Looking Ahead, Remembering Roots

At a time when private brand managers are scrambling to win over adventurous yet exacting millennial consumers with breakthrough offerings, Chicago-based Independent Grocers Alliance (IGA) takes a cautious rather than disruptive approach to change with its own-brand products.

A large proportion of the organization’s retailers reside in smaller cities and rural locales across the United States — places where consumers tend to be more traditional in their purchasing habits than those living in trendy neighborhoods in large metro areas. Still, IGA store customers are different today compared with a decade ago, notes Dave Bennett, IGA USA’s senior vice president of procurement and private brands. Interest in health and wellness, an increasingly multicultural customer base, and greater comfort with new technology at all points along the path to purchase are trends that transcend both geography and generations he says.

“We are developing products that are a little bit edgy to appeal to millennial while recognizing that our core shopper base is older,” Bennett says. For example, IGA recently rolled out own-brand single-serve coffee and is launching an organic largely GMO-free product line The intent isn’t to push the envelope with the most exotic flavors but to leverage the potential of already-dynamic categories.

“We use hard data from Nielsen to assess a category’s growth potential,” Bennett explains “When we looked at the growth of single-serve coffee we determined that there was a real private label opportunity. You can start with an intuitive belief, but you really need a quantitative understanding of what the category is doing and what the potential is for sales and profitability.”

After creating “IGA Better Choices” (igabetterchoices.com), a website with tips for healthful living, the organization decided to expand into organic offerings. “Research has shown that consumers of all generations, not just millennials, want to eat more healthfully and want to know where their food is coming from,” Bennett points out.

“They are looking for better-for-you items,” he continues. “They are looking for transparency relative to ingredients. And we as a brand owner need to make sure that if a consumer is looking for a non-GMO product, we call that out on our packaging.”

With transparency and health and wellness in mind, IGA has also reformulated more than 200 products in recent years, concentrating on reducing sodium, sugar and saturated and trans fat.

Rooted in tradition

Founded in 1926 to unite independent retailers so they could better compete with emerging chains, IGA began with one grocery store in Poughkeepsie, N.Y. By the end of the year, the alliance had expanded to 150 stores. In 1927, the organization debuted its first private brand, IGA flour. Other milestones include adopting the red oval IGA logo in 1976 and the “Hometown Proud” tag line in 1988. Over the years, IGA has become an international alliance — with nearly 5,000 IGA-branded supermarkets in more than 30 countries, commonwealths and territories around the world.

Although most IGA owners are single-store operators, the longstanding brand also attracts some multistore independent retailers. Today, IGA stores are found in 46 U.S. states, with greater concentration in the South and Midwest.

“Our roots are in the small town,” emphasizes Wayne Altschul, IGA USA’s vice president of private brands. “The thing that makes an IGA unique is the owner of the store’s relationship with his community.”

Many IGA stores have been family-owned for generations. “Each generation adds its ideas to the store, which makes it fun for us to watch,” Altschul adds.

Not a cooperative or a franchise, IGA can best be described as a licensing and marketing organization, Bennett explains. Retailers in the network pay a licensing fee that gives them permission to use the IGA logo and “Hometown Proud” slogan on their store facades, websites and promotional pieces. These retailers also receive access to IGA Exclusive Brand products, online training resources and marketing support.

The IGA brand resonates with consumers who live in the communities served by the grocers, according to Altschul. Just as these stores pass from generation to generation, many IGA shoppers remember shopping at IGA supermarkets with their parents and grandparents, and recognize the brand as an emblem of excellence, he notes.

“My customers know the IGA red oval. And when it is on our private brands, they trust the quality that has been a staple in IGA shoppers’ homes for more than 90 years,” says Bill Price of McMaken’s IGA in Brookville, Ohio. “I also want customers to remember my store and my products. That’s easy when the sign outside my store says IGA, and the products in the customer’s pantry say IGA, too.”

IGA sells its private brand products to retailers through 13 licensed distribution centers. These wholesale distributors range from publicly held firms such as Eden Prairie, Minn.-based Supervalu and Grand Rapids, Mich.-based SpartanNash to cooperatives such as Associated Wholesale Grocers of Kansas City, Kan., and Unified Grocers of Commerce, Calif.

