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Private Label Report for McCormick

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Private label

  1. 1. ABC Spice P/L Overview October 3, 2007
  2. 2. Agenda • P/L Trends – Evolution of P/L – Share Growth – Growing & Declining Categories – Consumer Perspectives • Retailer & Manufacturer Implications – US market & future opportunities • ABC Spice P/L Overview (Flavor Enhancers) – Role of P/L in ABC's Portfolio – Evaluating P/L size & performance in comparison to overall FE Category – Identifying Top 50 FE Retailer’s and evaluating trends vs. Total US Food • Evaluating Share of Shelf • What Manufacturers are providing P/L to respective retailers • Length of P/L Contract • Conclusions & Recommendations 2
  3. 3. Objectives • Provide ABC Spice with a foundation for developing a strategy in defining a private label role. • Assess current status of P/L in the Flavor Enhancers category. 3
  4. 4. Executive Summary • What is the full impact of P/L on our categories? • P/L has not eroded ABC Spice brands as badly as some other categories. All Other Branded competitors have gained more $ share than P/L and ABC over the last 2 years • What kind of SKUs are they selling and how many? What are units? • With syndicated data, the UPCs of P/L are masked. Store audits are a possible alternative source. • How does US market compare to other markets? • The US P/L Market is not as developed as other markets, especially Europe. US retailers view this as a window of opportunity to grow profitable P/L categories 4
  5. 5. Executive Summary • Who are other key suppliers within Spices? • Other P/L Suppliers are: Kroger, ACH, Sauers, and Bolner Fiesta • What info do we have already? Where are our information gaps? • Competitive P/L information – we’ve attempted to determine competitive terms of contract was and P/L share of shelf with key retailers. • Competitive information gaps - still exists with overall competitive P/L activity. ABC Spice should understand retailer objectives relative to P/L • Where are the big PL competitive losses? • Over the last 2 years, some of the largest P/L losses were at: – Winn-Dixie (-13.1%) – Kroger (-4.0%) – Ahold (-1.8%) – Wakefern (-1.6%) 5
  6. 6. Introduction 6 U.S. retailers across all food channels are placing an increasing amount of emphasis and resources into developing private brands and using these brands as a platform for differentiating their stores versus their direct competitors and competing channels. For best-in-class retailers, advances in P/L programs are benefiting their operations in several key ways: • enhances gross margin performance by shifting volume away from brands within traditionally low-margin categories. • provides a means to develop unique and innovative products that resonate with consumers. • enables the brands to serve all consumer groups through the use of multiple pricing tiers within P/L. • provides a new method to revitalize the center store and to differentiate through exclusive P/L products and creative in-store merchandising. • increases shopper loyalty and ability to profitably compete with value retailers through expanded P/L value offerings across the store.
  7. 7. Over the past three decades, P/L has evolved from a generic-based offering to a full multi-tiered approach used to effectively serve all consumer types. 1970s 1980s 1990s Today Retailer Strategy: Value offering for low-income households Improve Margins Improve Margins Increase Share, Differentiate Store, and Build Loyalty Positioning/Pricing: No Name Generics Store Brands Segmented and targeted 2-4 Private Label Pricing Tiers Packaging: No Frills Mainstream Distinctive Premium / Proprietary Labels Retailer Support: Limited On Shelf In-Store Support, Radio, Newspaper Television, Internet, Celebrity Endorsements Consumer Perception: Low Price / Low Quality Improved Value Value-Priced / Good Quality Depends on Product Positioning and Category Typical Manufacturer Viewpoint: Little Threat Temporary Threat Tough source of ongoing competition 1. Need innovation to differentiate 2. Need strategies to coexist in new world 3. Need marketing push to justify price premiums 7Source: IRI Consumer Network®
  8. 8. P/L share in the U.S. across channels is flat with approximately 15% Dollar Share, and 21% Unit Share indicating that retailers still have much room to grow P/L. 8 20.7% 20.6% 21.2% 21.2% 19.9% 15.3%15.4% 15.4% 15.8% 15.8% 2003 2004 2005 2006 2007 Dollar Share Unit Share Source: IRI Consumer Network® 52 weeks ending 8/12/2007; same period prior years P/L Share of CPG Spending: All Outlets
  9. 9. While retailers are making significant P/L sales gains in many key categories, they are seeing dramatic declines in others. 9 Data based on P/L dollar growth. Dollar amounts are in millions. Source: IRI Consumer Network ® & Infoscan 52 weeks ending 8/12/2007 (FDM incl’d Wal-Mart) 1. Milk $ 369 2. Fresh Eggs $ 325 3. Natural Cheese $ 112 4. Internal Analgesics $ 75 5. Bottled Water $ 67 6. FZ Seafood $ 67 7. FZ Poultry $ 56 8. Rfg. Juices/Drinks $ 45 9. Misc. Snacks $ 45 10. Fresh Bread & Rolls $ 44 Top 10 P/L $ Growth CategoriesTop 10 P/L $ Growth Categories Top 10 P/L $ Declining CategoriesTop 10 P/L $ Declining Categories 1. Dog Food -$ 151 2. Socks -$ 108 3. Diapers -$ 105 4. Cat Food -$ 52 5. Carb. Beverages -$ 44 6. Charcoal -$ 37 7. Rfg. Salad/Coleslaw -$ 32 8. Candles -$ 31 9. Pies & Cakes -$ 29 10. Baby Formula/Electrolyte -$ 27
  10. 10. 10 While private label enjoys 99%+ household penetration, sales are concentrated with 28% of Heavy P/L buyers; accounting for 54% of P/L dollar sales. The threat that P/L poses to ABC Spice Branded Products is not waning and should be monitored constantly Private Label Consumer Purchase Segments Source: IRI Consumer Network® 52 weeks ending 8/5/2007 72% 28% 54% 46% % PL Buyers % PL Sales Heavy Light Percent of Buyers by Private Label Purchase Segments Heavy Buyers = Top 1/3 Light Buyers = Bottom 2/3 * Buyer Share based off Raw Buyers
