Safeway Seeks Lift From New Private Brand
In a BrainTrust Query last week on RetailWire, Carol
Spieckerman, president of newmarketbuilders, wrote about Safeway’s success
introducing private labels through its Better Living Brands Alliance that not
only help build sales and profits at the chain’s stores, but were being distributed
at other chains including Brookshire Borthers, Hy-Vee and Price Chopper.
Yesterday,
Safeway announced the rollout of Open Nature, its new brand of 100 percent
natural foods. The line includes 100 products made from natural ingredients
with nothing artificial added. Items in the current lineup include
a variety of fresh and processed meats priced between $3.99 and $5.99. Safeway
plans to add Open Nature products in categories including bread, frozen foods,
ice cream, salad dressing and yogurt.
"Open Nature is a great addition to Safeway’s portfolio of health and
wellness brands joining O Organics and Eating Right. It’s another demonstration
of Safeway’s commitment to providing our customers the best possible experience
when they prepare and eat meals for themselves and their families," said
Joe Ennen, senior vice president of consumer brands at Safeway, in a press
release.
The Open Nature launch follows Safeway’s 2005 introduction of O Organics,
which the grocer claims is the number one organic line (470 items) of food
and beverages in the U.S. today. The company’s Eating Right line was launched
in 2007 and has grown to over 300 low-priced items.
Discussion Questions
Discussion Questions: How different is Safeway’s private label program from that of other retailers? Does its various private labels give Safeway a competitive advantage?
Do they really need another private label brand? From a marketing standpoint, I might think they are going to dilute their offerings using so many different names. It’s the opposite strategy from Publix, who has unified it’s private label products with one look.
Two points of differentiation immediately come to mind when it comes to Safeway’s private brand development. First, they have a highly-developed private brand organization and commitment to success. At last year’s Private Brand Movement conference, the need for executive commitment and buy-in was cited repeatedly as a critical success factor yet, for some retailers, “dare to succeed” and “if they come, we’ll build it” are still the model as private brand gets tacked on to other responsibilities or left to skeleton crews. I loved what Nancy Cota, Safeway’s VP of Perishables and Private Brand said: “What’s right for the brand may not drive sales.” As counterintuitive as that may sound, Safeway gets it that brand stewardship starts with the launch proposition; however, once sales start to roll in (or not), brand integrity must be maintained, even if that means keeping in laggard items that round out the brand story. Without them, the brand is degraded. Second, the Better Living Brand Alliance was created with the express purpose of exploring new distribution channels for select Safeway brands. To my knowledge, Safeway was the first to create such an entity (Sears came later) and it has driven volume for O Organics that otherwise would prove elusive if confined to Safeway’s stores.
Safeway has a system.
Safeway is kind of confusing because they already had a natural foods private label. What was wrong with their “O” label? Do they really need two? Or more than two? Are they going to issue a new press release for each individual private label?
Introducing this new line might help in drawing those shoppers who are searching for health and wellness for their families. Organics appeal to a specific group of shoppers and Safeway O is working there. For many people, healthy means “natural”–no artificial colors or preservatives, no trans fats, no HFCS, no artificial sweeteners. While natural can mean many things, some supermarkets have done well by working with the trend to healthier eating, by first eliminating all the things that are not perceived as healthy, then developing further product choices.
Finding these items on store shelves is greatly assisted by clearly identified icons and graphics–Fresh & Easy Eatwell, Whole Foods – Health Starts Here, Meijer Naturals – Additive Free Grocery, Loblaw – Blue Menu, and a number of others. Clear identification, in store promotion, distinctive packaging all make these products easier to find on the shelves, too. These PB tiers are not equivalent, and can serve to differentiate what the retailer stands for–noticeably Whole Foods had redefined itself around this tier.
With consumers looking for healthier options, it makes sense for Safeway to develop an All Natural line, with particular attention to meat and dairy. With the opportunity to offer a refined selection for health conscious shoppers, willing to pay a fair price for the right products, it would be unfortunate not move ahead here.
Looking beyond Safeway’s private brand prowess, which is impressive, the success of this line will turn on consumer’s reaction to the “All Natural” positioning. It currently rates as a highly desirable descriptor conceptually, but it remains to be seen what will happen when consumers discover that “All Natural” is about as wide open as “No Extraterrestrial Substances Added.” If consumers are essentially equating “All Natural” and “Organic” now (as I believe they are) then the organic brands marketers should come out blasting on the differences. Of course, Safeway’s “O Organics” won’t be leading that charge.
No applause from me. More like the sound of a nerf wind chime. As a forensic marketer I recognize clever marketing when I see it. Clever is good. Honest is better. I have three gripes about Safeway’s PL efforts: 1.) I’ve seen no reliable research that indicates shopper demand for PL. To claim that PL providers are responding to demand is specious. 2.) Safeway shoulders national brands off the shelf in favor of their PL. This is not a response to customer demand, but a play for more profit. Profit is good, but remember the role PL played in the demise of A&P. When taking pride in the sales growth of Safeway PL, they must also take into account the corresponding decline in national brand sales in those categories. 3.) Not only do shoppers NOT know what “organic” or “all-natural” mean, the FDA doesn’t either. The FDA’s definitions of these terms have holes that manufacturers and retailers could drive a truck through. That would be a Safeway tractor-trailer, by the way, not their tiny home delivery vans.
PL is more profitable than national brands because there are no promotional costs. In my view, if Safeway wants to take a leadership role in healthy, innovative, store-branded products, then it’s their responsibility to proactively teach shoppers about the new brands and their attributes. Less profit, but more consumer knowledge. Unless, of course, consumer knowledge is not an objective.
Safeway’s new effort in private label is confusing for consumers. There is no clear definition for “natural” and I think Open Nature will easily be confused with O Organics and Eating Right. Why not just remove artificial ingredients from those brands? Natural is not one of the new nutrition icons just launched by FMI and GMA.
And after all, there is only so much space on the shelves anyway. Will consumers really be happy to see a reduced product selection and more private label which is already very predominant at Safeway already? Time will tell.
I disagree with the statements made about private label weakness.
Great A&P’s downsizing in the 1970s had far less to do with their comprehensive private label strategy than it did with their poor store locations, lack of store upkeep and maintenance, stockouts, etc.
A&P has always been known for high quality private label products. Ann Page and Jane Parker were national brand equivalents in all aspects except price, and were sold exclusively by Great A&P.
Eight O’clock coffees were the first private label brand nationally distributed by a supermarket chain and sold in competitors stores.
The American buying public has fondly embraced private label products for their quality and value.
Safeway may be confusing customer perception with a separate natural private label offering. Great A&P’s Greenway is distinct for offering a comprehensive line of organics, natural food and household SKUs.