1. retail-merchandiser.com S T R A T E G I E S F O R G R O W T H
Illinois-based Topco Associates leads the way
in quality, safety, and sustainability for its own and its
members’ brands.
July/Aug. 2010
Hear
Our Voice
retail-merchandiser.com S T R A T E G I E S F O R G R O W T H
Sept./Oct. 2010
2. In1997,thefivelargestgrocerynationalretailersrepre-
sented$188billioninsales.By2009,theyrepresented
$514billion.Consolidationbecametheindustry’sshiny
penny,givinglargecompaniesachancetogrowlarger,fur-
therincreasingthegapbetweennationalsandindependents.
Priortotheconsolidationboom,TopcoAssociatesLLC
haddevelopedareputationforhelpingitsindependents
competethroughpurchasing,distribution,anddevelop-
mentaggregation.Butasthelargernationalslookedfor
strongindependentstogrowtheirsize,Topcosawitsreach,
andthereforeitsabilitytohelpitsmembers,shrink.
“Welostmembers,butnotbecauseofanythingTopco
did badly,”saidRandySkoda,executivevicepresident
responsibleforTopcoprogrammanagementandproduct/
brand development. “It was arguably because of the
things Topco did to help its members be successful.”
Therewas,however,asilverliningtothedarkcloudof
consolidation,saidSteveLauer,Topco’sCEOandpresi-
dent. Asthosefivenationalcompaniesdistancedthem-
selves,itcreatedmoreofaneedforcompaniesthatwanted
to remain independent to find a way to band together.
“Itwasanobviouscalltoaction,”saidLauer.“Topco
steppedintothatvoid,realizingthattobemoreeffective,
we needed to change our model.”
Call to action
Topcostartedbyrevampingitsmission:toenableitsfood
industryownerstorealizeasustainablecompetitiveadvan-
tage,relativetotheirnationalcompetitors,byproviding
aggregation,innovation,andknowledgemanagementsolu-
tionsforitsmembersandcustomers.
Inotherwords,privatelyheldTopcoexistsforthebenefit
ofits52member-ownersbutdifferentiates itselffromother
organizationsofitskindthroughthebroadarrayofprod-
uctsandservicesitoffers.“Weofferacompletesolutionfor
abrand,”saidFrankMuschetto,executivevicepresident
andchiefprocurementofficer,whoisresponsiblefor
sourcing all of Topco’s corporate brands and perishable
productsas wellas thecompany’slogistics,supplychain
management,andquality.
Topconotonlyharnessesapieceofthebuyingpowerof52
independentretailers,wholesalers,andfoodservicecompa-
niessuchasBrookshireGrocery,GiantEagle,Hy-Vee,and
Meijer (to name a few), it also has the capacity to handle
procurement, brand development, quality assurance, and
price valuation.
“Weuseourexpertiseandknowledgetoworkcollaborative-
lywithourmembers,sowecanbeanextensionoftheirbuy-
ingoperations,”saidMuschetto.“I’mnot
awareofanyothercompanythathasthat
abilityrelativetotheconceptofproduct,
brand,andlabeldevelopment;foodand
productsafety;andprocurement.”
Through the launch of new initiatives,
new product categories, new brands,
and new channels of distribution,
Topco repositioned itself from being a
private label company to a solution
PROFILE
Topco Associates
www.topco.com
HQ Skokie, Ill.
Revenue $10.6 billion
Buying Power $120 billion
Founded 1944
Estimated number of stores
serviced/operated by Topco
members 8,400
2 RETAIL MERCHANDISER WWW.RETAIL-MERCHANDISER.COM
More than a private label organization, this member-owned
consortium leads the way in quality, safety, and sustainability.
TOPCO
COVER STORY
HearOur Voice
3. SEPTEMBER/OCTOBER 2010 RETAIL MERCHANDISER 3
provider. As a result, member-owners spread the word
that to survive and thrive in a consolidation landscape,
independents needed to take a look at Topco.
