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PL Buyer's eReport June 24, 2008

June 26, 2008
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Bigger Isn’t Necessarily Better
Retailers are turning to smaller store formats to draw in customers.
 
Barrington, Ill.-based Willard Bishop and the Food Institute, Elmwood Park, N.J., said they would present a webinar (Tuesday, June 24, at 2 p.m. Eastern) on the future of food retailing, focusing on the spread of small-store formats that will drive change in the supermarket business in the coming years. The presenters also will explore what retailers are doing to gain competitive advantages, particularly in own brand initiatives and pricing strategies.
 
eReport editors spoke with Jim Hertel, managing partner at Willard Bishop, who noted: "A lot of smaller store formats are emerging, and they’re making a lot of noise."
 
As noted in a press release promoting the webinar, food inflation likely will continue and intensify, forcing retailers and suppliers to alter strategies as consumers change how they shop. The small-store format, most often associated with Tesco’s Fresh & Easy stores in the United States -- along with other initiatives from Giant Eagle, Wal-Mart and others -- isn’t a new store design concept. However, such express stores are going to be a feature of the retail landscape.
 
"This is still an evolving format, but the ones that are out there right now are really focused on the provision of being an easy neighborhood shop that people need, with a much greater focus on fresh foods," Hertel explained. "When these stores reach their full expression, they’re going to have a small and shopable format, orientation toward quick in and quick out, so it will be very convenient."
 
Hertel also noted that these smaller store formats haven’t just cut back on square footage, but also on prices, putting a heavy emphasis on stocking shelves with private label products.
 
"There is some opportunity for private label [in the smaller store formats]," Hertel said.
 
For example, he expects Whole Foods, with its strong 365 brand, to have strong own brand offerings in its Whole Foods Express stores, currently being tested in the Boulder, Colo., area.
 
In general, the smaller formats look to be 20 percent less expensive than traditional supermarkets, with products that have a strong sense of price value. And given the current economic conditions, lower prices ought to resonate with consumers.
 
Our Take: It wasn’t too long ago that many retailers were taking the opposite tack -- trying to offer almost everything for almost everyone in a super-sized format. The smaller-store format could be just the key to reaching overwhelmed consumers who want to simplify the shopping experience -- and save money along the way.
 


The Green Scene

Shared Transport Cuts Food Miles
International retailers collaborate to lower environmental impact on grocery transport.
 
IGD, a food and grocery think-tank based in the UK, announced that food retailers and manufacturers in the UK are collaborating in an effort to reduce their impact on the environment when transporting food and groceries. The Sustainable Distribution initiative was born out of spiraling energy costs and consumer demand for a reduction in miles traveled for food, reported Foodnavigator.com.
 
So far, 37 of the UK’s biggest food and drink companies have signed up for the initiative, which will result in the removal of 800 trucks from UK roads this year, as well as in savings of about 23 million liters of diesel fuel per year, IGD said.
 
"Shared transport is one of a number of activities that food and drink manufacturers and other companies across the supply chain can pursue to achieve fewer and friendlier food miles," stated Callton Young, director of sustainability and competitiveness for the UK-based Food and Drink Federation, noting that the industry has a role to play in ensuring sustainable distribution of goods.
 
The IGD said the outputs of the initiative will be shared widely within the industry to encourage improvements from companies of all sizes.
 
Our Take: Sounds like these companies have come up with a wise way to slash energy use and transportation costs. Why not here in North America?


Industry Insider

The 'It' Factor
Small businesses have identifiable qualities that make them more popular than others.
 
In a recent column, USA Today columnist Steve Strauss identified the "It" factors that make some small businesses more popular with consumers than others. The top quality successful businesses share?
 
"The best, most successful, most ’popular’ small businesses do their main job exceptionally well," Strauss wrote. "If yours is a restaurant, offer great food. If it’s a dry cleaner, get the spots out!"
Strauss noted that doing a job exceptionally well is a simple concept, but that not everyone gets it.
 
Companies that fail to excel at their core function do so because of several factors, which can include not understanding what the company’s real job is, spreading themselves too thin or focusing on other, less important matters.
 
"Whatever the case, while they might stay in business, they likely won't get far," Strauss wrote.
Good businesses that focus on what they do best -- and do it exceptionally well -- will get consumers to come back time and again, and also will get a "much-desired" addition: word-of-mouth advertising.
 
"The best small businesses know what it is they are hired to do and put sufficient energy, effort, resources and commitment into doing that thing to the very best of their ability," Strauss said.
 
Our Take: In the long run, it’s foolish for a business -- small or large -- to attempt to be a "jack of all trades." On the private label side, a well-defined message -- combined with strategic execution -- equate to a job well done.


Bits and Pieces

What’s News in Private Label
Among the most notable retail and private label news:  
 
  • Cott Corp., Toronto, said it would refocus on its private label business and has already begun to take actions to improve profitability. David Gibbons, Cott’s interim CEO, said Cott diverted too much energy and too many resources away from its core retailer customers and toward branded initiatives over the past 18 months. The company already has refocused its marketing efforts, and noted that its existing retail partners will drive new product development.
  • Tesco said it would revamp its Fresh & Easy stores to provide a warmer atmosphere. Stores will have more color and signage displaying product ranges and values, and also will feature added shelf labeling. Moreover, 250 items will be added to the fresh&easy line of products, based on customer requests. Products will include juices, brewed teas and prepared meals.
  • German sportswear maker Adidas started legal proceedings against Bentonville, Ark.-based Wal-Mart. Adidas filed a motion stating that Wal-Mart used a striped logo on its shoes similar to the one associated with Adidas products. Hearings will begin October 6, the German business daily Handelsblatt reported.
  • Minneapolis-based Target Corp. launched Sami Hayek for Target. The exclusive limited-edition collection includes bedding, decorative accessories, furniture and stationery, and is geared toward students. "Anyone who values function and practicality housed in great design will gravitate toward Hayek’s product," said Gina Sprenger, senior vice president of merchandising for Target.
  • According to Forbes.com, Belgian supermarket group Delhaize SA said it would become a member of the AMS buying alliance starting Jan. 1, 2009. In a statement, the group said that by joining AMS, it will be able to optimize its price negotiations for its private label programs. AMS is one of the largest buying alliances in Europe for private label products.

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