April 15, 2008
PLBuyer: Not Your Grandma’s Private Label
By Kathie Canning
Through a special arrangement, what follows is an excerpt of a current article from Private Label Buyer, presented here for discussion.
It wasn’t too long ago that Safeway found itself a bit overwhelmed. Between the late 1990s and 2001, the retail giant acquired five regional retail chains throughout the country – each with a loyal consumer base that, in some cases, appeared less than overjoyed with Safeway’s tweaks and changes.
In the 2001 to 2003 timeframe, Safeway says it also undertook the difficult task of centralizing all of its marketing, merchandising and procurement functions. With its marketing sources directed elsewhere, Safeway’s private label program lacked focus. In fact, the company found itself with an overabundance of private labels – some 70 of them representing thousands of food and non-food products.
In 2003, Safeway executives formulated a game-changing new strategy designed to differentiate its offerings from other conventional supermarkets. This strategy involved the renegotiation of labor contracts, the upgrade of perishable quality, remodeling of stores to the Lifestyle format and revitalization of its corporate brands.
Safeway got a much-needed shot in its private label arm in late 2005, when it hired James White, who previously worked for Nestle Purina and Procter & Gamble, to serve as senior vice president of consumer brands.
A major accomplishment during White’s tenure is Safeway’s rebranding of its entire private label portfolio – or what the company calls its consumer brands. Over the course of two years, the chain whittled a cumbersome assortment of 70 consumer brands down to 10 “power brands” The rebranding effort – which also entailed the development of attractive new packaging – encompasses approximately 3,000 product items.
“All are clearly positioned based on consumer and household insights,” Mr. White told PL Buyer.
Such insights now are critical to Safeway’s corporate brand program, and Mr. White stresses that they drive consumer solutions such as the company’s recently launched Eating Right and O Organics for Babies lines.
“Both [lines] are driven by deep consumer insights and deliver multi-category lifestyle solutions,” he said. “Overall, we are in the brand-building business, not traditional private label.”
The O Organics and Eating Right portfolios also mesh well with Safeway’s growing reputation in the health and wellness arena.
A vice president with another private label manufacturing company called the Eating Right line the “most impressive ‘consumer brand’ line” in which he’s participated during his 28-year career.
“It is meeting a true consumer need and is being well-communicated and funded, which will make it a very big success,” he adds.
From an investment standpoint, Jim Hertel, managing partner for Willard Bishop, applauds Safeway’s ongoing efforts dedicated to the O Organics line.
“[O Organics] makes a statement and it’s very consistent with Safeway’s image, both internally in terms of the focus on food and health, and externally in what they’re doing with the Lifestyle stores and a lot of the other pieces in terms of branding the Safeway operation. … So I think that’s an investment [in the company’s future].”
Discussion Questions: What is most impressive about Safeway’s recent success with its private label lines including Eating Right and O Organics? What can other retailers attempting to build strong private label programs learn from Safeway?
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I’ve gotta’ weigh in on this one because Safeway Brands is one of my pet peeves. For years I loved Safeway, not only as their corporation’s ad agency management contact while at Ketchum Communications in San Francisco, but later when I was hired (along with my team) to redesign and condense the labels for their entire PL line. You could say I have a little skin in this game.
A first-rate Safeway is a very short distance from my house in a new community in NorCal. Nice new store, but I usually go the extra couple of blocks to a beautiful Raley’s store (full disclosure, used to be a VP there). Safeway’s Private Label is the reason I put them in my rearview mirror. As I have written in these spaces previously, Safeway has shouldered national brands off of their shelves willy-nilly because, well, because they can. This has severely diluted their variety. The supposedly wonderful sales success of Safeway brands is because that’s pretty much what shoppers find on the shelves in their thousands of locations. And don’t even get me started on the uninformed and sure-to-evaporate interest in shamganics.
Do Safeway PLs perform as well as the many brands to which they’ve called frontsies? Yes, if you count only the margin percentages. PLs always win that comparison for reasons with which we’re all familiar. But in the dollars category, Safeway is curiously silent. As many sages have saged, “you can spend dollars but you can’t spend percentages.”
