Private Label Buyer

Innovation has slowed in private label HBC, said industry experts at a recent roundtable discussion PL Buyer held in partnership with ECRM, Cleveland. The roundtable took place on the first day of ECRM’s Private Brands HBC Efficient Program Planning Session (EPPS), held May 10-13 in Fort Myers, Fla.

During the EPPS event — which focused on private label categories such as OTC, hair care, skincare and more — ECRM set up strategic meetings between manufacturers from around the world and private label buyers from across North America.

The roundtable discussion — themed “Taking Private Label to the Next Level: Where Do We Go from Here?” — included the following participants:

• Lou Helfrich, vice president of purchasing, Chain Drug Consortium LLC

• Deborah Laskin-Rich, category manager, Hudson’s Bay Co.

• Laureen Schroeder, director, health and beauty, Daymon Worldwide

Starting off the session, Laskin-Rich said although creating products with innovative functions (anti-aging, organic, etc.) is key for big chains such as Walgreens and CVS in the United States and Shoppers Drug Mart in Canada, it’s much more difficult for smaller regional retailers to do, since there is no promised ROI.

“So I think you’re going to have a clear division between the big players and the small players,” she said.

Helfrich said it doesn’t matter how innovative a product is; if the item is not backed by marketing efforts, all is lost.

“You can put the product on the shelf; you could put it with the right packaging, but if the customer doesn’t know about it” or see the value of the product, he or she won’t buy it, he said.

Marketing national-brand-equivalent (NBE) products is easier, however — the product simply can be placed next to its national brand counterpart, Helfrich said. But drug stores don’t always have the marketing dollars that department stores such as Macy’s possess to market their items.

“If you get into HBC, if it’s not in front of the customer day in and day out, they’re going to forget about it,” Helfrich warned, adding that the national brands will always be spending money to try to keep their products in the limelight.

Schroeder added that she sees three macrotrends affecting all HBC categories: health and wellness, anti-aging and “recessionista” (referring to the changing consumer behavior and the new value mindset developed in response to the recession).

In terms of health and wellness, natural and organic products have taken a bit of a dip in the recession because people weren’t willing to pay more for those types of products, Schroeder said. However, particularly in beauty, the market is seeing an introduction of what Schroeder calls “fitter products,” with chemicals such as formaldehyde and paraffin being removed from products. Removing the chemicals doesn’t increase the price point, and it makes the product seem “better for you” and more appealing to consumers.

“The consumer says, ‘Oh, I get it — it has less negative chemicals,’” Schroeder said. “‘I’m going to buy that — it must be better for me. And it’s at the same price!’”

Recently, Schroeder explained, L’Oreal released a line of products with “free from” claims (no paraffins, no sulfites, etc). The products were advertised on television with the help of a celebrity teaching about the “free from” benefits. Schroeder said retailers can use this educating to their advantage — let the national brands spend money educating the consumer, then come out with similar “free from” products on your own.

As for product trends not worth pursuing, pretty much anything focusing on the upscale market in HBC should be considered a no-no, since many consumers still are careful with their spending. Helfrich explained that retailers, for the most part, are sticking with their core brands. Four or five years ago, many retailers were buying discarded brands. That’s not the case these days — now retailers are reinvesting back into their current brands.

Laskin-Rich agreed, stating that not many retailers are investing in innovation — national brand equivalence is the goal these days. She noted how Shoppers Drug Mart launched 500 SKUs under its Belea brand that are “clearly meant to go head-to-head against the equivalent national brands.”

Still, whatever retailer is building its brands has to make sure it is ready for a long-term commitment, Schroeder noted.

“They have to support it in marketing to make it distinctive to consumers,” She said. “And one advantage they have that national brands don’t have is what I call ‘national brand merchandising.’”

For example, Schroeder explained, when Burt’s Bees entered the market, it placed permanent displays that “crossed categories.” A consumer could go to a display seeking a body wash, and also find a lip balm he or she likes but didn’t know about. Since a retailer’s private brand can span a number of HBC categories, they have the ability to cross-merchandise different categories in the same display. National brands specializing in only one or two categories don’t have this advantage.

Schroeder also advised that as retailers consider what products to release, they need to look at macrotrends.

“Does this fit in with the things that are going on in health and wellness?” she asked. “Does this fit in with anti-aging? Does this fit in with ‘recessionista’ or good value, time equals money, all those things that fall under macrotrends?’”

If a retailer asks those questions, then it won’t run the risk of following a fad instead of a trend, Schroeder noted.

Two other places retailers can look for product development inspiration are Europe and Canada. Schroeder said retailers can learn a lot from the additional 20 years of experience both regions have with their private label program development.

“And a lot of consumer behaviors are similar — particularly in Canada,” she said.

