Grocers are turning to the local area to achieve key company goals and activate their packaged merchandise aisles. But experts said they must pay attention to pricing, layout and support for small brands.

This article is the second part of a four-part series of articles that explores the opportunities and challenges that retailers face in central stores. Next week, Grocery Dive will explore opportunities for e-commerce personalization and store design.

Bashas' has been dealing with local products for nearly 90 years, but this year the Arizona-based grocery chain decided to speed up its procurement and sales efforts. 

In addition to sourcing more products from Arizona, Bashas also redesigned the local shelf label, which reads "Local Like Us" next to the Arizona flag. "I don't think the [tags] on the shelf are loud enough... I just think we need to make this scream louder," said Steve Mayer, Bashas' senior vice president of marketing, sales and purchasing.

Mayer said the company has long wanted to do more with local products, but sourcing has been difficult. Therefore, the grocery store partnered with Forager this spring, a company that helped simplify local sourcing for brands and retailers. 

Bashas is not alone, striving to improve local products. Other chain retailers, including Meijer and Kroger, have issued appeals to local and emerging suppliers, and are increasing procurement and marketing efforts as new urgency emerges during the pandemic. Global supply chain issues have led to serious shortages, giving small brands the opportunity to fill the gaps on the shelves, and consumers have turned more attention to local products for various reasons.  

At the same time, with the emergence of companies such as Forager and RangeMe, which were established in 2015 and 2013, local sourcing has become easier and easier to solve the burden of grocers in finding and reviewing suppliers, and help brands gain more The visibility and access to resources have thus become available.  

Brandon Leong, Senior Vice President of Marketing and Growth at RangeMe, said: "The'local world' that [retailers] knows may not be all they can get." 

Therefore, although localization is not a new trend for retailers, as the company faces changing consumer demands and new supply chain realities, it is gaining more resources and relevance. Leong said that retailers are beginning to set goals for local events and promised to make permanent purchases locally, turning the local area into "less popular and more staple food." 

Although usually associated with fresh products, as retailers seek to diversify beyond national brands, local products appear on shelves alongside private label products. Experts say that in the central store, grocery stores in this area have long been trying to make shoppers more excited, and local products can enhance the treasure hunting experience in rows of packaged products. 

Recent research indicates that grocers are turning to local products to help differentiate their grocery aisles. In a report released this fall, the Food Industry Association (FMI) pointed out that 83% of the retailers surveyed indicated that the local assortment of the entire store was a welcome differentiating factor, and 58% of respondents believed This method is very successful. Among the 300 executives in the grocery industry surveyed by Grocery Dive and Inmar Intelligence in October, more people said they plan to add more local or emerging brands (53%) in the central store in the next two years. 

Local products take advantage of community pride and consumers’ desire to support small businesses, and arouse consumer interest through the stories behind the products. Liang said that even small brands that eventually enter national distribution can still use their "local hero stories" and cited the example of Anchor Steam Beer, which is made and loved in San Francisco.

"If you are an all-star at the farmers market, that doesn't mean you can put it on the shelves."

Senior Vice President of Marketing and Growth, RangeMe

Forager CEO Joe Blunda said: "For a long time, consumers have felt so far away from their food and they have been fascinated by it."

According to Andrew Criezis, NielsenIQ's head of product for small and medium-sized enterprises, small brands are innovating much faster, whether it's trying alternative ingredients or trying new packaging.

For example, Whole Foods Market works with local brands to help them develop innovative product line extensions, Kelly Landrieu, global coordinator for local and emerging brands at the grocery store, wrote in an email. Landrieu wrote that the grocery store included local products in its annual trend report, and featured products such as Ruby Hibiscus Water and Green Bar Distillery Lavender Bitters & Soda in the first Trends Discovery Box in the store’s history. The product debuted in October. 

According to sources, consumers usually equate local products with healthier for themselves and the planet. 

"In the central store, one of the biggest differences is'local' because it has its own certification for cleaner, fresher, and healthier food," Brenda said, adding that "local" increased consumption The emphasis on “cleanliness” and other statements. When used by a large CPG, it may be more cautious.  

Since sustainability and diversified sourcing have become the main goals of grocers, local sourcing has become a way to take advantage of these two initiatives. Local products usually have a lower carbon footprint because the manufacturing operations are usually smaller and the products have fewer mileage. 

