Master Of The (Store) Brand

A dual focus on innovation and shopper needs makes Safeway an overachiever within the store brand arena.

Within almost every industry, you are sure to find at least one overachiever among the crowd. The tech industry, for example, boasts Bill Gates (and until recently, also counted Steve Jobs among its ranks). And the entertainment industry has Barbra Streisand, reportedly the only woman to have won Academy, Grammy, Emmy, Tony, Peabody and American Film Institute awards.

Sometimes the overachiever within an industry is not a person (or persons), however, but a whole company. That certainly is the case with Pleasanton, Calif.-based Safeway Inc., a major go-getter within the grocery retail industry — and in our view, the past year's top achiever within the store brand space.

The retailer's standout status can be attributed, to a great extent, to a dual focus on innovation and shopper needs. In a press release announcing Safeway Inc.'s third-quarter 2011 results, Steven A. Burd, the retailer's chairman, president and CEO, said the company continues to "innovate throughout the business to meet our customers' needs and build their loyalty." He pointed to Safeway's new Open Nature line of 100 percent natural foods as one example of how it is doing so.

And that focus is taking Safeway's store brands — or what the retailer refers to as its Consumer Brands — into the winner's circle. During an Oct. 13, 2011, earnings call discussing third-quarter results, Burd noted that the retailer's sales growth on the private label side is outpacing that of the national brands by about three to one.

"Our brand portfolio is a critical way for us to demonstrate value, innovation and quality for our shoppers," says Joe Ennen, Safeway's senior vice president of consumer brands. "When we do it right and when we're able to drive innovation and drive quality, not only do those things create loyalty with our shoppers, but they also positively halo back to Safeway the banner and Safeway the mother brand."

Informed innovation

When it comes to store brand product development, Safeway is not a believer in blind innovation. Because it ultimately aims to meet shopper needs, the retailer relies on key consumer insights and consumer segmentation not only to inform innovation efforts here, but also to evaluate success, notes Mike Minasi, the retailer's president of marketing.

"I think our process is very consumer insight-driven," he says, "from early on in the product development process through the branding process and, ultimately, through measuring the effectiveness of the products that we launch and refining and expanding the lines of product that we bring to market."

Ennen adds that product development is quickly becoming one of Safeway's core strengths.

"We've put a considerable amount of effort into building that capability," he says. "And brand-building, brand innovation and brand activation, I think, are also areas where we have really strengthened our competencies and capabilities."

When asked what recent project he is most proud of in terms of leveraging these competencies and capabilities, Ennen points to Safeway's new Open Nature line of all-natural foods — although he admits choosing just one achievement is akin to having to pick a favorite child.

"We're very proud of the work that we've done on Open Nature," he says. "It's been very successful for us in terms of our shoppers [saying] they're excited that we're doing more to give them natural offerings."

But the Safeway Consumer Brands team also is excited about its new The Snack Artist lineup of salty snacks, cookies and frozen appetizers and exclusive Debi Lilly offerings, Ennen stresses. The Snack Artist salty snacks give shoppers a really meaningful innovation — resealable packaging — while allowing them to save money at the same time. As for the Debi Lilly lineup, Safeway was really the first grocery retailer to leverage an outside design expert to create and brand a product offering, he notes.

Targeted brands

The new brands to which Ennen refers are only the icing on an already impressive Consumer Brands cake, of course. From value-minded Pantry Essentials household and food items to premium Safeway Select foods, Safeway and its banners serve up a wide range of store brand items to suit the diverse needs of today's consumers. And each brand or set of brands has its own unique personality and positioning.

On the food side, one set of Safeway's brands — including Primo Taglio deli meats and cheeses, Signature Cafe deli items, Rancher's Reserve beef and Safeway Select premium foods — can be described as "aspirational," Ennen notes.

"Those are all brands where we want our shoppers to feel like they are getting the absolute best quality products possible," he explains.

Core-line food brands such as Safeway Kitchens and Safeway Farms, meanwhile, allow customers to feel they are "savvy and smart shoppers" who are making good choices and getting great quality at a great price, Ennen says, while food brands such as O Organics, Open Nature and Eating Right are targeted to specific consumer needs in relation to natural and organic foods and health and wellness. (It's worth noting that sales for the O Organics brand now exceed $400 million annually, according to a November 2010 Organic Monitor publication.)

And at least one food brand — The Snack Artist — aims squarely for fun.

"Snacking is an inherently fun activity, and we are trying to tap into and capture the kind of fun and irreverence that accompanies that kind of occasion," Ennen says.

Trust is big in Safeway's store brand positioning, too. The retailer's Mom to Mom baby care products (ranging from diapers and wipes to baby food and formula), for example, were developed using the insights and experiences of "real moms." Safeway's Priority pet care lineup, meanwhile, promises scientifically formulated products that are backed by experts in pet care and nutrition, while its Bright Green brand offers environmentally responsible cleaners and household items to eco-conscious shoppers.

But all of these Consumer Brands, as well as many of the retailer's others, share one common trait: a commitment to meeting shopper needs.

"In all aspects of our business, we are very concerned about shopper needs and how we can be more relevant to our shoppers over the long haul," Minasi explains. "We believe that our brand portfolio is all about that. It's about focusing on the needs of shoppers and identifying the needs that we uncover in our insight work and our market research. We would want to be perceived as a company that cares about our shoppers, that cares about the things that are important to them and their families, and that [ensures] that the products we develop and the products we market help satisfy their needs."

The brands also are critical to differentiation, Minasi adds, and differentiation is critical to building shopper loyalty.

"Our primary goal for 2012 and beyond," he says, "is to continue to do the good work we're doing in product innovation, product development and product and brand marketing to do our part in increasing the loyalty of the people who shop Safeway."

