Kroger, Walgreens in Purchasing Alliance

Combining against Amazon's dip into pharma?

Kroger and Walgreens are in a purchasing alliance and seeking more partners   by George Anderson in Retailwire

The Kroger Co. and Walgreens have formed a new purchasing organization to cut costs and drive innovation.

The new group purchasing organization (GPO), which will be called Retail Procurement Alliance, further expands joint efforts between the supermarket and drugstore powerhouses. In August, the two companies announced plans to expand a pilot program that places Kroger Express store-within-a-store shops inside of Walgreens locations. In a separate test, select Kroger stores are selling a limited offering of Walgreens health and beauty care products, including Boots No7 and Soap & Glory.

Kroger CFO Gary Millerchip said the new GPO “brings together the best of two great organizations to reinvent critical components of our sourcing practices.” 

Alex Gourlay, co-COO for Walgreens Boots Alliance, said the expanded relationship between his company and Kroger will not only “create efficiencies across our supply chains,” it will enhance the ability of the two companies to drive private label innovation and meet the “evolving needs for value and convenience” among consumers.

Kroger and Walgreens are looking for additional partners to join their newly formed purchasing group.

“If another organization thinks they have significant buying in these areas, they could partner with Kroger and Walgreens to save and reduce waste,” Mr. Millerchip told CNBC ..... " 

Procurement in Retail

Have noted the broad increase in quality and sticking of private labels.  Also linking these labels with other purchases in retail.  Advances are in play.  Considerable detail here:

Rethinking procurement in retail
For retailers, procurement is no longer solely a matter of negotiating “A” brands. Private labels and verticalization are trending. Advanced approaches and tools help get procurement in shape for the future.  .... 

Sent from McKinsey Insights, available in the App Store and Play Store. ....

The days in which bricks-and-mortar retail monopolized touchpoints to customers are gone. Alongside pure internet retailers such as Amazon and Zalando, and start-ups like the beverage delivery service Flaschenpost, brand manufacturers are increasingly seeking to gain direct access to consumers—be it online or through ultramodern flagship stores in premium city-center locations. Aside from pioneers like Apple, many categories are encroaching on the final consumer business, from coffee brands (take Nespresso) through to cosmetic lines such as Kiehl’s and Nyx by L’Oréal. As a result, traditional retailers not only face intensified pressure on margins but also unrelenting pressure to innovate.  .... "

Amazon Private Label: Skincare

Another interesting attempt at private label.   Marketing? How will consumers react? 

Amazon creates its own skincare line called Belei
Don't expect to see Amazon's name plastered over it, though. .... "

By Jon Fingas, in Engadget

Amazon and Private Label

Amazon has not bee very successful in this space in the past,  but there is evidence that are now pushing harder and more carefully.

Amazon and Private Label

In CustomerThink,  By: Bryan Pearson

The Jolly Green Giant, Tony the Tiger and the Keebler Elves have co-existed harmoniously in groceries, superstores and warehouse clubs for generations. But they may not survive the Amazon.

If Amazon opens a chain of grocery stores, as The Wall Street Journal reported, the most vulnerable competitors won’t be Kroger, Target and other supermarket chains. Rather, Kraft, Nabisco, Coca-Cola and similar makers of the brands that fill grocery shelves stand to lose the most. Or they stand to gain the least.

Amazon likely would carry a large number of private-label goods, a strategy it’s exploring now and is basically a must-have across all of retail. Aldi and Trader Joe’s specialize in private label, while Kroger, Target and Walmart are expanding their offerings aggressively. (Kroger Manufacturing in fact makes goods for other sellers, while its private label brands generate 26% of its own revenue).

It’s simply good business for retailers, which can better control the costs and distribution of house-made products. The profit margins on private-label items are estimated to be 25% to 30% higher than from national brands, CBInsights reports. The only real risk of introducing them is in displacing national brands shoppers come expressly to their stores to buy.

To put it simply: Crackers are fair game, but keep your hands off my Tide.  ..."

More on Kroger and Alibaba

More and expert comments on this.   Also notice the assistant augmented Tmall platform, testing for US application?  Large CPG's now getting private label competition from abroad in new markets?

Kroger teams with Alibaba to sell private labels to half-a-billion Chinese consumers
Who doesn’t want to access a billion-plus people who are much further along on the digital adoption journey than the U.S.?

by George Anderson in Retailwire

Kroger is looking to make its first overseas move a big one. America’s largest operator of supermarkets announced yesterday that it will test an online store selling its private label goods in China using Alibaba’s Tmall platform.

