Exceeding Expectations

Private brands are certainly not the only focus of Associated Wholesale Grocers (AWG), our 2013 Wholesaler of the Year. But they definitely are a critical part of the Kansas City, Kan.-based cooperative wholesale distributor's business model, and one reason for the company's track record of year-over-year growth.

The AWG Brands part of the business offers the company's 620-plus independent retailer members (and their more than 3,000 stores) an extensive multi-tier private brand assortment steeped in quality and consistency. In fiscal 2012, those brands recorded a record $1.1 billion in sales and accounted for roughly 23 percent of the company's grocery case sales. And according to Scott Richey, executive director, AWG Brands, 2013 sales will hit $1.2 billion.

Most important, AWG's private brands give member retailers a value proposition to offer their customers, which is critical in a competitive grocery landscape.

Something for everyone

"We're only successful if our member retailers are successful," stresses Steve Arnold, AWG's senior vice president, marketing. AWG's own-brand SKUs now number 3,915, Richey says. And AWG also offers to its retailer members a number of IGA brand products, bringing the total private brand SKU count to 4,740. The granddaddy among the brands, Always Save, will mark its 30th anniversary in 2014 and represents the value tier, he says. The brand currently covers 455 SKUs.

Linda Whiteside, AWG Brands category manager, notes that "consistent quality is key" to the long-term appeal of the Always Save brand. Best Choice, meanwhile, is AWG's national-brand-equivalent brand, she says. The brand allows member retailers the opportunity to earn a higher penny profit.

"Best Choice not only gives value to the customer," Whiteside says, "but it has quality that's equal to or better than the national brands'."

And AWG just announced the completion of a packaging revamp that aims to further boost the appeal of the Best Choice brand on the non-food side. The company's Valu Merchandisers subsidiary decided to modernize the package design for the brand's non-food products after performing a thorough analysis of both store brand and national brand packaging. The new packaging, created by Immotion Studios, is said to boast clean lines and vivid colors.

AWG had learned that shoppers liked the Best Choice packaging during consumer research – but they wished the logo was more legible, Richey explains. A test market found the new logo – which upholds the black and gold Best Choice branding in a fresh way – "significantly easier to read" than its predecessor. AWG believes the new logo will increase brand recognition at shelf level.

"We can finally give member retailers a premium item at a competitive cost structure so they can be more competitive," he says. "A lot of people might have questioned our timing on it because of the way the economy was, but weve had success with it."AWG also has the premium tier covered — it introduced the Superior Selections brand in the spring of 2012. The launch included approximately 120 items, and the company continues to introduce new items under the brand to the tune of about four or five a quarter, explains Larry Carnes, AWG Brands category manager.

Ann Thompson, AWG's quality assurance manager, notes that the quality of the Superior Selections products is very high.

"It isnt necessarily a national brand equivalent," she adds. "For example, we have a pure maple syrup and also some very unique items."

Speaking of unique items, brisk sales for some of them — such as cashew butter and almond butter — actually have surprised the company, Richey says. Arnold calls Superior Selections AWG's "laboratory," allowing the company to experiment, take more risks in terms of flavor profiles and capitalize on trends coming out of fads.

"Were trying to be more relevant there," he says. "Its less risk to go through Superior Selections than Best Choice."

Rounding out the AWG Brands program is the niche Clearly Organic brand, introduced in 2008.

"That was our first swipe at the new group of foods — healthy foods," explains Jay Votipka, AWG Brands category manager. "We launched with about 150 SKUs across multiple sections of the store.

In the works for the brand are a new look and new SKUs, Richey says, adding that all packaging changes the company makes to any of its brands are "approved at the shelf" within its member retailer stores.

"Weve seen our competitor's success," he says, "so were going to give that brand a big run in the next 12 to 14 months."

Eye on improvements
Tweaks in progress aren't limited to the Clearly Organic brand, however. AWG was early to the table in adding front-of-pack nutrition labeling to its food and beverage products, with more than 2,000 products currently shipping with such labels.

AWG also is making a concentrated effort to "do a better job" at calling out on packaging product attributes such as "gluten-free" and "all natural," Votipka says.

New products are an ongoing focus, too. It's up to the category managers to research and pinpoint which products are "up and coming," Thompson explains, and determine where new product development efforts should be focused.

"Theyll have our vendors submit samples for those products," she says. "If it's an Always Save item, then we're going for quality and consistency, but not necessarily innovation."

As for innovation tied to AWG's other private labels, the company "is transitioning from following the national brands to identifying what the consumer is looking for based on information — analytics, changes in the marketplace" — and adjusting its strategies to accommodate that, Arnold says. Actions range from calling out valuable product attributes to expanding a product line.

"In the past, we always watched the branded items to see what moved enough to justify development of a private label item," Carnes adds. "Now its like, '??Hey, weve got brands ourselves ... and in a category, maybe we need an item even if there's no national brand [counterpart]."