Between2001and2009,Topco’ssalesgrewfrom$3.2bil-
liontomorethan$10billion,andtoday,itsmemberscol-
lectivelyrepresentmorethan$120billioninretailsales.
Thisgrowth,saidSkoda,islargelyduetothesupportof
thecompany’smember-owners.
Join the team
Foratypicalfor-profitcompany,therearethreesetsof
stakeholders:employees,owners,andcustomers.Ifyouset
theemployeesasideandthinkabouttheinterestsofthe
ownersandcustomers,they’renotalwaysaligned—cus-
tomers want the lowestpossibleprices;ownerswantthe
highestpossiblereturns.
Althoughitisafor-profitcompany,thistypicalcustomer-
owner conflictdoesnotexistatTopco.“Wedon’thaveoneset
ofinterestsforownersandanotherforcustomersthatwe
havetobalance,”saidLauer.“Weareownedbyourcus-
tomers,andthatiswhowefocusonbringingvalueto.That’s
anadvantagetoourstructure.”
AnotheradvantageisthescaleofaggregationTopcobrings
tothetable.Inexpandingitsreachacrossvariouschannels,
brands,andqualitytiers,thecompanyhasstrengthenedits
abilitytoaggregateacrossdifferentchannels,oftenwiththe
samevendor—avalue-addforitsmember-ownerswhoare
inthewholesaleandfoodserviceindustries.
Topco’smember-ownersarequiteadiversegroupbecause
theyare locatedin variousregionsacrossthecountryand
havedifferentgo-to-marketstrategies,demographics,
Steven Lauer, CEO and president Frank Muschetto, EVP and CPO Randy Skoda, EVP
4. brands,etc.,which raises the question: how can such a diverse
group work together effectively? It all comes back to com-
mon goals.
Forone,eachmemberisinterestedindrivingdownproduct
costs. Foranother, the membershipworkstogethertodriveits
individualprivatelabelpenetrationpercentagesup.Lastly,it
workstogethertomaximizeproductdifferentiationfrom
nationalcompanies.
“Youcandifferentiateyourselfonserviceandstoreformat,but
whenitcomestonationalbrandproducts,you’resellingsimilar,
oftenidentical,products,”saidLauer.“Callitluck,greatplan-
ning,orcoincidence,butthebestwaystodifferentiateyourself
fromaproductstandpointfitrightintotheareasthatwe’ve
focusedonfordecades—corporatebrandsandperishables.”
Breaking down innovation
Topcodividesitscompanyinto10productprograms,each
withitsownstaffwithextensiveproductcategoryexpertise.
Eachprogramisautonomousandhandleseverythingfrom
productdevelopmentallthewaytobottom-linegrowth.
ItsCenterStorePrivateLabelprogramsincludefrozen,gro-
cery,dairy/bakery,andHBC/generalmerchandise.Under
itsperishablesprogramsarefreshandprocessedmeatand
produce.Itsthirdcategoryofprograms,whatLauercalls
“value-addeditems,”includespharmacy(prescriptiondrugs),
not-for-resale,andnationalbrands.“Thesearenon-traditional
areasforus,butmanyoftheprocurementandaggregation
basicsapply,”hesaid.
TopSource
Fiveyearsago,Topcoacquiredabusinessunitthathasblos-
somedintoasuccessfulnot-for-resalebusinessdivisioncalled
TopSource.Fromequipmentandsuppliestointangiblessuch
asservices,TopSourceaddedanotherlevelofvalueforTopco’s
member-owners.
SkodasaidTopSourcespeakstotheevolutionofTopcoandthe
roleitplayswithitsmembershiptoday.“We’retryingtohelpour
membersmaximizetheeffectivenessoftheirprivatebrandand
perishableprograms,butIwouldsayTopSourcehashelpedus
becomeevenmorestrategicallyalignedwithourowners,”hesaid.
“Ourmembershiplookstoustoprovideastrategicadvantage
whereverwecan,notjustforfoodproductsandprivate
brands.”Therearealmost500commoditiesinthenot-for-
resalespace,rangingfromrefrigerationequipmentinstoresto
delislicersandplasticT-shirtbags.
