The Great Reformulation

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The Great Reformulation

01/12/2017

John Persons has a history with Tops Friendly Markets. The 50-year-old president and chief operating officer of Tops began working for the grocer in the Buffalo, N.Y., area when he was a teenager.

“I started here pushing carts when I was 17,” says Persons, who also stocked shelves and manned a cash register, reflecting on his days of yore with Tops, which opened its first store in 1962. “It’s the only company I have ever worked for.”

Persons recently experienced a highlight in his 33-year Tops career — the reformulation of the Tops brand of private label products for the Williamsville, N.Y.-based company. Tops offers four lines of private brand products: Valu Time, its value line; Full Circle, its organic line; TopCare, its health and beauty line; and the Tops brand, which accounts for 87 percent of the grocer’s private label sales and includes 2,200 SKUs.

More than three years ago, the Tops team decided the Tops line needed a facelift. So the private label team began an initiative to reformulate the line and improve packaging to match the quality of the products.

They also wanted to simplify product ingredients and offer cleaner and more transparent labels. Another goal was to innovate by focusing on new trends and turning them into new-item opportunities.

While the largest percentage of the reformulated Tops line rollout began last September, the initial movement began several years ago with some new product introductions, including a clean-formula dairy aerosol whipped topping. By November of last year, about 75 percent of the line had been reintroduced, and Tops expects remaining products to be on store shelves by the end of March. The undertaking will include 300 new products when complete.

“It has really been a labor of love,” Persons says. “We have literally looked at every single one of the 2,200 SKUs.”

When Persons worked at Tops in the 1980s, he remembers the early days of private label, which basically consisted of bread, milk and paper towels. He also recalls the “generic” run of products, which included potato chips and beer.

“But in the 1990s, private label began to explode,” Persons says. “It has become a driving force and part of how retailers differentiate themselves from other retailers.”

Changing product, but not price

Tops’ private label team consists of 10 people, including Dave Damrath, director of marketing for private brands, and Nicky Walsh, director of business development for Daymon, a private brand development group. Although an employee of Daymon, Walsh has worked exclusively with Tops for the past eight years and is responsible for all facets of private brands. She previously worked at Tops for 12 years as a category manager.

““She knows the DNA of the organization,” Persons says. “When we had the opportunity to have her here, it was perfect for us.”

Walsh works closely with Damrath and others to execute Tops’ private brand vision. “We pride ourselves on working with premier suppliers to bring best-in-class product solutions,” she says.

Before the reformulation began, Tops conducted research and focus groups to gather consumer views on the Tops line. It was then that the private label team discovered the perceived gap of quality between packaging and product as well as consumers’ expectations for products with simpler and fewer ingredients.

Damrath offers a microcosm of the enhancements made with the Tops line by using the company’s rising crust pizza line as an example.

“Our rising crust pizza is a high-quality product, but the packaging didn’t sell the product,” Damrath says while holding up a new version of the pizza box, which features a close-up photograph of the product in a glossy black and red box. Previously, the photography on the package didn’t capture the product’s nuances or emanate what Damrath calls a “premium” product.

The pizza’s ingredients were also modified — the sodium level was reduced in the sauce and the crust was changed to preservative-free. But what didn’t change was the price.

“We want to make sure our customers realize we didn’t do this to make the Tops line more expensive,” Persons says. “What we are trying to do is make sure our customers understand the value inside the packaging.”

The new packaging was done in conjunction with Daymon’s sister company, Galileo Global Branding Group.

Recognizing the increased consumer demand for products with fewer and healthier ingredients, Tops went back to the drawing board with its manufacturers to develop products with cleaner labels. Many of the reintroduced and new products feature five or fewer ingredients such as its Triple Fruit Spread, a new product that is free from high fructose corn syrup, artificial sweeteners and flavors, gluten, trans fat and monosodium glutamate.

While the goal was to simplify product ingredients, it had to be done without affecting the taste and efficacy of the product.

“You have to do it in a way that people still want to eat it,” says Diane Colgan, Tops’ senior vice president of marketing and decision support.

On occasion, that was a challenge, such as with apple sauce. Tops wanted to offer apple sauce made without high fructose corn syrup, yet it was difficult to locate a manufacturer that created the product without it. After extensive research, a manufacturer was located and the reformulated product does not not contain high fructose corn syrup.

