Internet Food Shopping Dilutes Brand Exclusivity

February/March 2018 – The best use of branding in the deli is uncertain. The industry’s most prominent brand, Boar’s Head, has much equity with consumers. But the Boar’s Head deli positioning, with prominent signage and a commitment to keep non-Boar’s Head SKUs to a minimum, is also problematic. Unless a retailer has an exclusive in its area — the Boar’s Head positioning makes it difficult or impossible to differentiate oneself from other stores that feature almost identical delis.

Of course, that close identification with one brand leaves a retailer vulnerable if it was to ever lose the right to sell the brand or if a competitor begins selling it. And in an age of increasingly prevalent internet shopping, the whole idea of exclusivity is uncertain. Fresh Direct, for example, sells Boar’s Head product, so if a retailer’s stores are within a Fresh Direct delivery zone, they don’t really have an exclusive.

Tying one’s reputation to a master brand has the great advantage of simplifying procurement, but it also makes it difficult to use this as a competitive edge.

Sam Walton used to speak about Wal-Mart as the buying agent for the consumer. He was speaking of price, but also quality. Translated into food, it means the consumer should be able to trust not just food safety, sustainability and traceability in the supply chain, but also that the retailer has curated a quality assortment of products based on more than a one brand relationship.

Kroger has squared the circle on many of these dilemmas with its in-store Murray’s Cheese Shops. A reputable name and brand that has equity with consumers, Murray’s was purchased by Kroger supermarkets so it can maintain exclusivity when desired. Since the brand is retail, Kroger can still procure specific products, including a large array of items and brands from around the world.

This issue’s cover story, U.S.-Made Italian (page 14), includes a look at the Volpi Foods store-within-a-store concept being executed at Schnucks. Because both Volpi and Schnucks are St. Louis-based, the concept manages to simultaneously tie in global cuisine trends with local sourcing. There is a hometown pride element that will be difficult for others to duplicate — though, of course, these unique elements also may limit the scalability of the concept.

Private-label branding also is a seemingly irresistible trend for supermarkets, and the trend extends to the supermarket deli. With the rapid growth of concepts that are heavy or exclusively private label, such as Aldi, Trader Joe’s and Lidl, and the enormous margin pressures such concepts create, one can only see the trend continuing. However expedient, even necessary, such an effort might be, it comes with a price.

Consumer-brand companies use their margins to market and do research and development on new products. If retailers turn to private label, who will develop the new products and do the marketing that increases consumption and builds the next generation of consumers?

Also, it may be completely fine to have private label laundry detergent, but food sales, especially food in the deli/retail foodservice arena, depend on being evocative and eliciting desire from the consumers. Turning the department over to massive brands can lift consumption of new products due to consumer confidence in the brand, but it can also create a homogenized, even boring, offer.

Using one brand in the deli makes retailing easier. But if a retailer is going to survey the globe and identify unique high-quality products, most likely from smaller companies that don’t have the funds for mass marketing, the retailer not only has to invest in procurement but also has to take on the obligation of teaching consumers about each one of these products.

It’s great to create a store-within-a-store retail brand or collaborate with a specialized vendor to build unique venues that others can’t duplicate. But if you drop the job of building brand equity in your own store and stop curating unique assortments by surrendering that equity to one brand, don’t be surprised when some internet food site swoops across your trading area offering the same brand and the same assortment all at a cheaper price with some convenience thrown in.

At that point, there will be a rush to leverage a store’s own brand equity, but retailers may find that there is not much equity left to leverage.            db