Truetoitsnature,TopSourcetakesitonestepfurtherand
includesarmoredcarservices,floorcareservices,lifttrucks,
tractor/trailers,andmore.“Ifyoulookatit,youcanbringscale
toanyofthoseservices,”saidSkoda.
TopSourceiscurrentlyputtingtogetherapropertyandcasualty
insurancecaptiveforthebenefitofitsmembers,afarventure
4 RETAIL MERCHANDISER WWW.RETAIL-MERCHANDISER.COM
TOPCO
COVER STORY
5. fromthemainstreamofprivatebrand,
butanextensionofitsmissionstatement.
“AnumberoftheproductsTopSource
sources for members’ use in their com-
missariesandoperationsdirectlycorre-
latetotheproductswebuyforour
members to be sold at retail,” said
Muschetto.“Forcommonproducts
requiredforretailandforuseintheoperation,weactually
enhance our aggregation.”
National brands
Topcotakesthesameapproachwhendealingwithnational
brands,whichatfirstglancelookslikeadiversionfromits
privatelabelmission.Butthat’snotso,saidLauer.“Thefoun-
dationofourbusinessisthatwe’reapurchasingcompany,”
hesaid.
Thecompany’snationalbrandsdivisionworkswithCPG
companiestobringopportunitiesthatnationalretailersare
abletotapintobecauseoftheirscale.“Ourindividualmem-
berswouldhavetroubleaccessingsomethinglikethat,sowe
pullthevolumetogetherandworkwiththenationalbrandsto
runaspecial,”saidSkoda.“Examplesincludeadditionalmar-
ketingfundsandspecialpackstoourmembers.”
Theprogramalsoworkswellforthenationalbrands,which
havetakennoticeofthelossofshareduetotheresurgenceof
privatelabelintheretailspace.“They’retryingtoregainmar-
ketshare,andwe’relookingtoprovidevalueforourowners,”
Skodasaid.“It’sawin-winfortheCPGcompaniesandthe
retailers.”
Costrac
PriceassuranceisanimportantpieceofwhatTopcooffersto
itsmembership.Costrachelpsthecompanydoitsjob.
Anindependentbusinessunit,CostracmonitorsTopco’sbuy-
ingpracticesandresultsandcomparesitsfindingsagainst
industrybenchmarks,suchastheUSDA’sbenchmarksinthe
perishablescategory.
“Costracistopricewhatqualityassuranceistoproductquali-
ty,”saidLauer.“Itmakessurewe’rebuyingright,andwhen
we’renot,ithelpsusfindopportunitieswemissed.”
NuVal
Thepowerof52member-ownershaspresentedTopcoitself
withanumberofopportunities,includinghealthandwell-
ness.Severalyearsago,agroupofscientistsheadedupbyDr.
DavidKatzoftheYaleUniversity/GriffinHospitalPrevention
ResearchCenterdevelopedasophisticatedalgorithmtomeas-
urethenutritionalvalueoffood.
Once they finished the algorithm, they went looking for the
bestwaytobringittothecommercialmarketwithoutnar-
rowing their scope just to one chain. Topco was a perfect fit.
“TheywantedtodevelopNuValasanindustrystandard,”said
Lauer.“Werepresentanumberofcompaniesthatcollectively
haveanationalfootprint.Weknewwecouldhelpgetthe
NuValnutritionalscoringsystemintostoresandbegintobuild
consumerawareness.”
SkodasaidTopco’smembershipapproachedtheopportunity
withexcitement,ashealthandwellnesshasalwaysbeena
focus.NuValseemedthebestwaytogiveconsumersguidelines
onhowtomakebetterfoodchoiceswithoutpushingforone
productoranother.
WithNuVal,productsareratedonascalefromoneto100;
thehigherthescore,thehigherthenutrition.Notonlydoes
theclearsignagegiveconsumersaneasyunderstandingofthe
nutritionalvalue,italsogaveTopcomembersanotherwayto
competewithnationalbrands.
