Center Store Is Bouncing Back

Hannaford Bros.' Guiding Stars shelf labeling program is a perfect example of why the Center Store is making a comeback, according to a new report. After several years of sagging sales, dollar sales of key Center Store categories grew 3.1% in the 52 weeks ending Aug. 12, 2007, across food, drug and mass channels, including Wal-Mart, according to Information Resources Inc.'s Center

Scarborough, Maine — Hannaford Bros.' Guiding Stars shelf labeling program is a perfect example of why the Center Store is making a comeback, according to a new report.

After several years of sagging sales, dollar sales of key Center Store categories grew 3.1% in the 52 weeks ending Aug. 12, 2007, across food, drug and mass channels, including Wal-Mart, according to Information Resources Inc.'s “Center Store Revival: Retailers and Manufacturers Stage a Comeback.” (Wal-Mart doesn't share sales data with IRI; instead, the information was gleaned from IRI's Consumer Network household panel.)

Though the share gain may be small, it means a lot, since it follows a decade of Center Store share losses to supercenters, club stores and drug stores.

To survive in a price-oriented market, many retailers have tried to differentiate themselves by building their fresh and prepared foods sections. This has resulted in reduced investments in the Center Store.

But retailers are now revitalizing the department in several ways, with new health-and-wellness programs that incorporate the Center Store into storewide initiatives. Guiding Stars is an example of this.

“Our experience with Guiding Stars would suggest that customers are looking for guidance about nutrition more in Center Store than in other areas,” Hannaford spokeswoman Caren Epstein told SN.

Guiding Stars rates the nutritional content of more than 25,000 food products using a scale of zero to three stars, with three indicating the most nutritious items. Packaged foods with products that have one, two or three stars are selling at two and a half times the rate of those that have no stars, according to Hannaford.

While sales of some major Center Store categories like carbonated beverages and ready-to-eat cereal have eroded to other outlets, efforts like Guiding Stars show that supermarkets have not given up on the department, which still represents 46% of total grocery sales.

“Center Store is by no means dead or dying,” said Sheila McCusker, who researched the IRI report. “It remains a critical component of the store.”

The report recommends that retailers should learn a lesson from Guiding Stars and develop similar programs to tap into the health-and-wellness trend sweeping the food retailing industry.

Indeed, better-for-you food and products that offer functional benefits — such as ready-to-drink tea, trail mixes and bottled water — are among the fastest-growing Center Store categories, according to the report.

The IRI study referenced SN's 2007 Survey of Center Store performance, which showed that 95% of retailers plan to enhance their health and wellness positioning within Center Store over the next year.

Along with health and wellness, retailers and manufacturers are revitalizing Center Store in other ways, through stronger private-label development and product assortments that cater to local shoppers.

Private-label growth initiatives have become more focused on categories with the strongest opportunities, such as several non-edible grocery categories, including disposable tableware, whose dollar share grew 17 points in supermarkets between 2002 and 2007, and household cleaner cloths, which were up 10 points.

Retailers have also differentiated their stores by developing strong health-oriented private labels. Take Safeway's highly successful Eating Right and O Organics lines: Both are key components of the company's “Lifestyle” store repositioning plan.

Micromarketing is another strategy. The report states that the Center Store of the future will likely differ significantly from one store to the next, even within the same retailer. That's because operators will increasingly stock products that cater to their local shoppers. Some stores may carry certain flavors of packaged rice, while others carry different varieties.

Wal-Mart's “Stores of the Community,” for instance, deliver a relevant assortment and shopping experience to unique consumer segments, according to the report.

Along with retail efforts, manufacturers are doing their part, too, according to the report. While higher prices in some categories — including baked goods and baby formula — contributed to Center Store growth, product innovation played a large role as well.

IRI named Campbell Soup Co.'s reduced-sodium soups one of the most successful new product introductions last year, saying they helped the soup category — which for years had flat to declining sales — climb 5% in dollar sales in food, drug and mass channels last year.

Likewise, Center Store categories have benefited from nutritional symbols that PepsiCo., General Mills, Kellogg's and other manufacturers have placed on packages to help consumers more easily identify better-for-you products.

Manufacturers are also experimenting with new merchandising programs. The report cites Kraft's “Mom's Kitchen” cookie/cracker destination department as an example. As reported in SN, Buehler Food Markets, Wooster, Ohio, tested “Mom's Kitchen” in three stores. Sales increased not only of Kraft's Nabisco products, but also in the entire cookie/cracker category.

The test transformed the cookie/cracker section into a near replica of a kitchen, complete with tables, shelving and cookware. Products were merchandised in cabinets surrounded by items typically seen in a home kitchen, including hanging pots, pans and utensils and cookie jars on countertops.

Private Property

Non-edible groceries lead the list of private-label categories posting the largest share increase

CATEGORY DOLLAR SHARE POINT CHANGE (2007 VS. 2002)
Disposable tableware 17.7
Household cleaner cloths 10.8
Trail mixes 9.4
Egg substitutes 9.2
Dried meat snacks 7.4
Pet supplies 5.0
Source: IRI, based on supermarket sales for the 52 weeks ending Aug. 12, 2007, compared to the same 52 weeks in 2002.

Growth Categories

Ready-to-drink tea and energy drinks are among the fastest-growing Center Store categories

CATEGORY DOLLAR SALES CHANGE VOLUME SALES CHANGE
Ready-to-drink tea/coffee 28.6% 30.2%
Energy drinks 26.2% 32.6%
Trail mixes 24% 13%
Dip/dip mixes 13% 16.7%
Drink mixes 12.2% 1.2%
Dried fruit 11.6% 4.9%
Baked goods 11% 1.6%
Bottled water 10.8% 5.4%
Snack/granola bars 10.2% 6.4%
Wine* 8.1% 3.9%
Source: IRI, based on 52 weeks ending Aug. 12, 2007, vs. same period prior year, in food, drug and mass (including Wal-Mart).
* Wine sales include grocery and drug stores only.

Losing Steam

While Center Store is rebounding, supermarkets are still losing share to supercenters

CATEGORY SUPERMARKET SHARE CHANGE SUPERCENTER SHARE POINT
Change Carbonated beverages -5.4 3.5
Beer -2.0 1.6
Salty snacks -3.5 3.3
Cold cereal -5.2 2.7
Bottled water -1.8 1.2
Source: IRI, based on dollar share point change for 2007 vs. 2003.

Retailer Recommendations

Retailers can rebuild their Center Store by adopting certain business practices, according to IRI.

Among them:

  • Track Center Store share shifts at the store level
  • Implement a rigorous private-label development category selection process
  • Identify sourcing opportunities to bring in unique products
  • Ensure adequate shelf space and optimal assortment among high-growth Center Store categories
  • Monitor the impact of small-format store development (e.g., Tesco Fresh & Easy) on total store growth, including Center Store
  • Integrate Center Store categories into total-store growth initiatives, such as health and wellness

Front and Center

Center Store accounts for about half of supermarket dollar sales

DEPARTMENT 2007 SHARE 2004 SHARE
Center Store 45.9% 46.2%
Produce/prepared foods 9.5% 8.5%
Source: IRI