YEAR IN REVIEW

retailers to react, which several of impact of [.com buying them have done. Just look at the Whole Foods Market] has been online businesses of Walmart and overblown." , the nations top two gro• So far, it has. cery retailers, which are flourish• From a brick-and-mortar ing. They are investing heavily in standpoint, Wiole Foods Mar• online ordering and free grocery ket, with 470 stores, has a lot of pickup as well as home delivery. building to do to catch Walmart, Retailers in general are also which has more than 4,300 using their private brands pro• stores. And brick-and-mortar grams to differentiate. They are stores aren't going anywhere making investments in premium as long as retailers continue to AMAZON AND private brands to offer exclusive adapt to their customers' needs. products they know their cus• That's not to say Whole Foods WHOLE FOODS tomers cant get anywhere else. Market isn't growing. Its same- Last January, private brand store sales have grown about AREN'T RULING consultant Todd Maute, a partner 3 percent since being owned by with New York-based brand Amazon.com, and will continue agency CBX, told Store Brands his to grow. But a year after Amazon, GROCERY OR "gut feeling" is that that Amazon corn's acquisition of Whole Foods doesn't want to rule the grocery Market, it's clearly not the end of PRIVATE BRANDS world But ruling the retail world the grocery world as we know it is another matter. That said, a year isn't a long It has been almost 1.5 years "As Amazon continues to ex- time, especially when it comes since Amazon.com officially took over Whole Foods Market after purchasing the retailer for $137 billion in cash. At the time, some industry pundits made it sound like Amazon.com would soon take over the grocery industry — much like the evil Thanos taking over the universe in the summer blockbuster movie "Infinity War" — after it acquired the natural and organic foods retailer. Some industry insiders made it sound like Walmart, The Kroger Co., Albertsons Cos. and other grocery retailers would meet a doomed fate at the hands of Amazon.com Founder and CEO Jeff Bezos. pand into more and more cat• After the acquisition, grocery egories ... that is where I think stocks dropped like a sack of Amazon will rule the world," potatoes. Panicked investors Maute said. "I think Amazon sold their shares in Walmart, is just going to continue to go Kroger and other retailers. after one segment of business But fast-forward to now. The after another." grocery industry has changed, Maute's point is that Amazon, yet Walmart, Kroger and other com wants a sliver of the $800-bil- retailers are going strong. lion grocery pie, not the whole pie. If anything, Amazon.corns In a recent story on CNN. acquisition of Whole Foods Mar• com, reporter Nathaniel Mey¬ ket lit a fire under other grocery ersohn pointed out that "the

46 Store Brands / November 2018 / www.storebrands.com YEAR IN REVIEW

shoppers — aged 18 to 34 — had a particularly high awareness of Lidl and shopped there frequently, according to the survey, which also noted that 48 percent of 600 consumers who tried Lidl are now shopping there more than twice per month. Industry analyst Mike Paglia calls Lidl a "disruptor," which is as fine a compliment as you can give a grocer. Paglia is especially impressed with Lidls 90-percent assortment of private brands. "Lidl is challenging the conven• tional notion of private brands, which is if you want to get low prices you have to be willing to sacrifice quality' Paglia told Store Brands earlier this year. "That has been the unwritten rule of private label from a shopper perspective. LIDL STRUGGLES. Lidl is saying that doesn't have to be the case. You can get both low prices and high quality." WHAT'S NEXT? Much of the news about Lidl in 2018 centered on its growth. Industry insiders speculated that Lidl would open hundreds Lidl came out swinging in But the honeymoon ended if not a few thousand stores in the summer of 2017 and quickly when Lidl began being coming years. Then those same quickly opened about 25 stores criticized for underperforming speculators backtracked, which on the East Coast. Lidls arrival stores. Then, the pundits pounced posed a negative light on Lidl. was marked by much fanfare even more, chiding Lidl for its In fairness to Lidl, the retailer in the trade and mainstream poor selection of store locations, never announced how many media. Industry pundits touted and for stores that were too large U.S. stores it planned to open the Germany-based retailers low and expensive to operate. beyond 2018. prices and quality selection of Shortly after, Lidl scrapped "Overall, I think Lidl is off to a store brands. or delayed plans to build several good start," Paglia added. "But that stores. Its goal to open 100 stores doesn't mean there isn't room for by mid-2018 fell short by more improvement in the long run." than 40. Will Harwood, Lidl commu• In May, the proverbial private nications director in the U.S., said brand pasta hit the fan when the retailer sees much opportunity Lidl replaced its CEO in the U.S., for growth in the U.S. and looks Brendan Proctor, with Johannes forward to moving into new mar• Fieber. No reason was given for kets. Harwood emphasized that Proctors departure. Lidl is taking an "agile and ad In June, Lidl issued a report by tive" approach to store openii Boston-based consulting firm Oli• "We are looking forward to ver Wyman saying that younger building on the progress we consumers have taken a liking to have made," he said. the retailer, especially its private 2019 could be a pivotal year brands and low prices. Younger for Lidl.

