Aiming For The Bullseye

Target shoots for store brand success by understanding the needs of its guests — and meeting those needs with products stressing both quality and value.

When it comes to singing the praises of the shopping experience, fans of Minneapolis-based Target Corp. are one vocal bunch. They express their enthusiasm over Target store offerings in blogs such as "Slave to Target" (http://slavetotarget.blogspot.com) and "Target Addict" (http://targetaddict.blogspot.com), Facebook pages such as "I Love Target" and "I LOVE TARGET," and the @ilovetarget Twitter profile.

Shoppers' love for — and >loyalty to —Target's seemingly oxymoronic "upscale discount" proposition certainly keeps the retailer in growth mode. Target now operates 1,755 stores in 49 states, 252 of which are SuperTarget formats boasting full-scale grocery operations with in-store bakery, deli, meat and produce sections. And the retailer continues to convert many of its existing general-merchandise Target stores into the new PFresh format, which features a selection of fresh food offerings.

During a Feb. 24 fourth-quarter 2010 earnings conference call, Target CEO Gregg Steinhafel noted that Target completed a record 341 PFresh remodels in 2010.

"We expect to set another record this year by remodeling approximately 380 more stores," he added. "Consistent with last year's remodels, our 2011 projects will expand our assortment of dry, dairy and frozen foods with a thoughtfully edited assortment of the best-selling perishable items and incorporate reinventions in other areas of the store, including home, apparel, beauty, shoes and baby."

Steinhafel also pointed to ambitious expansion plans outside the PFresh format. For 2011, he said, Target expects to open 21 new stores within the United States. And in 2013 and 2014, the retailer plans to push farther north, opening between 100 and 150 Canadian Target stores tied to the acquisition of "leasehold interests" in more than 200 sites more than 200 sites currently operated by Zellers Inc., a Canadian mass merchandiser.

"We continue to develop our plans for a small urban format called CityTarget, and we expect to open pilot locations in Seattle, Los Angeles, Chicago and San Francisco in 2012," Steinhafel added. "If successful, this format will provide us more flexibility to operate in densely populated areas on sites that won't accommodate our larger store formats."

Guest-focused

Although Target's adoring shoppers (or "guests," as Target prefers to call them) have been key to the retailer's strong growth over the years, Target deserves the credit for setting the stage for the love-fest in the first place. The retailer excels when it comes to understanding its guests' needs.

"We have a pretty robust program internally," explains Annette Miller, senior vice president of grocery for Target.

That program involves research ranging from surveys to shop-alongs with Target guests, she says.

And Target's owned brands program plays a central role in meeting the guest needs identified.

"Owned brands are really a critical piece of Target's 'Expect More, Pay Less' promise," Miller says. "We look at our portfolio of owned brands as a way to give our guests access to high-quality, well-designed products at low prices — and at the same time, build loyalty because those items can only be found at Target."

Each of the retailer's owned brands is created to appeal to Target's "core guest," whom Miller describes as young (median age is 40) and well-educated, from a moderate- to better-income household, and engaged in an active lifestyle. Forty-three percent of Target guests, meanwhile, have children at home.

Although Target's core shopper hasn't changed much over time, Miller adds, her spending behavior certainly has. For one thing, she's more cautious with her money because the economy is still unstable.

"Target focuses on owned brand products where we are able to add significant value for our guests, either by serving an unmet guest need or by helping guests save money on their favorite foods," explains Annie Zipfel, Target's director of owned brands.

Unique brands

Target currently offers eight different owned brands within the grocery, health and beauty and OTC areas of its stores, Zipfel says. These brands include:

Market Pantry: Launched in 2001, this brand covers more than 1,900 SKUs of food products that match the quality of the national brands — at a lower price.

Archer Farms: This premium food line mirrors the Target strategy and positioning, Zipfel notes, with "high-quality, innovative and fun" products sold at "wallet-friendly prices." It was introduced in 1995 and significantly expanded in 1999; the line now features more than 1,600 SKUs.

Archer Farms Simply Balanced: An extension of the Archer Farms line, this collection addresses "a critical guest need" for high-quality better-for-you foods that "taste great" and are still affordable. The line was introduced in 2009.

Sutton & Dodge: Naturally aged and hand-trimmed, this line of premium-quality USDA Choice Angus beef offers the quality found in a good steakhouse at a fraction of the price.

choxie: This premium chocolate line features fine ingredients — many of them unique — and whimsical, bright-colored packaging.

