Before: More than 70 store brands with competing visions and minimal shelf impact.
After: A successful team of 10 mega-brands.

Safeway's business strategy over the past few years can be compared to an internal construction zone. Walls were blown out, new supports put in place, a complete redesign of the architecture tackled—all with the foundation maintained and re-energized.

And the unveiling is one that millions of consumers indulge in not just once, but every time they shop in a Safeway store.

Safeway trimmed off more than 70 brands to build a portfolio of 10 power brands including mega-hits like O Organics and Safeway SELECT. And it’s all part of Safeway’s recent brain swap, from thinking like a private-label retailer to acting like a consumer brands producer. Now, Safeway is paving the path, rather than taking it.

“Rather than being a fast follower of national brands, we are mining consumer insights and proactively developing brands and products that meet consumers’ emerging needs,” says Susan Shields, group vice president of innovation. “It’s about being proactive and developing a brand that has meaning.”

The whole company, including the consumer brands team, found a recipe for success. In 2006, sales totaled $40.2 billion, with a one-year sales growth of 4.6 percent; in the first quarter of 2007, sales increased in all 10 divisions for the first time in six years, and profits jumped 22 percent. No doubt, other retailers have noticed—and thanks to Safeway’s new strategy, consumers are once again noticing the retailer.

To successfully build brands, the company first had to build the best team. Safeway president Steve Burd recruited the top minds from consumer packaged goods (CPG) producers (see “CPG pillars” on p.46 for a peek at the team’s resumes.) And while the new lines would function as national brands, the employees had to understand the environment of a national retailer.

“It would have been a big mistake if we had just brought the best thinking from our CPG experience and air-dropped that into Safeway,” says Matt Miller, vice president of marketing/brand strategy and development. “It was taking the best of the best—CPG and retail best practices—to identify and establish our own unique and proprietary brand development process.”

While combined years of CPG experience for the new recruits probably exceed 100, the average tenure of each team member at Safeway is just a few years. But under the direction of James White, senior vice president of consumer brands, the team has already seen significant sales. (White was recognized as one of BRANDPACKAGING’s 2006 brandinnovators.)

“It’s all about having a good vision, with discipline and functional excellence,” says White. “I’ve got an experienced, talented team, and the leaders are functional experts in their fields.”

The Safeway portfolio used to swell with more than 70 brands. While the retailer offered multiple options, the brands (and the packaging) didn’t communicate a message that made the stores a destination for shoppers. Plus, they weren’t providing a benefit for customers other than reduced cost.

“You can’t invest in and support 70 brands,” White says. “At 10, you can be very smart about supporting them and communicating them to the consumer. Most retailers just put their names on a product. A product isn’t a brand.”

With a CPG power team in place, the company has spent the past few years paring those 70 down to 10 — Basic Red, Safeway “S” Brand, O Organics, Eating Right, Primo Taglio, Priority Pet, Lucerne, Rancher’s Reserve, Safeway SELECT and Signature—and modeling those 10 in four tiers. (For the power brand hierarchy, check out “Branding business”, sidebar this page).  According to David Nelsen, vice president of manufacturing, the overhaul had nothing to do with SKU reduction.

“It’s about brand building and redefining both the packaging and the products to meet those expectations,” he says.

They first worked with some outside experts to create a traditional national brand image, and then started re-branding their existing lines while developing new ones for niche markets.

“We wanted to merge our products into the whole shopping experience,” Miller says. “We developed a well-positioned portfolio with meaningful roles for all of our brands, and made sure they supported our initiative to move forward to a more fresh and premium retail environment.”

A variety of cross-functional teams worked hand-in-hand to develop the portfolio: brand development, packaging, marketing, innovation, product development, insight teams, design teams and outside agencies were all intimately involved in the process. Just as a CPG company would, the consumer brands team conducted extensive qualitative and quantitative research, attended industry trade shows and monitored the competition, all to gain inspiration for future development.

Manufacturing plays an integral role in brand development, too.

