Private-label grocery brands go upscale

ATLANTA — French-style flatbread with ham, caramelized onions and Gruyere cheese. Organic milk. Mustard-crusted ahi tuna nicoise.

Sound like the menu at an upscale restaurant? Think again.

It's the new wave of store brands, which traditionally evoke images of canned green beans and generic packaging. Supermarkets are sprucing up their private labels, adding upscale brands to boost customer loyalty and their bottom lines.

Kroger recently teamed with Disney for a private-label line aimed at children. Publix has added a gourmet line and an environmentally focused brand in the past five years, doubling the number of store-brand products it offered during that time. Also going the gourmet route: Whole Foods Markets, Target and Wal-Mart.

"Consumers are learning that saving money is a good thing. Poor people need low prices, but rich people love low prices," says Todd Hale of ACNielsen, a Schaumburg, Ill.-based market research firm.

To appeal to more affluent customers, stores are adding products that promise luxury rather than emphasize value, with names like Publix Premium, Kroger's Naturally Preferred and Target's Archer Farms.

Instead of merely matching the quality of a national brand, the new generation of private label foods aims to exceed it. Publix Premium strawberry ice cream, for example, would have more fruit and cream than the standard Publix brand, says Brenda Reid, a spokeswoman for the supermarket chain. Target sells basics like frozen Texas Toast and white sandwich bread under its Market Pantry label. The premium Archer Farms line includes artisan breads and such frozen foods as mustard-crusted ahi tuna nicoise with artichoke hearts and minted pesto.

Catering to customers' tastes for gourmet fare at lower prices has turned Trader Joe's, a Monrovia, Calif.-based gourmet grocer that opened its first metro Atlanta store in Roswell, Ga., last week, into a foodie and bargain-lovers favorite, with a reputation reaching far beyond the 21 states where it has more than 260 stores.

Meta Town buys store brands at Publix, but she's been longing for Trader Joe's shepherd's pie since moving back to Georgia from California last year.

"They have things you don't find in other stores," Town says. "The ingredients seem to be better; things just cook up better."

About 80 percent of Trader Joe's products are store brands, compared to about 20 percent for a typical supermarket.

Private label sales are expected to grow from $107 billion annually to more than $130 billion by 2010, according to ACNielsen. Supermarkets are investing more in their brands to woo back customers looking for bargains at Costco, with its own upscale Kirkland Signature line, and other club stores and discounters.

Price matters, but quality plays a more important role in persuading free-spending consumers to buy a store brand, industry observers say.

"They look for a richer, more gourmet flavor, " Reid says. "We want to be able to reach that customer with our own private label, to give them a variety."

Publix redesigned its store brand packaging this year to reflect its new image, junking busy labels for clean ones with a single image surrounded by white space. Among its new products this year: Milk from cows not given a genetically engineered hormone to increase milk output; and chicken that has been fed a vegetarian diet without antibiotics, and that is air-chilled in processing to improve flavor.

Robby Deckert discovered Target's powdered amaretto hot chocolate last year.

"The price was good and it's delicious," she says. "You could almost eat it without mixing it with anything."

Sometimes she does just that, shaking the powder over a favorite frozen yogurt. It's Blackjack Cherry, a Publix exclusive.

To keep customers happy, supermarkets typically offer a money-back guarantee on store brands. They're also putting more muscle into developing products that are a hit with professional tasters before they arrive on shelves.

"I would buy Trader Joe's store brand in a second," Deckert says. "I know I'm getting top quality. I know I won't be disappointed."

At Trader Joe's Boston and Monrovia offices, panels of up to 20 people sample products in development and others already on the shelves. They look for ones made without artificial additives; combinations unlikely to be found in other stores; if the cost fits into the company promise of low prices; and whether cooking instructions are clear.

Many panel members come from the chain's buying department, which sends employees around the world to look for exotic flavors and ethnic favorites. A green tea baking mix, discovered in Japan, is a recent find. Sometimes inspiration comes closer to home, from a restaurant dish that could make a good frozen dinner.

"Everything we bring in has to go through our tasting panel, and there are always things we want to tweak, take out," says Jon Basalone, senior vice president for marketing.

The panel approves about 10 percent of the products it samples, he says.

Take the dried tortellini it's testing.

"We still haven't been able to hit on the one we like," Basalone says. "We've gone through about five different variations, and each time we keep sending it back for various reasons: Not enough filling, too much filling, filling didn't cook as well as it could have, flavors not right."

Trader Joe's s introduces 1,000 products each year, yet stocks only about 3,000 in its stores. That means constant turnover. If consumers don't embrace the product, it's gone.

One of the top sellers at Trader Joe's stores has been its Charles Shaw wines, most often referred to as Two-Buck Chuck. (The wine isn't available yet at the Roswell store.)

But several years ago, customers didn't seem interested in the idea of a Trader Joe's private label wine, Basalone says.

"Private label is a constant churn," says Reid, of Publix. "You will have product introduced that may be popular today and three years from now, may not be."

Trader Joe's is adding more fast-fix meals, often with a hands-on component, so customers feel like they made the dinner, says company president Doug Rauch.

Amy Caspersen was among the first customers at the Roswell Trader Joe's store Friday morning. She bought three bags of Trader Joe's groceries, including some of the frozen entrees she'd heard about, such as potato gnocchi and pot stickers.

"When you have small kids, pre-cooked things are the best, period — the quicker the better," said Caspersen. Whether it's something to pass around at a party or a staple like Wal-Mart's organic milk, gourmet private label products are attracting a new kind of buyer.

Large families, households with children and blue-collar buyers still are most likely to purchase store brands. But smaller, more affluent households are increasing the amount they buy, experts say.

"It's not about stocking the pantry anymore," says Blaine Becker, directing of marketing and communications for the Hartman Group, a Bellevue, Wash., market research company.

"It's about experiencing different food cultures, or trying to re-create a great experience they had dining out at a fine restaurant."

Elizabeth Lee