“Wedidn’thaveastrongmetriconhowtomeasurenutritional
equivalency,”saidSkoda.“Wenowhaveanindependent
benchmarkthatsaysthisisbetter,asgoodas,ornotasgood
nutritionallyascompetingproducts.Ourgoalistomakeour
productsbetterforyou.”
NuValhashelpedTopcoimprovetheoverallnutritionalvalue
ofitsproducts;thecompanynowusesthealgorithmasaguid-
ingmetric.Andwiththerecession,asconsumershavebyand
largechangedtheirfocustosavingmoney,NuValgivesthat
busymomaquickwaytopricecheckwhilenotputtingthe
healthofherfamilyaside.
“NuValisnowpartofthedecisionbecauseit’srightthereonthe
pricetag,”saidSkoda.“Ourconsumersknowthey’respending
theirmoneyintherightplace.”
Private label push
Topco’srepositioningofthelastdecadehashelpedstrengthenits
corefocusofbeingaprivatelabelcompany.WiththeGreat
Recessionrefusingtoreleaseitsfirmgripontheeconomy,it
wouldseemthecompany’sfocusandenhancedofferingscame
attherighttime,butLauer,Muschetto,andSkodaallagreethat
theprivatelabelempirewasn’tbuiltonpricealone.
“Thetransformationofprivatelabelcomesfroma
combinationofhighproductqualityandeffective
merchandising.Toconsumers,theyare asappealing
asnationalbrandsbutatabetterprice,”saidSkoda.
ThisiswhereTopco’sbroadofferingin 10pro-
gramsshinesbrightest.Topcohandles26
SEPTEMBER/OCTOBER 2010 RETAIL MERCHANDISER 5
7. Support the strategy
AlthoughTopcocomestothetablewithprivatelabelprod-
ucts,retailersupportisanintegralpartofmakingthestrategy
work,andthey’rewillingsupporters.
Overtheyears,privatelabelhasbecomeadifferentiatorfor
independents, which ties back to the branding concept.
Whether a member-owned brand or a Topco-owned
brand,membersstaketheirreputationandfinancialsuccess
on the popularity and quality of the private label goods.
“From a financial standpoint, retailers can realize higher
margins by selling private brands,” said Skoda. “Many of
ourmembershavemadetheirprivatebrandspartoftheir
ethos.”
ThedifferentiationcomesfromtheexclusivityaPrice
ChopperSupermarket,forexample,hasfromaWalmartin
carryingitsownstorebrand.Whenretailerscansufficiently
expresstheinnovationandvaluebehindthestorebrand,being
theexclusivecarriergivesconsumersyetanotherreasonto
shopwiththem.“It’sjustonemorereasonthebrandingisso
important,”saidSkoda.
Stance on sustainability
ClearlyTopcohasitsprivatelabelducksallinarow,butin
alignmentwithadiversify-or-disappearphilosophy,thecom-
panyisalsoastrongproponentofsustainablepractices.
Thecompany’sfocuscanbebrokendownintotwocorecate-
gories.Firstishowtoimproveitscarbonfootprint.Secondis
howtoreducetheoveralluseofpackagingwhileincreasingthe
useofrecycledpackagingforitproducts.
In2010,Topcoputaninitiativeinplacethatresultedina35%
reductionofitscarbonfootprintfromitsdistributionopera-
tions.“WehavetwomaindistributioncentersintheUS,”said
Muschetto.“OneisintheMidwestandtheotherontheWest
Coast.Bytransitioningourmethodologyoftransitproduct
andcapitalizingonintermodalmeans,weconverted566,000
over-the-roadtruckmilestorailandremoved13million
poundsofCO2fromtheatmosphere.”
But Topco isn’t stopping there. Muschetto said the company
is also looking at developing a distribution center in the
Southeast to further reduce its carbon footprint by shrinking
the number of over-the-road truck miles it uses to service its
members.
Justlikeeveryothercompany,Topcopullsproducefrom
whereit’sgrown,muchofwhichistypicallyintheWest.Toget
thesegoodstotheEastCoast,mostcompanieswilltransit
productbytruck,butTopcohasfoundabetterway.