50 Store Brands / November 2018 / www.storebrands.com YEAR IN REVIEW A KROGER'S SIMPLE , TRUTH TOPS 1 A $2 BILLION IN SALES

The simple truth is it will be $2 billion in sales. Kroger addressed concerns etched as "extraordinary" Simple Truth products are about free-from and organic in the private brands history free from 101 artificial preserva• products, beginning with price. books. tives and ingredients. Simple "There's a general belief in We're talking about The Truth Organic products are the marketplace that organic Kroger Co.'s Simple Truth and certified organic by the U.S. De• means more expensive," said Simple Truth Organic private partment of Agriculture. Kroger Mary Ellen Adcock, Kroger's brands, released in September didn't just roll out the lines to vice president of natural 2012. In January, Cincinnati- jump on the free-from ingredi• foods at the time (she is now based Kroger announced the ent and organic bandwagon in group vice president of retail lines had achieved a whopping 2012. Listening to its customers, operations), in a press release YEAR IN REVIEW

announcing Simple Truth and branded shelf signs, stanchions Simple Truth Organic. "While in produce and meat sections, organic products are available and front-of-store standees and in most conventional grocery banners in more than 2,200 stores, our customers told us Kroger stores. Online elements that labels can be confusing. We included a Simple Truth website understand these challenges, so (www.simpletruth.com) and we're offering our shoppers the a social media presence on Simple Truth Organic brand — Facebook, Twitter and Pinterest. an easy, more clearly labeled and Kroger went all out to pro• affordable way to buy organic mote its new brand, something products." that was also different for a In 2012, Simple Truth and private brand in 2012, Jor¬ STORE Simple Truth Organic consisted gensen said. of about 250 products. That has " [Kroger] got behind the ballooned to more than brand, which was the oppo¬ BRANDS 1,400 products across _^|(P site of the old practice of launching and TjJ^k leaving it in IN THE ^,W"lJf^rm. Private brands," he added. LIMELIGHT B Kroger is H also taking H Simple Truth personal care (^"ITAWS W to China The spotlight shined on store brands in f —it will 2018, whether it was local television stations —• sell the line's interviewing shoppers about their willingness s^Jir products there to purchase more private brands or stores Truth in a nutshell: ^^^^^ on an e-commerce themselves promoting their own brands with Natural and organic foods site owned by Alibaba more fervor. Whatever the case, store brands that are affordable," Gil Phipps, Group Holding Ltd. In definitely received more clout in 2018. Krögers vice president of brand• August, Kroger announced it Consider Batavia, Ill.-based Aldi, which ing, marketing and Our Brands will open an online storefront won several awards in Store Brands 2018 (Krögers private brands), told on Alibaba's Tmall global site, Editors' Picks Awards, a program that Store Brands earlier this year. a platform for international recognizes the best new product concepts The success of Simple Truth brands. Launched in 2014, available for private branding. Aldi, real• and Simple Truth Organic is not Alibaba's Tmall Global platform izing the chance to differentiate, wasted no lost upon Carl Jorgensen, direc• is China's largest business- time in merchandising and promoting those tor of global thought leadership/ to-consumer marketplace for winning products in its stores with the 2018 wellness for Stamford, Conn.- China's consumers. Editors' Picks Awards logo. based Daymon, which provides Kroger's online store test will Earlier in the year, Store Brands reported retail strategies and services to start with select Simple Truth that consumers might be filling their shop• help retailers grow their private items, providing Alibaba's more ping baskets with private brands more in brands. Jorgensen calls Simple than half a billion Chinese 2018. This has definitely occurred, with Truth the most successful pri• consumers with easy access to several reports from market researchers vate brand launch in the history the products. touting store brand growth. In June, when of the grocery industry. Something tells us that $3 bil• Kroger announced its first-quarter earnings, When Kroger introduced lion in sales for Simple Truth will the grocer also announced it had achieved Simple Truth and Simple Truth come sooner than later. the highest-ever dollar share in the history i Organic, it did so behind an its Our Brands, which made up 28.7 percent integrated marketing campaign of unit sales and 26.7 percent of sales dollars, involving both in-store and Kroger's Simple Truth Low Cow and achieved 5.1 percent sales growth and online components. In-store Lite Ice Cream rivals the Halo 3.4 percent unit growth. communications Top brand. Aldi's continued growth (the deep-dis-