  11. 11. P/L Sales Growth ($ millions) – 2007 vs. 2004 Size of bubble = size of P/L dollar sales;Source: IRI Consumer Network®. Spice P/L has not matured like other categories P/L Threats -20 0 20 40 60 80 100 120 -$250 -$200 -$150 -$100 -$50 $0 $50 $100 $150 $200 $250 $300 $350 Growth ($ Millions) Penetration(%) Retreating Categories High Potentials Eggs Soda Paper Towels Bottled Water Vitamins Cups/Plates Natural Cheese Candles Butter Dried Fruit Misc. Snacks Cold Meds Liquids Fz Plain Vegetables Cigarettes Snack Nuts/Seeds Milk Batteries Fz Seafood Toilet Paper Laundry Detergent Diapers Growth Giants Growing Slipping Giants Declining Food/Trash Bags Bottled Juices Processed Cheese Spices Breakfast Meats Fz Novelties Dog Food Cat Food Margarine Sugar
  12. 12. 12 Retailer & Manufacturing Implications to P/L
  13. 13. Summary of Key Findings • Despite increased attention and investment from U.S. retailers, there are still a major P/L opportunities based on U.S. performance vs. European countries as well as relatively low P/L penetration among key household groups. • Given that grocers are beginning to scale back center store square footage, the growing presence of P/L will increase the likelihood that 2nd and 3rd tier national and regional brands will lose shelf space and SKUs. • Branded manufacturers (and consumers) believe that retailers have successfully “closed the gap” in terms of product quality and innovation in many key categories. Manufacturers are focusing their resources to determine how to create “space” between their brands and P/L in the minds of consumers. 13 Retailers today have identified P/L as one of their most promising strategies for driving sales growth, improving profit margins, and building shopper loyalty. In fact, grocery retailers are emboldened by their recent P/L successes and increased shopper acceptance of private brands. As a result, they are aggressively growing P/L variety across the center store and into perishables categories – a pattern that has critical implications for manufacturers. Additional summary points: Increased focus and expertise within P/L is providing progressive retailers with a new platform to drive profitable store sales and shopper loyalty. These changes will increase pressure on branded manufacturers to become more effective marketers, innovators, and value-added business partners. ImplicationsImplicationsImplicationsImplications
  14. 14. Retailer Implication - New Focus Areas in the Coming Decade Many retailers are refocusing and rethinking their P/L growth strategies. – Need to study best-in-class retailer programs versus their own programs to determine what is working well and what needs to be improved. – Need to conduct local shopper research to help identify unmet consumer needs and to determine where the largest category opportunities are for P/L innovation and increased marketing support. – Need to identify broader consumer trends, i.e. organic, natural, ethnic, low sodium, etc. that present P/L opportunities across categories. – Need to identify opportunities to expand category and display space for P/L and determine from which categories, segments, and brands the space will come from. – Need to rethink P/L promotions and how to effectively message P/L products across each shopper segment. – Retailers believe that P/L pricing is not only a key determining factor in how well a P/L product sells, but how it its perceived in the minds of consumers. – Some Retailers are developing their own Category Brand Management departments 14 Retailers that proactively grow P/L will differentiate themselves from other retailers, while growing their franchise brand and bottom-line sales and profit ImplicationsImplicationsImplicationsImplications
  15. 15. Retailer Implication - New Focus Areas in the Coming Decade Many retailers are refocusing and rethinking their P/L growth strategies. – Pricing - On average, most retailers try to stay 15%-20% lower on P/L price than the national brand and this grows to 25% in General Merchandise. Many retailers are moving to a tiered pricing format. – Packaging - Retailers consistently report that P/L product packaging is a key component of the overall P/L messaging strategy. Further, packaging initiatives are closely linked to the price tiers that each retailer manages – Favorable P/L Conditions - Any category that has high household penetration and not a lot of complicated dynamics make it favorable. (i.e., Meat and Seafood products) – Unfavorable P/L Conditions: • A category is unfavorable for P/L when the category is dominated by brands like Coke and Pepsi are just too entrenched. • Some categories where there’s a lot of technology and constant innovation like laundry detergent, it’s really tough for P/L. • When there’s a fashion element for the consumer, like in the hair care category, it’s tough for P/L to generate much share in the category. • It’s unfavorable if retailer’s can’t profitably offer a product with a big enough price gap (vs. branded) that will enable our product to sell 15
  16. 16. 16 Retailers typically make “where to play” P/L decisions based on category dynamics including speed and complexity of innovation and the number of strong brands within the category. Low Brand Strength – High Innovation (Ex. Energy Drinks) High Brand Strength – High Innovation (Ex. Beer) High Brand Strength – Low Innovation (Ex. Jams & Jellies) BrandStrength Speed / Level of Innovation in the CategoryLow High LowHigh “P/L can’t succeed. Let the brands fight it out.” “Fast-moving category. Wait until the right time.” “Innovate in P/L and remove tertiary brands” Low Brand Strength – Low Innovation (Ex. Canned Fruit) “Commodity category. Prime P/L opportunity.”
