KROGER ADDS PRIVATE-LABEL LOW-, NO-FAT PRODUCT LINES

CINCINNATI -- Kroger Co. here is looking to ring up some healthy sales with the introduction of two low-fat to no-fat private-label lines.Paul Bernish, spokesman for Kroger, said Healthy Indulgence items are available in grocery categories, bakery and dairy. Sensible Indulgence products, he said, can be found in the bakery and snack aisles. The lines are "doing quite well in all categories and we

CINCINNATI -- Kroger Co. here is looking to ring up some healthy sales with the introduction of two low-fat to no-fat private-label lines.

Paul Bernish, spokesman for Kroger, said Healthy Indulgence items are available in grocery categories, bakery and dairy. Sensible Indulgence products, he said, can be found in the bakery and snack aisles. The lines are "doing quite well in all categories and we are pleased with the products and their acceptance," he said.

"We have not established a target for the maximum number of items in either line; that will, of course, be determined by sales, customer demand and whether we can produce the items profitably -- the same standards we use for the entire Kroger private-label line," he said.

An industry analyst said the program comprises a small portion of Kroger's private label, with fewer than 100 stockkeeping units.

The chain has been running several full-page ads touting various products within the new lines. One ad in an Atlanta newspaper read, "Now, you can indulge without paying the price." Below the lettering was a picture of several of the products being offered: mesquite barbecue potato chips, mayonnaise, party crackers with buttery flavor, cheddar cheese extra thin crackers and Chip Mate chocolate chip cookies. Other products included cookies 'n cream ice cream, gelatin, shredded cheddar cheese, bread, yogurt, cream cheese and sour cream. Two quarter-page ads on subsequent pages

further advertised the new products.

"The difference between [the two lines] is essentially that Healthy is low and/or non-fat, while Sensible is reduced fat," Bernish said. Healthy meets the government's guidelines for claims as being "healthy," he added.

The full-page ad appearing in the Atlanta area spelled things out for consumers: "All Kroger Healthy Indulgence Foods contain 0 to 3 grams of total fat per serving, 0 to 1 gram of saturated fat+ and they all taste great."

The quarter-page ads touted Sensible Indulgence cheese curls, cheese popcorn, corn chips, mesquite barbecue chips, potato chips and mayonnaise. "To earn a name like Sensible Indulgence, each serving contains: 4 grams of total fat or less, 1.25 grams of saturated fat or less, 600 milligrams or less of sodium and 74 milligrams or less of cholesterol," read the copy on an imitation nutrition fact label included in the ad.

Kroger also touted the price savings the new lines offer when compared with national brands.

Lori Smith, a category manager for the division, was quoted in the ad, saying that many of the products in the line are priced at "less than half the price of the national brand." The Sensible Indulgence cheese curls, cheese popcorn and corn chips were priced at 99 cents per 4- to 11-ounce package. Mesquite barbecue chips and potato chips were selling at two 4- to 5-ounce packages for $3. A 32-ounce jar of mayonnaise was promoted at $1.69.

Industry observers said products in both lines were markedly less expensive than their national brand competitors.

One observer cited the ice cream category. "We noticed [the lines] primarily on signs on the freezer door with a price reduction that made it quite inexpensive," he said. "I guess they [were promoting it as a premium ice cream] although the price wouldn't have indicated it when we saw it." Bernish said Kroger is not positioning the lines as premium. "The real niche we are after are consumers interested in reducing fat in their diets without sacrificing flavor or enjoyment," he explained.

Kroger is calling attention to the line with yellow "New Item" shelf talkers, according to one observer.

This same source also said Kroger is giving "very good shelf position" to its private label, particularly in the frozens section. "I know it knocked quite a few [stockkeeping units] out of [frozens], because it takes up a lot of space in their section. They're going to expose that product to the best sets in those sections," he added. Mark Husson, vice president of J.P. Morgan Securities, New York, said the introductions are an effort by Kroger to reach its target audience.

"What you have to do when you're like Kroger and you want to be upper-middle market in terms of the aspirational level that you create, is you need to maintain interest in the store, but also to re-emphasize a lot of very positive attributes that the store already has."

Husson added, "It's a natural and logical extension of everything they've done in private brand in the last five years. It's not revolutionary; it's evolutionary."