54 Store Brands / November 2018 / www.storebrands.com much emphasis on its private ucts, they continue to improve the brands program lends itself to consumer trust in those products driving stronger consumer aware• and therefore have created a halo ness," Doug Baker, vice president effect," Baker said. "If I'm a strong of industry relations, private private brand user from one retail• brands and technology for the er and I go to another retailer, I'm Food Marketing Institute, said more willing to try that retailer's earlier this year. private brands because I have had The retailers that have made a good experience with the private strides by offering private brands brands I've purchased." that focus on quality products at The resurgence of private a low price, including Aldi and brands is not a fad. The fact that Monrovia, Calif-based Trader consumers are embracing private Aldi is promoting counter will expand from 1,600 to Joes, have already impacted the brands in an upbeat economy — several of its 2,500 stores nationwide by the end popularity of store brands and will not just in dour financial times new products for of2022) hasn't only heightened continue to do so, Baker added. as in previous eras — is evidence being honored competition among grocery retail• "As these retailers continue to that store brands are being in Store Brands' ers, it has also increased awareness grow their private brands pro• viewed for their quality, innova• 2018 Editors' of private brands. grams and deliver quality goods tion and exclusivity, not just their Picks Awards. "Any retailer that puts that and a good experience with prod• low prices. A CASE OF THE HAVES AND HAVE-NOTS

brand equivalents and lesser store brands — are added to the equation, the industry average of private brand share of total dollars sinks to 17 percent. The retailers deemed best in class — based on consumer percep• tion of private brands, shopper loyalty, breadth of store brand assortment and other factors — have almost double the penetra• tion rate compared to the retail• ers lacking the designation. "The best-in-class retailers have figured out something that [other retailers] haven't figured out," Jim Holbrook, Daymon's former CEO, said in February. "It comes back to dif• ferentiation." Retailers need to build cat• egories based on their offering ochester, N.Y.-based of private brands and then fill in egmans Food Markets the gaps with brand-name prod• offers a breadth of ucts, not the other way around, store brand products. Holbrook explained. The best- in-class retailers, of which there are about a dozen, are doing this but other retailers are not. If there was a resounding and other retailers increased 4 "The retailers that want message from Daymon's percent in 2017 — eight times to hang on to the emulation "Private Brand Intelligence more than national brand sales. products and the national brand Report 2018," it was that store Private brands contributed an equivalents will not only fall brands are as popular among estimated $50 billion in margin further behind, they will go out consumers as they have ever to retailers' sales in 2017, an in• of business," said Holbrook, been. However, there is clearly crease of $2 billion since 2016. who is now an advisor for Ad• a case of the haves and have- The haves, which Daymon vantage Solutions, which owns nots regarding the success of calls best-in-class retailers Daymon. retailers' store brands programs, innovating on many facets of "This really is a definin according to the report. store brands, are flourishing oment. We believe that yc ated that in- and achieving an average of 32 can evaluate a retailer's overall store and online sales of private percent in private brand share of health just by looking at its brands from traditional grocers, total dollar sales. But when the private brands. If it has a weak deep discounters, mass mer• have-nots — retailers content private brand offering, [that chandisers, convenience stores with simply offering national retailer is] in trouble."

