Gettin' fancy

With all the choices consumers have, can they be persuaded to forge a steel bond of fidelity to a store simply because it carries that "gotta-have-it, to-die-for" specialty gourmet product they don't want to live without?

Sure they can.

As a category, gourmet and specialty foods continue to grow, and store brands are hooking into the trend by creating more unique, upscale private label products to woo customers, observes Chris Barhyte, CEO of Barhyte Specialty Foods Inc., Pendleton, Ore., a second-generation family company that creates gourmet mustards, marinades and sauces.

"We've seen growth in upscale items on the private label side for the past 10 years, and it continues to grow," Barhyte says.

He estimates that about 20 percent of a given store's shoppers will purchase gourmet and specialty items.

"When they shop, they spend a lot of money," Barhyte adds. "Offer them great products."

Most important, provide customers with "great destination items...that they have to go to your store to get," says Teri Valentine, CEO of The Perfect Bite, Glendale, Calif.

She points to Trader Joe's as the company that brought about a fresh new mindset to store brand specialty and gourmet offerings. Instead of creating knockoffs of national brand products, they created their own high-quality items.

When Valentine, a former restaurateur and caterer, started The Perfect Bite with her partners eight years ago, she wondered if the company's handmade gourmet appetizers would sell anywhere but specialty stores. To her delight, she says, they took off in mainstream groceries.

The public is more educated about food these days, owing to the popularity of The Food Network, magazines and online sites devoted to the pleasures of the palate, Valentine notes.

"You can't get away from food," she says. "People are always talking about it."

And Americans also live busy lives. Their time is limited and their inclination to cook meals from scratch is even more so. Therefore, a significant number of consumers are willing to pay a price for good food, Valentine adds.

Times have changed from the days when a grocery store's specialty section consisted of a few imported items hidden away in a dark corner largely collecting dust, observes John Roberts, founder of the Carlsbad, Calif.-based Blackpoint Management consulting firm, which serves specialty food and beverage marketing clients. Roberts is also a former president of the National Association for the Specialty Food Trade (NASFT) and a longtime food industry executive.

"We used to joke that when specialty food sales increased, it was because the consumer accidently knocked it into the shopping cart," Roberts recalls.

But sales "really exploded" once supermarkets started integrating specialty items with mass market items, he points out. To take full advantage of the sales, loyalty and profit margins specialty foods can generate, retailers should target the approximately 30 percent of shoppers who have more money than time, want one-stop shopping, and want and can afford luxury products, because they will account for nearly all the store's profit, Roberts says.

And price those store brand items correctly without selling them short, he advises. One way shoppers judge a product they don't know is by price. Of course, the product needs to be of such high quality that the price is justified, he adds.

"You can't fool a consumer twice," Roberts stresses.

When store brand managers provide a line of premium, innovative and unique products that reflect the retailer's philosophy – an example might be non-GMO items with no artificial colorings or flavorings – "it brings the customers back to the store every time when they run out. So when the winner product builds its customer loyalty, so does the retailer at the same time," says Margaret Liang, marketing director for WN Foods, a Hayward, Calif., maker of gourmet sauces, dressings and marinades.

The specialty food sector reached new heights in 2011, with $75 billion in sales in retail and foodservice combined, contributing to a cumulative growth of nearly 20 percent since 2009, according to an April 2012 report from global market research firm Mintel and NASFT, "Specialty Foods – The NASFT State of the Industry Report – The Market – US."

Price-lookup-code items, including fresh olives, gourmet cheese sold by weight, specialty meat, fish and deli offerings "continue to grow in popularity in supermarkets as well as in the natural channel," the report said.

High stakes
Industry experts agree that store brand managers cannot compromise on the quality of gourmet and specialty offerings if they aim for consumers to make a repeat purchase.

"The product development stage is so important," Barhyte cautions. "You have to make sure it's a product people will like. Go through all the product testing. If you make price the number-one concern, that's going to cause problems ... and hurt the whole store brand."

Find a great product and make it better. Develop something that will have people talking about it, and recommending it to their friends and relatives, he advises.

In product development, the first question should be, "How do we make it so great they have to have it?" Valentine declares.

"The rule with specialty is not to make it cheaper; it is to make it better," Roberts says.

He advises seeking out suppliers who are high-quality artisanal producers.

Chains that understand how to compete here are Wegmans Food Markets, Rochester, N.Y.; Costco Wholesale, Issaquah, Wash.; Publix Super Markets, Lakeland, Fla.; and Trader Joe's, Monrovia, Calif., says Marc Brennet, vice president, retail brands, for Cuisine Solutions, Alexandria, Va. The company produces premium, fully-cooked foods using the sous-vide method.

