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Safeway's Private Label Sales Outpace National Brands, CEO Says

February 28, 2011
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Rising commodity costs won’t change the fact that private label offerings by definition deliver better margins than national brands, says Steven Burd, CEO and president of Safeway. Private label brand growth continues to outpace that of national brands sold at Safeway, Burd confirms on the company’s most recent quarterly earnings call.

Rising commodity costs won’t change the fact that private label offerings by definition deliver better margins than national brands, says Steven Burd, CEO and president of Safeway. Private label brand growth continues to outpace that of national brands sold at Safeway, Burd confirms on the company’s most recent quarterly earnings call.
 
“The national brands create a national pricing umbrella for us,” says Burd. “So we don't really expect any margin squeeze there. We had a brief period of time during 2010 where we actually made a bit more-than-normal margins in private label, but private label margins are sort of back to normalcy right now.”
 
Safeway already sees prices rising across the board, Burd says, including for produce, beef and other protein categories such as chicken, as well as other center-store and perimeter commodity items.

However, supply in some of these categories could quickly rebound to the point where inflationary trends abate, he notes. At the same time, rising energy costs could most especially impact produce categories.
In terms of dollar sales, “Private label continues to grow at a pace much stronger than national brand,” Hurd says. “Not as strong as it was maybe a year ago, but it's more than 500 basis points [5 percent] stronger than national brand growth.” The same could probably be said for unit sales, he adds, except for the uncertainty related to the volatility of milk sales.
 
“I really expect [growth in private label sales] to continue no matter how robust the economy becomes, because we're really doing some innovative things in our private brands area,” he says.
 

Hurd specifically cites Safeway’s success with private label brands O Organics and Eating Right, and the potential for growth of Open Nature, before concluding, “And they will do well in good times and in bad.”

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