Laskin-Rich agreed, noting that with their private label programs, Canadian retailers are active in certain categories U.S. retailers haven’t touched. In shampoo, for example, the only NBE products you’ll usually find on U.S. shelves are equivalent to Head & Shoulders and Pantene. In addition to Head & Shoulder and Pantene equivalents, some Canadian retailers offer shampoos equivalent to Fructis and TRESemmé.

However, Helfrich noted that the U.S. consumer might not be as likely to try such products as the Canadian consumer.

“There is a resistance from the U.S. consumer,” he said.

Helfrich noted that his company brought out NBE products equivalent to Fructis, but had little success with them.

“The consumer seemed to say, ‘If I’m going to buy Fructis, I’m going to buy Fructis,’” he said.

Still, if a retailer wants to create such a product, they should remember that for women, shampoo is a low-risk category (as opposed to categories such as anti-aging skincare), Schroeder said.

“If I buy a bottle of $4 shampoo and conditioner for color-treated hair, I’m more likely going to try a private brand,” she explained. “That’s just starting to pick up.”

Helfrich disagreed, noting that he hasn’t been seeing that trend occurring.

Skincare is a well-accepted category in private label, but not hair care, Helfrich said. For example, he noted, Procter & Gamble changes formulation or packaging for Pantene every two years to stay ahead of the private brands.

Helfrich also said he has seen some retailers have much success with AXE equivalents.

“It shocked the heck out of me,” he explained, because in the deodorant/body spray category, AXE is an extremely trendy brand.

Otherwise, Helfrich said, the deodorant category is a tough place for retailers to grab share with store brands. The only consumer groups that seem to like private label deodorant products are ethnic markets. Schroeder added that body washes also are popular in ethnic markets—more so than bar soap.

In terms of equivalents, packaging also should be as good as the national brands’. For example, Schroeder said, in the OTC category, having larger print on a label is beneficial to older consumers.

And less packaging benefits everyone, Laskin-Rich added. It gives retailers more shelf space and a sustainable message, suppliers save money by using less material, and consumers benefit by having less to throw away/recycle and gaining peace of mind. Still, retailers shouldn’t deviate from national brands by providing different packaging. Since 90 percent of private label is NBE, Laskin-Rich said, retailers could lose marketing advantage by not matching national brand packaging innovation, such as toothbrushes in blister packs.

But if they want to differentiate an NBE or NBE-better product, Schroeder said retailers should look at stores worldwide. Daymon does. For example, in sun care, Daymon found a “much more industrial” bottle for a sun care lotion retailed under a brand in Australia.

“It could be done so easily in this marketplace if you wanted to have a sun care product that stood out,” Schroeder said, noting that packaging innovation is key for future success in private label. Product could be NBE or NBE-better, but packaging could stand out. Packaging innovation is key for potential future success in private label.

Another example Schroeder gave is shaving cream packaging. Since shaving creams already retail at low price points, retailers wary of competing on a product quality level could consider using unique packaging.

“Maybe you produce a shaving cream that’s in a plastic container that’s more recyclable,” Schroeder said. “In a tube, maybe.”

Still, the shaving market is a difficult market to compete in due to the national brands already offering products at low price points.

Speaking of low price points, Schroeder said Daymon found a recent uptick in bar soap sales, which is unusual, considering the growing popularity of body washes. She attributed this uptick to the “recessionista” trend.

Going back to discuss body washes, Laskin-Rich mentioned that her company’s No. 1-selling body wash is an Herbal Essences equivalent, which is interesting because when P&G bought Clairol (owner of the Herbal Essences brand) in 2001, Herbal Essences body wash was taken off the market. This led to a question asked by Schroeder: If a national brand product is taken off the market, should a retailer automatically remove its equivalent private brand product from shelves? Sometimes, she said, it’s beneficial for the retailer to keep the NBE product on the market.

To conclude the discussion, Laskin-Rich mentioned that North American private label manufacturers will need to increase efficiency and innovation if they wish to remain relevant to North American retailers in the future.

“I think China is going to change the look of the North American supplier of private brands,” she said, noting that China is quick to offer innovation when retailers demand it.

Laskin-Rich noted that a Chinese supplier could provide a product six to eight months ahead of the typical North American vendor. If North American manufacturers want to keep their retailer partners, they’ll want to look to China to see how they could improve operations.

For more information about ECRM and the EPPS events, visit http://ecrm.marketgate.com. — R. Hofbauer

This June, Bloom, a banner of Salisbury, N.C.-based Food Lion LLC, advertised its new Sheffield & Sons line of USDA Choice Angus beef on roadsides with one of the nation’s first scented billboards, created in partnership with Birdsong Gregory, a Charlotte, N.C.-based advertising agency. However, although the billboard aroused the appetites of some commuters, it left other people sick to their stomach.

