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What's in Store: Stores push private label
Retailers turn to store brands to promote value, pump up margins
By Christine Blank
March 01, 2010
The growth of private-label foods has been one of the hottest trends in the grocery industry over the past few years, and seafood-department managers are capitalizing on the trend. The recession in part has fueled private-label growth, as consumers choose store brands to save money.
Several grocery chains have realized favorable profit margins with private-label fish fillets, seafood soups and sauces and other products.
While branded product still dominates the grocery industry, the share of private-label foods and beverages has increased to 22.3 percent in 2009, up from 20.7 percent in 2007, reports Todd Hale, senior VP of consumer and shopper insights for The Nielsen Co. in Chicago.
"Consumers are more value-oriented, and retailers are putting a lot more focus on store brands these days, as they use them to build their margins and their equity with shoppers," says Hale.
Canned and frozen items are the top private-label growth areas for seafood. Private-label canned-sardine sales, for example, jumped 86 percent in 2009, to $2.9 million, and unit sales increased 71.6 percent, to around 3.3 million, across all food, drug and mass-merchandiser stores excluding Walmart, according to Nielsen. Sales of canned, private-label salmon increased 34.6 percent, to $24.7 million, while unit sales rose 15.4 percent, to 10.7 million, and canned-tuna sales rose 17.5 percent, to approximately $226 million. Private-label canned-tuna volume rose 10.6 percent, to 258 million units (cans, pouches, cups, boxes), for the same period.
Sales of private-label frozen-seafood entrées also spiked 28 percent over 2008, to $21.3 million in 2009, while volume increased by only 0.1 percent; frozen-fish sales increased 21 percent, to $306.8 million, while volume rose by 9.5 percent, to 61 million units; and "remaining frozen" (including breaded seafood items besides fish and shrimp, along with unbreaded crab) rose 15 percent, to $44.6 million.
Frozen shrimp was the primary loser in private-label seafood over the past year, falling 11.5 percent, to $595 million, while volume dropped by 15.3 percent. In addition, sales of refrigerated, private-label seafood dropped 1.4 percent, to $43.8 million last year.
Still, private-label seafood benefits retailers' bottom line, along with the quality and variety they can offer customers, says Tom DeMott, COO of consulting firm Encore Associates in San Ramon, Calif.
"When you have a line of cooked or raw shrimp, for example, retailers can create the quality or sizing they want. When you put vendors out there to bid, it should take the mystery out of what you are going to get," says DeMott.
Retailers just venturing into private labels need to plan much further ahead than when working with branded products.
"The retailer needs to think more long-term. They are going to have a smaller group of vendors to pull from, and they have to think about filling the pipeline [with private-label product]," says DeMott.
For smaller retailers, private-label product development may not prove as profitable, since "you need to have a certain amount of volume" for success, says DeMott.
Several grocery chains told SeaFood Business they are adding new private-label seafood lines this year.
"We want to put in a line of Louisiana crawfish tail meat. We sold 100,000 pounds of tail meat last year and had to use several different packers," says Rick Heatherington, director of meat and seafood for Rouses, based in Thibodaux, La. The retailer operates approximately 35 stores in the southern United States.
Rouses typically sells crawfish tail meat for between $8 and $12 per 1-pound package. Heatherington and James Breuhl, Rouses' seafood-category manager, have high hopes for the private-label crawfish line after seeing the success of Rouses' refrigerated shrimp and seafood dips.
In November, Rouses launched a line of private-label cooked Louisiana shrimp in three sizes: tail-on 26-30s and 51-70s and peeled 71-90 salad shrimp.
Because the private-label shrimp's price, around $6.99 a pound, is higher than imported shrimp, Rouses' executives were not sure
whether shoppers would buy them.
But "the response has been wonderful," says Breuhl. "The consumer down here is willing to pay a little more for a much better product. And no competitor offers this product."
Publix Super Markets, based in Lakeland, Fla., is also looking to expand its private-label seafood soup and sauce offerings. Already, the 1,012-store chain sells three seafood soups, including Lobster Bisque and Crab Corn Chowder, three sauces and three seafood butters.
PCC Natural Markets, Seattle, Wash., added a line of private-label hot-smoked salmon in December. Flavors include Honey-Cured, Alehouse Pepper and Smoky Chipotle, which retail for $14.99 a pound. Lox-style cold-smoked salmon offerings, which retail for $7.99 a pound, include Traditional (using wild Alaskan sockeye) and Hint of Lime.
"Sales so far have been very strong, and we expect that will continue," says Diana Crane, PCC's director of sustainability.
Despite the success to date with private-label products, consultants say retailers could still do much more with seafood.
"The industry has to enhance overall private-label sales," says Nielsen's Hale. "If retailers would raise their prices by a penny across all their private-label products, it would result in thousands of dollars extra in revenue."
In addition, the private-label packaged protein category as a whole is still fairly undeveloped. "It represents an opportunity for retailers," says Hale.
Contributing Editor Joanne Friedrick lives in South Portland, Maine