Reducing opening-price-point value tier brands is the right move at the right time, for a lot of reasons.
Kroger is making a good move in consolidating its opening-price-point value tier from 17 brands down to two in its private label program. The two brands are Heritage Farm for fresh and dairy products, and the new brand Smart Way, for non-perishables. They are designed to help customers more easily identify opening price point items throughout the store.
CONCENTRATED FOCUS
This clearer, concentrated focus will also help build brand recognition and loyalty. As one observer put it, “Too many labels confuse the customer and dilute one of the primary purposes of private labels — driving loyalty.”
They are designed to help customers more easily identify opening price point items throughout the store.
The chain’s moves should help not only its bottom line but shore up its in-stock position while making the supply chain easier to manage. Overall, this is a good decision by Kroger’s CEO and store brand team.
By now, Kroger has already launched about 150 products under the new Smart Way banner, with more to come this fall. Rodney McMullen, Kroger’s chairman and CEO, says the Smart Way launch enabled Kroger to add some incremental items to its lower-tier private label offerings.
So, is this the right move at the right time? Well, Kroger is seeing what the suppliers and customers see: rising prices and shortages in many key categories. These are big problems for manufacturers, retailers and shoppers. So yes, now is a good time to review your SKU counts and supplier base.
Now more than ever, it is a must to have multiple suppliers in many categories. This is especially true in commodities and where the national brands are having supply issues.
In my opinion, retailers’ focus should be on their national brand equivalent, first and foremost. Retailers need to make sure they have the right suppliers to cover their annual needs. They should be working and planning their needs upfront and locking in not only quantities but cost as well — even if that means doing a bill and hold with each of them. Locking in the best price early and using your volume is an essential strategy. Make sure to consider promotions, holidays and increased sales that will come.
But don’t use your opening price point (OPP) to cut corners and come up with the lowest possible price. Use your buying/volume to get the best cost and price. Even in tough times, there’s no way shoppers will want to spend their money on the cheapest apples from the bottom of the barrel.
As for the argument that OPP is great for commodity items, I get it — but not this time. If you go dumpster diving for the cheapest of the cheap, you will quickly see that this time around, Mother Nature has put her hand on the climate scale. Weather has affected crop yields and quality around the world.
Store brand procurement teams need laser focus on getting the best quality and cost. That’s smarter than trying to juggle SKUs, cost, brands, availability and cheap sourcing. And I know your customer will appreciate it too.
Finally, the last thing you want is a return to the era of the generic brand — the infamous black and white no-name brands. Despite an inflationary economy, the answer is no, never, never, never. You should never want your store brand name on a product that has such poor quality that you wouldn’t buy it for yourself.
As customers continue to see food prices go up as the economy contracts till this time next year, now is not the time for dramatic changes. Don’t downgrade or lower tier quality, or confuse the customer in any way.
Now is the time for suppliers, buyers and operators to be working as one. Keep your eyes open on multiple suppliers, sourcing, raw cost, ingredients available, planning and merchandising. And keep your ear to the ground listening for global climate issues, crop conditions and the war in Ukraine.
Just sayin’.
Bob Anderson is the retired vp/general merchandise manager at Walmart, where he worked for 17 years. He can be reached at bob.sue@sbcglobal.net
