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IRI Research releases 2009 Private Label Trend Report

BY Drug Store News Team

NEW YORK The growth of private-label and what it means to retailers and suppliers all depends on which side of the negotiating table you’re sitting.

 

For retailers, pushing PL penetration ever closer to 25% translates into more productive inventory, both in terms of turns-per-week as well as gross profit margins. It’s a boon to the bottom line that’s arguably offsetting some of the pressures in today’s downturned economy. For retailers aggressively pursuing that PL penetration, it’s also sending a value-oriented message to consumers — shop with us and we’ll save you money.

 

Suppliers have historically had a more contentious view around the value in store brands. As the argument goes, store brands equal market share erosion from a competitor that isn’t weighed down with marketing, merchandising or research and development costs. And it’s that marketing and merchandising expense that helps drive consumer traffic, so private-label brands cash in on the marketing investments made by branded manufacturers.

So back again to what all of this means. Growth of private-label is both a positive and a negative. It’s a positive because it helps boost those bottom line results, keeping consumers happier and retailers healthier. That’s a big positive because it keeps consumers shopping and retail boxes open, without either of which branded suppliers wouldn’t be moving much product.

It’s a negative because it places increased pressure on branded manufacturers to move product in a challenged economy, either by introducing innovation not yet available across store brands or by convincing the consumer of a brand’s value versus PL, all in light of increased PL penetration in conjunction with a SKU rationalization initiative that many retailers are pursuing in an effort to cut supply chain costs.

There’s also a concern on what consumers are learning as more and more buy PL — that the inferior quality oftentimes associated with store brands is more and more a misperception. That may very well mean that once they realize the value of PL, it’ll be a little more difficult to convince them to buy back into branded in the future, a negative for both suppliers and retailers. After all, product innovation and the consumer ad support placed behind new products help drive traffic to specific categories within the store. And without that innovation and ad support, some once-profitable categories may suffer from fewer trips and purchase opportunities.

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Hy-Vee celebrates Arbor Day

BY Alaric DeArment

WEST DES MOINES, Iowa Hy-Vee marked Arbor Day this week when its representatives joined Iowa governor Mike Rounds and Sioux Falls, Iowa, mayor Dave Munson at a tree-planting ceremony.

Held at Sioux Falls’ Yankton Trail Park Tuesday, the ceremony highlight Hy-Vee’s donation of 800 trees as part of governor Rounds’ tree-planting initiative.

 

Trees donated included cedars, maples, lindens, oaks and flowering crabapples.

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Supermarket operator Penn Traffic Co. notes improved fiscal-year results

BY Alaric DeArment

SYRACUSE, N.Y. Supermarket operator The Penn Traffic Co. announced in a fourth-quarter and 12 months of fiscal 2009 earnings statement that it had “substantially” improved its balance sheet.

The company, which owns and operates the P&C, Quality and BiLo supermarket chains in the Northeast, said revenues from continuing operations were $872.3 million in fiscal 2009, compared with $896 million the year before, reflecting a reduction in the number of stores it owns. The company closed several stores and sold its wholesale business in December and January as part of a divestiture program. It said the lower revenues also reflected lower volume and traffic trends that have affected much of the grocery industry.

Losses from continuing operations in fiscal 2009 were $34.1 million, or $4.04 per share, compared with $29.2 million, or $3.45 per share, the year before. The company said that excluding higher tax expense for fiscal 2009, year-over-year loss from continuing operations was “essentially flat.”

Gross profit in was $267 million, or 30.6% of revenues, compared to $278.8 million, or 31.1% of revenues, the year before.

“We closed fiscal 2009 with a substantially improved balance sheet and a cost structure more closely aligned with what our business requires to deliver value to our customers,” president and CEO Gregory Young said. “At the same time, we continue to make targeted investments to enhance our top-line performance.”

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