"These are the types of stores where people will go specifically because what they offer is so special. People will shop there more often and buy more," Brennet says.

"When the consumer gets hooked [on a store brand specialty item], and says, 'Wow, I really like this premium product – I think I'll pick it up next time,' you've got new brand loyalty," says Jonathan Pehl, director of marketing & branding for Fischer & Wieser Specialty Foods, Inc., Fredericksburg, Texas, a manufacturer of premium gourmet finishing, dipping and pasta sauces; jellies, salsas, salad dressings, pie fillings and appetizers.

Product trends
The specialty/gourmet shopper is typically after something unique, different and cutting-edge. That often means organic or natural products with an international flavor and ethnic ingredients, adds Lynne Wilkie, vice president of sales for Hot Mama's Foods, Springfield, Mass., a producer of salsas, sauces, tapenades, pesto, hummus, salads, dips and other gourmet solutions.

And locally sourced ingredients are "hot" now, Wilkie, a past NASFT Specialty Food Buyer of the Year, says. Nutrition and taste issues draw consumers to products that have not travelled a terribly long way or been around a long time before they're consumed.

Retail grocers could introduce specialty items as part of their ongoing "research and development" to determine what sorts of things will bring in more customers and foster loyalty to the store, or simply to see if an item "has legs," Wilkie says, citing Stacy's Pita Chips as an example. Introduced as a specialty snack, the brand quickly grew into a national success.

Valentine observes that Indian cuisine is gaining favor with American consumers in search of fresh new eating experiences. And she recently traveled to Morocco on a kind of product development tour. In exploring exotic cuisines, she says, "take the essence...a little bit of flavor" from another part of the world "and translate it into American food."

Brennet concurs that consumers are becoming more adventurous in their tastes.

"We have definitely seen increasing interest in Thai cuisine," Liang adds. "Consumers have become more familiar with Thai flavors and spices after the proliferation of such restaurants across America. Consumers' perception of Thai flavor is exotic and premium, while pleasant – such as sweet Thai chili – and comforting – like Thai red curry."

Though gourmet eating can be indulgent, consumers still want to know that their food is natural and healthful.

Good-for-you specialty foods are increasingly popular with Americans concerned about their health and weight. In addition, the public also is worried about climate control, carbon footprints and how far ingredients travel to market, Wilkie says.

Brennet points to the popularity of Old World grains such as quinoa and amaranth as part of the health and wellness trend. Consumers are paying more attention to the ingredients in the food they purchase and consume. They want ingredients to be healthful, low in sodium, all-natural and flavorful, he adds.

Luxe look
In packaging gourmet and specialty goods, "that flair of high quality needs to come across," Valentine says.

Color is important, Roberts suggests. Neon orange just won't do here.

"Convey that these are luxury items. Use dark colors and make the label beautiful" with fine materials such as foil, he says.

Sometimes, Barhyte says, the package can be relatively simple, if it sports an upscale label.

"Make sure your label's fantastic and make sure what's inside is great," he says.

Gray- and cream-colored backgrounds are warming tones that project a softer, upscale image, Pehl adds. And an artist's rendering of the product such as a sketch can look more premium than a photograph, he says.

"It's really in the details," he notes. "Tweak and refine. It should be easily readable and clean."

And use packaging to appeal to consumers' concerns about their environment, Wilkie advises. She recently returned from a two-year stint in the Peace Corps, where she worked on food security issues and women's economic empowerment in Cameroon.

"It blows me away the amount of packaging we use [in the United States]," she says." In Africa, everything is reused. The growth of municipal recycling programs is making Americans more aware of the waste created from excessive use of packaging materials. Anytime you can minimize the amount of packaging on your product, or make it biodegradable, that is going to help consumers," Wilkie declares.

Tasting is believing
Sampling is one of the most effective ways to hook consumers on specialty and gourmet products, which are unlikely to be part of an everyday shopping list.

"Customers need to taste the product to get hooked on it," Pehl says.

In-store coupons also are a great way to promote specialty and gourmet store brand products, Barhyte says.

Roberts agrees that consumers can be won over to a retailer's specialty items by in-store demos, but says education also is called for.

"Educating consumers generates upgrading within most product categories," he says.

408, January 2013, Tuesday, January 1, 2013, PLSB5408, 408, Private Label Cover Story