SDM’s Confusing Private Label Food Offering

  • Last week in my mailbox I received a SDM flyer that included a four-page insert for grocery items which are featured in our local neighborhood store.

    Everybody and their dog is getting into food these days (including Canadian Tire) and I wanted to see just how SDM was highlighting food in their large format stores.

    The store had a good assortment of drinks, dairy, frozen and dry grocery spread along one whole aisle (and a little bit more), essentially your basic “fill-in” items that you would need in a pinch.

    This assortment fit the expectation that I had in my mind of SDM as a drug / convenience store, which it appears to be adapting as its overall brand positioning.

    What really threw me for a loop however is the complex array of private labels that are on-shelf at SDM (and the proliferation appears to be getting worse).

    SDM was promoting its latest PL offering in food called “Simply Food” which spans categories such as frozen entrees, chips, cookies, oatmeal, mac & cheese and frozen hamburgers.

    On its own, “Simply Food” is a pretty decent line-up of products with bright packaging, good photography and good exposure in-store.

    The bewildering part is the three other private labels that SDM is using in the food category including:

    “Everyday Market” is the PL brand in basic categories such as butter and eggs, but also in categories such as ketchup, frozen French fries, tea, coffee and canned goods. This brand appears to be a tier-two brand in the private label offering.

    “Life” brand, the grand lady of SDMs private label efforts, was showing up in categories such as margarine, keying off the national leading brand but also in tetra pack juices/drinks – a low value added category. In my mind this is careless use of the “Life” brand equity that SDM trades heavily on in “trust” categories such as OTC, Beauty and Personal Care.

    Finally, SDMs organic private label launch “Nativa” was sprinkled throughout the food section. I never really did understand this launch – which is a hodgepodge of SKUs that SDM has assembled from various PL suppliers; from olive oil to maple syrup.

    “Nativa” reminds me a lot of the short-lived “Carb Options” launch that I was a part of (and learned much from) while working with Unilever. The line-up included Pasta Sauce, Marinades and Iced Tea – and any other product where we could squeeze out carbohydrates. However, did the shopper really care about low-carb salad dressings?

    Over-assortment is also an issue in many food categories at SDM.

    In some categories, such as ketchup there was a National Brand, competing with a “Nativa” SKU as well as the “Everyday Market” SKU.

    In other categories you had “Nativa” and “Simply Food” competing with a national brand such as Kraft Dinner.

    All of these observations raised a few questions for me:

    Question #1 – Does SDM need FOUR private labels in the food category?

    My gut tells me that this is a bit of overkill, along the lines of Safeway having four different PL brands in the cough syrup category.

    I applaud “Simply Food”. I hope it becomes the anchor brand in the category and that SDM puts all of its weight behind it moving forward.

    But, does SDM even need two tiers of PL in food? “Everyday Market” products could easily be integrated into a bigger, more concentrated “Simply Food” offering.

    As for “Nativa”, I see a lot of dust and markdowns on this brand when I visit SDM. Yes, it aligns with SDMs overall health positioning, but organic mac & cheese or chocolate covered almonds are a bit of a stretch.

    I know all too well from over a decade working with National brand suppliers, that just because you CAN launch a brand / product does not mean that you SHOULD.

    Brand / SKU proliferation adds complexity, fragments category sales and increases costs of inventory and promotions that ultimately just shift volume from one brand to the other.

    My advice: Go big with “Simply Food” or go home.

    Question #2 – What image is SDM trying to build with its food offering?

    I don’t think anyone at SDM thinks they will become a destination for food (at least I hope not). Anyone who is shopping at SDM to fill their pantry on Saturday morning should be kindly explained the concept of a supermarket.

    At best, food is a convenience category, and as such, SDM should be taking its cues from successful c-store operators such as Couche Tard and 7-Eleven.

    The problem is that today most SDM stores with food are competing with supermarkets and convenience stores that are literally just steps away and offer better prices, better assortment and in many cases – better hours of operation.

    And for the most part, c-stores tend to focus on one big national brand in slow moving centre store categories.

    If I were in charge of food at SDM, I would pick the core convenience categories in which I wanted to play/win and then bid out exclusivity to the # 1 or # 2 brand in the category in return for competitive pricing and decent promotional support.

    Focus on the Top 50 categories – have a solid offering and price it for sales and profit.

    Question #3 – How is anyone (corporate, associates, national brands or private label suppliers) making any money on food at SDM?

    In the end, SDM is committing too many corporate resources developing multiple private labels and constantly re-jigging the plan-o-gram; while its associates have plenty of dead stock taking up too much space in their expensive-to-rent stores.

    Every new initiative has its learning curve but the status quo cannot be sustainable.

    SDM needs to be more strategic with their offering in the food category. Pick a category role, identify the supporting tactics in private label, assortment, pricing, promotion, etc. and then execute flawlessly.

    Until they complete this exercise, the chain will be squandering resources at head office and in the stores, and ultimately eroding shareholder value.

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