Cream of the Crop

June 15, 2009
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Meet PL Buyer's 2009 Retail Executives of the Year.
 




The economy is in turmoil, but private label is riding high. And thanks to the industry’s leaders - the retail executives who bring innovation and class to private label as a whole - store brands are poised for further growth, post-recession.

Nominated by the private label supplier community, the honorees share a commitment to building effective and memorable private label programs. It should come as no surprise that this year’s honorees come primarily from the supermarket channel, a segment in which private label really is making its mark. Please join us in congratulating this year’s winners (listed alphabetically by last name):

• Mark Amrhein, buyer at St. Louis-based Save-A-Lot (a wholly owned subsidiary of Supervalu Inc., Minneapolis).

• Joe Grady, vice president, personal care for Bentonville, Ark.-based Wal-Mart Stores Inc.

• Brian Heppell, general manager, Corporate Brands with the Overwaitea Food Group of Langley, British Columbia.

• Molly K. McAdams, Ph.D., vice president, Own Brand for H-E-B of San Antonio.*

• Joe McKie, vice president of Corporate Brands for Winn-Dixie Stores Inc., Jacksonville, Fla.

• Doug Palmer, vice president of Own Brands for the Great Atlantic & Pacific Tea Co. Inc. (A&P), Montvale, N.J.

• Linda Severin, vice president of Corporate Brands for Cincinnati-based Kroger Co.

• Regina Tator, director of Corporate Brands for Schenectady, N.Y.-based Price Chopper Supermarkets.

• Keith Winters, sourcing manager for Minneapolis-based Supervalu Inc.

• Dave Yandow, private brand manager for Salisbury, N.C.-based Food Lion LLC (a subsidiary of Brussels-based Delhaize Group).

PL Buyer invited the 2009 award winners to weigh in with their thoughts about the current state of the private label industry. The Q&A that follows provides some key insights into current triumphs and challenges, as well as future growth opportunities.
 
 

PL Buyer: Private label has been riding a growth wave over the last year, thanks to the recession and improvements in store brand product quality. Where do you see the industry heading over the next year or two?

Mark Amrhein: I continue to see the growth in private labels over the next couple of years. I believe that as consumers trust private labels more, they will find that they don’t have to sacrifice quality for cost. It is our job to deliver and guarantee the highest standards in order to keep consumers coming back and trying new items. At Save-A-Lot, we are consumer-centric and we focus on what the customer wants.

 

Brian Heppell: Consumers always are looking for value and quality, so that’s a focus that hasn’t ever changed for us. Certainly today’s economics present an even greater opportunity for corporate brands, as more consumers give them a try.

Fundamentally, we see this area as a great way to demonstrate value to customers and build loyalty at the same time. We focus our development plans on customer needs and continuous improvement, so we are better able to answer the value equation for the consumer. Long-term, consumers will support products that consistently meet their expectations.

 

Joe McKie: As private label programs have matured over the years, we have seen a shift from the simple value proposition vs. a national brand target to building standalone retailer brand equity. Over the next few years, I would expect that U.S. retailers utilizing a three-tiered “good, better, best” strategy will achieve European-level penetration as they develop their “own” products of distinction.

And by products of distinction, I am not referring to premium or upscale items, but rather relevant products that address the specific neighborhood or lifestyle of our customers. Meeting our customers’ needs today in every neighborhood, and anticipating what they will want in the future, is how we develop loyal customers who purchase our products, come back to buy them and tell their friends about them.

 

Doug Palmer: The increase in acceptance by consumers for private brands creates an excellent opportunity for retailers to “invest” in their programs and extend the recent growth trend. We will see an increase in the number of retailers who revitalize their programs by committing additional resources to branding, quality improvements and package innovation. Those who invest “now” will continue to experience growth three to five years from now.

 

Linda Severin: I expect that store brands will continue to offer an attractive value to all customers, even after our economy rebounds.

 

Regina Tator: My hope is that folks who have tried corporate brands for the first time due to economic restraints will decide not to go back to paying more for brands once the economy improves.