Wine Cube: Covering a wide range of varietals, this brand offers "delicious, high-quality wine without the high prices, broken corks, limited shelf life and fragile glass packaging typical of bottled wine," Zipfel says. Many of the varietals are award-winning, she adds — for example, the Cabernet Sauvignon took home a gold medal in the 2010 San Diego International Wine Competition.

up&up: A replacement for Target Brand across a number of household, OTC and health and beauty products, up&up reinforces the core qualities Target guests believe about the retailer — "an optimistic brand that's always looking up" — Zipfel explains. The line currently includes more than 900 SKUs.

Boots & Barkley: This brand covers a line of pet food, pet treats and pet accessories.

They might be the new kids on the block, but the up&up and Archer Farms Simply Balanced brands only add to the appeal of Target's unique owned brands program.

"Within the up&up brand, we are proud of the quality we provide and the choices we offer guests," Zipfel says. "From paper towels to pain relief to mouthwash, they are all developed with a keen focus on the guest."

Zipfel notes that Target is especially proud of its up&up diapers because they bring a significant technology improvement to guests.

"As a mom, I know how important a quality diaper can be," she adds, "and our up&up diapers are great!"

For its part, the Archer Farms Simply Balanced brand meshes with Target's many initiatives to help build healthier communities, notes Paul Curti, the retailer's vice president of grocery owned brands and quality assurance.

"Target's commitment to helping our guests make healthier choices spans our business," he says, "from our award-winning pharmacies and ClearRx prescription packaging, to our partnership with the American Cancer Society, to our ever-expanding fresh food assortment. Specific to food, SuperTarget has been a U.S. Department of Agriculture certified organic produce retailer since 2006, and our Archer Farms collection was the first national proprietary food brand to eliminate added trans fats from its entire product portfolio."

The Archer Farms Simply Balanced line now consists of approximately 100 products, all of which meet specific meaningful criteria in terms of calories and saturated fat, sodium and sugar levels. Additional products are in the works too, with new snacks, beverages, meat and bread products slated for introduction in 2011. Curti says guest reaction to the Archer Farms Simply Balanced line has been very positive, with sales exceeding expectations in most areas.

"We know our guests are very interested in healthy and better-for-you food products, so Archer Farms Simply Balanced is perfectly aligned with their needs and wants," he adds. "We also offer a wide selection of wellness and fitness products across our store, making Target an ideal one-stop shop."

But the new brands don't hold a monopoly on innovation — the tried-and-true owned brands have gotten their due, too. Curti points to new varieties of Market Pantry fruit snacks, reformulated Archer Farms yogurt and the wide selection of sustainably sourced Archer Farms and Market Pantry seafood as some of the more exciting recent additions here.

"We're also proud to share that we've received awards and industry recognition for many products," he adds, "notably, Archer Farms multigrain chips, spaghetti, ready-to-drink lattes and Belgian chocolate ice cream; Market Pantry chicken nuggets; and our award-winning Wine Cube."

Eye on development

Of course, new product development is a never-ending process, especially on the food side. As Miller points out, the food industry is constantly changing in response to new trends, new regulations and even new nutritional science. But Target's owned brands team is up to the task.

"It's really critical that we remain thoughtful and introduce meaningful products at the right time that are really going to be relevant to our guests," Miller maintains. "We take a really disciplined approach to owned brand product development."

That approach requires the team to understand not only Target's guests, she says, but also broader consumer shopping behavior and marketplace sales trends. The team must review the competitive landscape and examine guest feedback to determine which items are most in demand, and why.

After doing the requisite homework, Target looks to its food product development scientists and quality assurance specialists, who work with the retailer's vendor partners to create items that accomplish three goals. Those goals, Miller says, include meeting guest needs, supporting Target's brand standards and satisfying the retailer's business objectives.

Curti notes that Target operates its own test kitchens, where its food product development team is able to customize and differentiate product offerings to satisfy all three goals. The test kitchen also allows Target to validate cooking times and cooking temperatures to ensure guests have a great experience with the products at home, Miller adds.

"We challenge ourselves and our vendors to consistently meet or exceed our high product quality standards," Curti says. "We've implemented disciplined product development processes and ongoing product reviews to ensure we continually improve the quality of our owned brand portfolio."

