Add value to consumer staples

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Add value to consumer staples

09/01/2016

By Bob Phillips

Pasta, rice and grains are staples in many North American diets. Pasta, in particular, is a favorite.

“Americans consume over 6 billion pounds of pasta each year,” Olivia Matteo, marketing associate for South Windsor, Conn.-based Carla’s Pasta, notes.

But she says pasta’s role in the typical American diet has evolved over the years.

“Pasta has primarily been considered a vehicle for sauce accompanying protein as a side dish,” she says. “With the rising costs of protein, however, high-quality filled pasta can replace protein at a fraction of the cost.”

Better-for-you rules

Like they are doing in many other food categories, consumers are looking for “better for you” options when shopping for pasta, rice and grain products, too. And traceability is another major driver in the segment, according to Pasquale Laudiero, president of Manassas, Va.-based Ghigi Food Industries, a manufacturer of Italian and domestic pasta under its own brand and for private labeling.

“Traceability reflects the trend toward non-GMO products,” he says. “Consumers want to know where this pasta is coming from. And does it consist of two ingredients or 50?”

Perhaps because of the “good-for-you” movement, and perhaps because of the ability to create effective messaging, Laudiero offers that gluten-free and organic products are among Ghigi’s strongest offerings.

“Our standard pasta is not only delicious, it’s non-GMO certified,” he adds. “We have private label standard cuts — spaghetti, elbow and penne.”

According to Jared Koerten, senior analyst with London-based Euromonitor International, the popularity of organic pasta is being driven by consumers’ backlash against GMOs.

Because of these challenges, Koerten says, the category is still relatively small.

“However, current interest in avoiding genetically modified foods is continuing to rise, with strong consumer demand fueling category growth,” he explains.

Organics, of course, represent value-added products — a major buzzword in the food retailing industry, encompassing both branded and store brand items.

“With the price of organics coming down, there’s a big push for them,” Laudiero says. “Today, you can get store-brand organic pasta for $1.29–$1.39. Compare that to a box of American-made genetically modified Barilla pasta at $1.50. It’s a compelling value for the consumer.”

Retailers also have a chance to differentiate via specialty pasta cuts. For example, the typical yellowish pasta is called Teflon because it’s made with a Teflon die, Laudiero says. In contrast, products yielded by bronze dies offer a completely different set of attributes.

“They have more texture, hold sauce better and give the appearance of a more artisanal pasta,” Laudiero explains. “We can do that [use bronze dies] for regular cuts for no extra cost. But when a retailer puts it on the shelf, he can ask for maybe a 15 percent margin increase. Same quality product — [it] just looks a little nicer.”

On the rice front, U.S.-grown rice is picking up steam on the foodservice side, thanks to its “local” perceptions, so it might be something retailers want to consider for their own brands.

“U.S.-grown rice has a great story to tell when it comes to food sourcing and sustainability,” says Katie Maher, director of domestic promotion for the Arlington, Va.-based U.S. Rice Federation, adding that the “know your food” trend and the “free-from processing” trend go hand-in-hand with this trend.

Leverage trends

While the aforementioned trends might translate into higher margins for brand-name products, how might consumers’ changing habits toward healthier consumption be leveraged to increase store brand sales in the pasta, rice and grains segment? For starters, retailers need to be aware — and make their customers aware — that their store brand products offer the same high quality and authenticity as brand-name products do.

“Retailers have the opportunity to grow sales in the frozen pasta category that would otherwise be lost to quick-serve Italian restaurants,” Matteo notes as an example. “Retailers that execute a multiple-brand strategy with the proper price levels among offerings have made private label frozen pasta a destination category, and sales are growing.”

Matteo advises retailers to employ end-aisle displays, floor graphics and in-store media programs as strategies to effectively increase traffic through the aisles and into the frozen pasta section.

And on the shelf-stable side of pasta, rice and grains, retailers could work to minimize shopper confusion.

“One issue we see is that you walk into the pasta aisle, [and] there may be 20 brands on the shelf with no real order,” Laudiero says. “Retailers need to rationalize the category — low end, mid-range, high end —and arrange their shelves accordingly.”

He notes that success requires retailers to analyze the category strategically. Once that step is completed, they should invest in their private brand items and create a story around them to drive sales. He cites The Kroger Co. and its premium Private Selection and HemisFares store brands as examples.

“They’ve created a story around the brand and given it its own identity,” he notes. “Success involves investing in the brand and the story supporting it.”

On the packaging front, cellophane is becoming the package of choice for store brand items among discerning retailers. Another packaging trend is the inclusion of recipe ideas on store brand packaging.

“Some retailers change the recipe, offering varieties with a seasonal flair,” Matteo offers.