Channels / Grocery / Trend Features
Special Report: Retail Roundtable

Private Label Food World Moving Faster Than Ever

Retailers also reveal the ways suppliers can make an impact on them and their private label plans.

Grabbing chairs at the ECRM Private Brands Food conference in Napa, Calif., in March, a small group bantered around ideas about private label today.

Special report roundtable May 2013

Suppliers and retailers met in Napa, Calif., in March for the ECRM Private Brand Foods trade show, while retailers gathered for a roundtable.

They discussed packaging, differentiation, and the things suppliers can do to try and catch their eyes.

PLBuyer: What do you look for when you source products?

Colin Rafferty: There’s a couple things, price obviously comes into play. If I see packaging that’s different, especially if it’s value-added packaging, where there’s functionality. That’s something that is nice, it’s rare but it’s nice. But even packaging that is just a little bit different from what you expect.

Ted Kontopoulos: If you have in your mind what kind of product you’re looking for, then you have your checklist of attributes. For example, if it’s an entry price point product then price is obviously one of your big criteria. Differentiation and innovation have more recently become key attributes for many customers. Some of our customers are in the natural and organic segments. With them we may take a totally different tact. It’s about clean label, a lot of it’s about where the product comes from, how wholesome and nutritious it is.

Roundtable Participants:

  • Ted Kontopoulos, vice president management group, Federated Group
  • Colin Rafferty, category manager, Federated Group
  • Randy Scott, category manager, Speedway
  • Roy Whitehead, senior director of private brands, 7-Eleven

Randy Scott: We look at cost, cost is one of the first determining factors. If we have further discussions and if the cost is too high, it may be a great product but it’s never going to have a chance to get in the stores. Packaging is a consideration.  We don’t have unlimited freezer or refrigerated space so you have to understand this has to work in a convenience store environment. So storage is always a key issue. And I think the third key piece is the shelf life. Shelf life from production, frozen, even if they can get to the point where they say here’s how long it’s going to last in a warmer environment.

Roy Whitehead: The first thing for us is is it the right thing for our guest? That’s more important in my opinion than in a grocery environment … because we’ve got a very limited amount of space and we’re going to be swapping out an existing item. The second side of that is is our franchisee going to make more money on that item vs. the item we’re swapping out? Because even if it’s a cost savings to the guest there’s not an incentive to trade the customer down to an item they’re going to make less money on. So margin would be the second important thing.

PLBuyer: How do you know what your guest wants?

Whitehead: The customer insights we have about our guests, looking to new trends in the marketplace. We’re in a convenience store environment, we’re a destination for new as much as we can be. We try to be variety driven. I would say it’s a lot less shoot from the hip and intuition and more what our guest insights are.

Scott: We have a pretty robust loyalty program and it’s very active. Sometimes we’ll do what we call terminal surveys where on their receipt customers will be encouraged to go out over to our terminal and complete a survey. So if we’re not sure of which flavors or varieties we might like they can vote on that. And obviously we look at sales trends quite a bit. If a product or category seems to be losing steam we may just decide to move away from that.

Kontopoulos: For us we define the customer as the retailer, wholesaler, foodservice distributor and C-store chain that we’re working with, so we rely on them to provide parameters as to what they’re looking for, but we also have a category analytics team. And we use IRI primarily, some AC Nielsen, we’ll use that data to collaborate with our customers and help support or help validate what our customers are telling us they’re looking for. Also input from the supplier.

PLBuyer: What are we looking at today that we weren’t looking at five years ago?

Rafferty: I think the biggest change is what hasn’t changed, and that’s the economy. Times are still rough. Consumers are still largely looking for value, and value can be more for less or it can just be all price-driven. In addition to that, we’ve also started to see more of a defined growth of the premium tier, more products in that. If you look at the suppliers here most of them are bringing out the sexy all-natural, all-organic, gluten-free types of items where there’s still a significant amount of demand for customers who just want the lowest-priced product they can get that’s still functional.

Kontopoulos: I still see a lot of growth and opportunity in the perimeter of the store. That’s a trend I still see continuing to go up. In our environment the blinders are totally wide open because you really have to understand who your customer is, and who they’re selling to, and who’s shopping their customer’s stores and tailor offerings to that.

Scott: How quickly things change in terms of trends, new items.

Whitehead: That’s exactly what I was going to say. (room erupts into laughter)

Scott: With technology, social media, even just five years ago the time it would take for products to really make its way across the nation or across the different channels took a lot longer than what it does today. The other thing is the whole quality piece. We really look at the QSR side of it and McDonald’s of 2013 doesn’t look like the McDonald’s of 2010. Thanks to Panera Bread, Chipotle and others like that, customers’ expectations even in the cheapest of cheap QSRs is much, much greater. That puts a lot of pressure on the convenience store industry to ramp up. It’s something we’ve been experimenting with on our menu is adding some premium items, and I’ll tell you, we’re seeing some great sales results, which is encouraging. (turning to Roy) I didn’t mean to steal yours.

