SpartanNash Eyes Private Label Product Growth
SpartanNash is aiming to hit the $10 billion mark in revenue by 2025, and a big part of its multi-pronged approach to boost sales by $1 billion over the next three years is continued expansion of its private label assortment.
Recently, the company gave its selection of store-branded products a boost with the addition of 480 “indulgence and convenience” products sold under the Fresh & Finest brand. The assortment includes a variety of freshly cut produce along with take-and-break bread that serves as grab-and-go items for shoppers.
“We will be increasing our own brand product penetration by 20%,” Masiar Tayebi, SpartanNash’s executive vice president and chief strategy and information officer, said during the company’s first-ever Investor Day held in New York City. “Our goal is to launch 1,000 new (private label) products by 2025. We are committed and we have a strategy.”
The company’s current private label assortment includes the brands Our Family and Fresh & Finest sold at SpartanNash-owned grocers and to retail customers, and Freedom’s Choice that is sold to military based retailers such as the Defense Commissary Agency (DeCA).
While timing for the growth of its private label assortment is somewhat fortuitous, the process began with the company’s change in leadership just a couple of years ago, said Becca McKenzie, marketing manager for Own Brands with SpartanNash. She noted the company has been working to refresh its private label assortment and new products have been well-received at a time when inflation-weary shoppers are looking for quality, lower-priced alternatives to national brands.
“We combine our expertise with feedback we receive from consumer research and the knowledge of our suppliers when developing new products,” she said. “From a marketing standpoint, although the items offer a lower price to shoppers, we focus on product quality. We say our products are better than national brands. We are also active on social media and use those platforms to highlight our own brand products.”
As private label assortments grow, so too does the conversation around sustainability as it pertains to packaging. Rick Weekley, the company’s senior director of Own Brands Marketing, noted issues pertaining to sustainability are becoming an important decision maker in the product development process.
“It’s no longer about just having a pretty label, stacking it up and selling it,” he said. “It is about social responsibility. Our own research at the store level validates what we are seeing nationally. Sustainability is escalating as a reason to buy products.”
Weekley noted the development of environmentally-friendly packaging is a team effort requiring SpartanNash to have “open conversations” with its manufacturing partners. While the demand from consumers and retailers alike for packaging that can be recycled or composted is growing, cost is still a factor.
“For an assortment like our Fresh & Finest line, there is more margin in those products,” he said. “As a result, there is more room to have packaging that might be of higher cost. But overall it’s a journey and it will take time.”
Future Company Growth
With 2021 revenue of $8.9 billion, SpartanNash officials are focused on hitting the $10 billion mark by 2025, said Tony Sarsam, president/CEO of SpartanNash. To hit that goal, the company is focused on growth from share gains and continued expansion into value-add offerings.
Company officials forecast the additional $1 billion in company-wide sales to derive from $800 million in sales growth from its wholesale division and $300 million in growth from its retail segment.
Additionally, SpartanNash is looking to increase EBITDA (earnings before interest, taxes, depreciation, and amortization) to $300 million annually by implementing several initiatives including margin-enhancing innovation that includes own brand execution, supply chain efficiencies, and automation and retail execution.
The targeted growth discussed by Sarsam at his company’s Investors Day came on the same day SpartanNash raised guidance for fiscal year 2022. The company now expects net sales to range from $9.5 billion to $9.7 billion, up from previous guidance of $9.3 billion and $9.6 billion. Adjusted EBITA is now expected to be between $237 million and $242 million, up from previous guidance of $227 million to $240 million).