BJ'S: PRIVATE-LABEL PROGRAM TO SPEED UP

NEW YORK -- BJ's Wholesale Club is accelerating its corporate-brand program from close to 5% of company sales now to 10% penetration by January 2005, according to Laura Send, executive vice president, merchandise.Speaking at the UBS Warburg Global Consumer Conference here, Send said private label has shown double-digit comp increases and provided a new competitive tool for the Natick, Mass.-based

NEW YORK -- BJ's Wholesale Club is accelerating its corporate-brand program from close to 5% of company sales now to 10% penetration by January 2005, according to Laura Send, executive vice president, merchandise.

Speaking at the UBS Warburg Global Consumer Conference here, Send said private label has shown double-digit comp increases and provided a new competitive tool for the Natick, Mass.-based membership warehouse club chain.

"We want to gain market share from other channels," she said. "We'll always be chiefly national brand, but will follow the consumer [when it comes to interest in private label]." BJ's launched its private-label efforts in January 1999, and had 185 items with 3% sales penetration by January 2001. It expects to have 250 items with 5% penetration by January 2002.

Warehouse clubs traditionally play down private label, but BJ's has recognized an opportunity. The focus is on premium private-label merchandise priced 20% below comparable brands. This includes SKUs in grocery, health and beauty aids and general merchandise, including signature products in categories without a brand leader, Send said. Examples of the latter include a dried fruit and nut mix, and a cookware set.

"Private label provides brand strengthening for BJ's and we also pick up some margin," Frank Forward, executive vice president, chief financial officer, told the conference.

BJ's uses two private labels: Berkley & Jensen for nonbusiness customers and Executive Choice for business members.

The Berkley & Jensen line has products in grocery, HBA and general merchandise, as follows:

Grocery: juices, pastas, frozen foods, laundry detergent, parmesan cheeses, and premium holiday nuts and candies.

HBA: vitamins and supplements, nonprescription medicines, children's chewable vitamins, antibacterial hand soap and herbal remedies.

General Merchandise: luggage, men's apparel, mixing bowl sets, barbecue sets, down comforters and flannel sheets.

The Executive Choice line incorporates a large range of products for small business, including: coffee and coffee filters, condiments, frozen french fries, plastic cutlery, commercial-grade cleaning products, office chairs, steam tables, shop towels, wastebaskets and windshield washer.

There are also a number of private-label products under development, including:

Cleaning Supplies: chemicals, rubber gloves and body wash.

Condiments: honey, dressings, mayonnaise and peanut butter.

Frozens: carrot cake, orange juice, shrimp and novelty ice cream.

Furniture: bunk beds and futons.

Product growth at BJ's isn't confined to private labels. The club is expanding stockkeeping units in a range of store departments, including those geared to the general consumer, which is the company's primary constituency, Forward said.

"For instance, we're offering not just pet food, but also pet accessories," he said. "We have an expanding variety of TVs. We also offer categories not available in other clubs, such as greeting cards, magazines and specialized housewares. Broader merchandise brings higher margin opportunities, and we try for more convenient product packages for our nonbusiness members. We're offering 6,000 SKUs, compared to about 4,000 at Sam's and Costco."

Also fueling growth is club-unit expansion, Forward said. BJ's, which now operates 125 units, expects to have about 175 by the end of 2004 and close to 200 by the end of 2005. The company adds 10% of selling square footage to the chain each year as it fills in gaps and enters new markets. BJ's expansion is helped by its smaller footprint, which at an average 111,000 square feet is smaller than that of Sam's and Costco. The smaller size reduces site development and construction costs, and provides more options for site locations, Forward said.

"Our objective is to become the most visible club in our markets, so we will be adding more units," Forward said.

Florida is among the markets with strong potential for new growth. Among other new markets with strong potential are Georgia and North Carolina.