Leong said there is a connection between small brands and diverse owners, whether they are owned by ethnic minorities, women or veterans. Brenda said that as equity and inclusiveness issues surfaced during the pandemic, grocers are putting more pressure on companies such as Forager to help them find diverse suppliers.  

"This is a huge opportunity for CPG because, frankly, in terms of freshness, you can't really turn on the switch and diversify that business or supply chain," Brenda said. 

Kroger’s goal is to invest up to US$10 billion in diversified suppliers by 2030 and to triple its procurement from diversified suppliers as part of its 10 part of the promotion of diversification and fairness released last fall Part of the plan. Earlier this year, Kroger held a competition to expand sourcing from local and regional growers and producers, allowing the winner to get a display on Kroger’s shelves, and the company and its affiliates’ continued business development.

"Diverse people have different experiences. So they have different perspectives. Therefore, you can get different ideas, and when you have different ideas, you get innovation," Kroger's diversity and inclusion Angel Colón, senior director of multiculturalism, said development and supplier incorporation.

Cologne said that in the listening session held at the grocery store last year, black colleagues pushed the grocery store to focus on improving sourcing diversity - something customers have been pushing. Cologne said that Kroger works with many certified organizations, which usually have local chapters to find different brands, including the National Minority Supplier Development Council, the National Council of Women’s Business Enterprises, and the Hispanic Chamber of Commerce in the United States.

"It has happened many times that many of our diversified suppliers started locally," Cologne said, adding that Kroger has seen local brands become national brands.

The source said that in the central store, there are usually a large number of local product categories including honey, sauces and spices. Brenda said snacks and non-alcoholic beverages are Forager's fastest growing areas. 

Blunda said that due to limited capacity, or due to the limited number of items on the shelves and brand challenges, local products did not really occupy a place in the freezer area. According to sources, other categories, such as coffee, have had mixed results, with the number of local choices and the retailer’s sales strength varying. 

Landrieu writes that Whole Foods' local classification varies by category and city due to product availability and consumer interest. For example, local protein powders and nutrition bars have a higher density in the fitness field.

Although the shelves of the central store usually do not cause space constraints like the surrounding refrigerators or freezers, it is still a challenge for small brands to get on the shelves and gain a prominent position. In FMI’s September report, 66% of retail respondents indicated that they are increasing the SKU allocation of local products, whether in-store or online, compared to private brands and organic, gluten-free or health and wellness products. Assign more. But 68% said they plan to maintain the overall space allocation of the central store, while 24% plan to reduce it. 

With the increase in maturity and volume, large-scale fast-moving consumer goods usually occupy a larger area and pay for priority placement in central stores, leaving other brands with hard-to-reach and out-of-sight top or bottom space. "If you are an all-star at the farmers' market, that doesn't mean you can put it on the shelves," Liang said. 

Criezis said that for small brands, the cost of listing is high. Obstacles include listing fees, the requirement that the brand promises to provide a certain number of products, and paid shelf access, which can cost thousands of dollars. Nelson IQ. To make shelf placement easier for smaller brands, City Feed and Supply, a grocer with two stores in Boston, does not charge local suppliers for purchases.

NielsenIQ sees that smaller brands have a greater impact through short-term promotions or end caps, which can attract the attention of shoppers. He said that even during periods of inflation, "promotional activities are very effective." He said that under normal circumstances, national retailers will conduct trials for a small brand in a region for months or a year, and then determine whether and how much to expand. For example, Bashas sometimes waits for a reset to add local products, but other times it will plug and play—deliver products that are not in the cycle, Mayer said.

How many products a local brand can provide will not only affect the number of stores it enters, but also affect the placement of products. David Warner, president and co-founder of City Feed and Supply, said: "If there are enough products in this category to choose from and can span multiple shelves, then we will try to provide them with better locations. "

Brands stated that the location where their products end up in stores varies from grocery store to grocery store. Amanda Gilman, founder of AMG Snacks in Massachusetts, said that she saw her energy snacks sold in the snack aisle, nut section and end caps, and pointed out that she liked the visibility of the end caps, but they usually Need cost. "If you just go to the shelf and buy other products, you will lose your way," she said.