 

Keith Winters: Private label products are an increasingly important ingredient in a retailer’s strategy to differentiate itself from competitors, drive loyalty among shoppers and improve margin. The combination of growing consumer acceptance and increased focus and improved variety and quality from retailers has created a real growth industry that I think will only continue, regardless of the economic backdrop.

I see the industry having more innovative private label products in the next year or two and, in addition, products with healthier nutritional profiles and in more sustainable packaging.

 

Dave Yandow: While I believe the economic situation has given private brand[s] some quick traction, a significant portion of the growth we are seeing was inevitable. For the last several years, Food Lion LLC has focused its efforts on enhancing the program and making strategic investments to grow our private brand sales. This is a fairly consistent approach throughout the industry, and we are seeing the results of this effort.

 

PL Buyer: We hear a lot about the importance of retailer/manufacturer partnerships in the equation for private label success. What changes are you noting in retailer/supplier relationships, and why?

 

Amrhein: A strong relationship with our manufacturers is vital to our business success. This is true more so for Save-A-Lot than most other retailers, given our business model. Private labels are the foundation of our business and make up about 75 percent of our store format. Regular communication with our vendors is what helps us consistently deliver great food at great prices.

 

Heppell: Retailers and suppliers ultimately want the same thing, a healthy business. Collaboration and understanding of each other’s capabilities are the keys to developing the framework for a successful long-term partnership.

 

McKie: Suppliers have always worked to provide retailers with insight and recommendations on new products and promotional strategies, as well as category and competitive product knowledge. Today, we are seeing suppliers expand their influence with discussions around sustainability, food safety and quality. Developing great products, with consistently high quality, in packaging that reduces waste and improves logistics are important components today, along with the cost of goods.

 

Palmer: Discussions between retailers and suppliers are starting to move beyond “cost” due to the desire of retailers to create proprietary points of difference in product innovation. This requires more conversation about capabilities and mutual goals. Behind every new innovative product, there is a healthy two-way dialogue between supplier and retailer.

 

Severin: We are looking for manufacturing partners who can bring customer insights and new ideas to the table, along with consistently delivering the quality we’ve requested at the lowest possible cost.

 

Tator: We have always valued our relationships with trade partners, and I feel that business is best served when there is a strong win-win partnership. Buyouts, larger territories and leaner staffing make it challenging to have the face-to-face meetings, but it is not impossible to cultivate good relationships.

 

Winters: I believe there has been improvement in establishing stronger partnerships between retailers and manufacturers. As competition has increased for both retailers and suppliers, the realization is clear that there is a need for strong business partners in order to move from survival mode to growth.

I think both are committed to identifying cost-reduction areas and working together closer to achieve benefits for both the retailer and manufacturer. I also think there is more attention given to development of longer-term strategies, particularly in the area of innovation.

 

Yandow: Strong, strategic vendor/partner relationships are critical to the private brand program at Food Lion LLC. We have made great strides developing excellent partnerships over the past couple of years. I believe long-term relationships and commitments foster innovation, enhanced quality, accountability and better products for our customers.

 

PL Buyer: What private label sectors are you most excited about right now, and why? Which sectors aren’t getting the attention they deserve?

 

Amrhein: I am excited about “healthy” private label items. Great strides have been made to bring healthy, great-tasting food to Save-A-Lot store shelves and, ultimately, home to our shoppers’ dinner tables. With greater economic pressures, families are spending more time together eating at home and need healthy options. I also believe that [the] cereal and frozen food sectors have a great opportunity to play a key role in the private label category.

 

Heppell: Developing corporate brands on the fresh side of the business is a very exciting area of development. The opportunity for developing innovative signature products that reflect our value and quality commitment benefits our brand and gives our customers one less decision to make. It’s all about making it easer for our customers when they shop in our stores.

 

Palmer: The most important trend in recent years is the addition to store brand programs of sophisticated, well-thought-out proprietary brands. Managing “brands” vs. “private labels” is changing the way we think about store brands and how they compete on the shelf. This continues to be the most dramatic change in our industry and, at the same time, the greatest opportunity.

 

Severin: We let our customers tell us which sectors they are most excited about.

