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PL packaged meats can appeal to consumers with quality, healthy messaging
Private label comprised slightly more than 17 percent of lunchmeat sales for the year ending June 12, 2011, primarily sliced rather than non-sliced, according to research firm SymphonyIRI Group, Chicago.
Store brands also have made significant inroads in other packaged meats categories, such as uncooked meats (45.9 percent of sales, and up 31.7 percent from a year prior), frozen meat (not including poultry, 28.1 percent), frozen and refrigerated chicken and chicken substitute (38.3 percent), according to SymphonyIRI.
Private label lunchmeat enjoyed more than $500 million in sales in 2010, growing 6.8 percent from 2009 to 2010, second in market share only to Kraft Foods. Store brands have an opportunity to continue such growth if they can tap into consumers’ twin desires to save money and eat healthy, according to a recent report from Mintel International Ltd., Chicago.
“Despite the economic situation, consumers have not been making purchase decisions solely on price,” the report says.
“As long as the economy continues to be challenged, I believe people are going to be trying and evaluating private labels and certainly, in some cases, are finding the private label to be equal to or better than some of the brands out there,” says Tom Buddig, executive vice president of marketing at Carl Buddig, South Holland, Ill., which makes private label versions of all its packaged meat offerings.
“The reason that private label is growing is because consumers are looking for a value,” adds Janet Sweeney, marketing director at Specialty Foods Group, Inc., Hampton, Va., which sells Nathan’s hot dogs and other brands in addition to manufacturing for private label. “The No. 1 factor is product quality and taste. You have to deliver on the consumer’s expectations.”
Store brands have a stronger emphasis on quality, Mintel says, citing the Primo Taglio line of lunchmeat and cheese platters at Safeway, which are sold at the deli counter. And some retailers have taken packaged lunchmeats more upscale, as well, such as the Hannaford Thin Deli Sliced Oven Roasted Turkey Breast.
“One advantage that private label has is that, even for a premium product, its price is generally lower than those of national brands,” Mintel’s report says. “Therefore, if its quality is the same as that of branded products, consumers may not see a reason to move away from purchasing private label.”
Stores that stick with the same private label manufacturer rather than continuously shopping around for a supply bargain will win on quality, says Brian O’Connor, director of specialty meats, Abbyland Foods, Inc., Abbotsford, Wis., primarily a contract manufacturer and private label maker.
“Once they established that branded product and the quality of that branded product and the taste of that branded product, customers come back,” he says. Retailers need to become comfortable declaring: “Our brat is not the Johnsonville brat, but guess what? It’s our brat. And our customers like our brat.”
Better-for-you products will continue to have opportunities to make inroads, particularly with female consumers, Mintel finds. Between 21 percent and 29 percent of Mintel survey respondents say they seek out these types of products, and lunchmeat manufacturers have responded with improved nutritional profiles.
Price has receded as the only key factor for private label during the past five years, says Mark Russell, director of business management for West Liberty Foods, West Liberty, Iowa, which makes peel and reseal containers of ham for Costco’s Kirkland brand, among other private label products.
“We’re definitely seeing growth in the category,” he says. “Private labels are becoming the innovators instead of the followers. They’re staying ahead of the curve, so to speak. That’s a big change from where private label has been in the past-it’s not just an alternative to the national brands but has its own identity.”
Among other things, this has meant interest in new, more unusual flavor profiles, Russell says. “Everyone is trying to differentiate a little bit,” he says. “One of the things we are seeing and fully support is being in front rather than waiting for the brands to roll out a new flavor.”
Buddig also sees “some excitement around new flavors,” such as mesquite, honey, brown sugar or even chipotle in poultry or ham. He believes meat prices will continue to stay high for the short- to medium-term, thanks to demand from countries like China, which means consumers will be more likely to seek out lower-cost alternatives.
Although organics and natural products, such as Safeway’s Eat Smart brand, will experience growth over time, Buddig doesn’t necessarily think that time is now. “That’s slowed up a bit and will continue to be slow in this economy because people don’t want to pay more,” he says. But he adds, “It isn’t just about price-it’s about quality for the price. That’s how people define value.”
Godshalls Quality Meats, Telford, Pa., has convinced consumers of the value and health proposition of its private label turkey bacon, which recently has added a maple flavor choice, says Jeff Fisher, vice president of sales and marketing. The company rolled out a chicken bacon product Sept. 15 and is also working on a Canadian turkey bacon concoction.
Buddig would like to see more marketing around private label lunchmeats but hears more about that marketing than he actually sees in the store or elsewhere. “Certainly they’ve gained a lot of press about retailers thinking more like marketers when it comes to their own brands,” he says. But “I don’t know that I’ve actually seen much of that-the use of floor-talk, shelf-talk, in some cases the use of coupons.”
Doing so will help the category continue to grow, Buddig says.
“They’ve learned to promote their own product, and they stand behind it,” O’Connor adds. “A lot of people are moving toward private label.”
The only challenge Sweeney sees in the category is the perennial issue of commodity prices, which has been more of a challenge in recent years. “We’re all going to face those,” she says. “Commodity increases will have to be passed on to consumers. There’s no way around it.”
Godshalls paid somewhere around 98 cents per pound for turkey sausage meat 15 months ago, Fisher says; now, it’s about $1.36. “When that’s the primary ingredient for the product, it’s tough to get efficiencies to that degree. You can’t just swallow them,” she says. “We try to be discriminating when we [pass along costs] and validate it to our customers.”
But Russell says the biggest challenge in private label is often figuring out what’s coming next. “Is it new packaging? Is it all natural? Is it this new low-sodium push-is that here to stay?” he says. “What people say and what people are doing, in figuring out where private label needs to be positioned, is probably the biggest challenge.”
But opportunities abound for private label, Russell says. “It truly is becoming a brand,” he says. “It’s not really the generic that it used to be. Private labels are legitimate and can be very powerful brands that drive consumer interest and can drive consumers into the store.”
Brands expand flavors, healthy choices
Kraft Foods, by far the largest lunchmeat seller at more than $1.1 billion annually, introduced in 2009 four new varieties of sliced, packaged meats designed to expand the company’s flavor profile: Black Forest Ham, Cracked Black Peppered Turkey Breast, French Dip Flavored Roast Beef and Cajun Seasoned Chicken Breast. And Kraft’s Lunchables line expanded last year to include two new health-conscious varieties: Chicken Strips with 100 percent white meat chicken, and the Chicken + American Sub Sandwich with rotisserie seasoned chicken and whole grain bread.
Sara Lee’s Hillshire Farm lunchmeat brand has introduced two new healthier choices just this February: Hillshire Farm lunchmeat: Deli Select Ultra Thin Lower Sodium Honey Turkey and Deli Select Ultra Thin Lower Sodium Smoked Ham. Already previously available in Oven Roasted Turkey Breast and Honey Ham, the Deli Select Ultra thin line contains 25 percent less sodium than USDA standards for turkey and ham, Sara Lee says.
Boar’s Head recently introduced the Black Forest Brand 25 percent Lower Sodium Smoked Ham to go along with already existing low-salt ham, oven-roasted chicken breast and Swiss cheese offerings.
As for dinner meat brands, Johnsonville in March rolled out a three-pack of new chicken sausage flavors: three-cheese Italian style, which blends mozzarella, Romano and Parmesan; Chipotle Monterey Jack cheese; and apple chicken sausage. The company also debuted in January a Facebook page for its snack-sized Deli Bites.