Kamaal Jarrett, founder of Massachusetts hot sauce brand Hillside Harvest, said that his products have several ideal locations, including international channels, meat channels and hot sauce areas, as well as seasonal barbecue displays and other regional secondary and tertiary layouts. spices.

Although price and convenience are the top considerations for consumers, the novelty of local products helps them stand out. "I think customers will look at two products-one is local and one is not, and their prices are relatively the same-usually win locally," Bashas' Mayer said. "I think local is very powerful."

Warner said that City Feed found that customers like to have options at different price points. Approximately 40% of City Feed’s inventory is made up of local products, and in the central store, the grocery store’s goal is to provide three to four local or regional brands and one or two national brands, such as organic food and lower-priced generic products. Warner said that each product category serves customers at different price points. 

Since consumers tend to equate local products with specialty products, grocers can often sell local products at high prices, thereby increasing profit margins. According to sources, consumers are willing to spend more on local products because they generally believe that these products are of higher quality and more in line with specific values. 

The source said that although small grocers tend to adopt high-priced pricing for local products, small brands often find it difficult to have the quantity needed to reduce costs in order to compete with large brands in pricing. This is usually a concern for larger retailers.

Combining the pricing of products sold online directly to consumers, farmers’ markets and Amazon, Jarrett said it’s important not to cause too many changes in pricing across these different channels. 

"What we see now is that we have to be aware of our prices in each channel. We don't want to alienate people," he said. "We don't want too much parity between pricing, but we also don't want to be at a professional price point in a large retail grocery chain."

As sales increase, Jarrett said he expects prices to fall. Before that, he had been playing promotional activities when setting prices for products that had not yet seen cost changes. 

"We are not among the 86 or so Stop & Shops in Massachusetts. We only have 10, so we have not yet gained the advantage of scale, but the price point needs to meet the expectations of Stop & Shop customers," Jarrett said.

Mayer said that because local suppliers have invested a lot of money in their products, it is important to put their products on the shelves and sell them as soon as possible, and then pay quickly.

Although with the arrival of companies such as Forager and RangeMe, finding and working with local suppliers has become easier, grocers say that smaller brands still need additional help. Mayer said that as local suppliers were affected by the shortage of trucks, Bashas had to show them the package size or pick up the product.

The source said that compared with the production department, the central store usually requires the brand to take more measures to prepare for the shelves, because in the production department, packaging is not so important. It takes a long sequence of steps to be ready to go on sale, including adding insurance, safety certification, barcodes, and nutrition labels. 

“We tend to move slowly in the face of opportunities because we are just scattered so little. And I think buyers and managers know this, so they won’t crucify us for it, but I think we are Business owners are more aware of our missed opportunities," Jarrett said. 

"I think customers will look at two products-one is local and one is not, and their prices are relatively the same-the local usually wins."

Bashas' Senior Vice President of Marketing, Sales and Purchasing

Cologne says that once Kroger finds and reviews these brands, grocers have development opportunities, such as helping them prepare for category manager meetings, providing webinars on business growth, and providing guidance. Earlier this year, Kroger created a resource guide for small businesses on preparing for retail, covering topics such as pricing, promotion, supply chain, and product development. 

Whole Foods provides low-interest loans through its local producer loan program created 15 years ago.  

Some retailers, such as City Feed, also spend time coaching local brands and helping them improve their business. Recently, Warner had an hour-long conversation with a potential supplier. Usually, guidance includes talking about pricing strategies, packaging, what customers want, what the grocery store wants, and general business advice, such as "make sure you can pay yourself first," he said. 

Warner said he is proud to help small local brands succeed, such as Effie's Homemade, a Massachusetts-based cookie and oatmeal maker that is now sold in major grocery chains in the United States.

"I got inspiration from it," he said. 

Follow Catherine Douglas Moran on Twitter

Stockholm-based Lifvs oversees a series of unattended food stores throughout Scandinavia, some of which are as small as 300 square feet.

According to Grocery Dive’s proprietary retailers and shoppers surveys, consumers are more enthusiastic about central stores than ever before, but the shift to online is bringing new challenges.

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Stockholm-based Lifvs oversees a series of unattended food stores throughout Scandinavia, some of which are as small as 300 square feet.

According to Grocery Dive’s proprietary retailers and shoppers surveys, consumers are more enthusiastic about central stores than ever before, but the shift to online is bringing new challenges.

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