PL Buyer Cover Story: Charging Forward

Discussion
Feb 21, 2007

By Jill Rivkin

Through special arrangement, we offer this excerpt from PLBuyer’s recent cover article for discussion on RetailWire.

It’s not often you’d see a company’s revenues at $40 billion and consider it “new,” but Supervalu seems to be just that. Thanks to the acquisition of Albertsons last year, Supervalu is the No. 3 grocery retailer in the United States, behind only Wal-Mart Stores and Kroger.

Michael Witynski, Supervalu’s group vice president of the Our Own Brands group, said, “Our challenge in the short-term is the complexity of bringing two large organizations together. Now that we have 103 store brands, we’re working toward consolidating those brands and making sure they’re relevant to consumers in the different formats we serve.”

“Really, there are 103 labels and very few brands,” he added. “And that’s what our charge is — to create brand equity. We need to rationalize and create better brands. Our philosophy is based on becoming a best-in-class, industry-leading own-brands company.”

Supervalu’s pillars driving business development are developing formats that are relevant to customers; creating passion and fun in selling food; having a superior own-brands offering; and leveraging the size of the organization.

“We have a lot of work to do in terms of growing our own-brand category share,” said Mr. Witynski. “We’re sitting on about 16.5 percent if you look across the enterprise. Across the different banners, it’s anywhere from 9.5 percent to as much as 24 percent … By the end of year three, we want to be at 25 percent penetration. And by the end of year five, we’d like to get to 30 percent because our peers are sitting at about 24 to 25 percent today.”

So how is Supervalu going to reach these goals? By leveraging scale, staying focused in the store and picking brands from the lot that really mean something to consumers.

“In the long-term, we’ll be working on innovation to drive growth and in a parallel path working on our strategy to create mega-brands,” said Mr. Witynski.

With mega-brands, Supervalu will recognize cost efficiencies in research and development, production, labeling, packaging and everything in between, enabling the organization to invest in its brands and strengthen profits. Altering the company’s pricing strategy will be justifiable as “we move away from that 15 percent delta across the board,” Mr. Witynski said. “It will all depend on the category manager’s strategy in center-store and fresh, and what we’re trying to accomplish with the brand. With our innovation and product quality, now we have to have the courage to realize it’s OK to be proud, deliver superior quality and base our pricing strategy on that. It’s a discipline that we need to bring in and change the culture.”

To tag some of its own-brands with a higher price, Supervalu recognizes the need for a higher level of performance in new products and the development process. What was once about a year-long process, the team is targeting six months from concept to shelf, of course varying depending on the complexity of an idea.

Supervalu is looking for vendors to play a bigger role. “The online auction, in my mind, isn’t relevant any more,” said Mr. Witynski. “To collaborate with a manufacturer, price is absolutely important, but we can get there in different ways. Collaborating makes you work hard at delivering on customers’ expectations, and we plan to work hard to collaborate vs. short-term auctions and price relationships.”

Discussion Questions: What do you see as the biggest challenges going forward for Supervalu in its private label program? What should it do to bring a sense of cohesion when it starts with 103 separate product brands/labels? What was your reaction to the comment that online auctions aren’t relevant anymore?

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6 Comments on "PL Buyer Cover Story: Charging Forward"


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Mark Lilien
Guest
15 years 3 months ago

Innovation is the healthiest way to drive private label growth. Most supermarket private label is price-driven, not innovation-driven. For some categories, the lowest possible price is what the shopper wants. But for many items, creativity can lead to profits. Many many times people point to Trader Joe’s and Whole Foods for product innovation examples. Retailers have to be willing to test a lot of new ideas in very short cycles with modest quantities to reap innovation profits.

Charlie Moro
Guest
Charlie Moro
15 years 3 months ago

The establishment of brands or experiences is much more important than having items. Also, the concept of pushing costs and specs from either end was never a win/win or even a productive strategy in developing new and different concepts to market. There needs to be a critical interaction between the manufacturer and retailer to work together to see what is possible, not what can be replicated. I think SuperValu seems to be very much on the right track.

To be fair as well, I have known Mike Witynski for a number of years; he brings an enormous amount of talent and energy to the task and his success should be expected in this quest, not underestimated.

Dennis Serbu
Guest
Dennis Serbu
15 years 3 months ago

I agree with Ben regarding the “two levers.” A strong Private Label begins with quality. The second most important opportunity is positioning. Quality is sacrificed when positioning for the lowest bidder, positioning is where direction is provided by the “Category Partner.” Leadership is often surrendered on both points.

This isn’t rocket science. High quality manufacture of the product, and insist on placement of the product next to the best selling national brand as part of the consumer decision tree. Pricing should be consistent with a good value compared to the national brand, not an absurdly low price point that begs the question of quality.

Richard J. George, Ph.D.
Guest
15 years 3 months ago

Certainly Supervalu has a daunting task of reducing brand proliferation while developing signature brands. I agree that innovation is the key. I recommend that the process begin by focusing on areas that national brand manufacturers may eschew because they do not see the necessary scale (volume) to cover incremental costs.

For example, the development of health, wellness, and organic private label may well reverse the traditional orientation of order of entry, namely, CPG to store/private label.

Ben Ball
Guest
15 years 3 months ago

Focus on the fact that SuperValu controls the two greatest levers in brand building today–the product itself, and how it is presented to the consumer, particularly in the store. Consolidating labels allows focus, but it doesn’t automatically create strong brands as Mr. Wytinski points out himself. It’s the focus on a single strong positioning; that’s the hard part. It sounds like Mr. Wytinski has been given the necessary stroke to direct the product design, packaging, brand communication, etc. to get the front end of the focus right. So ironically enough, his greatest challenge may be the same one other brand marketers face–getting the SuperValu stores to adhere to the brand concept and provide superior in-store execution. Even though they own the in-store environment, the reality is that most food retailers do not use it effectively to build their own brands.

Justin Time
Guest
15 years 3 months ago

I have always been confused about SuperValu’s private branding.

As they absorbed, they never revamped the private brands. This is definitely a major missing link in their integration process.

They need to do what A&P did in 1994. Realizing that they had many banners, each with their own store brands, A&P decided on a multi-tier private brand approach. Now they offer a premium line; Master Choice, a mid line; America’s Choice and an entry brand; Savings Plus. It seems to work for them.

SuperValu’s private labels, be they Richfood or the hundred others, need uniformity and more quality for the buck. This issue needs to be addressed by them sooner rather than later.

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