Sunripe Marketplace: A Private Label Strategy

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Information about Sunripe Marketplace: A Private Label Strategy
Business & Mgmt

Published on February 20, 2014

Author: karanjaidkakj

Source: slideshare.net

Sunripe Marketplace: A Private Label Strategy Karan Jaidka (12P141) Mayur Kumar (12P216) Nikhil Lilani (12P218) Suraj Khanna (12P235) Retailing and Franchising (R&F) – Section B – Group 11 PGPM 2012-14, Management Development Institute (MDI), Gurgaon

Introduction to Sunrise Marketplace       Founded by Will Willemsen in 1982 Present in 2 locations in Canada: London, Ontario and Sarnia The first few years were challenging as Willemsen was in charge of sourcing as well as managing the store It had two fresh food oriented shops and a unique set of distribution and storage system level that distinguished Sunripe from other supermarkets Willemsen tried to ensure that only the best and freshest products were available at his stores Its stores had several private brands that customers loved

How was Sourcing done? The Ontario Food Terminal (OFT)    Produce from over 11 countries was present under one roof More than 835,000 tonnes of food was sold annually to independent wholesalers, distributors, etc. Willemsen made a onestop sourcing trip to the OFT, about twice a week Advantages of this method      Willemsen personally hand-picked and chose the produce he needed, searching tirelessly for the best of every item on his shopping list He was able to develop good relations with a number of wholesale buyers, who set aside top-quality produce to sell (at a small premium) to Willemsen He could purchase all his produce from a single location Willemsen’s customers could get produce up to a week fresher, as compared to any supermarket Willemsen was able to earn a decent margin in this way

Customer Profile of Shoppers at Sunripe Frequency of visit: Once or twice a week Profile: Involved in the community, focussed on environmental and social issues Reasons for shopping at Sunripe: For its highquality fresh produce Demographics: Aged 35+ and earning above average incomes Customers of Sunripe What they were looking for: A satisfying shopping experience, wellmerchandized and decorated stores, informed employees

Product Portfolio at Sunripe (1 of 2) Fruits and Vegetables Meats Similar to supermarkets Purchased from the OFT Apples, oranges, pears, lettuce, broccoli and tomatoes Cheese and Deli meats Purchased from the OFT Beef, chicken, pork, frozen seafood Bakery Products Shipped in daily from Sunripe’s Sarnia store National dairy brands Kept in stock to save customers trips to supermarkets Neilsen and Danone Private Label Products Branded items included Charcoal Beef (fresh beef), Cacklebury Max (fresh chicken) and Brick Bread Sunripe branded items included ready-to-eat salads, juices, roasted chicken

Product Portfolio at Sunripe (2 of 2) Portfolio of Sunripe’s Private Label Products Private Label Brand Product Annual Sales (USD) Gross Margin (%) Fresh Chicken 400,000 40% Charcoal Beef Fresh Beef 320,000 30% Pink Lady Pork Fresh Pork 240,000 40% WWF Breads Bread 160,000 35% Beaver Tails Marinated Chicken 48,000 50% Value-added Salads Salads 48,000 65% Value-added Juices Juices 160,000 60% Dips, Jams, Cookies 224,000 40% 1,600,000 41% Cacklebury Max Sunripe Branded Others TOTAL

Why did Sunripe’s private label strategy work out well? Specific Products    Charcoal Beef: Sunripe was the only retailer in that trade area to prepare beef in the traditional way (natural aging, corn-fed). Charcoal Beef outsold packaged beef by a 2:1 margin Cacklebury Max Chicken: Prepared in the traditional way (grain-fed and air-chilled), it did not shrink in weight while being cooked. Parity pricing was followed Brick Bread: Prepared as a handmade, heavy, dense, ovenbaked with a soft crust. Midrange price followed Success Formula       Products were prepared in the traditional way, the way customers liked it These methods of production were not followed by general supermarkets The private label products were priced similarly to other high-end supermarkets Processes were in place to ensure that the products were always fresh, without any blemishes The display was appealing, to avoid rummaging by customers Sunripe’s spoilage rate (0.5%) was well below the industry average (810%)

Outcomes of the Private Label Strategy        A competitive advantage was created for Sunripe Customer loyalty was being built steadily It allowed Sunripe to build a brand for itself (e.g.: people demanded Charcoal Beef by name) The products gave customers enough reasons to drive past supermarkets and come to Sunripe’s stores for private labels which were available at Sunripe only Sunripe adopted a parity-pricing system and hence, did not play on price. It focussed more on quality, value addition and freshness, things which mattered more to its target customers The entire category generated 5-10% higher average gross margins than other brands Costs were under Sunripe’s control itself as it sourced and manufactured its own private label products

What were Sunripe’s competitors doing? Loblaw's  Two distinct private label umbrella brands were sold:  At higher-end stores: President’s Choice Brand was predominant, which was packaged in premium quality wrappers, positioned as premium private labels of high quality at prices similar to national brands At economical No-Frills stores: President’s Choice products were mixed with discount-priced No Name brand of private label products Great Atlantic & Pacific Company (A&P)   Private label products were positioned as lowcost alternatives to national brands Umbrella brands included Master Choice (higher level products) and Equality (lower priced products)

Decision Dilemma The Current Scenario Willemsen believed that having distinctly branded private label items (distinct from the Sunripe brand) allowed each product to develop its own brand image and recall However, Sunripe’s competitors focussed on a single umbrella brand for their private labels Customer Response to the Current Strategy  Sunripe’s customers, being drawn to the store by the fresh produce, were satisfied with the quality, taste and price of the products  A significant number of customers purchased private label products at Sunripe  The Sunripe brand was well-known to its loyal customers and was already being used on some items like jams Alternative available Leverage the Sunripe brand with extensions into additional private label and value-added products (single umbrella brand)

The Way Forward  Continue with the existing strategy of carrying both distinctly branded private label products and value-added products (Sunripe umbrella)   Juices and salads are not frequently purchased staple items, as compared to the private label meats and bread being offered   Though Sunripe branded products have better margins, the private label brands have much higher annual sales There is very clear demand and customer satisfaction for the existing private label brands, hence, replacing them with Sunripe-branded equivalent products is undesirable However, Sunripe-branded products have a promising future, hence, based on customer profile and suggestions, new items can be introduced such as exotic fresh foods, gourmet items, etc.   Possible risks: A single unsatisfactory product can ruin the entire brand image of Sunripe, so adequate care must be taken to prevent this   Sunripe can leverage upon its well developed and trusted store brand of considerable repute Introduction of too many new brands under the Sunripe umbrella should be disallowed to avoid confusion and brand dilution The same rigourous focus on quality and freshness should be continued and the parity-pricing should be maintained. A premium can be charged on products which provide a distinct competitive advantage to Sunripe

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