Marketing-minded

Speaking of own-brand marketing, we can't find another grocery retailer that's been more active — or more creative — than Safeway in recent years

Although the retailer's own-brands "marketing evolution" really began about 10 years ago with efforts centered around brands such as Rancher's Reserve, marketing efforts reached to new heights last summer when Safeway broke the Guinness World Record for the world's longest picnic table in a public debut of its Open Nature line. Held in San Francisco on National Picnic Day, the event also featured Food Network TV chef and restaurateur Tyler Florence, who cooked up meals for picnic guests using Open Nature store brand products. Minasi says the event was in keeping with Safeway's commitment of late to leveraging as many touch points as possible to communicate the marketing message to shoppers — shoppers who are consuming media differently today than in the past.

"We believe with Open Nature our opportunity was to be as holistic in the marketing of that brand as we could be," he says. "We had an opportunity to leverage traditional media, our ongoing normal print and point-of-sale material that's important to the core business, but also were able to use digital and social and PR buzz marketing with that brand in a unique way. The world's longest picnic table was a device to link Open Nature not only to picnicking and family gatherings and entertaining, but also to a time of year that is highly relevant."

Packaging and merchandising also are critical marketing tools, of course. As Ennen explains, packaging is a "hugely important" part of how Safeway communicates individual brand messages to its shoppers. Open Nature products, for instance, boast many natural cues and feature the ingredients on the front of the box to address the need for transparency. He notes that the retailer has great packaging partners in Anthem Worldwide and PhilippeBecker.

"It's a very deep and involved relationship with them, and that's how all great agency-client relationships work — when you're transparent and collaborative and willing to push each other," he says.

Top of mind for Safeway here is what will excite and interest shoppers when they come into the store, Ennen explains. But Safeway's approach to merchandising its store brands also has changed over the years.

"In terms of how we merchandise and shelve, I think that's an evolution," he says. "As our brands become the number-one or number-two brands in the category, the whole idea of sort of striping in next to the national brand is kind of a passé idea. What you see in our stores increasingly is us blocking and managing our brands as a discreet offering as opposed to an alternative."

And the corporate brands team's collaboration with Safeway's merchandising team has been critical to success here, Minasi adds. In fact, the retailer views the brand portfolio as "an asset the entire company needs to rally behind" for success.

Win-win relationships

The collaborative relationships behind Safeway's store brand success go beyond that between its corporate brands and merchandising teams. Ennen calls the relationships between the corporate brands team and store brand manufacturer-partners "symbiotic" — they are very much win-win relationships.

"The more we sell of their product, the more they obviously sell," he says.

Safeway conducts top-to-top meetings with its major suppliers, Ennen notes, inviting them all to come into its offices once or twice a year to communicate specific goals, strategies, priorities and expectations related to corporate brands products. Although the retailer relies on key suppliers to help achieve its innovation goals, it remains highly involved in the product development process from start to finish.

"We are very, very passionate about the quality of the products that we sell to our shoppers with our name on the package," he emphasizes. "And we are very aggressive about making sure that the products we launch and the products that carry our brand names are as good as they possibly can be. And we play a very active role in making sure those products meet our standards."

It's critical to Safeway, therefore, that its manufacturer partners fully comprehend what the retailer is aiming to do with a particular brand and the expectations involved. And those manufacturer partners must be just as passionate about product quality as Safeway is, Ennen explains.

"Fundamentally, it's about starting off with a very clear set of expectations around specifications and making sure that you're working with the right partners who share your values," he adds, "because you can't police every single product every single day from every single lot and every single batch."

It's worth noting that Safeway also manufacturers a number of its own-brand products, operating 20 plants within the United States and 12 in Canada. That reality brings with it some critical advantages.

"We're literally completely vertically integrated, all the way to the point of selling, so that allows us much better control over costs and transparency around costs," Ennen maintains. "And it allows us to move quickly and respond quickly to changing consumer trends."

Equipped for challenges

Safeway's consumer brands' product development and marketing achievements might be impressive, but the road to success has not always been trouble-free. With a breadth of offerings going across numerous categories and encompassing thousands of SKUs, Safeway's corporate brands business is "incredibly complex" to manage, Ennen admits.

"We are involved in and manage everything from milk to paper plates and bag salads to frozen entrées," he says.

To help "manage the chaos," the Consumer Brands team again relies heavily on its merchandising team partners for category expertise and category insights, Ennen says. The team then combines that category knowledge with what it is trying to build on the brand and products side of the business.

And Safeway also aims to stay true to its mission of delivering its own version of value to the shopper — instead of trying to deliver another retailer's version.

"That for us looks like a portfolio of offerings from very sharp price-pointed products and brand offerings like Pantry Essentials to great-value products like Open Nature and O Organics," Ennen says. "Our focus is on making sure that, for our shoppers, we're meeting their definition of what great value looks like."

And Safeway appears to be well-equipped to handle whatever challenges — and opportunities — that come its way in the years to come.

"We've done some very good things in 2011, and we've got a lot of upside opportunity going forward," Minasi says. "We're building organization capabilities to do the best job that we can possibly do. We try to stay focused on the things we think are important to our shoppers, and we believe if we do that and do that well, we'll be successful."

Safeway Inc., at a glance

Headquarters: Pleasanton, Calif.

Top Executive: Steven A. Burd, chairman, president and CEO

Grocery Retail Banners: Safeway, Carrs, Dominick's, Genuardi's, Pavilions, Randalls, Tom Thumb, Vons

No. of Stores: 1,687 in the United States and Canada

Store Brands: Bright Green, Eating Right, Lucerne, Mom to Mom, Open Nature, O Organics, Pantry Essentials, Primo Taglio, Priority (pet care), Rancher's Reserve, Safeway, Safeway Select, Signature Café, Waterfront Bistro and more