58 Store Brands / November 2018 / www.storebrands.com A YEAR IN REVIEW

WE JUST CAN'T STOP TALKING ABOUT MILLENNIALS

A lot of people - including millennials themselves - are tired of hearing about millennials and private brands. But as Don Stuart said during a seminar at the Private Label Manufacturer Associations Annual Meeting & Leadership Conference last March, millennials will play a pivotal role in the "boom or bust" of private brands in coming years. They cant be ignored. Stuart, managing partner of Wilton, Conn.-based Cadent Consulting Group, believes private brands are sitting on the cusp of a major boom. So do a lot of people. In fact, when Stuart asked the 200 or so attendees of his seminar at the conference to raise their hands if they thought store brands would be booming in the next five years, almost all hands went up. Zero hands were raised when Stuart asked who thought private brands would be a bust. Stuart and his firm have been studying private brands closely and crunching numbers along the way. While many reports say that "most" millennials are open to purchasing private brands and are brand agnostic, Stuart believes that number is closer to half of millennials, about 51 percent. But that number is still significant, considering that only 39 percent of baby boomers are open to purchasing private brands, he added. "That's 12 percent, which makes a difference in the share shifts," Stuart stressed. Stuart also noted there will be 15 million more millennials than baby boomers in the next 10 years simply because baby boomers will be leaving this world. So the the share shift factor

60 Store Brands / November 2018 / www.storebrands.com YEAR IN REVIEW

Association (NRA). Don't forget the 2016 shooting at What does this have to do with the Pulse nightclub in Orlando, store brands? Plenty where 49 people were killed. As store brands evolve and Publix operates most of its become more than just creating 1,160 stores in . In the and selling tangible private brand wake of the Tampa Bay Tribune's AND products, retailers are trying to report — when Publix began to be make a good name for them• criticized for supporting an NRA selves through excellent customer proponent — the retailer said it POLITICS service and other non-tangible was supporting Putnam for his measures to improve their own "pro business values," and made Publix Super Markets made brand images. But they might it clear it was donating money to Time magazine. But not like want to stay out of politics. Putnam, not the NRA. It's a point the Lakeland, Fla.-based super• Publix made national news well-taken, but it didn't seem to market chain wanted to make after the Tampa Bay Tribune re• resonate with everyone. Time magazine. ported in May that the Lakeland, Soon after the news hit, there In the June 11 issue of Time, Fla.-based grocery chain donated were calls to boycott Publix a photograph spanning two $670,000 in the last three years to through social media and other entire pages depicted a "die-in ' support Putnam's campaign. The mediums, including the die-ins protest at a Publix supermarket Republican politician said last organized by Hogg, which oc• in Coral Springs, Fla., organized year that he was proud to be an curred at several Publix stores. by , a survivor of the "NRA sellout." Opposing politicians also Marjory Stoneman Douglas High Of course, the acronym jumped in. State Rep. Carlos School shooting in Parkland, Fla. "NRA" is a sizzling hot potato G. Smith, a Democrat from A die-in is a demonstration in these days, especially in Florida, Winter Park, Fla., tweeted: "How which people lie down as if dead. mainly because of the heart• many flowers did I buy from Hogg, now a gun control activist, breaking school shootings that your stores for funerals, graves, rallied others to protest Publix's have occurred throughout the + memorials for Pulse + MSD support for Florida gubernatorial country, including last Febru• victims? #BoycottPublix" candidate Adam Putnam, a stout ary at Stoneman Douglas High Realizing it had a potential supporter of the National Rifle School, where 17 people died. public relations nightmare on its hands, Publix issued a statement saying it was suspending corpo• Publix was rate-funded political contributions boycotted for and was going to re-evaluate its supporting Florida giving processes. Publix also said: gubernatorial "We respect the students and candidate Adam members of the community who Putnam, a stout have chosen to express their voices supporter of the on these issues. We regret our National Rifle contributions have led to a divide Association. in our community. We did not intend to put our associates and the customers they serve in the middle of a political debate." Being a private company, Publix can support any political leader or political issue it wants. Publix, in fact, has supported Putnam for more than 20 years and nobody ever seemed to care. But this was a perfect storm of sorts, with gun control serving as the lightning rod.

