Our standard local grocery store, Safeway, has been under a lot of pressure from the lower end of the market (Costco, Walmart, various food discounters) and the upper end (Whole Foods, local high end groceries). In response it looks like they have attempted to adopt a similar strategy to another grocery, Trader Joe’s. If you haven’t been to a Trader Joe’s, they are a smaller store that has fewer options and the options they have tend to be branded under the Trader Joe name. This means that they receive any brand premium, though likely smaller, that standard brands do by packaging and advertising. There is also what can be thought of as a separate store brand premium from the high percentage of items in the store that share the store’s brand. You can expect to find breakfast cereal and say pickles branded under the same store brand.
Safeway has either observed this or independently arrived at it and is pushing more Safeway branded items into their stores. It is observable as a customer in changes that pop up on shelf space where Safeway items suddenly appear and take up prime locations pushing down and out national food\grocery product brand options. The Safeway products compete on the low end of the price range for comparable options. They should presumably yield a decent profit since they eliminate the major middleman who, because of the brand premium, is capturing an important piece of pie of the revenue received for the sale. The major failure of this so far has been that the products are terrible.
At Trader Joe’s, the products that you get under the Trader Joe brand are anywhere from pretty good to better than comparable for national brands. For example, we like their pickles more than we like the comparable national brands. Their soups are pretty good. Maybe not quite comparable, that would be hard to say, but certainly not different enough that we care. Safeway brand items on the other hand have been uniformly terrible. The worst part for them as a brand is that the price point will cause you to give them a try, particularly for things you don’t have a strong feeling about, but the product experience is so bad you are pretty much done at that point. We’ve tried several products, though separated by a fair amount of time to allow the lingering bad perception to diminish but arrived at a point due to uniform bad experience across the products where the Safeway branded products just don’t exist for us any more as an option. I realized this the other day when I went into one of their sections where they have taken over at least a third, maybe more, of the available shelf space for their brand and I just blanked that section out. This was the exact same way I blank out a lot of unwanted advertising by just blipping over it. I kind of figure that we are probably not normal in having given more than one of their products a try before banishing the entire brand to the dustbin. I suspect that many people may be lured to try one based on price point but then fast forward to the dustbin part if their experience is anything like ours. Having achieved one of the more difficult things out there, getting people to try your product, you make sure that they won’t be back. I had always been aware that it was possible to have a negative brand perception for a particular product but I hadn’t thought much about it extending to every product associated with your brand.
I suppose I can imagine that we are an outlier and that there are sufficient people for whom the Safeway branded products are of sufficient quality that they will go with them and continue to purchase them. Perhaps there is so much profit in their own branded product or that the mix of variables that is impacted because of the strategy produces results that I wouldn’t expect on the face of it. Intuitively this seems unlikely but I have to be aware that our bad experiences have biased me towards wanting to see the strategy fail.