“We’re involved in daily and weekly meetings,” says Nelsen. “Being integrated into the consumer brands group gives us a huge opportunity to understand and interface at the front end.”

For Safeway, developing new brands—and new packages—starts and ends with the consumer. The company has become an expert at customer buying habits and behaviors in the store and at home—an advantage that not only sets them apart from other retailers like Wal-Mart and Target, but also from many CPG companies.

 “We actually know what the behaviors are, and we look at what are the missing and unarticulated needs,” White says.

Because of the tiered brand positioning, Safeway now has brands to accommodate all purchasing behaviors. To avoid confusion at the shelf, each new product fits within the design architecture of one of the power brands.

“The logo, the architecture, need to remain consistent to maintain the essence of the brand,” Shields says. “You need to make sure that the category drivers are being addressed. It may be freshness in one, appetite appeal in another or just plain convenience. It’s a balancing act.”

CPG companies are known for constantly updating their packaging, according to director of package design David Kessler, but private-label companies are historically less likely to make a change. When he came to Safeway eight years ago, the company did a package redesign every year, but not on every brand, and some weren’t significant enough to be noticed by consumers, he says.

“In many cases it was cost-based, in other cases it was their own experience, or lack of experience,” he says. “The development of the consumer’s confidence in private-label programs has spurred the need to be competitive in every level.”

Safeway’s packaging department consists of 20 people, but all of the design work is done by outside firms. Safeway’s two primary design partners are San Francisco-based Phillipe Becker Design Inc., who was responsible for the O Organics line, and Anthem, a Schawk Strategic Design Co., who has worked extensively on many of the other power brands.

When developing a new brand design architecture, the team identifies the audience they’re trying to attract and the tier of the brand. They then study consumer habits at the shelf.

“Are they looking at a brand first? A category? A flavor? What order of things do they go through?” Kessler says. “We look at it from a hierarchy and communication standpoint. It’s integral to the way we’ve designed our packaging.” And they make sure to do this outside of the comforts of the office, paying close attention to how a product is stocked on the shelf.

According to Kessler, the design process timeline for a retailer can be a lot shorter than for a CPG company because they need to get products out on their shelves. The development of O Organics, for example, took just under a year. The impactful design and success of the products garnered extensive media coverage and $164 million in sales in its first year on the shelf.

“It’s a bright, simple execution. Because it was a new brand and organics were such a buzz, we wanted people to know instantly that it was organic,” Kessler says. At the same time, the team knew they didn’t want it to be a “farm” brand. “A lot of the organic brands give you the impression that it’s right out of the barn. We wanted to give it a much more contemporary, clean and healthy feeling, but also emphasize the source of the product,” he says.

The “O” communicates the brand across product categories, while the graphics communicate the individual product. The desired result is that many customers don’t even know the line is a private-label brand. Safeway is still looking to expand the O Organics line to 260 products by the end of 2007, and they’ve developed line extensions for O Organics for Baby and O Organics for Toddler. Because of the flexible architecture of the brand, the design team was able to use more youthful type and imagery for the extensions.

Safeway’s flexible design architecture allows the company to accommodate value-based and premium markets across all product categories with successful standalone brands, rather than national brand copies. An example of this is the design for Eating Right, Safeway’s newest brand (see “The right design for Eating Right” on p.48).

For now, the company uses stock containers from suppliers for its packaging production. Because Safeway is only distributing to 1,765 stores, spending money for molds on plastic and glass containers can be cost-prohibitive.

The company is looking into developing proprietary containers in the near future—as long as it provides a benefit, either aesthetic or functional, for the consumer.

“It’s difficult to add more cost for a package of an existing product without a noticeable benefit, because consumers don’t want to pay for a new package with the same product,” Shields says. “When you design a new package and product together that meets a consumer need, the whole concept can drive a premium price that can enable you to still hit your margin targets with a unique design.”

The industry push for sustainable practices is hard to miss, and something Safeway is well aware of. The company is just beginning to look into sustainable materials for its packaging—but they want to make sure the effects don’t overshadow the intent.