“There’sauniqueopportunitythroughacompanycalled
Railex,whichwebeganusinglatelastyearasatrial,”
Muschettosaid.“RailexhasonedepotisinWashington,
oneinCalifornia,andaterminalinSchenectady,NY.”
Thisyearalone,byusingRailex,Topcoconvertedmorethan
250,000over-the-roadtruckmilestorailforproduceproducts,
removing7millionpoundsofcarbon,reducingitscarbonfoot-
printmorethan70%onthisparticularopportunity.
“We’reexploringotherrailopportunitiestocapitalizeonhow
wecanfurtherreduceourcarbonfootprint,”Muschettosaid.
“Altogetherthisyear,weconvertedcloseto1millionover-the-
roadtruckmilestorailandremoved20millionpoundsof
carbon.”
Exploring ecology
Using environmentally friendly packaging isn’t a new addi-
tion to Topco’s operating philosophy, but this year, a new ini-
tiative is raising the stakes. The goal is to have 100% of
Topco’s retail carton products recyclable and a target of 30%
minimum recycled product in them.
“We’reworkingwithoursupplierstoreducetheamountof
contentinshippingcartonsaswell,”saidMuschetto.“We’ve
setaminimumtargetof10%reductioninthatcategory.”
Althoughasubstantialtargettohit,incorporatingsustainabili-
tyintoproductsandpackagingisn’tquitetheuphillbattleit
seems,duetoTopco’scategoryreviewprocess.Withit,the
companylooksateachcategoryofproductsonaperiodic
SEPTEMBER/OCTOBER 2010 RETAIL MERCHANDISER 7
TOPCO
COVER STORY
10. What kind of expertise does your team have?
Ourteamhasexpertiseinbranddevelopmentand
packagedesign,withextensiveexperienceinnational
andprivatelabelbrands.Teammembersalsoknow
howcriticalitistocreatecompellingdesignsthatare
printer-friendly.
Why are your services so important to Topco’s
member-owners?
Weprovidestrategic
brandingandpackaging
solutionstoourmember-
owners.Equallyimpor-
tant,wemanageand
executeontheirbehalf.
Frominitialconceptexecutionthroughphotography,
prepress,andprinting,ourteamoverseeseveryaspectof
thebrandinganddesignprocess.Thebrandinganddesign
strategieswedevelopallowourmember-ownerstocreatea
connection—arelationshipwiththeircustomers—through
theirbrands.
10 RETAIL MERCHANDISER WWW.RETAIL-MERCHANDISER.COM
Creative Process
Creativity
WhereItCountsWendy Sallak, vice president of Topco Associates’ Creative Services department, took
some time to talk about why package design is important to brand development.
TOPCO
COVER STORY
11. SEPTEMBER/OCTOBER 2010 RETAIL MERCHANDIS-
ER 11
What is your ultimate goal when designing a product’s
packaging?
Ourgoalistocreatetrust,confidence,andastrongrelation-
shipbetweenourmember-ownersandtheircustomers
throughthebrandandthepackageonshelf.
Identifyingproductbenefitsandattributesonthepackage
communicatesproductquality,whichallowstheproductto
competeeffectively.It’sthebranding(howwecommunicate
theuniqueperspectiveandpersonalityofthebrandandulti-
matelythatoftheretailer)thatcreatestherelationshipwith
thecustomer.Andwhentheproductdeliversonthequality
we’vecommunicatedonthepackage,customersbecomeloyal
tothat brandandthat retailer.
What input do you get
from Topco’s member-
owners on the design of
their own brands?
Ourmember-ownersunder-
standtheirmarketsandtheircus-
tomer.Eachisunique,withitsown
personalityandpointofview.It’s
ourjobtovisuallycommunicatethat
pointofviewonthepackage,andour
member-ownersprovideuswiththeinsighttomakethat
happen.
How does this differ from the input you receive for a
Topco brand?