  17. 17. Implications for Manufacturers New Challenges and Opportunities 17 In the next decade, branded and P/L manufacturers will need to develop new methods of adding value to retailer partnerships – including methods that will help retailers maximize the performance of their own private brands. Implications With increased retailer commitment to P/L, manufacturers need to be mindful that their retailer partners are becoming increasingly important and savvy competitors. Manufacturers need to understand and effectively respond to emerging changes in the retailer-manufacturer partnership: • Retailers will use P/L to leverage their position versus both branded and P/L manufacturers to gain pricing and other concessions. • Increased consumer acceptance of P/L products has emboldened retailers to increase shelf space, display space, and feature ad space allocations for P/L. (i.e., Publix Greenwise). • Retailers are committed to innovating ahead of branded manufacturers in key categories. In other categories, they’re committed to quickly developing me-too products at the heels of branded manufacturer innovation. • Ultimately, retailers control shelf space and pricing and are in the position of power to control the future prospects of key categories and brands.
  18. 18. 18 ABC Spice P/L Overview Flavor Enhancers only (Seasonings and Liquid)
  19. 19. ABC Spice Brands vs. P/L Overview 19 Hypothesis • P/L driving category growth • P/L growing at a faster rate than national brands • P/L pricing had an impact on branded sales • P/L being managed properly at retail and in relation to inventory and resource allocation • Consumer perception has changed relative to P/L quality Observation • In Total US Food – P/L FE is not driving growth in Units or Dollars (52 wk. ending 8/12/07) • Price – Overall average P/L price has not kept pace with Branded price increases over past 2 years, resulting in decrease in ABC brand unit sales. • ABC Spice really doesn’t have a defined role that P/L plays in conjunction with Branded product. A defined P/L role should be considered. • Consumers surveyed feel that most P/L products are equal in quality to many brands, but at a discounted price Implications • Share (% of Total Category) of P/L Flavored Enhancers in both Units & Dollars is consistent with the national average across all categories & channels • Close attention should be given to P/L relative to retailers expectations • Price increases of P/L should be strategically aligned with Branded price increases • Develop and Maintain a merchandising, promotional, and pricing strategy to control P/L – should be included in P/L role definition
  20. 20. By not aligning P/L price increases in conjunction with ABC brands attributed to a decline in branded unit volume over 2 years • An effort was made to grow P/L unit volume at the expense of branded units & profit • This strategy is dangerous and can result in further commoditization within the Spice Category while further eroding more profitable branded business. (Total US Food) – 2007 vs. 2005 – P/L (Units +2.3% / Dollars +3.0%) – 2007 vs. 2005 - ABC Spice Brand (Units -0.8% / Dollars +4.8%) – 2007 vs. 2005 – All Other brands (Units +1.8% / Dollars +11.1%) • More focus should be given to value-added innovation with branded products to differentiate ABC Spice from P/L and A/O branded competitors (i.e., Grinder’s) • Price increases on P/L should be strategically aligned with branded products 20 Suggests:
  21. 21. 21(Total US Food)IRI InfoScan $- $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 Average Price/Unit - 3 Years ABC Spice Total Private Label FE All Other FE $2.54 $2.11 $2.76 $2.22$2.19 $1.91 +8.7% +10.5% +1.4% 13.8% Gap 19.5% Gap 12.8% Gap 5.0% Gap •All Other brands fall well below the traditional 15% to 20% pricing gap between P/L and branded product. •Average Price Point of ABC brand FE has seen a 8.7% increase over the past 3 years; compared to a 1.4% increase in P/L.
