Corner Office Perspective

May 20, 2010
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A Discussion with Keith Winters, Supervalu’s Sourcing Manager of Own Brands

With more than $37 billion in sales last year through its regional and national banners, Minneapolis-based Supervalu continues to press for growth and makes its own brands program a big part of the strategy.

In a recent conference call, Craig Herkert, Supervalu’s president and CEO, said continued SKU rationalization and implementation of “new guardrails” in relation to private brand pricing are a big part of the retailer’s approach moving forward.

Recently, PL Buyer had the opportunity to talk with Keith Winters, sourcing manager for Supervalu’s own brands, about the current state of the industry.

PL Buyer: The recession and improving store brand product quality have left a very positive mark on the industry recently. Where do you see the industry heading in the next year?

Keith Winters: I think the duration of the economic downturn and slow recovery bodes well for own brands sales short-term. The confidence built with consumers on own brand products over an extended period of time should help as we transition into a somewhat better economy.

PL Buyer: And in five years?

Winters: We will see continued growth in own brands’ share. Helping fuel the growth will be expansion of brand and SKU rationalization across more categories. … I think high quality levels (at or above national brand target) and better consistency in the quality levels will be required in order to build on the gains made over the past 18 months.

There will be many formulation changes to make products healthier with lower calories/less salt. Our First Lady is making childhood obesity a platform and is sure to get plenty of attention/emphasis in the coming years.

PL Buyer: In your view, how has private label’s role in the traditional grocery store changed in the past year?

Winters: Having watched the Oscars recently, an analogy comes to mind of own brands moving from “supporting role” to “leading role.” With the increased importance of own brands with most consumers, it is key that own brands [are] central to all decisions pertaining to each category. In assuming a “leading role,” extending value to the consumer 52 weeks a year is essential. This means consistently high national-brand-equivalent quality levels at competitive costs and appropriate retails on own brand products.

PL Buyer: What do you think is the appropriate mix of national brands and store brands?

Winters: If you look overseas, particularly in Europe, it is not unreasonable to see proprietary brand penetration in the 35 to 50 percent range. In today’s economy, I think an own brand penetration of 25 to 30 percent should be a minimum target.

PL Buyer: How has private label made an impact at Supervalu, in particular?

Winters: Supervalu continues to build the own brands program. We have had several successful launches in the past year in the ice cream, soda and pet care categories. Our own brands penetration rate is at a record high and is a central element of our go-to-market strategy.

PL Buyer: And where do you see your program going in the coming year?

Winters: Own brand sales growth in the coming year at Supervalu will continue to be a major area of emphasis. As we continue to look for ways to improve the consumer shopping experience, we will eliminate the redundant items and superfluous national brands on the shelf. That will further highlight the value proposition of our proprietary brands and items. Our own brand items will have better positioning, as well as more space on the shelf. Additionally, we will continue to generate cost savings as we grow volumes and eliminate competing value offerings on shelf.

PL Buyer: What changes are you noting in retailer/supplier relationships, and why?

Winters: I see many more traditionally branded suppliers now interested in - and in many cases, pursuing - own brand business. This may be due to having lost branded business in accounts as assortments are rationalized, creating lost revenue and excess capacity. In other cases, it may be recognition that own brands will continue to build sales and share and will help forge a stronger partnership with retailers. Whatever the motivation, the number of own brand vendor options has increased in many categories.

PL Buyer: What do you see as the biggest challenge for the private label industry right now?

Winters: I believe the biggest challenge will be to keep costs and retails competitive. Consumers want and expect own brand products to offer them the quality of the brand while delivering value. It is very apparent that many branded suppliers stung by sales inroads made by own brands have reacted by undercutting own brands with significant branded promotional funding for extended periods of time. Own brand suppliers need to recognize and respond to these situations - comparing branded list costs to their list costs will not reflect a complete picture on their level of competitiveness. If there is failure to keep own brands [as] the value offering, the recent own brand sales gains will be history. PLB

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