AWG listens closely to product-related comments it receives from its member retailers, too, Richey says, emphasizing that "they are not bashful." Instrumental to allowing the company to do so are the 50 AWG sales representatives who are geographically dispersed and work with the stores in relation to store brands, promotions and more. They call on each store every 10 to 12 weeks.

"They get a lot of feedback," Whiteside explains, "and they pass it on to us."

Additional ideas are gleaned through periodic focus groups, Arnold says, which help the company understand the wants and needs of today's consumers. In fact, it was a focus group that impelled AWG to add the front-of-pack nutritional labeling.

Product comments and suggestions also come via e-mail (and an occasional phone call) from consumers, as contact information is included on product packaging.

QA is critical
Because quality and consistency are so important across all of its brands, AWG puts a major emphasis on quality assurance (QA) efforts. The company tests all of its products against specifications several times a year, Thompson explains.

"If we find issues, then we're immediately in contact with our vendor," she says.

AWG requires its food and beverage vendors to be SQF certified, too. And Thompson and her team audit the manufacturing facilities of all of the company's 200-plus vendors — at a rate of roughly 30 per year. AWG also relies on proven quality and consistency to bring in new member retailers. Because the biggest concern new customers have is the private label program, Thompson's department performs test cuttings with prospective customers. As Arnold puts it, "We ship and sell. We dont ship and wait."

Recalls also fall under QA and Thompson's territory. For these, the company recently implemented an online process. 

"It really helps us in being able to respond," Thompson says.

Ready to lend a hand
Great private brand products that mesh with consumer wants boost the competitiveness and profits of AWG's member retailers. But AWG doesn't just drop off the products and call it a day. Instead, it actively supports its brands and its member retailers by helping with everything from planograms for each category to in-store radio ads, shelf materials, sign kits, display-ready shippers and merchandising, Richey says.

"For new members, we send a team to the store and work with them to reset the store," he says, "to make sure they get off on the right foot."

Within the planogram segment of AWG's program, the company looks at the size of each category and subcategory, Arnold explains, adjusting for each retailer and the demographics of the distribution center (the company operates nine of them) with respect to products.

AWG also holds an event for new members centered on product trial, Arnold adds. And the company makes demos a big focus when launching a new product into stores.

On the topic of product launches, AWG also makes life simpler for member retailers here by introducing new products in waves, Votipka says. By doing so, AWG sales representatives are able to cut in all the items at once, reducing disruptions in store.

Another boon for member retailers is AWG's 20-plus-year-old Save-A-Label program, which helps more than 13,000 non-profit organizations raise money based on sales of Best Choice products. Thompson, who handles that program, says the organizations may register online or in the member retailer stores.

Participating organizations collect Best Choice labels with the UPC intact, and mail them in to receive 3 cents for each UPC.

"It's really simple," Arnold explains. "A member retailer can sign a participant up. And then that, in turn, helps to connect their brand to the organization and back to the member retailer."

Speaking of connecting, that's a major theme for AWG overall for 2013, Richey says — with the critical points of connection being sales, member retailers and consumers. With connection in mind, the company recently introduced its Customer Connect Center to help member retailers "excel in the digital world" (see the sidebar, below).

Going forward, AWG certainly looks on track to continue its store brand success story — and that of its member retailers as well.

"Its a good time to be in the store brands business," Richey stresses. "Today's consumers want a store that has a lot of store brand products. ... Our main goal in life is to support our retailers, and we're going to deliver more penny profit for them through our brands."

Sidebar: Listening and engaging

Back in April, AWG announced the launch of its Customer Connect Center, a social media monitoring and engagement program to support its independent member retailers. The center houses trained subject-matter experts who leverage industry-leading technology to provide reporting and engagement services to member retailers. The program is built on comprehensive monitoring of social media websites and other online content sources.

As Kyle Rogers, digital engagement strategist for AWG, explains, the company wanted to give member retailers some help in keeping up with the rapidly changing social media and online arena.
"For independent retailers, its really a challenge," he says. "We have different capabilities and bandwidth for everyone from the smallest operator to the largest chain."

The Customer Connect Center is used for defensive monitoring — to learn about what's being said in the social media/online space about AWG, its private brands and its member retailers, notes Steve Arnold, AWG's senior vice president, marketing. The next phase is an offensive one centering on engagement and making offers available to member retailers.

"What we're trying to do is communicate the value of the brands to consumers," Rogers says, adding that the company is able to do that at a fairly low cost.

Initial work has centered on the Best Choice brand, which already has more than 10,000 "likes" on its Facebook page, he notes. Efforts here have ranged from digital coupons and product giveaways to an online contest that gave consumers a chance to win $1,000 for themselves and $1,000 for the charity of their choice. But it's not all about money and freebies.

"A lot of what we do is content-driven; we try to just drive the communication," Rogers says. "We're also using it to get some feedback on things that we might do in the future. And you really start to develop advocates."

Complementing efforts here are four mommy bloggers posting on the AWG Brands website. These women, onboard for about a year, try specific AWG private brand products and write about their pros and cons, says Scott Richey, executive director, AWG Brands.

The social space "opens up a whole new level of understanding for us," Arnold adds.