A&P used the same pretentious, egotistical gambit decades ago, resulting in short-term success and eventual disaster. They never recovered.
Quality is of the utmost importance. The marketing will get consumers to buy at least once but, if the quality isn’t there, they won’t be back. Congratulations on a smart strategic move.
All too often, private label is deployed strictly as a necessary “me-too,” component to a supermarket’s business model. Safeway has used private label to help establish a point of difference for itself which is a smart strategy. The next few years will dictate how well the program is maintained and further developed to keep up with changing times.
The most striking thing about this development, in conjunction and harmony with the “Lifestyle” store, is that Safeway looks like it may be the first major U.S. based grocery chain to successfully implement a “consumer ownership” strategy that has long been the hallmark of European chains like Marks & Spencer. That is to say, they are working to own not only the consumer retail shopping experience, but also the brands that complete that experience in the home.
This is not to say that there are no other good U.S. retailers in the grocery business. There are plenty who have successfully branded the retail shopping experience. Think Wal-Mart, Wegmans and Publix for just a few. And Whole Foods set the bar high for a “themed” shopping experience. But they had the advantage of starting with a clean slate and a focused positioning who’s time had arrived for U.S. consumers. Safeway appears to be on the way to a strikingly successful reincarnation–in many ways a much more difficult task.
Safeway deserves its status in private label. They have gone above and beyond in all operational aspects of their house brand program. In a recent visit to a store on the West Coast, I was thoroughly impressed with the merchandising and assortment. What really blew me away was the product knowledge the floor associate had when I asked questions about the O line. She was well versed and knew much about organic certification and content.
Other chains can take a lesson from Safeway in regards to PL. Think margins! Think margins!
I have to hand it to Burd and Safeway; they are doing a great job creating, rolling out and promoting their PL.
But the competition is taking notice. Great A&P will be announcing during their May 5, 2008 quarterly conference call their introduction of new PL items.
This is fantastic news for the consumer. PL is a store’s signature drawing card. Only at a particular store can the consumer enjoy their special PL product.
I can’t leave out Aldi’s without a chuckle after reading all of their innovative PL brands, Happy Farm, Tundra, FitActive, etc. In these inflationary times, high quality PL products are the way to go.
Safeway stock is $28. A year ago it was $37. It’s known for being one of the better-run supermarket companies. A&P stock is down 25% in the past year. RetailWire contributors often trash A&P. Yet both companies’ stock price declined about the same awful proportion. What is wrong with this picture?
I shop exclusively at one of the regional chains that Safeway purchased several years ago. And I remember the major backlash they encountered when they tried to impose their own brands on the consumers who wanted their old stores back.
Over time, with the gradual changes and additions to their private label brands, I think they’ve won back the people who were very critical and willing to jump ship. Even the employees (many of whom have worked there for years) seem happier now than they did in the early days after the purchase.
Kudos to Safeway!
Safeway has done a great job in meeting consumer demands with their “O” and “Eating Right” P/L lines that dovetail the Life Style concept Brian Cornell and his team executed.
A&P has taken notice of Safeway’s success as they have hired several Safeway P/L executives to lead its P/L program in the past two years
Given the recessionary period we are in, I still believe the two tier P/L programs will see a much anticipated increase in both dollar and unit sales in the next 24 months.
Let’s not forget Kroger and the power house P/L program they have in place as well.
The products display eye catching graphics. The labels contain useful consumer information and the products are good quality. In addition, Safeway has prominent placement of private label products throughout the store and in their ads which catches the customer’s attention and increases sales.
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I’ve gotta’ weigh in on this one because Safeway Brands is one of my pet peeves. For years I loved Safeway, not only as their corporation’s ad agency management contact while at Ketchum Communications in San Francisco, but later when I was hired (along with my team) to redesign and condense the labels for their entire PL line. You could say I have a little skin in this game.
