NEW YORK (FNS) -- Nowhere within today's modern supermarket can retailers feel the pull of private label more intensely than in the perishables departments. This power perimeter -- dairy, deli, bakery, seafood, meat and produce -- is being put to work as a marketing strategy in an effort to build store image and create differentiation. As a result, it is increasingly becoming the primary, deciding factor for consumers in store selection.
Private-label fresh foods have also delivered supermarket operators an effective competitive tool to fight for the share of a consumer's market basket.
"Perishables have become the main battlefield for traditional supermarket operators to assert their role as the main buying location of food by consumers," said Brian Sharoff, president of the Private Label Manufacturers Association here. "Every other area is under the challenge from other classes of trade. Mass merchants, category killers, warehouse stores and the Internet virtual stores each pose a challenge, offering the same goods as supermarkets. The one remaining distinction left is in the perishables departments.
"When the supermarket needs to reassert itself competitively, it can be done strategically with private-label perishables," he continued. "That is where the true power of private label can be unleashed."
Even national-brand oriented merchants, such as Wal-Mart, Bentonville, Ark., have quickly come to recognize the attraction of private label. "While it is critically important to hang our hat on national brands, we do have our Sam's American Choice and Great Value lines," said Bruce Peterson, vice president of perishable merchandising for the retailer. "While second tier in importance, private label has been a successful part of our merchandising plan. Private label satisfies a customer need and offers our customers a different kind of value."
Offering value is not the only strategy retailers are attaching to private label. Operators are aligning it with a larger strategy to capture new shoppers, while retaining the repeat customer.
"Today's store brands are emerging as a vital part of supermarkets' overall marketing strategies; and they exert a major influence on the entire chain's image among consumers," noted John Waters, a partner in MarCom Communications, a Greenville, S.C.-based consulting firm. "Private label is rapidly moving out of the realm of price promotion and into the category of strategic marketing tool.
"The growing influence of store brands in perishables is just the beginning of what will likely become a solid, long-term trend, because it's an outgrowth of some well-established market forces," he said. "Perishables are important to consumers."
It is this consumer interest in private label that supermarket operators are hoping to leverage in meeting and beating competitive forces. In one instance, alternative formats have put great pressure on supermarket operators. Warehouse clubs, general merchandisers and specialty retailers have been taking market share, particularly in Center-Store categories, industry experts said. As a result, supermarkets are becoming more sophisticated about marketing themselves with strategies such as private label that capitalize on their strengths in perishables and shopper trust, noted Waters.
Creating store brands in the fresh departments that reflect a commitment to quality, freshness and variety is an effective way for supermarkets to differentiate and maintain customer-visit frequency. But how can store branding pack a punch with items that are not generally contained in a can or in a box? The PLMA's Sharoff suggested that branding sections of the store is one method.
"Branding of perishable departments cannot happen overnight," he cautioned. "It takes time to develop and understand, process and execute. Store-branding identifiers of perishable departments is not a fad, it's a long-term strategy."
At D&W Food Centers, Grand Rapids, Mich., the operator has developed icons, logos and brands for all items in each fresh department. Produce, for example, is dubbed the Farmer's Market, seafood is called Fish Tails, and meat is distinguished as The Butcher's Block.
Bellingham, Wash.-based Haggen Food & Pharmacy banners its food-service and deli area under the Market Street Cafe. Bi-Lo, Mauldin, S.C., has taken the name of a popular local restaurant and emblazoned its name -- Vince's -- on a variety of products in the service deli case, creating a distinguishing brand for the department.
Despite the marketing issues, quality remains a key issue with private-label perishables. Operators must create strong manufacturer partnerships if they want to build and maintain a successful private-label image that transcends all departments to the actual store banner, said industry observers. Chain executives must understand that when a customer believes the base advertising, as well as the store's image, he or she tends to believe in the packaging, and is comfortable enough to take a risk on a purchase.
This image identity is crucial for the initial sale, but it is performance and repeat sales that bolster a total program and generate store loyalty, retailers said. When a private-label product truly performs as promised, customers patronize a particular venue because they know there is nowhere else they can get the item than at that store.
"We own our labels. We can change suppliers, without recognition at the customer level. But the quality level must be there," said one operator.
D&W has positioned its private-label program to be equal to, or better than, the leading national brand. And, in a twist, it has created distinctive items with unique qualities in the form of value-added, signature items.
"Retailers who conceptually add value to the perishable categories effectively change the product in the eye of the consumer," said the PLMA's Sharoff. "When melon, bread and chicken is sold in a supermarket, it is a simple commodity. By making the chicken oven-ready or even preparing it; by slicing the fruit; and by offering artisan bread, retailers are taking the ingredients and combining categories to add value.
"Retailers today see tremendous profit potential with private-label perishables, he added. "Private label creates loyalty above and beyond commodity presentations and adds value to products."