When developing a Topco brand, we have to be relevant to a
broadrangeofretailersandcustomers.OurProgram
Managementteamprovidestheresearchandinsightweneed
tocreatepackagingthatisnotonlycompellingtoabroad
rangeofcustomers,butalsostandsoutagainstthecompetition
onshelf. O
12. 12 RETAIL MERCHANDISER WWW.RETAIL-MERCHANDISER.COM
WalkingintoTopco’sQualityAssurancedepartmentisa
lotlikewalkingintoalaboratory.Beakers,scales,and
labcoatsareparforthecourse.What’sdifferent,however,is
thatthesetoolsareusedtomeasurethequalityofeachprod-
uctTopcohandles,frombleachtobeans,throughouttheyear.
TheyearsofexperiencewithinTopcoQualityAssurance
(QA) range from less thanonetonearly40yearsofservice.
Thetechnicalstaffhasundergraduateand/orgraduatedegrees
invariousdisciplines,includingfoodscience,meatscience,biol-
ogy,microbiology,andchemistry,andeachisassignedresponsi-
bilityforagivengroupofproductsandsuppliers.
“Althoughsomecrosstrainingoccurstomaximizeeffective-
ness,coreproductresponsibilitiesremainfairlyconstantto
alloweachtechnologisttobecomewell-versedtechnicallyin
hisorherrespectivearea,”Popoolasaid.
TounderstandtheimportanceofTopcoQA,onemustcon-
siderthatanumberofmember-ownersdonothavetheirown
QAstaffs.Asaresult,
theyrelyexclusivelyon
TopcoQAfornewprod-
uctandnewsupplier
approval,productmoni-
toring,andregulatory
assistance—TopcoQA’s
threecorecompetencies.
Formember-owners
withtheirown QA
staffs,TopcoQAserves
asanextensionofthe
member’steam.“Byhan-
dlingthecorecompeten-
cies,TopcoQAallows
themember-owners’QA
staffstofocusonwork
specifictotheirindivid-
ualneeds,”Popoolasaid.
Sowhataretheseservices? Asa
procurementorganization,
Topco’sbuyerssourceandpur-
chaseproductsattherequestof
themember-owners.Popoola
saidtypicallytheseitemshavearecognizedNationalBrand
Equivalent(likeKraftfornaturalcheeses,DelMontefor
cannedvegetables,orWindexforwindowcleaner).
TopcoQA’squalitystandardsaremeasuredbyclearlydefined,
finishedproductspecifications,whicharebased—when
applicable—ontheNBE’squalitystandards.“AllTopcoQA
specsaddressthephysical,chemical,andbiologicalparame-
tersofthegivenitem,”saidPopoola.
SincejoiningTopcoin2009,Popoolahasreorganizedand
streamlinedTopco’squalityassurancedepartment.“Byre-
assigningoneofourtechnologistsasaregulatoryspecialist,
weestablishedasinglepointofcontactforallofourwith-
drawalandrecallactivity,”hesaid.
Thistransitionhasresultedinasinglepersonhandlingwith-
drawalandrecallsfromseveralindividualtechnologists(depend-
ingonwhoseproductwasaffected),allowingTopcoQAto
become moreefficientincommunicatingthisinformationtoits
member-owners.Italsogivesthemember-ownersago-toper-
sonwhentheyhavequestionsaboutthespecificsofawith-
drawal/recall.
“Wealsointroducedanewproductmonitoringprotocolbased
ontheinherentriskoftheitemandthesupplier’sproductsafe-
tyandqualityperformance,whichisreviewedeverysix
monthsandfeedsintothesupplierscorecardprogram,”
Popoolasaid.
ThisallowsTopcoQAtospenditstimeandenergymosteffi-
ciently.Andwithastaffof20chargedwithmonitoringthe
qualityofmore60,000SKUsfrommorethan1,600supplier
facilities,saidPopoola,“weknowthateffectivenessisfunda-
mentaltooursuccess.” O
Quality Assurance
NothingLess
ThantheBestHoward Popoola, vice president of quality assurance, makes
sure quality is never in question at Topco Associates.
TOPCO
COVER STORY