64 Store Brands / November 2018 / www.storebrands.com includes several authentic prod• ucts. Members of Sam's Club pri• PLACING A vate brand team literally combed the globe — from visiting olive PREMIUM ON and tomato farms in Italy to wine orchards in France and to a smokehouse in East Texas — to PREMIUM procure the best ingredients and processing methods to create new products and improve exist• ing ones for the line. Trader Joe's is also making a name for itself behind its authen• tic private brands by sourcing products and ingredients from countries where they originate. Last spring, Keasbey, N.J.- based ShopRite, which has more than 270 stores in New Jersey, New York, Connecticut, Mary• land, Delaware and Pennsylva• nia, debuted the ShopRite Trad• ing Company, a line consisting of premium, artisanal foods that the retailer says is inspired by a vari• ety of world cuisines. Around the same time, Boise, Idaho-based Albertsons introduced Signature Reserve, a line of products for consumers "who are obsessed with the exceptional," according to the retailer. "We scour the earth for ingre• dients and unique flavors that Premium The top retailers realize they are Albertsons Cos. and ShopRite, meet the exacting standards of store need to take their store brands which introduced such programs Signature Reserve," Geoff White, brands are programs up a notch. They know this spring. Albertsons' president of Own experiencing that name brand equivalent "These brands can be pre-emp• Brands, said in a press release substantial products just don't cut it any• tive in many ways, and consumers announcing the line. "Products growth. more. They realize the relevance view them in an entirely different earn the Signature Reserve label of premium authentic private light than they traditionally have only after a rigorous selection brands as a way to differentiate viewed store brands," says Jim process, which includes scrutiny — and make money. Wisner, a private brand consultant by our culinary professionals According to market researcher and president of Libertyville, 111.- and expert merchants for top Nielsen, sales of private brands based Wisner Marketing. quality craftsmanship." eclipsed $125 billion across Wisner calls Krögers Hemis- More retailers are scour• traditional retail, thriving at plus 3 Fares a "watershed" private brand ing the planet to discover and percent in dollar sales year-over- for its authenticity. HemisFares is scrutinize foods and ingredients year with premium private brands billed as "a journey of epicurean in an effort to raise the bar for bringing 10 percent dollar growth. proportions." their store brands. It is what The Kroger Co., Sam's Club and Last year, Bentonville, Ark.- store brands are becoming Trader Joe's are three fine ex• based Sam's Club announced because retailers realize what amples of retailers embracing pre• the revamping of its Member's it is that will keep consumers mium authentic private brands. So Mark private brand line, which coming back to their stores.

66 Store Brands / November 2018 / www.storebrands.com YEAR IN REVIEW

68 Store Brands / November 2018 / www.storebrands.com YEAR IN REVIEW

'ECCELLENTE' IDEAS FOR PRIVATE BRANDS

of differentiation as a store brand for U.S. retailers. We also spoke with several representatives from Italian pizza ingredient manufacturers to get their views on selling authentic Italian pizza in the U.S. as a store brand. Stefano Laudadio, business development executive for PizzaSi, which manufactures "premium pizza bases" at its facility in Italy, said that Italians like the "full Bologna. This area is home to experience" of pizza, meaning 4,000 thousand farms where they like to taste the dough, the cows are fed on locally grown sauce, the cheese and whatever forage that bans the use of silage toppings are placed meticulously and fermented feeds. Cows on the pizza in every bite. It is are milked twice daily, and In May, Store Brands why all of the ingredients are the milk is taken to the cheese attended the CIBUS viewed as equal, none more house within two hours of each International Food Exhibition important than the other. milking. The milk is also used in Parma, Italy, on behalf of the "The dough is not just a straight from the cows without Italian Trade Agency. CIBUS, support that holds the toppings," any additives. After the cheese is one of the largest food shows Laudadio said. "We stress made in wheels, it is aged for a in Europe, featured about the fact that its not about the minimum of 12 months and up 3,100 Italian food exhibitors, quantities, it's about the quality. to 24 months. including hundreds of exhibitors Less is best. Pizza doesn't have Balsamico Village is located that introduced new products. to be junk food." in the picturesque midst of 173 No doubt that "Made in Italy" The visit to Italy also included acres of vineyards where the resonates with many Americans, several tours, including of grapes are grown to produce especially when it comes to a Parmigiano Reggiano Balsamic vinegar. Modena, food. So the CIBUS show will cheese plant in Parma and known as the "Balsamic Valley," remain a place to find potential of the Balsamico Village, an is the only place in the world and authentic Italian private educational theme park in where it's possible to produce it. brand products. Modena that teaches visitors the According to Luca Gamberi, During the show, we sampled origin of balsamic vinegar. who provided a tour of many products, from nduja The origin of Parmigiano Balsamico Village, the area is to pizza. The former is a Reggiano dates back nine home to secrets and recipes th mainstream product in Calabria, centuries. It's produced were developed in accordance Italy, and has been for nearly exclusively in the Italian to the unique climatic 30 years. But nduja — a spicy, provinces of Parma, Reggio characteristics of the region. spreadable pork salami from Emilia, Modena and parts of It's very cold in the winter (32 Italy — could be the definition the provinces of Mantua and degrees Fahrenheit) and very

Store Brands / November 20)8 / www.storebrands.com