Q&A: SpartanNash’s Bennett Morgan Talks Private Label, Fresh Expansion
The grocery business has long had its complexities, but today, it could be easily argued the industry is as complex as ever. Issues including pricing, technology, labor and supply chain management each provide their unique hurdles daily and require companies large and small to be nimble.
At SpartanNash, a high level of nimbleness is vital to meeting the needs of its independent retail customers. Recently, the company promoted its chief merchandising officer, Bennett Morgan, to executive vice president. He has oversight of several key areas including fresh, center store and pharmacy merchandising, category management, pricing, promotions, and master data management.
Recently, Morgan spoke with Store Brands to share his insight on the company’s current merchandising efforts, the role of private brands, the challenges facing independent retailers today and how his team can provide needed assistance in meeting and overcoming today’s headwinds.
STORE BRANDS: As you move into your executive vice president role with SpartanNash, what are your top priorities as it pertains to the company’s merchandising efforts?
BENNETT MORGAN: What you see is growth and expansion focused on merchandising that I've brought to the company, but some of the fundamental things about SpartanNash haven't changed and I'll continue to drive those. The roots of this company go back 100 years and we have built a legacy of trust with our retail customers and consumers. That’s something important to me and important to the merchandising effort we have. I think it fits really well to think about the legacy of this company.
"People first" is also a big part of the approach. Whether with our own teams or our independent retailers, “people first” is the root of success as part of this transformation that we’ve been driving at SpartanNash. That will continue to be a major focus for me.
The other element that I wanted to emphasize is continuous learning and growing. We recently held a four-day summit where we shared some of our best practices and opportunities for growth. That's something that we're passionate about and we'll leverage some of this "people first" and customer focus to be able to drive it.
SB: What are some of the key elements of this transformation effort?
BM: There are two initial areas of focus that we have in our merchandising transformation. One is on assortment and the other one is on promotions. With assortment, that's one of the main decisions we've got to make as a merchandising organization. What items are you going to carry? In our business, when we look at assortment or promotions, we see those as major unlocks not just for our independent customers, but for our own retail stores.
We are leveraging customer loyalty and trends to develop a more compelling offer on the shelf for our customers. Those are things I've done in my prior life and we're taking it to the next level. How do you leverage some of the data and analytics that you have, feed that into technology, and blend this art and science to be able to deliver a better experience for the customer? So, if you think about things such as a customer decision tree, how do you arrange things on the shelf, that's a key part of how you deliver a compelling offer; and leveraging some of the data helps you figure out what's resonating from a customer perspective for assortment.
If you think about promotions, this is a key unlock for anybody that's in the world of grocery. This is particularly true now as we see that inflation has caused a lot of pressure on customers and we're now also seeing government dollars go down. We're not quite back to pre-COVID levels, but those numbers have come down quite a bit, so customers are seeking value, and promotions would be an obvious focus area for us. Related to that would be pricing and the continued effort to offer terrific value on products every day that matter most to our shoppers.
SB: What do you see as some of the biggest challenges facing independent grocers currently and what can be done to help them overcome these challenges?
BM: They are most definitely having challenges with labor. And that can have an impact on the merchandising programs we offer. No matter how great the plan and the strategy, it doesn’t matter unless you can execute it. Understanding this challenge, it's critical for us to develop turnkey programs that allow them to execute at a high level. Ultimately, I want to make sure it resonates really well for the customer. If I think about the shopper that's coming into their stores: How am I designing programs? How am I designing support for them that ultimately allows for a really high execution level and a terrific experience for their shoppers?
If you think about more practical things they're dealing with, I don't think any of these are surprising. Pricing and promotions are very hot topics related to inflation. We are seeing that costs are slowing down, but costs on an absolute basis, or prices on an absolute basis, are up pretty dramatically from pre-COVID.
One of the things we did in merchandising transformation is we have a cost policy that we rolled out. That includes checks and balances to ensure transparency and accountability with vendor cost increases.
SB: How is the growing consumer demand for private label products impacting the merchandising efforts for SparanNash and its retail customers?
BM: We are seeing a big pickup on the own-brand side as a lot of customers trade into own-brands as they seek value. If you look at SpartanNash’s Our Family brand, which has been around for more than a century, it is well-liked from a consumer perspective, and a lot of our independents have seen the power of that brand. We're also investing significantly into that brand, and that's paying dividends for them. This includes quality, pricing, packaging and the range of things we offer. This includes natural, organic and plant-based; things that are really important to customers.
Fresh is another area that we're investing heavily in our own retail stores. How do we differentiate in fresh and how does own brands play a role there? Is that premium sushi? Are there grab-and-go options? Is it premium, fresh-cut fruit and vegetables? Grilled-to-order paninis? Store-made, artisan sandwiches? These are things that we’re building as part of our retail innovation. We’re also seeing the independents recognize the need to put these items into their businesses.
SB: What product categories are seeing the highest demand for private label items from shoppers?
BM: I will call out fresh as being a big one. We are expanding the number of items and differentiation that we're putting there. And there's just, quite frankly, bigger demand where folks are going into it. Bakery is also one of those areas that really is going to stand out for us. You're also seeing growth across grocery, probably not surprising, as customers look for some of that deal-seeking. We're seeing salty snacks as an area that we have invested in that's growing significantly. Shortening and oils is another category where the customer is looking for differentiation and looking for value.
SB: We’ve heard a great deal about manufacturing capacity issues this year. Are you seeing the same thing?
BM: Yes, we are, and it’s been tough. We've seen some consolidation on private brands from the supply perspective, and some of the minimum thresholds from those suppliers have gone up. It’s important to be on your game with own-brands to be able to succeed. It goes back to when you think about what we're doing in our retail stores and the independents. I talked about the growing interest (in private label products) from our independents. That's something really important to us, because if the independents pick up that volume, then I can guarantee more volume, hit the minimums with the manufacturers, and then I can continue to provide great products for them.
SB: How is technology currently helping independent retailers connect with their customers? Is there a need to do more and make greater use of technology?
BM: Customer centricity is an important issue and that continues to be an area where you have to leverage data and technology. The best folks out there are trying to do it completely automated, and they're not having terrific success because it's difficult to do. But we got to be there too, and so what you've seen over the past decade is the cost of processing power, and the cost of just building advanced analytics in your business has gone down dramatically. That’s an area where SpartanNash is investing heavily.
What we're doing with that data then is we say, "The customer is telling us what they like and what they don't like and what products they're willing to trade from and not.” How do you take that data and help deliver a better offer for the customer? That's a key way that we're using technology.
When thinking about pricing, you can’t do advanced pricing without having heavy analytics. Think about how fast pricing moves in the market today. A lot of the folks use advanced analytics in their own pricing, so if your pricing isn't using advanced analytics, you won't be able to keep up with what your competition's doing.
And all of these things translate directly to independents. It's no different in our own retail stores than it is for them. Figuring out how to package that up for them is the challenge. How do I make sure that I can help them with the labor shortages? Some of these folks don't even know the capabilities that exist out there, so how do I help them understand: "What is it that we can do for you, how would you deploy it in your business, and what kind of results should you expect?" Those are areas that we're investing in heavily. Pricing is a great example of that, where we're seeing a lot of independent customers expressing more interest in that as the market is getting tougher for them and they're trying to figure out how to compete better.