Retail news and trends analysis Aldi is equipping its exclusive Fit & Active line of better-for-you products

with GDA "Fit Facts" on the bottom right-hand corner of each package. The discount limited-assortment format operator is billing itself as the first U.S. grocer to showcase guideline daily amounts (GDAs) on its private label products. Fit Facts include four standard nutritional facts based on the USDA's recommended daily allowances of calories, fat, sodium, and sugar. The Fit & Active line will also feature supplemental benefits, such as products that are good sources of vitamins and minerals, good sources of fiber, are free of caffeine, have low cholesterol, and contain no trans fats. "Since 2004, Aldi's Fit & Active line has offered healthy alternatives for smart shoppers on the go," says Joan Kavanaugh, v.p. of corporate purchasing for the Batavia, Ill.-based grocery chain. "Consumers' growing demand for healthier choices is a significant opportunity for us." Company spokeswoman Martha Swaney notes that Aldi's aim is to "take the guesswork out" of consumers' quest for healthier foods, by "clearly highlighting nutritional benefits as an added convenience." Consumer demand for Fit & Active products continues to grow exponentially, says Kavanaugh, adding that Fit & Active sales increased about 30 percent in 2007 compared with the previous year, and are projected to grow another 30 percent in 2008. There are 121 varieties of 58 core Fit & Active items offered daily, and more than 20 additional products are set to be featured as special purchase items throughout the year. Among the products offered under the brand are 100 percent fat-free chicken broth, an assortment of dried fruit, egg substitute, nonfat trail mix, lean ground chicken burgers, frozen pizza, and light mayonnaise. The products aren't only better for shoppers' health, but for their wallets as well: The average retail price for Fit & Active items is $1.99, with the chicken broth going for just 39 cents. All new Fit & Active products with GDA packaging rolled out in stores Jan. 1, 2009, according to the chain. Millville, Aldi's exclusive cereal brand, also now features GDAs on its product labeling, effective Jan. 1. Aldi operates nearly 1,000 U.S. stores in 29 states, primarily from Kansas to the East Coast.

The juice category offers retailers some unique opportunities to experiment with and fine-tune their private brands. It is a collection of diverse subcategories positioned throughout the store with a wide range of packaging options. Moreover, retailers with multi-tier privatebrand programs can compete in several juice segments. And perhaps most important, store brand juices already represent 15.5 percent of retailer promotion support. Retailer ad support varies by juice segment for both store brands and traditional brands. Multi-serve juices (both refrigerated and shelf-stable) receive 77.5 percent of retail ad support. Private label often receives strong promo support in these multi-serve value segments. While single-serve juices represent less than 8 percent of feature ads, this impulse segment represents opportunity for store brands to increase their low share of retailer ad support. So which retailers promote store brand juice most overall? By comparing retailer ads in print circulars, we find that Associated Supermarkets in New York runs the most ads for private label juice by a wide margin, with 183 ads per year. (Supermarkets in the Eastern United States tend to run the most ad blocks per circular.) Another metric is private labels share of retailer print ads, which can be measured across the store or for specific categories. For example, ALDI, Fresh & Easy Neighborhood Market and Wegmans lead all retailers, with store brands representing the majority of their juice ads. (It's worth noting that store brands represent more than 90 percent of what ALDI offers.) These three retailers all use their weekly print circulars to define and differentiate themselves with strong private label ad support across categories. Retailer ad support continues to shift focus across juice segments, manufacturers and brands. Private label share of ad support dropped to 15.5 percent for the 12 months ending April 2 versus 18.9

