beast, and why is this appropriate now?

Peter Brennan: The FMI Show has always been about presenting supermarket retailers with opportunities. ACNielsen reports that private label is the leader in 240 categories. In the United States PL products represent about 16% of dollars and 22% of volume, yet penetration over the past few years has been relatively flat, so there is tremendous opportunity. In most retailers, the PL brand is the top selling brand in the store because, yet how many retailers really treat private label as their number one brand? I think Brian Tully of FMI had a terrific response to a question like this in an interview you did with him last week. He said it all starts with the consumer and consumers are savvier than ever.

MNB: Conventional wisdom suggests that private label traditionally has been an economic choice, though that certainly has changed over the years. Talk about where the private label industry is these days in terms of the price-value-quality equation and how it is perceived by consumers.

Peter Brennan: Today it is all about choice and quality. No longer are PL products seen as a low priced alternative; consumers choose based on quality and value and buy PL because it’s the smartest shopping decision they can make – not necessarily the lowest cost choice. For the retailer, the store brand allows them to extend the consumer’s shopping experience into the home. Sometimes our industry can be its own worst enemy by focusing too much on the value part of the private label proposition and not enough on the quality portion.

MNB: Should private label generally be perceived by retailers as a replacement for a national brand, or a supplement? Or this is something that needs to be considered on a case-by-case basis?

Peter Brennan: Private label should be the most important brand that the retailer offers. It can do so much more to strengthen the retailer’s relationship with the consumer than any national brand can. Instead of being purveyors of someone else’s brands, retailers should be purveyors of their own brands to stand out from the competition. Retailers must establish a point of difference and they cannot do that by selling just Coke soda and Kraft singles. That only creates a sea of sameness, and in effect limits a retailer’s ability to build its brand.

MNB: Since private label is by its very nature something that differentiates one retailer from another, does the retailer need to look at the promotion, marketing and merchandising of this segment differently than he does traditional branded items? And what are the advantages here?

Peter Brennan: Private label is the best selling brand in most retailers. So, if you look at PL as a marketing tool versus a brand alternative, it is the most powerful tool a retailer has to build and enhance its image. During one of our Forum presentation on Saturday, it was pointed out that if a retailer sells 500 million units of private label a year, each unit has the opportunity to provide three impressions on a consumer. First is the image on the shelf, which is why packaging is so important. Second is the reason the consumer purchases - it could be price, quality, uniqueness, etc. And finally it’s the performance of the product itself - was it a good value? Did it taste good? Was it truly unique? Multiply these three impression occasions by units sold and you get 1.5 billion impressions – and any CPG company will tell you that is a very significant opportunity.

MNB: Finally, what is the next great private label opportunity that most retailers aren’t considering right now?

Peter Brennan: There are different opportunities for different retailers, but collectively one of our greatest opportunities is to continue our never-ending quest to improve quality and enhance the value proposition of our products. Another opportunity for our industry is to continue working to properly communicate and market our accomplishments to the consumer. This is an ongoing opportunity, not a temporary process. One way we can capitalize on this opportunity is by doing a better job of educating the thousands of associates who work in our stores about our own brands. We can enhance their roles by helping them to become corporate brand associates.

Grocery Outlet, which has made news with its efforts to use the Lucky trademark that it believes Albertsons let lapse, announced yesterday that it plans to triple its Lucky store count.

The company plans to convert an existing Grocery Outlet unit in Vacaville, California, to the Lucky name within the next 60 days, and then open a new ground-up unit in San Leandro, California, by mid-September. Both units will, according to the company, feature fresh meat, expanded produce, wine, cheese, and deli, as well as everyday low pricing.

It was just a month ago that Grocery Outlet instigated a legal battle by using the Lucky banner on one of its newly renovated stores in Rocklin, California, saying that because Albertsons hadn't used the name for six years it no longer had legal rights to the name. Grocery Outlet has been citing federal law, saying that companies that do not use trademarked names for three years then lose exclusive rights to those trademarks.

Albertsons, which inherited the Lucky brand when it acquired American Stores, had in fact stopped using the brand – though this hasn't prevented it from trying to maintain rights to the name through legal recourse. The company also is trying to find some evidence anywhere that it hadn’t completely abandoned the brand, though Grocery Outlet's investigators are confident that no such evidence exists. A federal judge in San Francisco denied Albertsons a temporary restraining order that would have kept Grocery Outlet from using the name, but there likely will be numerous court dates before any sort of final decision is reached.

Furthermore, Grocery Outlet has filed a lawsuit against the larger retailer charging it with trademark infringement and unfair competition. The filing, in part, says that Albertsons' actions in the Lucky case "are likely to cause confusion, to cause mistake, and/or to deceive customers and potential customers of the parties, at least as to some affiliation, connection, or association of defendants with Grocery Outlet, or as to the origin, sponsorship, or approval of defendants’ goods, services, or commercial activities by Grocery Outlet."

These two new stores appear to be Grocery Outlet's way of dealing with last week's Sacramento Bee report that at least some consumers were disappointed by the new Lucky store. "While some shoppers welcomed the wider aisles, cleaner look and improved selection in certain departments, others came away disappointed," the Bee wrote, and "some shoppers complained that the new Lucky is too similar to the old Grocery Outlet – far smaller, at 13,500 square feet, than most supermarkets, and lacking many of the amenities, like a deli counter, that consumers want."

CHICAGO - The Food Marketing Institute (FMI) yesterday issued a document entitled "Avian Influenza and Pandemic Preparedness: A Planning Resource for the Grocery Industry," which FMI CEO Tim Hammonds said told a convention audience was designed to give retailers the tools with which to prepare themselves for a possible pandemic – though he suggested in his remarks that he did not judge such an occurrence to be likely.

"The recent jump of this disease beyond Asia into Europe and then into Africa indicates that the current control measures have not stopped its spread," the document states. "As a result, every organization needs to begin thinking about steps to improve readiness…This is not a document that sits on a shelf until a pandemic erupts. It is a resource to help you develop your own action plans well in advance of the actual need.

"Not every organization will implement all of these recommendations and certainly not all at once," the document states. "However, you should review this document to determine your own priorities and timetable. If a pandemic actually erupts, it will be too late to start planning your response."

Among the recommendations made, depending on the severity, extent and locality of a pandemic outbreak:

• Analyze product lists to identify and fulfill demand shifts during a pandemic, with backup strategies to react to shortages.

• Implement an analysis of essential and non-essential job functions during a pandemic outbreak, with plans to be able to shift human resources with early cross-training efforts. A chain of communication with emergency mechanisms is considered key.

• Consider expansion or creation of an e-shopping program that will allow customers to order via the Internet and have food delivered to their homes.

• Develop plans and policies that would limit interpersonal contacts, deal with product and labor shortages, provide precautionary tools (gloves, masks, etc….), and that would interact with appropriate local, state and federal officials.

Meanwhile, Advertising Age reports that, "Hoping to stave off a full-blown panic pandemic over the prospect of avian flu on U.S. shores, a host of major marketers are launching stay-calm campaigns. Although an avian-flu epidemic among birds -- let alone humans -- is a long way from hitting America, marketers are moving to ward off a wave of fear that could have disastrous consequences for the $50 billion retail poultry industry. With producers Tyson Foods and Pilgrim's Pride already suffering slower sales, the race is on to educate the public as ABC-TV prepares to air this week a disaster drama about avian flu and the U.S. government unleashes public service announcements about the flu."

The goal is to convince consumers that eating chicken is safe as long as it is properly and completely cooked – in fact, putting much of the responsibility on consumers for handling and cooking poultry correctly.