The pilot program will initially test sales of Kroger’s Simple Truth natural and organic private label. Last year, sales of Simple Truth products exceeded $2 billion, making it the largest natural and organic brand in the U.S., according to Kroger. Simple Truth is the second largest label in Kroger’s private brands portfolio. .... " 

Amazon and Private Label

Watched this early on and it seemed the were digging deeply here.

Supermarket chains can breathe easy — for now, at least — about Amazon’s grocery push on one front: private label.  in Supermarket News

Of Amazon’s roughly 7,000 private brand products, less than 2% are food and beverage items, according to an analysis of the e-tailer’s private label offering by Coresight Research. A far higher proportion is in apparel, which accounts for nearly 5,000, or approximately three-quarters, of Amazon’s private brand roster.

“Apparel is the dominant category in Amazon’s private-label offering, and one that appears to be growing, as the retailer pushes further into the clothing and footwear markets,” Deborah Weinswig, chief executive officer and founder of New York-based Coresight, said in the report. “In contrast, Amazon’s private-label offering in grocery categories such as food and household care remains limited, and in beauty and personal care, Amazon offers just two private-label products.” .... "

Retailers Shortchanging National Brands

We spent much time and effort examining private retail label versus retail brands.  Was just in a Kroger today and scanned some categories we had worked with, and the evolution of changes wwas stunning.

Are retailers short-changing national grocery brands?     by Tom Ryan in Retailwire, includes expert comment. 

A study from Acosta finds that shoppers overwhelmingly prefer national brands and that pushes toward private labels might be undermining their effectiveness.

Overall, shoppers agreed that “name brands are better than store brands” in 41 of 53 categories, including pet food, beauty & personal care, carbonated soft drinks, coffee and chocolate.

Name and store brands were found to be “about the same” in 12 out of 53. These were most likely in the perimeter (dairy, produce, fresh meat, bakery, etc.) as well as paper products and bottled water.

For no category did respondents believe that store brands are better than name brands.

Generally, the more personal, innovative and differentiated the category, the more likely a shopper is to choose a national brand over a private label brand.

The top three reasons consumers gave for purchasing national brands while grocery shopping included:

“National brand products are higher quality in taste and/or performance.”
“I can get better deals on national brands (through sales/coupons).”
“I trust national brand products more.”
Cost savings was the primary driver of private label brands, and purchases are often viewed as a compromise, the study found.

An accompanying study of over 100 retailers found:
  .... " 

Maintaining Shopping Lists in Amazon Dash

I got a note from Amazon yesterday, indicating that one of my Amazon Dash items had been discontinued.  And offered me a long list of substitutions.  Have now been a 'subscriber' to Dash items almost from their beginning.  The idea works well.   In fact, recall talking the idea at our innovation center before they were announced.  Which reminds me of the need to maintain lists and preferences.   Also permits the constructor of the list some power in inserting their own choices.   Not clear if there are any statements in the EULA to that effect, but will investigate.

Amazon on Private Label

Amazon has dabbled in this space already.   How will it be integrated with classic CPG marketing?

Is Amazon poised to dominate private-label products?

Amazon not only offers its AmazonBasics line of private-label products, but the company also brings in sales from the nearly 45 other brands it owns. Because Amazon can pore through its customer and sales data, the retailer is likely to launch new products to compete with high-selling brands and dominate private-label sales in 2018, writes Shareen Pathak.

Amazon has long honed the business of being the middleman — getting brands to sell on its site, letting shoppers pay for and receive those items fast and efficiently.

But 2017 was the year Amazon started taking steps to create its own brands. If done at the right price point, Amazon will be in a strong position next year to prove it not only can help other retailers grow, it can be a retailer itself.

Amazon already has its AmazonBasics line of essentials like batteries and chargers. These items are largely commoditized, said Forrester analyst Sucharita Mulpuru-Kodali. It’s easy for Amazon to keep growing there: By bumping those products up in search results and pricing them right — which will be easy to do since Amazon owns the data — this line is poised to keep growing. 

Private Label Grocery

 Is private label grocery about to go to the next level?   by Denise Leathers with discussion .... 

Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Refrigerated Buyer magazine.