  22. 22. Issue Tree 22 Develop a role for P/L to meet consumer and retailer needs, while assuring continued growth for brands Can ABC Spice get by and offer P/L product (when needed) that is one stage behind Branded formulas? Understand RMA P/L objectives and their overall value segment Do Consumers see more value in P/L vs. Branded w/o sacrificing quality? How to grow ABC Brand sales while still managing P/L business Learn Consumer P/L Purchase Behaviors Sub-issues Sub-sub-issues Issue Do Retailers see more growth opportunities in P/L vs. Branded? Can Retailers increase category conversion, Buyer Purchase Frequency, improve Household Penetration with an improved assortment mix while increasing P/L? Don’t sacrifice ABC Brand R&D for P/L tech advancements Can ABC Spice deploy a strategy that would limit P/L to certain SKU’s? Can product formulation & technology be more aligned with price offered? Will Retailers sacrifice Branded facings at retail for P/L? How can more innovation with brands keep consumers focused on this sub-segment vs. P/L? Are US Retailers in a position to create a graduated pricing format with P/L?
  23. 23. Share of Units - 52 Weeks Ending 8/5/2007 2 3 19%37% 44% All Other Private Label ABC Branded In Top 50 FE RMA’s, All Other brands has a larger share of units sales vs. ABC Spice brands and P/L (Total Category Unit Sales In Top 50 RMA’S = 467,682,188) 204,508,407 173,650,342 89,523,438 Suggests: • P/L is more developed in ABC's core retailers being driven by Giant Eagle and Safeway • All Other brands is more a threat to ABC Spice brands vs. competitor brands ABC Spice brands = Total ABC Spice Company FE. Unit sales only (includes Dry and Liquid FE)
  24. 24. ABC Spice brands have a larger share than P/L in all items. 21% of ABC brands have similar P/L items in the FE category. Increased innovation with ABC Spice brands will differentiate and offset P/L share gains. 24 IRI InfoScan Latest 52 weeks ending Aug 5, 2007 Like Items 21.0% 10.4% ABC Private Label All Items 17.1%27.8% ABC Private Label (Total ABC share vs. P/L) (Like item share vs. P/L) (Total US Food in Units)
  25. 25. All Other & P/L unit sales growth in the Top 50 FE RMA’s exceed ABC Spice brand sales over latest 52 weeks. Rekindled focus should be given to brand competitors. Total FE ABC FE Private Label FE All Other Year End 8-7-05 290,357,000 105,108,400 72,206,940 113,041,700 Year End 8-6-06 305,243,200 109,005,200 75,797,840 120,440,200 Year End 8-5-07 315,676,200 111,151,600 77,436,330 127,088,300 0 50 100 150 200 250 300 350 Millions 25 (Unit Sales – Top 50 FE RMA’s) +3.4% +2.0% +2.3% +5.5% IRI InfoScan 2x Growth Rate
  26. 26. All Other brands’ pricing strategies have effectively resulted in 2x the rate of ABC brands. P/L $ Share was 23.9% in 2007 vs. 17.0% in Total US Food. Total FE ABC FE Private Label FE All Other Year End 8-7-05 $688,481,000 $305,858,800 $171,911,300 $210,711,000 Year End 8-6-06 $734,356,600 $321,124,000 $178,741,800 $234,490,800 Year End 8-5-07 $779,295,700 $335,972,500 $186,378,700 $256,944,600 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 Millions 26 (Dollar Sales – Top 50 FE RMA’s) Suggests: • P/L is more developed in ABC's core retailers being driven by Safeway and Giant Eagle. • P/L is more a threat to ABC brands in core retailer’s than A/O brands. +4.6% +4.3% +6.1% +9.6% IRI InfoScan 2x Growth Rate