Miller notes that Target's "very talented, really creative" internal team performs much of product development, but looks to its vendor partners for technical knowledge and actual manufacturing of such products.

"We use a collaborative model that really allows us to take advantage of the strengths of both teams," she says.

Through its collaborative, disciplined approach, Target managed to introduce hundreds of new owned brand products in 2010, Curti says. And as one might expect from Target, the new items are anything but boring — a sampling includes Archer Farms thick-cut ripple chips in flavors such as Mac & Cheese and Loaded Baked Potato; Archer Farms pizza in Italian Arugula and Sicilian Vegetable varieties; and Market Pantry sparkling waters in Strawberry Lemonade and Cherry-Limeade combinations.

Packaging, too, is a major owned brand focus for Target — and one that seems to mesh well with the company's overall reputation of having "an eye for design." Zipfel says packaging design helps Target not only more clearly communicate owned brand products' features and benefits, but also share a very important message to guests: "At Target, you can get a lot without spending a lot."

Each owned brand boasts its own differentiated and consistent design, Zipfel explains, allowing Target to send to guests clearer brand messages. For example, up&up packaging uses white space and avoids busy graphics for visual appeal.

"Guests will continue to see the 'compare to ... language on the front of most up&up packaging," she adds, "because they told us it was important. We also added information about Target's 5 percent giving commitment to the back of up&up packaging because we know our guests value shopping at a retailer that has an active presence in their community."

Zipfel says Target also is able to create an emotional connection with its guests by adding an element of design to owned brands packaging.

"Our guests come to Target because we can make the ordinary extraordinary," she stresses, "even in categories such as paper towels."

Because Target aims to minimize its impact to the environment and manage its costs without impacting product quality, the retailer continually works with its vendor partners to assess resources and materials used in packaging (and products), Zipfel adds. The goal is to promote natural ingredients, recycling and nontoxic chemicals, making owned brand packaging as environmentally friendly as possible.

Looking ahead

As Target continues to expand its reach, its quality-minded owned brands will remain a critical part of that expansion. Zipfel says the retailer will be making significant investments in new product development to ensure it offers "relevant, trend-right product offerings" for its core guest. The company also will continue to invest in resources to maintain or improve the quality of existing products to ensure they live up to brand expectations and "reinforce guests' love for Target."

Social media, too, has become — and will continue to be — an important tool for Target in connecting with consumers and improving its owned brands program.

"We're always looking for innovative ways to engage our guests online, present unique store offers and share product news," Zipfel says. "We also monitor all types of media for feedback on owned brands."

Among the challenges Target and other retailers now face are rising commodity prices. But that challenge also could spell opportunity for the retailer's owned brands program.

"The consumer today is really focused on value," Miller says. "Consumer optimism is increasing, but guests tell us they are still risk-averse — they still really want to focus on controlling household budgets.

Owned brands were growing very fast before the recession, but I think they present an even greater value in this timeframe when the guest continues to be cautious in their spending."

Moreover, Target's unique approach to the shopping experience and its owned brands program, both inside and outside the food arena, should keep loyal guests very happy — and vocal — for many years to come.

"I think food is just one part of the overall experience, and that makes us different from other more traditional retailers," Miller says. "I think guests come back for both the unique products and the price."

Target, at a Glance

Headquarters: Minneapolis

Top Executive: Gregg Steinhafel, chairman, president and CEO

Retail Banners: Target, SuperTarget, CityTarget (coming in 2012)

No. of Stores: 1,755 stores in 49 states, including 252 SuperTarget stores and 462 PFresh stores (at 2010 year end)

Owned Brands: Archer Farms, Archer Farms Simply Balanced, Boots & Barkley, Choxie, Market Pantry, Sutton & Dodge, up&up and Wine Cube, as well as many other owned brands within the apparel, home goods and other areas of the store

‘It's really critical that we remain thoughtful and introduce meaningful products at the right time that are really going to be relevant to our guests.’

— Annette Miller, senior vice president of grocery

‘We know our guests are very interested in healthy and better-for-you food products, so Archer Farms Simply Balanced is perfectly aligned with their needs and wants.’

— Paul Curti, vice president of grocery owned brands and quality assurance

‘Our guests come to Target because we can make the ordinary extraordinary.’

— Annie Zipfel, director of owned brands