Retailer of the Year

PL RETAILER OF THE YEAR

January 12, 2011
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It used to be that if your friends or family came to visit and you bought store brand products, it would be embarrassing and you’d try to hide them; just as you’d try to keep your crazy old Uncle Louie out of sight somewhere in the back of the house while you entertained in the living room.

 
But Publix, one of the first supermarket chains in the Southeast, is changing the way people feel about private label goods. In fact, it’s been said that some Floridians have even been spotted shopping at Walmart with their reusable Publix shopping bags because they want to be known as Publix shoppers - it’s considered a status symbol of sorts.




It used to be that if your friends or family came to visit and you bought store brand products, it would be embarrassing and you’d try to hide them; just as you’d try to keep your crazy old Uncle Louie out of sight somewhere in the back of the house while you entertained in the living room.
But Publix, one of the first supermarket chains in the Southeast, is changing the way people feel about private label goods. In fact, it’s been said that some Floridians have even been spotted shopping at Walmart with their reusable Publix shopping bags because they want to be known as Publix shoppers - it’s considered a status symbol of sorts.
PL Buyer has chosen Lakeland, Fla.-based Publix as our 2011 PL Retailer of the Year because of the success it has had with building consumer trust in its private label offerings. It’s done that by listening to consumer wants and expanding private label in response rather than just using private label as the low-cost alternative. It employs a two-tier private label approach that include its basic Publix brand and its Publix Premium label. Plus, it has launched a specialty private label brand, GreenWise, which appeals to shoppers seeking natural and organic options, and also is targeting Hispanic shoppers with offerings within its Publix brand. The result has been private label sales that account for 20 percent of all Publix sales. In short, Publix is being pro-active in building private label sales rather than merely reactive to what national brands are doing.
The retailer racked up estimated private label grocery sales of $5.2 billion in 2009, putting Publix at No. 9 on PL Buyer’s exclusive list of North American private label grocery retailers, as compiled by London-based research firm Planet Retail.

Private label grocery sales will have reached a Planet Retail projected $6.6 billion for Publix by 2014 as it continues rolling out new products as part of its various private label lines, which include the Publix, Publix premium, Publix GreenWise Markets, Publix Bakery and Publix Deli brands.

From Humble Beginnings
A young man named George W. Jenkins was managing a Piggly Wiggly grocery store in Winter Haven, Fla., in 1930 when hard times brought a drop in the store’s sales volume, and staff pay cuts. When Jenkins learned the owner had sold his store to an Atlanta businessman, he looked forward to a visit from the new owner, confident he’d impress him with his managerial skills.
As weeks passed and still no visit came, Jenkins decided to drive to Atlanta and introduce himself. The new owner sent word that he was tied up in an important business conference.
“Well’, as Mr. Jenkins often recalled to Publix colleagues, “I could hear what the conference was all about. He was saying that if he hadn’t taken a six on the dogleg eight hole, he’d have broken 90 in his last golf game.”
This indifferent treatment sent Jenkins home determined to start his own grocery store - and vowing to never treat his employees or customers the way the absentee owner had treated him. The result was his creation of Publix in 1930.
Today, Publix is the largest employee-owned supermarket chain in the United States with 1,035 store locations and more than 146,000 employees.

Creating a Culture of Quality

When it comes to its private label brands, Publix aims to sell products of the highest quality and offered at a savings compared with national brands, says Maria Brous, director of media and community relations for Publix.
 “Our positioning of items under the Publix brand is that they are equal to or better than the national brands, and we always offer our Publix guarantee that if a customer isn’t satisfied for whatever reason, they can return any item for a full refund,” says Brous.
When it comes to private label sourcing and responsiveness, Brous says the internal process that Publix uses to identify potential suppliers and to approve them is considered one of the most thorough in the industry. “This sometimes means that we sacrifice short-term speed, but we benefit in the long-term with less supplier turnover, better quality products and we have also experienced fewer product recalls than the industry as a whole over the past few years.”

For Publix, this means that quality, not price, is the main driver of supplier selection, according to Brous.

“I think the Publix strategy when it comes to private label has been to find products that are popular with consumers and do a good job of keeping the quality up,” says Liz Crawford, senior vice president, business and communications strategy with Purchase, N.Y.-based Mars, a shopper marketing agency.

“The quality of Publix private label products are at least as good as the equivalent national brands it carries,” says Bill Emerson, president of Palm Beach County, Fla.-based Emerson Advisors, a retail consulting firm.
“Publix has a good, better, best approach which allows customers to trade up while also realizing improved value,” says Kevin Sterneckert, research director for Gartner Inc., a Stamford, Conn.-based research firm. “So a customer, who used to buy a leading brand can of beans, can now buy the Publix brand can of beans and receive the same or better quality at a better price. I think that consumers who were forced to seek out lower-priced alternatives have been pleasantly surprised at the quality that Publix has been delivering for a long time.”
Publix also has been much quicker and bolder than its competitors in terms of promoting its private label products, says Natalie Berg, global research director of London-based research firm Planet Retail. “A great example of this is its Publix store brand challenge which gave away a private label product for free when shoppers bought a national brand product. This was the ultimate testament to quality and shoppers had nothing to lose since the private label products were free.” The program was launched four years ago and is still in place today.
Sensitivity to customer needs led to the creation of the GreenWise line of products, which offer high-quality natural, organic and/or generally environmentally-friendly choices.
“I think in the premium tier, the GreenWise line is generally strong and offers comparable quality to branded products,” says Paula Rosenblum, managing partner of Miami, Fla.-based Retail Systems Research (RSR).