  27. 27. Within the Top 25 FE RMA’s, Kroger’s share of P/L unit sales is highly developed. 27 *= includes Divisional RMA’sIRI InfoScan Latest 52 weeks ending Aug 5, 2007 (Unit Sales) • Kroger is own supplier of P/L. ABC Spice opportunity lies with becoming lead P/L supplier for other RMA’s. ABC Spice second opportunity is to offset All Other brands nationally. Rank RMA Supplier Approx Contract Expiration Date PRIVATE LABEL FE UNITS as % TOTAL FE Category for RMA ABC Branded % of TTL Category All Other Branded 1 KR ATLANTA-RMA KROGER UNKNOWN 60.0% 2.0% 38.0% 2 DH FOOD LION CORP-RMA ACH UNKNOWN 17.9% 38.4% 43.7% 3 KR KING SPR/CTY M-RMA KROGER UNKNOWN 50.7% 4.4% 44.9% 4 KR MID-SOUTH-RMA KROGER UNKNOWN 59.8% 1.9% 38.3% 5 SFWY-NOR WOHI DIV-RMA MC ON GOING 21.6% 22.3% 56.1% 6 KR COLUMBUS-RMA KROGER UNKNOWN 68.0% 2.5% 29.5% 7 KR CINCINNATI-RMA KROGER UNKNOWN 61.0% 1.4% 37.6% 8 SFWY-VONS DIV-RMA MC ON GOING 22.6% 21.0% 56.3% 9 KR FRY'S-RMA KROGER UNKNOWN 46.4% 6.4% 47.2% 10 KR RALPHS-RMA KROGER UNKNOWN 31.2% 13.4% 55.3% 11 KR DELTA-RMA KROGER UNKNOWN 61.5% 2.0% 36.5% 12 KR CENTRAL-RMA KROGER UNKNOWN 68.5% 1.5% 30.1% 13 KR FM CORP-RMA KROGER UNKNOWN 42.4% 0.0% 57.6% 14 KR MICHIGAN-RMA KROGER UNKNOWN 61.7% 3.0% 35.3% 15 GE-CORPORATE-RMA MC ON GOING 29.9% 39.6% 30.5% 16 STOP & SHOP TOTAL-RMA MC 14.4% 34.5% 51.1% 17 KR MID-ATLANTIC-RMA KROGER UNKNOWN 61.3% 2.0% 36.8% 18 WD CORPORATE-RMA CF SAUERS UNKNOWN 13.8% 18.6% 67.7% 19 KR SMITHS CORP-RMA KROGER UNKNOWN 43.1% 9.5% 47.4% 20 KR HOUSTON-RMA KROGER UNKNOWN 35.0% 2.7% 62.3% 21 SFWY-EASTERN DIV-RMA MC ON GOING 32.1% 36.4% 31.5% 22 SFWY-SEA WOAK DIV-RMA MC ON GOING 25.7% 23.3% 51.1% 23 SPVL NORTHERN - RMA MC 2 YEARS 12.2% 21.5% 66.3% 24 HY-VEE CORPORATE-RMA ACH UNKNOWN 19.3% 10.3% 70.4% 25 WEGMANS CORPORATE-RMA MC ON GOING 24.7% 36.1% 39.1%
  28. 28. 28 ABC Spice is primary supplier of P/L in lower 25 FE RMA’s*. All Other Brands pose more of a threat vs. P/L at these retailers. *= includes Divisional RMA’sIRI InfoScan Latest 52 weeks ending Aug 5, 2007 • ABC Spice should first evaluate the role of P/L vs. Branded • Develop a strategy to capture share from A/O Branded competitors • Identify competitive P/L contract terms and request to be part of next RFQ (Unit Sales) Rank RMA Supplier Approx Contract Expiration Date P/L FE UNITS as % TOTAL FE Category for RMA ABC Branded % of TTL Category All Other Branded 26 FIESTA-RMA BOLNER FIESTA UNKNOWN 22.8% 6.0% 71.3% 27 PUBLIX LAKELAND-RMA MC ON GOING 11.8% 22.0% 66.2% 28 KR DALLAS-RMA KROGER UNKNOWN 45.2% 1.7% 53.1% 29 DH HANNAFORD CORP-RMA MC ON GOING 20.2% 29.1% 50.8% 30 KR DILLON-RMA KROGER UNKNOWN 62.6% 8.4% 29.0% 31 SFWY-DENVER DIV-RMA MC ON GOING 27.3% 21.7% 51.0% 32 PUBLIX JCKSNVLLE-RMA MC ON GOING 12.0% 22.5% 65.5% 33 SV-ALB SHAWS DIV-RMA MC ON GOING 20.0% 30.0% 49.9% 34 KR FOOD 4 LESS S-RMA KROGER 16.4% 5.6% 78.0% 35 BROOKSHIRE CORP-RMA MC ON GOING 26.4% 20.6% 53.1% 36 WAKEFERN-CORP-RMA MC ON GOING 7.0% 22.3% 70.7% 37 SFWY-PHOENIX DIV-RMA MC ON GOING 24.0% 20.6% 55.4% 38 MINYARD CORPORATE-RMA MC ON GOING 36.2% 9.0% 54.9% 39 PUBLIX MIAMI-RMA MC ON GOING 5.6% 12.5% 81.9% 40 BI-LO TOTAL-RMA MC GEL 22.2% 36.5% 41.4% 41 PUBLIX ATL GA/SC-RMA MC ON GOING 12.9% 25.4% 61.7% 42 SFWY-DOMINICK DIV-RMA MC ON GOING 30.4% 29.5% 40.1% 43 SFWY-RAND/TOM DIV-RMA MC ON GOING 23.8% 28.6% 47.6% 44 SV-ALB JWL DIV-RMA MC ON GOING 10.5% 38.1% 51.5% 45 SPVL MIDWEST - RMA MC ON GOING 10.6% 29.1% 60.3% 46 SV-ALB SCA DIV-RMA MC ON GOING 9.9% 24.8% 65.2% 47 SFWY-PORTLAND DIV-RMA MC ON GOING 30.4% 27.8% 41.9% 48 K-VA-T FOODS-RMA ACH UNKNOWN 43.6% 29.2% 27.2% 49 GIANT LANDOVER MD-RMA MC ON GOING 11.5% 44.4% 44.0% 50 PRICE CHOPPER CRP-RMA MC ON GOING 17.7% 33.4% 48.8%