Balancing act

In November, Chicago-based market research firm IRI released a report citing that a stronger economy, falling food prices and the maturation of some important private label sectors have hampered growth of private label products. The report emphasized the importance for consumer packaged goods, retailers and manufacturers to strike the right balance between national and private label brands — while providing shoppers with the value and quality they seek in private brands.

Finding the right balance between private label and name brands in its own-brands overhaul is precisely what Tops set out to do to provide a solid value proposition to consumers. In doing so, Tops also aimed to “breathe new life into mature private label categories,” as IRI’s report suggests to do.

Tops hangs its hat on branded products because its two main competitors, Walmart and Rochester, N.Y.-based Wegmans, hang their hats on offering more private brands. In fact, Tops offers 15 percent to 20 percent more national brands in most categories than Walmart and Wegmans, Persons says.

“We need to drive that national brand presence,” Persons says. “And while that might seem like private brands aren’t important to us, that’s not true at all. Private brands are critical for us.”

In the past few years, Tops’ brand partners have become more aggressive in the new introduction and promotion of their own products, especially with items featuring clean labels. The Tops team realized it was vital to spruce up its own-brand line to maintain the proper balance between national and private label.

“We knew we had to balance that by driving the private brand business through new items, innovation and things that customers were specifically looking for,” Persons says.

Damrath adds: “We surprise and delight our shoppers with a weekly cadence of promotions on high-quality brands across the store and offer more choice than our competition. Balance is achieved by offering our shoppers this weekly choice of both national brand and Tops brand items through our promotional features.”

Tops’ private label team has identified several store brand-building categories, including coffee, cheese, ice cream, wholesome snacks, salty snacks, yogurt, cookies, crackers, frozen vegetables and frozen fruit.

“These are the categories we want to own and build,” Colgan says. “We will not be the No. 1 brand in all of them like chips because Frito-Lay and others are strong in that arena.” Tops’ brand products are represented in 97 categories and are the No. 1 brand in 33 categories.

Jeff Culhane, senior vice president of merchandising, says a strategy is to “ride the coattails” of national brands to create more exposure for private brands. Hence, in-store displays such as ingredients for chili feature national brands along with private brands. While deflation, particularly with commodity products, has affected private label sales for many retailers, Persons keeps an eye on unit sales, which he believes are a better barometer of how private brands are performing.

“While sales are important, so is moving units,” he states. “Let’s make sure that customers are buying our products.”

One private label category where Tops is No. 1 is salsa. Being No. 1 in any category allows Tops to differentiate by offering more innovative products in its own-brand categories. So Tops introduced premium salsa in pineapple mango and garlic chipotle flavors to differentiate itself from national brands.

“Salsa is a category where we can innovate because our supplier allows us to do smaller batches so we can offer unique flavors,” Damrath explains. “We can’t do that in all categories.”

As part of the new private label strategy, Persons implemented a key structural change — moving private label from the merchandising department into the marketing department — which he believes will benefit the line. “From a strategic level, this helps bring all the elements [of our private brands] together,” Persons explains. “So the marketing end of it is also the packaging and product end of it. We believe this was a game-changer to move the business forward.”

The loyalty factor

Tops has been a mainstay for 55 years in western New York, where about 80 percent of its stores are located in Buffalo, Rochester and Syracuse and surrounding areas. On average, the company’s stores are within 150 miles of its warehouse facility, which Tops says allows it to replenish inventory quickly and manage distribution costs.

Tops has grown and continues to grow — it recently acquired and converted five stores in New York’s Hudson Valley and one in Massachusetts, former Stop & Shop and Hannaford stores, as a result of the Ahold U.S.A. and Delhaize America merger. Colgan says Tops has a loyal following, which extends to its private label products, especially the Tops brand.

“Eighty-five percent of consumers say it’s important to do business with a company that they have strong emotions for,” she notes. “If they don’t trust what you stand for, they are probably not going to buy products that have your name on them. So the name of the business and the brand have to be closely aligned.”

As for the recent reformulation of the Tops brand, while Tops didn’t release sales figures, Damrath says the rollout has “exceeded expectations.”

For Persons, who has seen an array of private label products come and go in his lengthy Tops career, the reformulation has taken the grocer’s own-brand offering to another level.

“I’m really excited with where we’re at with our private brand offering,” Persons says. “I think it’s the best we have ever had.”

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