Mike Minasi and James White, Safeway

When consumers like Deb Poe speak, marketers listen. Last month, the well-heeled mother of three was shopping at a Dominick’s supermarket in the Chicago suburb of Oak Park, Ill. when she reached for a bag of O Organics whole wheat pasta. The Safeway-owned store brand, with its colorful packaging and slanted “O” logo, stood out on shelves next to boxes of Barilla spaghetti and other familiar products.

“I tried Barilla’s whole wheat pasta but I wasn’t too happy with the flavor,” said Poe, who also regularly buys Safeway’s Eating Right frozen chicken and rice enchiladas. “They are low fat and taste good. I first noticed their [bright green] labels. I like that they come in a five-pack.”

By her own estimation, Poe is not a typical value shopper. She doesn’t hunt for bargains and chooses food items primarily based on their quality and taste. Although she may be something of an anomaly in these penny-pinching times, Poe is precisely the kind of consumer that Safeway is counting on to take its ballooning private-label business—whose self-proclaimed “consumer brands” are built on a promise of delivering holistic dietary solutions, not super-low prices—to even greater heights.
Introduced in 2006, the O Organics food line generated sales of $300 million last year and is expected to bring in $400 million in 2008, per Safeway. Eating Right, which bowed last spring, is on track to hit $200 million in sales this year. With expanded distribution that includes the company’s plan to begin selling the products in rival U.S. supermarkets this fall (they are already in retailers overseas), these healthy numbers could be just the beginning.
“We think we’ve hit on something magical with consumers,” said James White, svp-consumer brands.
Just how magical? Safeway says that both lines have the potential to exceed the $1 billion sales mark in the next two to four years. That would be a considerable feat for the Pleasanton, Calif., company, currently the nation’s No. 5 grocery retailer with more than 1,700 stores and $42 billion in annual sales.
While it is far from alone in its efforts, Safeway’s successful repositioning of its vast array of private label products under a unified brand message—one compelling enough for discriminating shoppers like Poe, not to mention retail competitors—is setting an example for the entire industry.
Redefining Private Label
Safeway’s not the only retailer to realize that private label can benefit from better quality, packaging and advertising, but it’s the most state of the art. “It’s a good idea that many of Safeway’s competitors are copying,” said David Livingston, an analyst with DJL Research, Milwaukee. “Nowadays, your private label must be national brand quality.”
Wal-Mart, Kroger and other leading grocery retailers have all expanded their private label offerings and many are jockeying for a bigger share of the $23 million organic foods category. Meanwhile, Whole Foods, specialty retailers like Trader Joe’s and regional grocers such as the upscale HEB chain, noted Livingston, continue to raise the bar on product innovation.
Still, Safeway thinks it has the edge. “We’re not assuming we’re the only ones who could do this,” said Safeway president Mike Minasi, 49, who’s been with the company since 1996. “But we believe our partners will look at our track record of success, consider the speed to market that we can deliver and recognize that we’ve got a compelling consumer proposition.”
White argues that Safeway is “addressing unique consumer needs and filling gaps in the stores’ overall assortment.” The more than 300 items in the O Organics line, for example, include Italian sodas and a bevy of baby snacks and beverages, products that Minasi says “brought us to the center of the store where there were no brands or just a single choice.” Added White: “What we’ve learned is that people are taking more visits to different types of outlets to fill their shopping needs. Our strategy is to build brand solutions so they no longer have to do that.”