The state-of-the-art billboard, which featured photography of a “larger than life” fork with an “appetizing slice of beef,” wafted the scent of grilled steak to commuters traveling along River Highway in Mooresville, N.C. from 7 a.m. until 10 a.m. and 4 p.m. until 7 p.m. every day through June 18, the retailer said. The specially formulated scent was emitted into the air using scent marketing technology from Charlotte-based ScentAir Technologies.

People for Ethical Treatment of Animals (PETA), however, plans to erect a billboard of its own in response to the ad, reported a June 11 article in the Mooresville Tribune. The PETA billboard, set to read “Meat Stinks: Go Vegan. PETA,” will feature a skinned cow’s head on a slaughter hook and emanate smells of rotting flesh, urine, feces and blood. The article went on to report that PETA is negotiating with billboard companies and hopes to secure a location near the spot where Bloom’s billboard stood.

Christy Phillips-Brown, spokeswoman for Delhaize America, the Belgian company that owns Food Lion, gave PL Buyer a response to PETA’s decision.

“Bloom launched its billboard to promote a new brand in our stores,” she said. “We respect the dietary needs of all of our guests, and strongly believe in providing customers a variety of meal selections, including fresh fruits and vegetables, quality meat products as well as natural and organic items throughout our stores.” — R. Hofbauer

Elk Grove Village, Ill.-based Little Lady Foods — a manufacturer of highly customized frozen foods such as premium pizzas, gourmet sandwiches and portable handheld items for private label celebrated 25 years of business at the National Restaurant Association’s NRA Show 2010, which took place May 22-25 in Chicago.

Little Lady Foods was founded 50 years ago in the Chicago neighborhood of Wrigleyville. In 1984, restaurateur Angelo Geocaris bought the small company and took his locally famous Barnaby’s pizza into grocery stores nationwide, bringing the company to prominence.

Peter Cokinos, senior vice president of sales and marketing at Little Lady Foods, discussed how excited he was to watch the company grow since joining it in 1992. At that time, Little Lady Foods was a retail-branded company with close to $7 million in annual revenue.

“I think one of the crowning achievements for us is when we exceeded $100 million in sales over the last 25 years,” Cokinos told PL Buyer. “And we’ve continued to grow the company and exceeded $200 million in sales.”

Cokinos explained that Little Lady Foods’ strives to serve its customers by supporting their brands — both national brands and retailers’ brands.

“Private label has really become a robust platform for retailers,” he notes, adding that many younger consumers are finding strong appeal in store brands.

Store brands certainly play a role in the company’s 25-year growth plan.

“What we’re looking for [during] the next 25 years of our company is to continue to add capabilities,” Cokinos said. “Today, we run three manufacturing facilities. [We plan to] continue to add capabilities and support our private label customers with new capabilities, abilities to market their brands, research and development areas where we can help bring new capabilities to them with culinary ideas, and … bringing new ideas to the categories via the private label channel, as opposed to ideas that already have been out there.”

As for now, Cokinos said the folks at Little Lady Foods just want to sit back, relax and celebrate the company’s 25 years of success. In honor of the occasion, the company is increasing its involvement with the Greater Chicago Food Depository. It also expects to hold several employee outings during the summer.

And later this year, Little Lady Foods is planning a special celebration at the 2010 PLMA show, which will be held Nov. 14-16 in Rosemont, Ill. The celebration will be a show of appreciation to the company’s private label partners. — R. Hofbauer

Kronos Foods Inc., a Glendale Heights, Ill., maker of Mediterranean specialty foods under its own brand and for private label, earlier this year was “looking to find a way to give something back to the community,” said Michael Austin, Kronos’ CEO.

When Kronos became aware of the Fisher House Foundation, thanks to President Obama giving part of his Nobel Prize money to the organization, the company felt it had found the right way to accomplish its goal of giving back, Austin said.

Fisher House, established in 1990, maintains 45 houses at Veterans Administration and Department of Defense medical facilities around the country. The homes provide temporary shelter for families visiting wounded veterans being treated at those medical facilities.

Kronos announced in June that it would partner with Fisher House, providing meals once a month to families at a Fisher House in the Chicago area, as well as doing national promotions that will benefit Fisher. Volunteer Kronos employees will be working with the company’s head chef to prepare meals at the Chicago-area house at the Edward J. Hines Jr. Veterans Hospital just west of Chicago.

“It truly does mean a lot to the families that companies like Kronos are taking us under their wing,” said Holly Wright, manager of the Chicago-area Fisher House. “Our families are tired, sitting by bedsides all day. To be able to come back to a freshly prepared, hot meal is going to mean a lot to them.”

Plans are underway to create a Veterans’ Day Kronos promotion as part of its new Fisher partnership, Austin says. In the meantime, those with military IDs, which include military family members, will be able to secure 25 percent discounts when dining at four restaurants that Kronos operates along Illinois tollways.

The partnership kicked off with a Kronos luncheon June 15 at the Chicago-area Fisher House, during which the company also donated outdoor furniture to the facility. — J. N. Frank