Products Aplenty

Publix has the same high standards of measuring success or failure for its private label items as it does for national brands it carries, Brous says. “Private label is just one component of the offering and we want to be perceptive to how our customers are responding to our item selection - all items. If we have a private label item that we believe is the right size, flavor, package and we have supported the item, but it is not reaching the [sales] goals of the category, then we need take that item out of the category. Our goal is to sell more products, not to sell more private label products.”
Publix is a strong regional player in Alabama, Florida, Georgia, South Carolina and Tennessee, that really seems to have its finger on the pulse of the local shopper, says Crawford. “Because it has a good sense of what its local consumers want to buy in terms of things like food and taste, Publix can focus it private label products on giving consumers what they want. And while it may not be right for everyone, everywhere, it’s right for its shoppers and I think it’s really great.”

“They are adding more SKUs a bit at a time, learning from each cycle of it and then expanding,” says Emerson. “It appears to have a pretty thoughtful strategy on how it’s rolling out [new PL products]. I think there’s certainly a lot of potential for it to expand into other categories, but that’s always a balancing act.”

Capitalize on Categories
Publix first launched its redesigned Publix brand private label packaging in 2003, offering a clean, simple and predominately white design system across all the products within the Publix brand category. The previous design was very similar to other retailer’s private brands; the products looked very similar to the national brand equivalent and blended in with other items on the shelf.
“The primary goal of the redesign was to improve our private label sales,” Brous says. “The new design made our products easier to see on the shelf and, in many cases, customers noticed our store brand products for the first time. The natural response was that we were adding more private label items and discontinuing other items. We were expanding our lineup from about 1,200 items to over 3,000 items over a six-year period, but it was surprising to see how many calls we had related to private label items that we had on the shelf for years before the conversion.”
Publix is in a good place right now in terms of its private label, Emerson says. “It is looking at its strategy saying ‘well how big do we want to make this and how many categories do we want to go into,’” he says. “Publix is even at the point of saying ‘well maybe we should think about competing in multiple price zones within our own private label’. It’s developing its own brand and its not like embarrassing Uncle Louie. This is something it’s proud of and if retailers are respectful of their own brands, then their customers will be as well.”
Publix has done a very good job of penetrating its categories and differentiating its products in ways that are recognizable by its customers, says Sterneckert.
“It has transformed its brands into a strategic weapon,” he says. “Anyone can sell Tide on their shelves, but no one [else] can sell the Publix special formulation that exceeds the cleaning capabilities of Tide or that offers a fragrance that is unique and interesting to Publix consumers. By differentiating its products according to its consumers’ preferences, it has competitive private label products that cannot be copied by national chains and I think this is an opportunity it has seized upon and recognized for a long time now.”

Berg agrees that Publix has excelled in areas such as marketing and new product development when it comes to its private label products. “It has also been very innovative in expanding its brand into previously underpenetrated categories, such as pre-packaged kids’ meals,” she notes.

 

The Future’s So Bright

In 2011, Publix plans to continue to roll out the updated Publix Premium line package designs which began in 2010, and roll out new package design systems for Publix GreenWise Market products and Publix Deli products.
“My expectation is that Publix is going to have a strong 2011,” says Emerson. “I fully expect to see it very thoughtfully expand on its private label including both the GreenWise line and its Publix brand. I also expect to see some very thoughtful growth, but very consistent growth until it finds what it considers to be the right balance point for it.”

“We can expect to anticipate more of the same from Publix in 2011, just more accelerated,” says Sterneckert. “It will likely introduce new private label products, continue to give its brands successful on-shelf positioning and continue to market them to its consumers while offering differentiating products.”

“Our research shows retail winners [those who over-perform in comparable store sales growth] continue to increase the percentage of private label in their merchandise mixes,” says Rosenblum. “I would expect to see Publix continue to do the same.”
“I wouldn’t be surprised if it continued to march along the private label path and make its brand experience increasingly exclusive,” says Crawford. “It gives Publix enough distinction from other retailers so that it can retain its shopper base.”
One of the most important elements of its private label success is the emotional connections it establishes with its customers.
“Publix conveys this image, particularly in its television advertising, of family and a good meal, it’s almost like love on the table,” Crawford says. “There’s a warmth there that any national chain, even the really successful ones, just can’t seem to match. I get the sense that Publix really is lodged in the hearts of its shoppers.”

What separates Publix from other retailers when it comes to private label is its significant investment in quality and maintaining that quality across all of its product lines.

“Customers see the Publix brand in a very consistent and far-reaching penetration of the store,” says Sterneckert. “There’s not pockets of excellence, there’s excellence across the entire store and I think that’s one of the reasons why it excels is that other retailers have yet to accomplish this same level of consistency across the entire store.”