 

Tator: Our upscale Central Market Classic line continues to be a pet of mine. Even in tough times, people like a little indulgence, and that line offers an affordable option. Natural and organics seem to be in a holding pattern right now, and although we continue to develop the offering, it is not the buzz that it once was. It will be interesting to see if the focus goes back on that segment when finances improve.

 

Winters: I am especially excited about coffee. With the move away from coffee shop consumption, a golden opportunity exists for private label. Our brands are performing very well and offer outstanding quality and value. I see continued consumer acceptance and growth for this sector.

I am also excited about the resurgence of private label canned fruit and vegetables. The private label sales increases in the past year have been outstanding, and with some additional brand rationalization in this category, there is a very significant upside to private label sales and profits.

The baking aisle has not had a lot of attention for some time, but the aisle has been showing some signs of growth over the past year. I think broadening the private label product offerings in the aisle and employing single private label brand or two-brand strategies will yield very positive private label results in both sales dollars and profits.

 

Yandow: At Food Lion LLC, our core grocery and non-foods staple items drive tremendous volume for our company. When looking at future growth potential, we are focusing on some key categories which currently have lower private brand share compared to our market or other best-in-class markets. As we continue to leverage private brand, we believe we continue to have significant growth opportunities in certain categories. In addition, we are focusing on areas such as home meal solutions with our On the Go Bistro line of products.

 

PL Buyer: In your view, what components are most critical to private label program success?

 

Amrhein: At Save-A-Lot, we make it our job to listen and anticipate our customers’ needs. Consumer data is critical to private label success. We also take all of our products through a rigorous QA and cutting process to ensure they meet or exceed national brand quality. We also take pride in the branding and look of our products. We have worked hard taking generic brand products to the next level of exclusive private labels.

 

Heppell: The most critical component for success in this area is the overall development platform. For example, if you fashion your overall development strategies around the best quality, cost and service of goods and then leverage the data to develop the tactical components of product, placement, price and promotion, your chances of success are greatly increased.

 

McKie: There are four important components for success that I would share. The first is to never compromise your quality standards. Develop the products your customers need and want to buy. Market like a brand. And finally, it’s all about the people. You must build advocates for the brand and create a private label culture within your organization. And we have been successful in doing that.

 

Palmer: First of all, a private label program needs senior management commitment that considers private label as a key component in the overall competitive strategy for the organization. Second, you must have store associates involved in the process. They are your best salespersons once they get engaged. And third, there has to be a willingness by the organization to “lead” instead of “follow.” Innovation will succeed only if retailers are willing to take a risk now and then. Fortunately, I have all three at A&P.

 

Severin: Putting our customers first, listening to their needs and better meeting their expectations.

 

Tator: Quality is key, followed by gaining consumer confidence in your brands.

 

Winters: For starters, we are single-mindedly focused on delivering one thing to the consumer: value. We must provide a national brand-quality product at a noticeably better price. To do that, we need to look at three areas:

1) Quality. Supervalu is at the forefront of reinforcing private label program quality. Working closely with manufacturers, every Supervalu Own Brands product goes through rigorous quality assurance testing before being placed on store shelves. In our company’s new Innovation Center in Eden Prairie, Minn., test kitchens mimic the typical consumer kitchen, complete with mixers, ovens, toasters and other home appliances. The environment allows the products to be tested in real-world settings, not industrial kitchens. This adds another level of quality assurance and supports the company’s investment in its private label products.

2) Options. A three-tiered approach that gives consumers the opportunity to select Own Brands products at the value, national-brand-equivalent and premium levels. By developing strategically important, consumer-relevant brands, Own Brands is positioned to deliver higher margins, market differentiation and customer loyalty.

3) Marketing. To be successful, it takes more than just having a high-quality product in attractive packaging. Consumers need to become aware of the product and its attributes, as well as recognize the value being offered.

 

Yandow: Quality control is critical to our program’s success. Internal alignment with category management and marketing is also an important component to a successful program.

 

PL Buyer: What challenges lie ahead for private label programs, and how could/should retailers respond?

Amrhein: The challenge right now is the competition. Save-A-Lot has been a leader in the private label business for over 30 years and remains committed to our private labels. Today, however, other retailers are now seeing the value behind private labels, and the competitive landscape is growing. As the changing economy is pressuring business to become leaner, private label professionals must continue to find ways to maintain quality and price.

