PL Buyer's eReport July 15, 2008

July 16, 2008
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Rethink the Program
A new study gives retailers advice for making the most of private label programs. 

A well-run private label program can help retailers boost their stores' price image and enhance shopper loyalty -- while driving bottom-line profits, according to the June issue of Competitive Edge from Barrington, Ill.-based Willard Bishop. Jim Hertel, managing partner at Willard Bishop and the newsletter's author, spoke with eReport editors, noting some of the key issues and strategies of which retailers should be aware if they want to get the full value from their programs.

"The number-one thing that retailers can take away from [this issue of Competitive Edge] is that private label needs to be a program and not just a set of SKUs managed at a category level," Hertel said. "What ends up happening is that programs lack cohesiveness and focus."

Hertel identifies multiple struggles that retailers encounter with their private label programs, including but not limited to the lack of a compelling strategy to win with shoppers; a limited private brand vision; and merchandising planned with little focus on basket or shopper-level impact. Hertel stressed that retailers need to plan a private label program with the shopper, putting the shopper's needs at the forefront.

"The shopper is the one constituency that is left out of direct discussions for retailers who are underperforming relative to what they want to do," he noted. "As retailers, the ones who want to do their program really well are thinking about this almost like a brand marketer. And obviously when you're thinking like a brand marketer, the consumer is first, and all products are developed in the context of what the consumer needs.

"There are retailers out there who do the consumer research and are really good at it," he added. "But it takes a commitment and it takes an organization."

The latest issue of Competitive Edge also notes that retailers can check and balance themselves to ensure their private label program is running well. Pricing and penetration are aspects to keep tabs on. Retailers also should watch trends and be aware of the holistic picture of a shopper's level of satisfaction with the overall program. Hertel noted that retailers need to ask themselves whether or not they are using their private label products to attract the kind of baskets they want.

"People who are active in private brands tend to be your very best shoppers," Hertel told eReport editors. "That makes sense because the people who are your very best shoppers have bought into the whole value proposition that you're offering them, and private brands are a key part of that."

Our Take: Shopper research is not just a nice thing to do -- it's essential for retailers that want to develop store brand products that will actually sell. The more you know about your shoppers, the more you can do to bring them back to your store.

Eye on Health

 Food Scoring System Set for September Launch
NuVal's emblem will appear on shelf tags next to the price.
Three major U.S. grocery chains in more than a dozen markets will launch the NuVal Nutritional Scoring System in September. The system is powered by a patent-pending algorithm known as the Overall Nutritional Quality Index (ONQI), according to NuVal, a joint venture formed this year by Skokie, Ill.-based Topco Associates LLC and Griffin Hospital, Derby, Conn.

NuVal said it would make public in September the first grocery chains to use the system. The newly formed company also said it is focused on reaching all U.S. markets and scoring all 40,000 available products in the average grocery store by September 2009.

"Consumers want clear information about the nutritional value of the foods they eat, and NuVal scores are going to give it to them," said Nancy McDermott, NuVal president. "We've got the scientific foundation, the logistical ability and the retail partners needed to bring this important education to consumers coast to coast."

Our Take: Shoppers ultimately will decide whether or not the NuVal system is a useful tool in the quest for nutritional information. But this major undertaking certainly is a step in the right direction.

Industry Insider

Survey Says ...
A new survey shows positive results for independent operators
The National Grocers Association, Arlington, Va., and Financial Management Solutions Inc. (FMS Inc.), Pasadena, Md., announced the results from their annual survey of independent operators. The survey is designed to help independent retail grocers and independent supermarkets better understand how their store operations compare with national averages and other retailers of similar size. This year's survey's questions covered topics ranging from financial and accounting benchmarking to economic factors and key political issues impacting the industry.

The survey noted that single-store operators showed a stronger net profit before taxes, while multi-store operators slipped.

Retailers also were asked to choose one type of tax change or reform they'd like to see pass this year. The number-one choice? Improving tax incentives for environmentally friendly practices. Second was overall corporate tax rate reductions.

"Retailers are feeling the impact of energy costs from both sides; internal costs are increasing; and consumers' budgets are tightening," Robert Graybill, vice president of FMS, said in a press release.

"The results of this survey provide excellent bench-marketing information for independent retailers," noted Frank DiPasquale, senior vice president of the National Grocers Association, in the statement. "Retailers, wholesalers and manufacturers continue to show resiliency in a very turbulent market with increases in energy and commodities at a seldom seen level. Unlike other industries like the airline industry, supermarket operators continue to focus on service and other points of differentiation to buttress the consumer's negative responses to continued price increases."

Our Take: It's also a sign of the times that energy policy and energy tax concerns placed a strong second behind healthcare reform for the first time in the survey's six-year history. The "small guys" certainly are going to need some help to stay afloat.

Bits and Pieces

What's News in Private Label
Among the most notable retail and private label news:  
  • UK-based Tesco won the Anglo Overseas Trophy for the best malt whiskey up to 15 years old. Tesco's 12-year-old Highland Single Malt was judged to have the best taste, beating out some of the top names in whiskey (such as Laphroaig and Bowmore). Executives for Tesco noted that Tesco's whiskey wins on price, too.
  • Walgreen Co., Deerfield, Ill., announced the acquisition of Louisville, Ky.-based CuraScript Infusion Pharmacy Inc. CuraScript is one of the nation's largest providers of infusion services. Walgreens also announced plans to reduce its organic drugstore growth, beginning in fiscal 2009, "to provide flexibility to invest in its core strategies and improve shareholder value."   
  • Montvale, N.J.-based A&P announced the launch of the "How Do You Haub" photo contest as a way to promote its line of Elizabeth Haub reusable shopping bags -- which are said to be chic, eco-friendly and available for only 99 cents in stores. The contestant who submits a photo demonstrating the most unique and creative way to use the bag will win a grand prize of $1,000 worth of grocery gift cards valid at any A&P, Pathmark, The Food Emporium, Waldbuam's or SuperFresh store. 
  • Target Corp., Minneapolis, said it partnered with The Walt Disney Co. to offer licensed products featuring the Disney Channel's Camp Rock movie and its stars, the Jonas Brothers teen singing group. Target will carry a variety of exclusive Camp Rock back-to-school necessities, including backpacks, lunch totes and supplies, as well as apparel, accessories, bedding, furniture and toys.

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