Make It Special

Premium-tier foods and beverages certainly aren’t new to the store brand space. But in recent years, such items have become a more critical product-development focus for many retailers as a means to differentiate their stores from those of the competition.

Even some no-frills deep discounters now are dabbling in the premium-tier space. For example, Batavia, Ill.-based ALDI Inc. announced the debut of its Specially Selected brand this past April. Featuring sophisticated packaging, the brand (first launched in Europe) covers a range of specialty food products — from German coffees and gourmet pastas to premium meats and cheeses — that are available periodically throughout the year.

In its “Ideas in Food 2012, A Cultural Perspective,” The Hartman Group, Bellevue, Wash., also points to the rise in private label premium-tier offerings.

“Private label continues to drive interest among consumers seeking higher-quality premium foods and beverages on everyday occasions,” the publication notes.

Think chocolate

Although premium-tier growth opportunities can be found in a wide range of categories ranging from coffee and wine to sauces and spices, one of the more significant opportunities might lie in chocolate. In a 2012 report, the Packaged Facts division of Rockville, Md.-based MarketResearch.com noted that chocolate can be counted on to outpace overall food market growth. The market research firm cited several reasons for its rosy forecast, including but not limited to:

• The success and increasingly widespread acceptance of premium chocolates, spurred both by consumers’ desire to indulge in this “affordable luxury” and by the influence of foodie culture.
• Continued innovation in packaging and flavors by major and niche chocolate manufacturers alike.

Speaking of flavors, Sheila Shechtman, CEO of Hebert Candies, a Shrewsbury, Mass.-based division of Gourmet Group LLC, says her company has seen “a huge uptick” in flavored filled chocolate bars. She says retailers could tap into the trend toward different flavored bars such as sea salt caramel, mint cookie crunch, chipotle and more to “engage and connect with new and different demographics,” while also giving their existing customers something unique and high in quality

“Offering products with mass appeal is critical, but [just] as importantly, there needs to be a compelling reason to buy” she says. “The product offered needs to be of great quality, thus reinforcing the value of the brand.”

Brad van Dam, president and CEO of Hollister, Calif.-based Marich Confectionery Co., notes that a portion of the chocolate-loving population might appreciate product development aimed at what he calls “the outer edges of exotic.” For example, his company offers Dark Chocolate Chipotle Almonds — and adds a “unique premium twist” to all of its products.

“Other chocolatiers have explored with smoked salts, bacon, chiles, lemongrass and other ethnic flavors and spices,” he says, “some with great success. Speaking of salt, sea salt remains a very hot food element across multiple food categories.”

A natural formulation, too, is appealing to consumers and is a must on the chocolate side, van Dam insists.

“While chocolate remains an indulgence, the added benefit of being natural gives consumers the ability to choose to eat better-for-you products, along with their healthier good-for-you primary dietary choices.”

Cater to consumers

In many areas outside of the premium chocolate arena, consumers are showing more interest in what Agron Kosova, president of Naperville, Ill.-based Fine Italian Foods, refers to as “medium high-quality products” — especially when it comes to Italian items. Essentially, they want a higher quality, but at a value. To help meet this demand, he says his company is adding more value to its flavored oils and balsamic vinegars by offering organic versions.

The product’s “story” also is important on the premium side of product label, suggests Beth Bitzegaio, sales manager for Nielsen-Massey Vanillas, Waukegan, Ill.

“American consumers are now label-readers — [they have] more interest than ever in where their food comes from and how and where it is sourced and manufactured,” she says. “Responsible sourcing and manufacturing, along with traceability, are key.”

Also holding appeal to consumers of premium products, Bitzegaio says, are claims such as “made in the USA,” “non-GMO” and other statements aligned with high quality standards.

“Cobranding can also be very effective in this arena,” she says. And “sizing the product to reach a key price point is an important discussion between the manufacturer and the retailer.”

Differentiation in terms of product format also can be highly desirable on the premium side. For example, Kosova points to a 100 percent natural (chemical-free) olive oil cooking spray his company made available for private labeling recently.

Packaging really matters, too. And when it comes to chocolate — especially chocolate bars — it’s all about evoking an emotion on the part of the consumer, Shechtman stresses.

“What works are designs that are minimal enough for the customer to see what the product is, but have enough going on to compel them to pick it up,” she says, “all while staying true to the brand. It is a very fine line. In other words, not too cutesy and not too busy, but eye-catching and distinctive.”

Small “self-treat” packages also hold appeal in the premium sector, van Dam notes. He adds that Marich created a pack style that addresses this need in the confectionery space and also gives retailers the ability to “build a colorful and creative set” that includes something for just about everyone — at a price point that promotes affordable indulgence and encourages trial of more than one variety.

Talk it up

To draw even more attention to upscale, prettily packaged store brand items, retailers also will need to dedicate some marketing and merchandising efforts to them. According to van Dam, placing premium chocolate in high-traffic areas is a critical merchandising move.

“Chocolate is rarely on a shopping list and relies on impulse; therefore, high-traffic locations provide the highest turn rates,” he says. “Also, merchandise in unexpected yet sensible locations such as near complementary items [such as] wine, beer, fine cheeses, bakery and areas where the customer is ‘treasure hunting’ and generally looking to make experiential purchase.”

Cross-merchandising could benefit other store brand premium-tier categories as well, Kosova suggests. For example, premium oils and vinegars could be displayed and/or demoed with bread and other products within the bakery department, potentially helping to boost sales of all of those products.

On the marketing side, retailers could use signage or other means to communicate the products’ stories to shoppers.

“Highlight why the product is unique and interesting,” van Dam suggests. “Maybe it is locally sourced or has a unique ingredient.”

And education also plays a role in the marketing plan, he adds. By becoming “experts” in their own premium products, retail management and store staff could positively influence sales.

“Partner with suppliers to learn more about what makes the products unique,” van Dam advises retailers. “Call out the unique features and allocate margin for sampling, when possible. Sampling has a high conversion rate, especially with new brands.”