  29. 29. 29 Kroger understands importance of driving P/L unit and dollar sales. *= includes Divisional RMA’sIRI InfoScan Latest 52 weeks ending Aug 5, 2007 (Dollar Sales) •ABC Spice should capitalize on increasing branded sales at the expense of all other brands •Use Kroger as a test market for branded innovation. RANK RMA PRIVATE LABEL FE DOLLARS % of TOTAL PL ABC Branded % of TTL Category All Other Branded 1 KR COLUMBUS-RMA 66.4% 2.5% 31.2% 2 KR CENTRAL-RMA 64.8% 1.4% 33.8% 3 KR MID-ATLANTIC-RMA 61.7% 1.9% 36.5% 4 KR ATLANTA-RMA 61.3% 2.3% 36.4% 5 KR MICHIGAN-RMA 60.6% 3.2% 36.2% 6 KR MID-SOUTH-RMA 60.2% 2.0% 37.8% 7 KR DELTA-RMA 59.5% 2.3% 38.2% 8 KR CINCINNATI-RMA 59.2% 1.5% 39.2% 9 KR DILLON-RMA 56.7% 10.8% 32.5% 10 KR FRY'S-RMA 49.2% 8.9% 41.9% 11 KR FM CORP-RMA 44.1% 0.0% 55.9% 12 KR DALLAS-RMA 43.4% 1.6% 55.0% 13 KR KING SPR/CTY M-RMA 41.2% 6.2% 52.6% 14 KR SMITHS CORP-RMA 41.0% 13.4% 45.6% 15 K-VA-T FOODS-RMA 38.5% 36.5% 25.0% 16 KR HOUSTON-RMA 33.2% 2.6% 64.1% 17 KR RALPHS-RMA 30.1% 17.9% 52.0% 18 MINYARD CORPORATE-RMA 28.6% 15.0% 56.4% 19 SFWY-DOMINICK DIV-RMA 28.1% 37.5% 34.4% 20 SFWY-PORTLANDDIV-RMA 27.4% 32.2% 40.4% 21 SFWY-DENVER DIV-RMA 27.1% 29.2% 43.7% 22 SFWY-EASTERNDIV-RMA 26.1% 39.0% 34.9% 23 SFWY-SEAWOAK DIV-RMA 25.9% 29.9% 44.2% 24 SFWY-PHOENIXDIV-RMA 25.5% 28.3% 46.2% 25 WEISCORP-RMA 23.9% 41.0% 35.1%
  30. 30. 30 *= includes Divisional RMA’sIRI InfoScan Latest 52 weeks ending Aug 5, 2007 ABC brands outpaces P/L dollar sales in 2nd tier of Top 25 FE RMA’s*. • ABC Spice brand leads by almost 2:1 over P/L in these RMA’s. • A/O Branded Product is a bigger threat to ABC Brand than P/L in these second 25 retailers. (Dollar Sales) RANK RMA PRIVATE LABEL FE DOLLARS % of TOTAL PL ABC Branded % of TTL Category All Other Branded 26 SFWY-NOR WOHI DIV-RMA 23.3% 32.1% 44.6% 27 SFWY-RAND/TOM DIV-RMA 22.3% 33.3% 44.4% 28 SFWY-VONS DIV-RMA 22.2% 30.5% 47.3% 29 HOMELAND-RMA 21.6% 41.1% 37.3% 30 BI-LO TOTAL-RMA 21.2% 44.8% 34.1% 31 WEGMANS CORPORATE-RMA 20.8% 42.9% 36.3% 32 SV-ALB SHAWS DIV-RMA 20.7% 35.1% 44.2% 33 ABS LLC ROCKY MTN-RMA 20.3% 36.6% 43.0% 34 DH HANNAFORD CORP-RMA 20.1% 38.7% 41.2% 35 SV-ALB NW DIV-RMA 19.9% 38.5% 41.5% 36 PRICE CHOPPER CRP-RMA 19.7% 42.6% 37.6% 37 SV-ALB IM DIV-RMA 19.2% 42.7% 38.1% 38 KR QFC SEATTLE-RMA 18.8% 24.6% 56.6% 39 GE-CORPORATE-RMA 18.5% 52.8% 28.6% 40 FARMER JACK MICHI-RMA 16.9% 51.0% 32.1% 41 HY-VEE CORPORATE-RMA 16.8% 15.9% 67.3% 42 KR FOOD 4 LESS S-RMA 15.9% 9.0% 75.1% 43 STOP & SHOP TOTAL-RMA 15.8% 43.3% 40.8% 44 BROOKSHIRE CORP-RMA 15.4% 28.2% 56.4% 45 SV-ALB ACME DIV-RMA 15.2% 48.4% 36.4% 46 PUBLIX ATL GA/SC-RMA 15.0% 32.0% 52.9% 47 SUPERFRESH PHILA-RMA 14.6% 48.1% 37.3% 48 PUBLIX JCKSNVLLE-RMA 14.4% 28.9% 56.7% 49 SV CUB-RMA 14.4% 38.9% 46.7% 50 PUBLIX LAKELAND-RMA 14.3% 28.7% 56.9%
  31. 31. Top 10 Flavor Enhancer Retailer’s 31 Su• RMAs with aggressive P/L programs with 25%+ share in category • Kroger • Safeway • Giant Eagle • ABC Spice brands are losing share to competitive brands over last 2 years at: • SuperValu • Ahold • Giant Eagle Suggests: Competitive Branded Mfg’s are becoming more aggressive by adding innovative products, increasing share of shelf and/or merchandising IRI InfoScan Latest 52 weeks ending Aug 5, 2007 •Albertson’s •Kroger •Publix UNITS - Based on Calendar Year, and 2007 is through 8/12/07 