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Raley's Rolls out Private Brand of Organic Products.

West Sacramento-based Raley's introduced its Full Circle label of organic and natural goods on Wednesday, reports The Sacramento Bee. The line includes about 120 items -- from lentil beans to laundry detergent -- that meet government organic criteria or what the company calls its "natural" standard.

Raley's believes it can tie its brand more closely to healthy eating options, fend off old competitors and cut off emerging rivals exploiting the demand for organic goods. It also underscores how organic products have gone from a boutique business that often offered unpalatable high-priced items to a mainstream industry that mass-produces attractive goods for less.

Raley's strategy mirrors what Safeway Inc. did two years ago with its O Organics line. The products marry the strengths of private-labeling -- higher profits on exclusively branded products that cost less for a store to acquire than national brands -- with the health and social appeal of organic goods.

Bill Coyne, Raley's chief executive, said his company isn't engaging in "me too" marketing.

"We don't consider this new territory," Coyne said, noting that Raley's has sold organic goods since the 1970s. "We're responding to what consumers want, not to any competition."

But Robert Reynolds, a supermarket consultant based in Moraga, said the Full Circle line is "playing catch-up" with Safeway and others with private-label organic offerings.

"Unless you're an innovator in this business, you're almost always following somebody's lead," Reynolds said. "To remain competitive, especially in a tough market like Sacramento, Raley's would be fools not to do this."

Raley's, which controls more than one-third of the Sacramento grocery market, figures Full Circle will get the attention of health-conscious shoppers like Leah Knight, who loaded her basket the other day with a $5.99 gallon of organic milk at Safeway's Natomas store.

Knight, a mother of three teens, said she's buying more organic products than a year ago because she wants her family to eat more healthy food.

"It's not that much more expensive," she said. "It's worth it just for the peace of mind, knowing that you're eating right."

Such sentiments have made organic food one of the fastest-growing segments in the $600 billion U.S. grocery industry. According to the Organic Trade Association based in Greenfield, Mass., organic-product sales doubled to $16.7 billion in a five-year period ending in 2006, the last year for which figures are available.

The trend is a boost for grocery stores searching for ways to differentiate themselves in a crowded and competitive field.

The grocery business in Northern California, where Raley's pulls most of its $3 billion in annual sales, is particularly bruising, experts say. The area is saturated with major chains jockeying for consumer attention while aggressive new players elbow into the market:

* Wal-Mart Stores Inc. has opened nine discount Supercenters in the Sacramento area that sell groceries, including organic goods, in tandem with general merchandise.

* Modesto-based Save Mart Supermarkets, once roughly the same size as Raley's, doubled the number of stores last year and boosted its annual revenues to $5 billion when it bought 132 Northern California Albertsons locations. Many of the rebranded stores are challenging Raley's in its Sacramento-area stronghold.

* Safeway invested in new stores, remodeled older ones and successfully touted its private label. The company has grown its O brand to 300, with sales nearly doubling last year to $300 million.

* Woodland-based Nugget Markets opened new stores in Roseville and El Dorado Hills with expanded fresh food and prepared food sections. The family-run chain plans a May debut in Elk Grove and has its eye on the Bay Area.

* Fresh & Easy Neighborhood Markets, an arm of British-based retail giant Tesco PLC, plans to open dozens of Northern California stores this year. The stores emphasize organic products, fresh foods, take-home meals and private-label goods. "Sacramento is a tough market," said Reynolds, the supermarket consultant. "It always has been."

Raley's Coyne said the shifts in the region's grocery scene don't faze his company and that it doesn't make decisions based on industry trends.

"Competition is good," Coyne said during an interview at Raley's headquarters. "It makes us better."

Raley's Full Circle line comes after many months spent sourcing products, checking quality and negotiating prices. Topco Associates LLC, a grocery products cooperative based near Chicago, helped Raley's research goods and arrange terms with vendors and manufacturers.

The Full Circle blue, green and orange label includes 78 items certified organic by the U.S. Department of Agriculture. The products meet federal organic standards for packaging, production and ingredients.

Raley's considers another 44 products "natural" Full Circle items for which the government has no standard. Raley's said the items come as "close to a natural state as possible," and are made without artificial ingredients, have limited refined ingredients, and are "responsibly produced and managed."
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Publication:Gourmet Retailer
Date:Feb 12, 2008
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