percent for the year-ago period. Retail ads for store brand juices, meanwhile, quietly declined by 19 percent across retail channels in the United States and Canada. Coca Cola and Welch's also have seen double-digit declines in feature support versus the year-ago period. In contrast, other juice-makers such as PepsiCo, Kraft, Simply Orange and Campbell show strong increases in ad support. Campbell also supported its V8 brands with FSI coupons in February and April. Some smaller brands such as POM Wonderful, White House and Hansen's also show strong growth in retailer ad support. Many juices with growing retailer support compete in premium single-serve segments where private label is less developed. These might be excellent brands to target and watch as they develop their brand identity. Nature's Promise juice boxes are a good example of private label promoted as a premium organic brand available exclusively at Ahold banners. Wild Harvest organic juices are a similar offering from Supervalu. The overall decline in retailer ad support for store brand juices could lead to short-term declines in sales volume, but several of the most innovative retailers still see the potential value of promoting their private brands. Fresh & Easy, Loblaw, ALDI, Bashas', Copps, Food-4-Less and Publix all increased their number of store brand juice ads significantly versus the year-ago period. Juice products are perfect for sampling and trial purchases in single-serve sizes. Shoppers who might hesitate to spend more than two dollars to try a 48-ounce store brand probably would be much more likely to try a singleserve private label juice promoted at less than a dollar. If the quality meets or exceeds expectations, look for repeat purchases that could create opportunities for private brands in other categories. Looking ahead, expect more retailers to experiment with private label juices in a variety of segments, sizes and price points. Many of the lessons learned with juices can be applied directly to other categories throughout the store. Manufacturer Share of Retailer Ad Support

Private Label

PepsiCo Coca Cola USA Kraft Foods Ocean Spray Citrus World Simply Orange Nestle Campbell Mott's
Most Store Brand Juice Ads

15.5% 11.4% 8.6% 8.1% 5.4% 5.3% 5.3% 3.8% 3.7% 2.9% No. of Store Brand Ad Blocks 183 151 122 103 89 81 79 77 73 72

Retailer Associated Supermarkets Tops Markets Fresh & Easy Neighborhood Market Price Chopper (Golub) Weis Markets Ingles Markets Jewel-Osco Giant Food, Carlisle BI-LO Pathmark

Highest Store Brand Share of Juice Ads

Retailer
ALDI

Store Brand Share 100% 82.4% 65.9% 40.6% 39.3% 34.9% 34.2% 32.2% 30.9% 28.6%

Fresh & Easy Neighborhood Market Wegmans HEB Tops Markets Ingles Markets Kmart Price Chopper (Golub) Hannaford Bros. Associated Supermarkets
2011.

Source: ECRM's MarketGate Ad Comparisons; U.S. and Canadian CPG retailers; 12-month period ending April 2,

Product cost leverage is achieved with tremendous buying power concentrated on very few items. Rough math would lead one to conclude that their average private brand item yields retail sales of over $5 million per year. Concentrate that on negotiations with a single vendor per item and you have real clout. They can sell their private brands at retails of from 30% to 50% savings compared to a standard supermarket because of leverage in operations as well. Consider that the customer is strongly encouraged to be an efficient customer because they bag their own groceries, they don't bring in coupons to redeem, there is no arguing about sale items, they pay for the grocery sacks they use or they bring in their own sacks and they don't abscond with the grocery carts because they are paying the quarter to use them and then bring them back. Also, consider the fact that their stores are anything but exciting: bare walls, stark product presentation, no variety of the nature a consumer is used to, no sampling, and no departmental service. They also have relatively little shrink due to the product mix they offer: very little by way of perishables or service departments that can cause the most shrink. Supervision is slight as well: only a direct line supervisor, no departmental supervision, minimal-but focused-training. This regimentation of format and diligent restraint on their operational practices allows Aldi to achieve yet other benefits of scale. Their site selection process is greatly simplified, as are their architectural and construction or remodeling costs. The use of less expensive fixturing gives them added flexibility in adapting to any site or building constraints that would otherwise cause internal "footprint" problems. This emphasis on simplicity has made Aldi very scalable as they move to other parts of the country. All of this leverage translates into a shopping trip that concentrates on private brands at the lowest retail prices possible.