Whitehead: That just means it’s the right answer.

(more laughter)

Whitehead: Just to add what you just said about the changing needs of the customer, it does happen so much quicker. Ten years ago it was about refreshment, then it was about energy, now it’s about the source of the energy. It went from sugar to caffeine to protein and the market just continues to segment faster and faster. And what you were saying about social media when you have an exclusive flavor on a product the word gets out pretty quick and it can really drive the business. The club stores have been known for their treasure hunts, and I think it’s convenience stores, it’s going across retailers, there’s a treasure hunt mentality for variety-driven products.

Scott: I was going to add, too, the whole healthier for you, it’s not gaining much traction in the convenience store industry. People say all the time yeah I want something healthier, so we may dabble and put some healthier options out there and they just don’t sell. There’s not a single conference or event that I go to that there’s not something on the agenda that talks about healthier types of formats. I think that’s one area the C-store industry is behind but I don’t see first mover advantage there.

Whitehead: I think you definitely need a different customer, because the current customer, we’re not going to move them off a bag of chips onto a bag of fruit. But if we can get that other customer in there that’s not coming in then I do think we have an opportunity. And I think we have so many units out there as an industry that we have a lot of options for people who want to eat that way to pull in and grab something.

Scott: The roller grill still gets a lot of traffic in our stores, you know?

PLBuyer: Are you looking for different products because you either have different customers coming into your stores or because you expect different customers coming along the way?

Whitehead: When I work behind the counter of a 7-11, certainly I see the wealthy folks that live in the neighborhood and I see the folks that are cutting their grass. … We are trying to appeal to a broad group with a very limited amount of shelf space. That means you have to make hard decisions, especially when it comes to private label. I think selling more hot dogs, we’re selling all those we can sell, so we are looking for that other customer to come in and buy other things. But hot dogs have paid the bills for a long time. We want to attract those guests with more and healthier fresh offerings. The trend toward health and wellness continues to build, and we want to be there for our guest.

Scott: That channel blurring is concerning. I noticed recently in the Sunday paper when I looked at the Menards ad. Menards has always been more than a place to buy lumber. Now they’re really into groceries. I think Menards is a case by themselves of blurring. It’s interesting. The drugstore channel is always concerning because they’ve got a lot of great corners, and for a period of time the convenience store industry pretty much owned those corners. They’re testing some food and cold sandwiches and things like that. But as an industry we’re also going on the offensive. We’ve got the QSRs in our site, and breakfast sales in the industry are up big. That’s coming from somewhere. But the QSRs also are looking at us now. McDonald’s has done a whole lot with any size fountain drinks for a dollar. If it wasn’t for the C-store industry’s aggressive fountain pricing strategy they wouldn’t be doing that. We’re not really changing our item selection as much but we are really putting a full court press on foodservice, and really the higher-end type foodservice. But that Menards piece is a little scary.

Kontopoulos: From our perspective the channel blurring actually creates opportunity for us, because we play in the wholesale arena, the retail arena, the foodservice arena, the C-store arena. We’re able to lend some of our expertise to these various channels to help people find solutions. It’s funny that you mention Menards because they actually stock our Parade label as their private brand.

Rafferty: You’re not looking for different items, you’re looking for different sizes. We have some customers that are looking for dollar price points so different formulations in some cases or finding the right suppliers.

PLBuyer: Is channel blurring not just a matter of customers but also smaller format sizes, where retailers have to make harder decisions about what private label and branded items to put on shelves in limited space?

Kontopoulos:They do look to folks like us for input. We have intel on multiple channels. … You can never have too much information. For example, we’ll be asked, well, what do you see working on the foodservice side? That’s one area where our value proposition is strong.

PLBuyer: What do you look for when considering a new supplier?

Whitehead: Identify something new for me and tell me about it. Tell me what’s the latest and greatest thing, and do it over time. We want our suppliers to bring us innovation. For them to challenge our thinking to improve the health of the category. The suppliers with a track record of growing our categories through innovation will be the most successful.

Scott: They should really understand our industry, and one size doesn’t fit all. What do you do on the research and development side? They ought to come in and say they can give us a turnkey product and program. We are limited on resources and space, and they have these huge resources available to them already.

Kontopoulos: I think it starts with the basics of blocking and tackling, of providing appropriate cost, service level, and quality. Also, the supplier that understands diverse formats and different customer needs are the suppliers that resonate with our customer base.

 Rafferty: For medium to large suppliers, it’s operational flexibility. I need someone to pack my business consistently and do it over and over, and as long as I’m still happy, you’ll have my business. For smaller suppliers, this is their baby, and they’re so passionate about it, and that’s great. But they need to find a way to make that my baby. To look at how it fits in my business and not how it looks for theirs. 

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