 

Palmer: The challenge for most private label programs will be to sustain their recent gains in sales. The economy has “jump-started” private label gains, but [retailers] will not be able to maintain this growth without keeping consumers focused on their brands. A “platform” of innovation, new items and marketing should be created now to facilitate future growth.

 

Severin: I believe one of our biggest challenges is helping customers understand how store brands have evolved and improved. The best way to do this is to inspire trial and let the brands speak for themselves.

 

Tator: Brands are bound to spend against their declining shares. It’s important that a balance between national brands and corporate brands is maintained.

 

Winters: I believe we will see ongoing formulation changes from branded vendors to try to more effectively compete with private label items and gain back market share. I believe retailers should respond by providing a consistently high quality level on their private label products and being cautious in their formulation changes. We have seen a real shift upward in consumer satisfaction and confidence in private label products; the trend will be reversed very quickly if consumers detect reductions in quality.

 

Yandow: Retailers need to continue to remain focused on their private brand strategies while monitoring the changing competitive landscape.
 

PL Buyer: What factors make your job most rewarding? What would you change if you could?

 

Amrhein: The most rewarding part of my job is knowing that the products that Save-A-Lot delivers are high-quality and that we provide that product everyday at an exceptional savings for the consumer. Seeing the growth of current items and the development of many new private label items also makes my job worthwhile. It is rewarding to work for a company that fully recognizes the importance of private label. From the senior staff to all the great associates, we are focused and driven to provide the consumer with the best product at a great value. At the end of the day, I take pride in delivering great food [and] great prices by great people to communities where it is needed most.

 

Heppell: Collaborating with all our different stakeholders to put great products out for our customers makes this role very rewarding and lots of fun.

 

McKie: While I appreciate the recognition from PL Buyer, the most rewarding thing is to work with over 50,000 Winn-Dixie associates who are supporters and advocates of our Winn-Dixie brands. They all deserve recognition for the success we are experiencing, both as a company and with our private label program.

 

Palmer: The most rewarding factor in my job is working with a team that is passionate about what they do. Their hard work and commitment make it a pleasure to come to work each day. I also enjoy working with suppliers that are flexible, innovative and willing to entertain a new idea. When I find a supplier that is [as] passionate about an idea as I am, it usually results in a big sales opportunity for both of us. Finding that “diamond in the rough” product and supplier is a daily motivation for the team and me. When you enjoy what you do and the people you work with, I can’t think of a reason to change anything.

 

Severin: I enjoy leading change and inspiring a team to work together toward a better solution. When the team is successful and they become champions, I smile.

 

Tator: I am blessed to work for a company that is extremely charitable, and we have been able to tie Corporate Brand items to significant donations to programs like breast cancer research and Paul Newman’s Hole in the Wall camps for disabled children. Offering a great product at a value and making a difference in people’s lives is very rewarding. If I could change something about Corporate Brands, it would be the perception that some folks have that those items are somehow inferior. On too many occasions, I have had folks tell me that they tried one of our items and it was good - my wish would be that that would not come as a surprise to them!

 

Winters: The most rewarding factor in my job is to work for a company that has made a commitment to grow our Own Brands business by devoting significant resources to this effort and seeing the subsequent Own Brands success. The progress made and change in company culture over the past few years has been nothing short of amazing.

Another is to work in a team environment with many talented and creative individuals, each committed to the success of our Own Brands program. It is very rewarding to see the results of our teams’ efforts delivering on consumer expectations and also be recognized with several product and packaging awards.

If I could change something, it would be to have industrywide 100 percent private label-supplier compliance to the new quality standards in GFSI (SQF Level 2 or above and/or BRC). With this platform in place, consumers should see consistently high-quality private label products and [have] confidence in their safety.

 

Yandow: The fast-pace progression we have experienced with private brand is very rewarding. I enjoy the variety that private brand presents, working with virtually every category, hundreds of suppliers and all aspects of the business - product innovation, manufacturing processes, quality control, branding, marketing, pricing, associate education, promotion, packaging, supply chain, etc. If I could change one aspect, it would be the customer perception of private brand products.

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