BELOW: Aldi's private brands for nonfood include Kwik n' Fresh, Clarissa, Shique, and RainFresh.
Product Quality When Aldi first made its appearance in the U.S., retail competitors were shocked at the low retails and amused by the "homey" names and label designs on all the products. Their conclusion was that the products must be of lower quality and they tended to react accordingly. The "homey" names and label designs, however, have served to reinforce the message, at least from the price perspective. They have a ring of familiarity without the baggage of recognition. When tested, the product is generally fine quality. Again, the power of leverage.

LEFT: Aldi's private brands for food include Cheese Club, Casa Mamita, Millville, Cambridge, Corntown, Southern Grove, and Chazoo.
So, who shops at Aldi?

LEFT: Aldi's private brands for food include Cheese Club, Casa Mamita, Millville, Cambridge, Corntown, Southern Grove, and Chazoo.

When Aldi first began opening stores, competing retailers generally misread the appeal. Without any brand recognition of either the store or the products they carried, initial reaction was muted. But when they began to visit their new competition, they became understandably concerned--cars in the parking lots were not the "beaters" or older cars generally ascribed to those in lower income brackets. Customers in the aisles appeared to be from all walks of life. Research demonstrated that customers were probably better defined by psychographics than by demographics. Sure, a large part of the customer base was those on a limited budget, as expected. What was unexpected was this customer's acceptance of private, unknown brands. Those customers who live on a more limited budget are sometimes less prone to experimenting with private brands, choosing, instead, to buy the insurance of quality or performance of the national brands. But the retail prices were so low that the response seemed to be: "how can I afford not to at least try?" The product itself needed to be tested, but the risk of testing was low enough to not be a hurdle. The more affluent customer, the ones who can afford to experiment, did also. The psychographic profile of the Aldi customer is more inclusive, consisting of people who are attracted to real value. The customer appealed to with a value proposition has, today, many more choices to buy their food: larger grocery stores, convenience stores, super centers, warehouse stores, membership warehouse stores, drug stores with expanded food offerings, specialty food stores, and, of course, the limited assortment box store--the one that started it all The fact that Aldi has such a limited assortment actually opens up opportunities for other food retailers. Since most Aldi customers perceive they must shop other food stores to complete their shopping trip needs, they can be compatible from a geographic perspective--perhaps even sharing the same parking lot. They are likely to be able to co-exist with other stores. Aldi can exist in higher income neighborhoods as well as lower income ones. The key is to find the customers who truly are open to a value proposition. Aldi Changes Yes, Aldi changes, but ever so slowly and only when those changes will mean better value to their customers and more efficiency for Aldi. Abrupt changes, changes that catch the latest marketing wind, are inconsistent with Aldi's mission. But they do change. Aldi has scanning. The prices of scanning equipment has come down and the amount of information available from scanning files allow Aldi to speed up their checkout process, ensure greater pricing accuracy and gain information that would help schedule their labor. Aldi does advertise. Not too long ago, the only advertising Aldi did was to publish price lists in their stores. To find out what Aldi was offering and compare prices with other, more conventional retailers, a customer made the trip to Aldi. Today, Aldi inserts flyers into local papers with item and price. Aldi also distributes its ad flyers via the Internet and posts them on its website. Aldi does carry national brands. Initially, Aldi carried private brands exclusively. Today, there is a variety of national brands (albeit very, very limited) that Aldi has contracted with to carry their products. Featured in their "flyers" are a number of non-food items as well . . . it could be tools, flashlights, even clothing. Aldi does go upscale. Sticking with their "homey" brand names and label designs, Aldi now has lines of more "gourmet" items (like Grandessa entrees), recognizing the makeup of their customer and their customer's desire to get value on items other than the sheer basics.

Aldi continues to be a retailer to watch very closely.

ABOVE: Aldi USA introduced this year under its Grandessa label a new line of restaurant quality frozen dinners created exclusively for Aldi by master chef M.J. Brando. The 10-oz. dinners retail for an amazing $1.99 each. Grandessa is the brand name used by Aldi South of Germany on its line of gourmet foods.