CPG Mindset
If anyone is qualified to develop those solutions, it’s White. At 47, he is a veteran of CPG firms Gillette, Nestlé and Coca-Cola and uses that expertise to lead Safeway’s cross-functional team of about 50 marketing executives. He also oversees sales and manufacturing functions of its consumer brands unit.
White’s hiring in late 2005 signaled a much broader shakeup at the company, which had long been on a mission from CEO Steve Burd to streamline operations and reinvent its approach to marketing. “We have to act as if we are a CPG organization within a retail company,” said Minasi. “That mindset is critical to where we’ve gotten.”
To breathe new life into its private label program, Safeway bolstered its consumer research capabilities and enlisted outside agencies to create sophisticated package designs and TV advertising. (It now runs dedicated private label spots as opposed to embedding products in existing ads, a more common tack.) Total ad spending for Safeway stores reached a high of $149 million in 2006 (not including online), per Nielsen Monitor-Plus, before dipping to $114 million in 2007 and just $24 million through May of this year. A company rep said the spend was “consistent with historic levels” for the brand.
Additionally, Safeway consolidated its complex hierarchy of 70 store brands into 10 “power” brands and recruited a host of CPG marketers in the mold of White. “We realized we had to think differently about the kinds of individuals we brought in to manage that process,” said Minasi. Two of those individuals, both former colleagues of White’s, are Matt Miller, vp-marketing and innovation, and Sheetal Khanna, director of marketing.
“James is a visionary. He sees trends early and has an ability to mobilize teams toward a common cause,” observed Miller, an ex-Nestlé marketer who often receives kudos for his deft handling of Safeway’s agency relationships. Khanna, a former Gillette employee, concurred. “My admiration for James’ leadership is a big reason why I’m here.”
Figuring Out What Works
White defines his “vision” as an ability to assess marketplace trends in the context of quantitative research. For example, customer feedback gleaned from a variety of sources (e.g., focus groups, transactional store data) revealed that, despite the store’s large selection of health-oriented frozen entrees, many of those products simply didn’t taste very good. In developing the Eating Right portfolio, White said, “We didn’t want to build a fad-oriented brand or a diet brand. It wouldn’t have had the fewest calories or lowest fat and it would have tasted terrible.”
Thus, Safeway positioned the line as “Uniting Flavor and Nutrition” and created a system of packaging markers in the shape of easy-to-spot colored spheres to delineate a particular health benefit such as “low fat,” “high in fiber,” or “made with whole grain.” The overall clean, contemporary package design (by Anthem, San Francisco) conveys a simplicity and lightness that effectively reinforces the brand’s message.
A key insight on O Organics, meanwhile, was consumers’ confusion about the origin of organic products. “There was a major gap on packaging in term of stating where the products are being manufactured, [with] no connection to the source,” said Khanna.
To gain design inspiration, creatives at Phillipe Becker, San Francisco, scoured supermarket product aisles and visited a local farmer’s market. What they found was consistent use of muted earth tones, illustrations of farm scenes and a lot of intricate handcrafted photography that was deemed too fussy or boring.
“We saw a real opportunity to bring vitality to the category,” said the agency’s co-principal and lead creative director, Philippe Becker. “The [primary] color palette of the brand was inspired by the essential elements of nature: Sun, water, light, earth. Our photography direction was simple. Everything was shot in natural lighting in everyday settings. Where possible, we showed product close to its source or [in] its purest form.”
Echoing this treatment, TV ads from DDB, Chicago, were folded into Safeway’s long-standing “Ingredients for Life” campaign. In one 30-second spot, which ran last year in all of Safeway’s major markets, a fresh-faced young couple wearing T-shirts that list their human “ingredients” (work ethic, weakness for ice cream, kind heart, etc.) frolics on a couch and prepares appetizing looking meals with the O Organics products. The brightly lit visuals, sans dialogue, are set to a catchy tune that contains yet another double entendre: “You’ve got such a beautiful naaa . . . ture . . .”

Private Label Going Public
In the coming months, new advertising is expected to promote the Better Living Brands Alliance, a large group of food manufacturers and distributors responsible for marketing O Organics and Eating Right products to other U.S. retailers through a licensing agreement with Safeway. So far, the products have made inroads with international retailers in Chile, Colombia, Hong Kong and Taiwan and are currently being delivered through U.S. food service operations to new locales such as the Arizona Sate University campus and Google’s cafeteria.
So which of Safeway’s supermarket rivals will bite? Minasi and company are mum on their identities but insist Safeway will be shipping product to “major retailers” this fall. Said Minasi, “O Organics and Eating Right are viewed as complements to the retailers’ health and wellness agendas and their own private label programs.”
One thing is certain: Safeway’s foray has been well-timed. Rising foods costs are causing more consumers to switch to store brands. Private label products today account for more than one-fifth of all U.S. grocery sales, up from about 17% five years ago, per Nielsen research. “I suspect private label will continue to grow in importance as the economy continues to struggle,” said Todd Hale, svp-consumer and shopper insights at Nielsen. To Safeway’s marketing duo, that’s only part of the story. The key to success in any economy, said White, is giving customers the kinds of products and brands they crave. “Our strategy is based on more than the value alternative,” reminded Minasi. “We plan to keep innovating in a way that’s relevant to consumers. That’s how you drive bigger share of wallet.”

Photo by Dan Clark