Additionally, Publix focuses extensively on customer service and has worked to distinguish its private label from other retailers by creating unique formulas and offering a solid assortment of products. Other retailers might want to take a cue from its private label strategies. PLB

 

SIDEBAR 1:

Publix At-A-Glance

 

Publix Super Markets Inc.

 

PL Grocery Sales: $5.2 billion*

 

Retail banners: Apron’s,

Publix, Publix Green Wise Markets, Crispers

 

No. of stores: 1,035

 

No. of employees: 146,000

 

Publix private labels:

• Publix brand - Its NBE (National Brand Equivalent). Represents the largest number of Publix private label SKUs. Includes Hispanic products.

• Publix premium brand -Positioned to compete against specialty, gourmet and high-end products. A new design system introduced in 2010.

• Publix GreenWise Markets brand -health and wellness brand. It has about 250 products. A new design system is planned in 2011.

• Publix Bakery - Includes breads, muffins, pastries, cakes, desserts. This line features a simple, clean, package and label design system.

• Publix Deli - A new design system planned in 2011. Publix plans to add gourmet cheeses.

 

SIDEBAR 2:

 

The Publix Side of Things

 

Publix agreed to supply written responses to PL Buyer’s questions for this feature.

The following is an edited transcript of answers received from Maria Brous, director of media & community relations, for Publix.

 

 

PL Buyer: Can you talk specifically about some of the more interesting things you’ve done when it comes to marketing your private label products?

 

Brous: Our ‘store brand challenge’ has been a successful promotion. We offer our product free to the customer when they purchase the designated national brand item. This allows the customer to compare the products in their home, on their own time, and when they can easily compare how the product performs for them. This is an extremely efficient program that has grown share in almost every category. We also do a monthly insert offering a variety of store brand products at a reduced savings.

 

PL Buyer: What can you expect to see from Publix in 2011, both overall and from the private label side of things?

 

Brous: Related to PL, we will continue to roll out the updated Publix Premium line package designs; rollout of new package design systems for Publix GreenWise Market products and Publix Deli products and continue to ensure that our products deliver quality and value for our customers.

 

PL Buyer: Publix has earned a reputation for being one of the leading innovators/pioneers in the supermarket business. Can you talk about some of the private label innovations that you have introduced?

 

Brous: Our approach is to focus our innovation efforts on key business areas, such as bakery and deli, or in key categories such as ice cream. Publix was the first grocery retailer to use a clean, simple and predominantly white design system across all private label products within a single tier. Similarly, Publix was the first to use clever/humorous imagery (e.g. tin foil creatures) and copy on private label packages. We were also one of the first retailers to create a unique proprietary system for a private label brand that actually featured the retailer’s name, moving away from the trend of mimicking national brand looks.

 

PL Buyer: Tell us about the major redesign of the Publix brand that took place in 2003; what was the overall goal for that project?

 

Brous: The primary goal was to improve our private label sales. We learned from research that customers liked our private label products and that they trusted our name (the Publix brand name as a whole had equity). We also learned that there was a lack of awareness regarding our private label offerings. We believed that we could improve sales by developing a new package design system that addressed the awareness issue by applying a unique, yet consistent, look across all SKUs, thereby helping customers to more quickly identify our products and leverage the equity of the Publix name via the use of a confident proprietary design that was unique to Publix.

 

 PL Buyer: What kind of results have you seen since the Publix brand redesign?

 

Brous: The new design made our products easier to see on the shelf and in many cases, customers noticed our store brand products for the first time. We were expanding our lineup from about 1,200 items to 3,000 over a six-year period, but it was surprising to see how many calls we had related to PL items that we had on the shelf for years before the conversion. However, from a business results side, our share had grown over the same period. The design system has certainly played a major role in that performance.

 

PL Buyer: I know that one of the store brand-related goals Publix has is to make every SKU “work.” Can you tell us more specifically about how you go about making that goal a reality?

 

Brous: We place the same criteria on private label items as we do any item in the category. Remember that PL is one component of the offering and we want to be responsive to how our customers are responding to our item selection - including all items. If we have a PL item that we believe is the right size, flavor, package, etc. and we have supported the item, but it’s not reaching the goals of the category, then we need to take that item out of that category. Our goal is to sell more products overall, not to sell more PL products.

 

PL Buyer: Can you tell me how Publix deals with the challenge of private label sourcing and responsiveness?

 

Brous: Our internal process to identify potential suppliers and then to approve them is considered one of the most thorough in the industry. This sometimes means that we sacrifice short-term speed but we benefit in the long-term with less supplier turnover, better quality products, and we have also experienced fewer product recalls than the industry over the past few years.

 

PL Buyer: Much has been said about Publix establishing an emotional connection with its customers. How has Publix gone about those efforts in general and also when it comes to private label?

 

Brous: When appropriate, we always try to create an emotional connection with our customers in any of our communications. We want to demonstrate that we understand and care for them; we want to meet their needs. When we connect on an emotional level we have an opportunity to create brand advocates. We like brand advocates; they can have a tremendous amount of positive influence on other customers in a way that we cannot.

 

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