2005 Private Label % of TTL FE Category 2005 ABC Branded % of TTL FE Category 2005 All Other Branded % of TTL FE Category 2006 Private Label % of TTL FE Category 2006 ABC Branded % of TTL FE Category 2006 All Other Branded % of TTL FE Category 2007 Private Label % of TTL FE Category 2007 ABC Branded % of TTL FE Category 2007 All Other Branded % of TTL FE Category 1 TTL SUPERVALU 12.0% 28.3% 59.8% 12.0% 27.9% 60.1% 11.5% 26.0% 62.4% 2 KROGER CORPORATE 50.1% 5.1% 44.8% 48.5% 4.8% 46.7% 46.1% 4.5% 49.3% 3 SAFEWAY-CORP 23.4% 23.6% 53.0% 25.2% 23.3% 51.5% 25.7% 24.0% 50.3% 4 PUBLIX CORPORATE-RMA 9.0% 21.8% 69.3% 9.5% 20.4% 70.1% 9.6% 18.1% 72.2% 5 AHOLD - TOTAL 14.0% 40.3% 45.7% 13.8% 40.0% 46.2% 12.2% 37.6% 50.2% 6 DELHAIZE - TOTAL (EX JH HARVEY) 17.7% 37.3% 44.9% 17.0% 36.6% 46.4% 18.4% 32.9% 48.7% 7 WAKEFERN-CORP 8.5% 22.5% 69.0% 7.4% 22.4% 70.2% 6.9% 22.8% 70.3% 8 WINN DIXIE CORP 25.2% 14.5% 60.4% 18.2% 17.3% 64.5% 12.1% 18.4% 69.5% 9 ALBERTSON'S - CORP 13.0% 29.3% 57.7% 14.2% 27.4% 58.4% 12.4% 24.6% 62.9% 10 GIANT EAGLE-CORP 28.2% 43.7% 28.1% 28.5% 40.7% 30.7% 30.9% 37.9% 31.1%
  32. 32. P/L has stronger share of shelf at Kroger. ABC Brands hold more territory than P/L at other RMA’s. A/O Brand at Publix nears ABC brand. 32 Retailer P/L ABC Spice A/O Branded Kroger 53.1% 21.6% 25.4% Publix 14.6% 43.1% 42.3% Delhaize 13.7% 66.8% 19.5% Safeway 13.4% 54.0% 32.6% Ahold 9.8% 68.8% 21.4% SuperValu 6.3% 78.6% 15.1% Delhaize 13.7% 66.8% 19.5% Albertsons 5.6% 51.5% 42.9% Giant Eagle 4.9% 66.3% 28.8% • Need to compare share of shelf to sales volumes to identify opportunities to increase ABC Brand facings. • Plan-o-gram audit suggested to assure proper assortment mix. Source: Retailer POG’s as of 9/2007 Share of Shelf
  33. 33. Recommendations & Next Steps: Enhanced P/L Management & Growing brands • Define a role that P/L will play in the total portfolio of products – Short & Long term objectives (Units & Dollars). – Margin objectives for P/L • Understand retail objectives relevant to P/L • Strategically evaluate the distribution of P/L at the national & retail level – Make business decisions at the RMA level that dovetails with national P/L objectives • SKU Rationalization • Pricing/Promotional/Merchandising objectives • Minimum annual Unit requirements that Retailers must adhere to get P/L (i.e. 100,000 units annually per SKU – minimum) • ABC Spice has an extremely strong Brand, capitalize on the strength of the Brand with expanded technology & innovation to make it harder for P/L to succeed 33
  34. 34. Take Aways • Don’t – Underestimate the negative impact P/L can have on branded business – Underestimate retailer’s desire to grow P/L at the expense of branded product – Provide new branded technology/formulation in P/L • Do’s – Understand the “Best Practices” being used by other CPG companies regarding P/L, including profitability compensation programs being implemented – Be aware of 3rd party P/L brokers who add cost to the system 34
  35. 35. Appendix 35
  36. 36. Demographic Profiles 36 Source: Nielsen, 9/2007 •P/L buyers are more likely to be African American and have least some high school education. •ABC Spice brand buyers tend to be Caucasian and be better educated. 10326.611830.425.8College Graduate 10127.810929.927.4Some College 9826.29124.326.6High School Graduate 10512.98310.312.4Some High School 896.7665.07.5Grade School Householder Education 915.2915.25.7Other Races 9810.0909.310.3Hispanic 12514.19811.111.3Black 9770.610374.572.5White Race IndexPctIndexPct%Demographic Private LabelABCNation 10326.611830.425.8College Graduate 10127.810929.927.4Some College 9826.29124.326.6High School Graduate 10512.98310.312.4Some High School 896.7665.07.5Grade School Householder Education 915.2915.25.7Other Races 9810.0909.310.3Hispanic 12514.19811.111.3Black 9770.610374.572.5White Race IndexPctIndexPct%Demographic Private LabelNation
