KANSAS CITY, Mo. -- Fresh meat and poultry have long been used by retailers as hallmarks of quality and variety in their stores. But in today's climate of consolidation and increased competition, the category is taking on new significance.
A number of progressive operators are using beef and chicken -- both raw and value-added -- as part of a larger private-label strategy that captures customer trust and creates a total-store environment where the retailer's "brand" represents more than mere product.
The concept is sound, but the execution requires careful planning, according to supermarket executives spearheading their store's private-label meat programs. Issues such as market segmentation, packaging, labeling, prices and promotional support all are factors in bringing to bear a successful long-term program, they said.
"Shoppers turn to their supermarkets for advice on menus, preparation, cooking and new products," said John Waters, a partner in MarCom Communications, Greer, S.C. "That trust that they've developed over time is a supermarket's most powerful asset. But they can't take it for granted."
Waters made his comments during the recent 2000 Meat Marketing Conference here, in a retailer panel discussion of store-brand implications for the supermarket meat department.
Private label has meant significant growth for Roundy's, the Pewaukee, Wis.-based wholesaler, which enjoyed more than a 150% increase in private-label volume between 1996 and 1998, according to Dennis Smith, corporate deli/meat director for the 900-store cooperative.
"We felt we had to have another [tool] to compete with other than price," he said, noting that competition from supercenters has virtually removed pricing as a stand-alone strategy. "Private label is that vehicle."
Other market forces, like reduced brand loyalty, also made store-brand implementation easier; similarly, adding private label to the mix allowed Roundy's more control over food-safety related processing specifications, he said.
Roundy's currently offers 75 meat items and recently expanded its store-brand inventory to include a line of 12 deli products, under a sub-brand called Main Street Deli. The line was launched with four products: turkey, ham, roast beef and salami, all sourced from three suppliers.
"We took every supplier that we deal with for these products and we evaluated each one of them. We had 200 people in our corporate office sample all this product and give us their opinion. That's how we decided who we'd go with."
Securing a long-term relationship, involving both time and money, was critical in selecting what company to source from, Smith added. The ensuing partnership allowed both Roundy's and the manufacturers to develop a four-part promotional program that included point-of-purchase kits for each store, coupons, employee training and demonstrations.
The new line helped boost deli sales 48% after two months, he said. In one week, one Roundy's division reported nearly 18% distribution in private-label sales, "which for us, a wholesaler, is a very big number."
At the retail level, private-label items in meats are helping to create destination departments and signature sub-categories. Wegmans Food Markets, Rochester, N.Y., has developed three store-brand lines that appeal to a variety of customers, according to Marty Gardner, director of meat merchandising for the 59-unit independent.
Wegmans' private-label philosophy encompasses all levels of products, including upscaled and upgraded commodity items. This approach places significant emphasis on quality and uniqueness, so that Wegmans considers more than 7,000 items in a typical unit to be private label in nature, with 300 more coming out in an average year, said Gardner.
The first label, Wegmans, comprises the largest number of products throughout the store, and is the most price-competitive, he said, adding that the chain does about half of its business in "a label like this." The healthy-profile Food You Feel Good About brand was introduced in 1992 and now includes 800 stockkeeping units. It can be found in meat, seafood, produce and grocery. The label takes a high profile, especially in the meat department.
"These are meat products that have never had hormones or antibiotics and have never [had] animal byproducts in the feed, and everything in the brand markets to that point," said Gardner.
To highlight the brand in both the service and the self-service case, all meats under the Feel Good About line are merchandised together, which helps build a unified, premium image in the customer's mind, he added.
The final brand is the most-recently introduced. The Chef Developed logo is tied specifically to ready-to-cook products, and is also found in the meat and other perishables categories, Gardner said. This proprietary line, prepared in-store by Wegmans' store chefs, is the "most exciting" right now, because it's growing at the fastest rate in the meat department and has the highest contribution to margin. But regardless of product, Gardner stressed, there needs to be a commitment on all sides for a winning program at any level.
"You need to make specific arrangements with like-minded vendors," he said of Wegmans' success with the brands. "You need to have unique product specifications so you can market around that and carve out that opportunity within your marketplace."
Likewise, there needs to be a "ruthless" adherence to quality, as well as a consistent labeling policy that crosses categories and creates a strong brand identity, he said.
"When quality suffers, everything in the brand suffers," he said.
Russ Wolfe, senior vice president of perishables for Topco Associates, Skokie, Ill., agreed, saying that customers today automatically associate anything that does not carry a name on it as the retailer's. For that reason alone, it's important to rigorously protect quality and safety.
As a buying cooperative serving 26 retail groups, Topco's private-label odyssey has moved from a single, all-purpose brand, Food Club, to some 16 individual store-label brands that include deli meats, bacon and frankfurters. All help build equity in the store, he said.
"I want the consumer and the relationship that we're going to have to be between them and me. I don't need any third-party label in the mix," said Wolfe. "And, I don't think you can build equity anymore on somebody else's label."
The store brands help to create a point of differentiation, and to boost profits -- at least in the long term -- because there's more in-house control over the product line, he added.
"If we want to be able to differentiate ourselves and develop the relationship that we want with our consumers, we're going to have to be able to do it with corporate brands," said Wolfe.
At units of Edina, Minn.-based Lunds Food Holdings, the relationship between the customer and retailer is growing through the popular Chef Market line of value-added meat, poultry and, now, seafood. Dave Barber, executive chef of meat and seafood, said the private-label line has grown from about 40 choices introduced three years ago to some 150 today.
"Meatcutters make everything behind the counter," he said. "We have stuffed chicken, pork, beef, lamb and marinades. All the labels on the products have the ingredients, cooking instructions and nutritional information."
The line is one of the most popular ideas coming out of the meat department, and the Chef Market label is responsible for nearly 20% of department sales, he said.
Outsourcing other fresh products has upscaled the commodity status to reflect new levels of quality. The retailer has an exclusive contract with Gold 'n Plump Poultry, St. Cloud, Minn.; is one of four companies in the world that sell a variety of farmed shrimp from Honduras; offers certified Angus beef from Coleman Natural Products, Denver; and has found great success with in-store glazing of hams from a Wisconsin supplier, Barber said.
In Europe, private label is leaps and bounds beyond anything found Stateside. Store-brand "ready-meals" in England alone are a $1.2 billion business, are growing at 19% a year and currently make up 99% of the category in stores, according to Richard Walker, marketing director for Oscar-Mayer/Hygrade, Bristol, United Kingdom. The manufacturer of fresh meals has a single customer, J. Sainsbury.
"It's a destination category in all the top retailers, and in Sainsbury, it's their No. 2 category," he said of the brand's high in-store profile and popularity with customers. Of all the items, lasagna is the best seller, he added.
"The shopping basket at Sainsbury's that has a ready meal and beer or wine in it is the biggest-grossing shopping basket Sainsbury's has," he said. "A normal basket is [worth] 35 pounds; a basket with those products in it is worth more than 70."
Another British retailer, Marks & Spencer, devotes more than 2,000 linear feet to private-label fresh meals, typically four or five double-wide aisles filled on both sides, said Walker. This is the highest evolution of private-label products to date, and a possibility for American retailers willing to put in the time and energy necessary to develop store-brand programs over the long term.
"Six million ready meals a week include beef or chicken," said Walker. "So, we're not actually losing meat consumption in the U.K. Rather, people are moving towards more convenient eating solutions, and we've got to include meat and chicken in those forms that consumers prefer."