What a difference 12 months makes! Last year at this time, we were resigning ourselves to the fact that private label shares in food may have plateaued — and store brands in the U.S. might never enjoy the kind of success they have in Europe.  .... " 

Now, a new report from Cadent Consulting suggests private label dollar share could swell as much as eight points to 25.7 percent by 2027.   .... " 

Innovation and Risk in Private Label

My own observation is that there has been considerable innovation in private label.   It does make sense that it would be first used for the low hanging fruit of emulating existing product.   Thus minimizing risk. With the data that retailers have this could easily be modeled.

In Retailwire: 
Although it should be a great place to make small bets, "Private label has historically had a high aversion to risk. And innovation requires risk," says Bob Shaw, president and CEO of Concentric Marketing. .... " 

IRI on Private Label and National Brands

In Retailwire:  And discussion.

" .... IRI in their latest Times & Trends report offers this advice: "Ensure that price is a lever that creates demand without diminishing margin." In the previous Business Tip, we discussed factors other than price that make up consumers' definition of "affordability" including preferences for flavors, favorite brands and household appeal. But in IRI's research, "good value for the money" still weighs heaviest as an "affordability" factor.

In that regard, private label products still generally offer meaningful savings versus their national brand counterparts — about 28 percent, on average. That gap broadens to 50 percent in 19 percent of categories studied by IRI. And yet in 25 percent of categories, there is less than a 10 percent differential. ... " 

Brands, Private and National, Matter

From Bain:  National brand vs Private label.  " .... It was only a decade ago when many industry analysts looked at two looming trends—the rise of retail consolidation and proliferation of private labels—and issued dire warnings about the power of consumer packaged goods brands. However, their predictions turned out to be premature. Brands aggressively managed overhead costs, pursued dynamic growth in developing markets and gained scale, efficiency and entry to new markets through mergers and acquisitions (M&A). As a result, brands now report 10-year high operating margins. ... " 

Private Label Growth Slowing

In Mediapost: Not that private labels are decreasing in share, but their growth compared to national brands is slowing.  Interesting numbers provided.  Was involved in the analysis of some of these kinds of numbers in CPG.

Kroger Successful with Private Labels

Branding private label at Kroger has been very successful,   What are the dimensional characteristics of such a label to make it most powerful?  The data must exist.

In FoodBusinessNews:
" ... Kroger's Simple Truth and Simple Truth Organic brands grew to $1.2 billion in sales during the 2014 fiscal year, the company said. The retailer will continue integrating products from the private-label lines into the center of the store, blurring lines between departments in an effort to cross-merchandise and appeal to a larger customer base, Kroger President and Chief Operating Officer Mike Ellis said ... " 

Amazon pulls Diaper Brand

This very notable private label introduction has been pulled after six weeks on the market.  In GigaOM.  They say for redesign.   Do expect more examples of private label CPG from Amazon, leveraging their delivery and consumer knowledge expertise.

Kroger Private Label Growth

Continued growth of retail private label, statistics:

How Kroger's private-label brands fuel growth 
Kroger's Simple Truth natural private-label brand is on track to reach $1 billion in annual sales, and its Kroger brand is the top-selling brand in its stores. The retailer's private-label brands have grown to account for 25% of grocery sales, company executives said, and Kroger has also added a range of lower-priced private labels for shoppers with smaller budgets, including P$$t for nonperishable items, Check this Out for household goods and Heritage Farm for fresh foods .... " 

Why Private Brands Fail

In MypBrands: Why private brands fail.  " ... Most brands fail. In fact, some estimate that 70-80% of new brands launched each year flounder and eventually flop. But do Private Brands fail? Do they follow the same sobering failure rate as other brands?... 

Private Brands fail differently than manufacturer brands. And because of this, tracking failure isn’t as obvious. Failure is not a word often used in reference to Private Brands, and yet there are clear ways retailer owned brands can fail in today’s marketplace. To become better brand builders, launchers and managers, we must become students of why Private Brands fail. ... " 

Private Label Brands Hold Ground

An indication that private label brands are holding their own after a slow recovery.   " ... While private labels have existed for some time, the recession proved to be the inflection point for them to become a true force in the marketplace. And now that the economy is improving, private labels continue to increase in popularity due to both their improved quality and relatively lower price compared to national brands..... "  Good detail in this article.

Optimizing Packaging

In CGT, an overview of the characteristics that make a difference in packaging.   From Manufacturing to Supply Chain to Shelf.   " ... With stores stocking innumerable branded and private label competitors in every category, traditional promises of consumer goods brand quality and safety are no longer sufficient differentiators. Cambashi, a global industry analyst firm, explains why product packaging is taking over as a crucial instrument of brand identity in the retail environment.... "