  37. 37. Demographic Profiles 3 7 Source: Nielsen, 9/2007 • P/L buyers are represented throughout all income levels while ABC Spice brand buyers skew toward the higher income levels. • Number of people in the household is not a significant factor when choosing either ABC Spice brand or P/L. 11019.214325.017.5$100,000+ 10712.712414.711.8$75,000- $99,999 10420.210921.319.5$50,000- $74,999 9810.0959.810.3$40,000- $49,999 9510.5869.511.1$30,000- $39,999 9310.5728.211.3$20,000- $29,999 939.8636.710.5$10,000- $19,999 877.1554.58.2Under $10,000 Household Income 12313.211512.410.85+ Persons 11516.211315.914.14 Persons 11018.511419.216.93 Persons 10634.411336.732.62 Persons 6717.56216.226.21 Person Number of Persons IndexPctIndexPct%Demographic Private LabelABCNation 11019.214325.017.5$100,000+ 10712.712414.711.8$75,000- $99,999 10420.210921.319.5$50,000- $74,999 9810.0959.810.3$40,000- $49,999 9510.5869.511.1$30,000- $39,999 9310.5728.211.3$20,000- $29,999 939.8636.710.5$10,000- $19,999 877.1554.58.2Under $10,000 Household Income 12313.211512.410.85+ Persons 11516.211315.914.14 Persons 11018.511419.216.93 Persons 10634.411336.732.62 Persons 6717.56216.226.21 Person Number of Persons IndexPctIndexPct%Demographic Private LabelNation
  38. 38. Top 25 All Other Brands All Other Brands Unit Sales Unit Sales % Chg vs YA Unit Sales Chg vs YA Dollar Sales Dollar Sales % Chg vs YA Dollar Sales Chg vs YA Herthyfa Fresh 9,197,702 49 3,021,876 19,469,450 51 6,609,385 Sanwgree Fresh 9,960,029 11 988,489 16,417,340 0 73,087 Miravall Bag 995,074 1,835 943,658 1,119,778 815 997,375 Goya Valadden 19,055,130 5 874,240 35,820,560 7 2,381,018 Kernseas Valadden 1,407,284 158 862,877 3,745,588 149 2,238,758 Tampico Bag 1,755,888 76 758,200 2,499,980 68 1,013,731 Nobrand Bag 1,667,871 80 741,585 1,579,446 66 628,980 Herbgar1 Fresh 3,875,221 23 730,439 9,031,640 26 1,859,942 Julispic Bag 877,347 396 700,442 1,226,941 349 953,718 Chriranc Garloni 4,099,088 18 618,684 9,577,464 20 1,596,923 Livifres Fresh 3,207,869 22 580,512 6,526,259 26 1,327,145 Mortbass Gourmet 2,724,160 27 576,722 16,202,040 30 3,749,902 W ebgricr Valadden 512,094 512,094 1,290,857 1,290,857 Newenghe Fresh 2,906,184 20 476,800 6,854,660 18 1,025,308 Infiherb Fresh 467,247 1,868 443,506 964,147 1,622 908,146 Micosten Bag 943,535 79 417,751 1,710,792 73 721,767 Herbthym Fresh 500,165 489 415,295 1,089,753 494 906,418 Jacofarm Fresh 1,385,154 41 402,297 3,301,804 45 1,022,278 Gourgard Fresh 2,397,657 20 393,921 8,684,068 19 1,399,093 Osaggard Fresh 1,066,878 58 393,479 3,014,669 63 1,162,388 Spiceit Valadden 635,450 143 374,167 630,506 139 366,895 Spicworl Garloni 15,371,310 2 353,677 35,350,640 2 835,796 Bobredmi Bag 1,990,117 22 352,642 6,453,486 26 1,350,534 Snorivra Fresh 2,238,890 18 346,279 5,315,219 23 993,445 Hergarwo Fresh 1,515,605 29 338,332 3,243,182 30 743,319 38 • Fresh & Bag is driving growth and represents 76% of the Top 25 A/O Brands IRI InfoScan Latest 52 weeks ending Aug 5, 2007

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