Both IGA-licensed stores and distribution centers can take part in incentive programs that reward them for having the highest volume or biggest percentage increase in IGA own-brand sales. In one such program, retail and distribution center team members can win tickets to the Super Bowl. In addition, IGA organizes shopper sweepstakes, with IGA products and kitchen cooking tools as prizes.

The organization does not provide shelf-management guidance directly to retailers but works with the licensed distribution centers to ensure that IGA-brand items are merchandised effectively in a category mix that could also include the distributor’s own brands.

Innovator or imitator?

IGA today offers 1,700 private brand SKUs — having added approximately 300 new items since Bennett joined the organization in 2007 and Altschul came on board less than two years later. IGA-brand products include fresh, frozen and shelf-stable foods and a limited assortment of household items.

Bennett and Altschul prioritize quality assurance (QA) and cost control as well as new product development.

“Food safety is very important to us, and quality assurance is a start for that,” Bennett says, noting that IGA contracts with Arlington Heights, Ill.-based Federated Foods to perform regular QA assessments by category. Roughly 200 manufacturers produce IGA-brand items, often with multiple suppliers manufacturing products in a single category.

“For example, we have four manufacturers of peanut butter across the United States,” Bennett says. “We have to ensure that consumers, whether they be in California or Maine, are getting the same product quality and consistency.”

While Bennett likes to try “new and different” products himself, he says that IGA must balance various priorities when adding to its private label line.

“The good news is that private brands have grown up so much since the days of generic products in white-and-black or yellow-and-black packaging,” Bennett says. “The quality and selection have improved so much.”

Indeed, private brand owners today are urged to be trendsetters, not just purveyors of national brand equivalent (NBE) products. “Should private brands be more cutting-edge than national brands?” Bennett asks. “Should they be innovators or imitators?”

For IGA, frequently a fast-follower of national brands, it is important not to neglect staple products. “At times, you can get too edgy — where based on volume and consumer acceptance, you risk losing money on a product and even alienating your traditional shoppers,” Bennett says.

“From our view, IGA Exclusive Brand products have to be somewhat more mainstream,” he continues. “I can’t take the approach of an East Coast retailer with some 4,000 private brand SKUs, ranging from a brie cheese to the most exotic fish. I just can’t go that route with our typical customer base.”

At McMaken’s IGA, for instance, the best-selling IGA-brand products are water, bread, milk and canned vegetables, Price notes. “These are highly consumable and are on the weekly shopping list,” he explains.

Nevertheless, there are categories such as yogurt — newer and inherently more innovative — that allow for more variety and low-risk experimentation, Bennett says. For example, he recently enjoyed a cup of Noosa pineapple-jalapeño yogurt for breakfast and is weighing the feasibility of developing something similar “with a bite to it” for IGA.

Embracing new technologies

IGA may not always need to be at the flavor vanguard, but the organization can’t ignore consumer demands for transparency, according to Bennett. Consequently, IGA has joined the SmartLabel initiative launched in late 2015 by the Grocery Manufacturers of America and the Food Marketing Institute — a technological partnership that will eventually enable shoppers to retrieve detailed product information (on up to 100 attributes) by scanning special product bar codes with a smart phone app.

SmartLabel is a great initiative and a brand-new one for us,” Bennett says. “Not all retailers and wholesalers agree that it’s the ultimate answer, but it seems to be the best answer relative to affordability and current capability.”

The initiative should benefit aging boomers, many of whom need to reduce salt and sugar intake, as well as millennials who steer clear of additives and consumers with food allergies, Bennett says.

Because of intense competition from Amazon.com and other online food-delivery services, IGA is also encouraging its retailers to foray into e-commerce and is looking for ways to help them with this undertaking.

“I think independents are behind the eight ball and trying to catch up in this whole arena,” Bennett says. “How do you defend your business? By ensuring that you don’t force your customer to go to a competitor to purchase electronically. This isn’t necessarily a profit-making opportunity or an investment that will grow your business. It’s really a defensive stance — one that will let you keep what you have.”

Looking ahead, the organization knows it must embrace new technologies while not forsaking the values that matter most to IGA shoppers. As Bennett observes, “It’s the delicate balance between tradition and innovation that keeps IGA moving forward.”