A first-rate Safeway is a very short distance from my house in a new community in NorCal. Nice new store, but I usually go the extra couple of blocks to a beautiful Raley’s store (full disclosure, used to be a VP there). Safeway’s Private Label is the reason I put them in my rearview mirror. As I have written in these spaces previously, Safeway has shouldered national brands off of their shelves willy-nilly because, well, because they can. This has severely diluted their variety. The supposedly wonderful sales success of Safeway brands is because that’s pretty much what shoppers find on the shelves in their thousands of locations. And don’t even get me started on the uninformed and sure-to-evaporate interest in shamganics.
Do Safeway PLs perform as well as the many brands to which they’ve called frontsies? Yes, if you count only the margin percentages. PLs always win that comparison for reasons with which we’re all familiar. But in the dollars category, Safeway is curiously silent. As many sages have saged, “you can spend dollars but you can’t spend percentages.”
A&P used the same pretentious, egotistical gambit decades ago, resulting in short-term success and eventual disaster. They never recovered.
Quality is of the utmost importance. The marketing will get consumers to buy at least once but, if the quality isn’t there, they won’t be back. Congratulations on a smart strategic move.
All too often, private label is deployed strictly as a necessary “me-too,” component to a supermarket’s business model. Safeway has used private label to help establish a point of difference for itself which is a smart strategy. The next few years will dictate how well the program is maintained and further developed to keep up with changing times.
The most striking thing about this development, in conjunction and harmony with the “Lifestyle” store, is that Safeway looks like it may be the first major U.S. based grocery chain to successfully implement a “consumer ownership” strategy that has long been the hallmark of European chains like Marks & Spencer. That is to say, they are working to own not only the consumer retail shopping experience, but also the brands that complete that experience in the home.
This is not to say that there are no other good U.S. retailers in the grocery business. There are plenty who have successfully branded the retail shopping experience. Think Wal-Mart, Wegmans and Publix for just a few. And Whole Foods set the bar high for a “themed” shopping experience. But they had the advantage of starting with a clean slate and a focused positioning who’s time had arrived for U.S. consumers. Safeway appears to be on the way to a strikingly successful reincarnation–in many ways a much more difficult task.
Safeway deserves its status in private label. They have gone above and beyond in all operational aspects of their house brand program. In a recent visit to a store on the West Coast, I was thoroughly impressed with the merchandising and assortment. What really blew me away was the product knowledge the floor associate had when I asked questions about the O line. She was well versed and knew much about organic certification and content.
Other chains can take a lesson from Safeway in regards to PL. Think margins! Think margins!
I have to hand it to Burd and Safeway; they are doing a great job creating, rolling out and promoting their PL.
But the competition is taking notice. Great A&P will be announcing during their May 5, 2008 quarterly conference call their introduction of new PL items.
This is fantastic news for the consumer. PL is a store’s signature drawing card. Only at a particular store can the consumer enjoy their special PL product.
I can’t leave out Aldi’s without a chuckle after reading all of their innovative PL brands, Happy Farm, Tundra, FitActive, etc. In these inflationary times, high quality PL products are the way to go.
Safeway stock is $28. A year ago it was $37. It’s known for being one of the better-run supermarket companies. A&P stock is down 25% in the past year. RetailWire contributors often trash A&P. Yet both companies’ stock price declined about the same awful proportion. What is wrong with this picture?
I shop exclusively at one of the regional chains that Safeway purchased several years ago. And I remember the major backlash they encountered when they tried to impose their own brands on the consumers who wanted their old stores back.
Over time, with the gradual changes and additions to their private label brands, I think they’ve won back the people who were very critical and willing to jump ship. Even the employees (many of whom have worked there for years) seem happier now than they did in the early days after the purchase.
Kudos to Safeway!
Safeway has done a great job in meeting consumer demands with their “O” and “Eating Right” P/L lines that dovetail the Life Style concept Brian Cornell and his team executed.
A&P has taken notice of Safeway’s success as they have hired several Safeway P/L executives to lead its P/L program in the past two years
Given the recessionary period we are in, I still believe the two tier P/L programs will see a much anticipated increase in both dollar and unit sales in the next 24 months.
Let’s not forget Kroger and the power house P/L program they have in place as well.
The products display eye catching graphics. The labels contain useful consumer information and the products are good quality. In addition, Safeway has prominent placement of private label products throughout the store and in their ads which catches the customer’s attention and increases sales.