“If you concentrate on wanting to use glass, as opposed to plastic, you add more weight and therefore more fuel consumption,” Kessler says. “Also, we offer our product at a much different price. It’s not always apples to apples.”

While an in-depth sustainable materials platform may be a ways out, Safeway has been making great strides in reducing energy consumption and carbon dioxide emissions. This past May, the company received an Energy Efficiency award from Flex Your Power, California’s statewide energy efficiency campaign. The energy-saving initiatives also work well with a new store design. In the past few years, Safeway developed a “Lifestyle” store architecture to compliment its new design architecture. Floral, produce and foodservice areas were upgraded to reflect the sophistication and benefits of the brands. The redesigns also include energy-efficient reflective roofing technologies and fluorescent lighting.

“If you think about the people who buy organic and natural products, they’re historically shopping at specialty outlets,” White says. “Now they don’t need to make that extra shopping trip.”

More than 700 Safeway stores  have been converted to the new design, and the company plans to spend $1.7 billion in 2007 to open 25 new lifestyle stores and complete 275 more remodels.

With such an accessible retail environment, Safeway also is able to take risks most CPG companies can’t afford. The retailer can test products at its own stores (Safeway now owns and operates Vons, Dominick’s, Randalls, Tom Thumb, Genuardi’s, Pavilions and Carrs grocery stores), or even test market at only a handful of locations.

“There’s an entrepreneurial feel within this huge corporation, which is unique,” Shields says. “There’s a real tolerance for, ‘Let’s try something, let’s learn by doing.’”

Thanks to the retail environment, Safeway has the opportunity to learn quickly. Its approach to design is consumer driven, which speeds up the design process and expedites time-to-market.

And as many members of the Safeway team have said, 10 is not a magic number.

“It’s about really effectively running the portfolio and building these multi-category lifestyle brands,” White says. “We’ll be focused on the 10. If that leads us to 11, we’ll go from there.”

Megan Waitkoff is the Associate Editor of our sister publication, Food & Drug Packaging. Contact Megan at mwaitkoff@stagnito.com

Safeway consolidated more than 70 brands, and added a few new ones, to create 10 Power Brands mirrored off of Consumer Packaged Goods products. Here’s the brand breakdown:
Core Expertise: Safeway “S” Brand, Basic Red
Wellness: O Organics, Eating Right
Category Authority: Primo Taglio, Priority Pet, Lucerne
Central/Destination-Building: Rancher’s Reserve, Safeway SELECT, Signature

Creating a consumer packaged goods company inside a retailer structure is a groundbreaking concept—and one that requires certain expertise at the top. To execute the task, Safeway recruited some of the best talent in the CPG world:
James White, SVP of consumer brandsPreviously with Gillette, Nestlé, Ralston Purina, Coca-Cola

Matt Miller, VP of marketing/brand strategy and developmentWorked at Ralston Purina, then Nestlé

Susan Shields, GVP of innovationPrior experience at Quaker Oats, Del Monte

David Kessler, director of package designWorked at Ketchum Advertising and Broderbund Software

A reoccurring consumer need was the driver for Eating Right, Safeway’s newest brand. Marketed as a “Great tasting, better for you” brand, Eating Right was developed to provide consumers with a healthy option across multiple product categories, rather than just a few. The company wanted to simplify the shopper experience.

“The magic that we try to bring to the shelf is the knowledge of our shopper base,” White says.

The company already had a few frozen entrees operating under the name, but when they started looking into other healthy options that could fit under the same platform, they found an opportunity to extend the brand across categories.

“We wanted to go beyond fitness bars and nutrition shakes and provide a multi-category solution for our shoppers,” Shields says. The rebirth of the brand took roughly a year.

To communicate each product’s health benefits, the team developed icons for the packaging to make the dietary attributes in each product clear to the consumer (such as high in fiber or high in protein). The iconography provides a clear delivery of the brand’s position, distinguishing themselves against competing brands on the shelf. The overall design is clean; photography of ingredients is the main focal point, with some white and green color cues. The package communicates a lighter, healthier product.