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Part 2 of 2: Kroger and Loblaw Roll Out Retail-Ready Packaging for Store Brands

March 9, 2010

Exclusive to Store Brands Decisions

Editor's Note: This is the second part of a two-part report on retail-ready packaging for store brands. Part 1  last week discussed the roots of the emerging trend as well as manufacturer concerns about the resulting increase in product packaging costs. This part focuses on the retail benefits of retail-ready packaging, as well as Kroger’s and Loblaw’s five pillars of execution.

Kroger's acceptable RRP...

Kroger and Loblaw take the plunge with retail-ready packaging (RRP) to create more efficient retail models that better compete with warehouse clubs, discounters and limited assortment operators.

In separate presentations recently given to store brand suppliers –– copies of which were obtained by Store Brands Decision –– Kroger and Loblaw stated similar benefits and goals of their programs. The top five benefits of RRP, according to data presented by Phil Hayman, Loblaw’s senior director of supply chain, are labor efficiencies, better on-shelf availability, brand enhancement, increased sales and an easier shopping experience (see chart at right).

... and unacceptable RRP.

Kroger is the first mainline U.S. grocer to implement RRP for its store brands “and I give them credit for keeping a broad competitive scope,” an anonymous industry source told Store BrandsDecisions. "They probably see they are losing business to value retailers like Costco and Save-A-Lot. If they can take costs out and have better looking product presence on the shelf that may draw more consumers then it’s a win-win for them.”

Products best suited for RRP are jarred and plastic containers of less than 16-ounces and packaging that doesn’t stand up on its own on the shelf such as foil pouches or snack bags, or anything that is small and fragile, the industry source said. Products not suited for RRP, he added, are large and heavy bottom-shelf items and nearly all bulk items in the paper aisle.

Both companies base their programs on five core pillars –– easy to identify, easy to open, easy to stock/replenish, easy to shop, easy to dispose/recycle. Kroger’s presentation showed detailed graphics of acceptable and unacceptable packaging, and provided specific instructions on each program pillar:

• Easy to identify: Cases must be labeled clearly and concisely, and product and brand should be easy to see.
• Easy to open: Instructions should be clearly marked on the boxes and easy to understand.
• Easy to stock: All packaging and trays should be stable and strong to survive the supply chain, and easy for associates to place on the shelf. 
• Easy to shop: Customers should be able to remove the product from the [RRP] and return the product to the [RRP] with no difficulty; the customer should be able to easily identify brand and variety.Easy to dispose and recycle: Associates can easily collapse and stack [RRP} and tertiary carriers without difficulty; appropriate recycling logos must be easily identifiable.
•  Easy to dispose and recycle: Associates can easily collapse and stack [RRP} and tertiary carriers without difficulty; appropriate recycling logos must be easily identifiable.

Reduced labor and improved on-shelf availability are the top RRP benefits.

In Kroger’s program, plain brown boxes are unacceptable and “white corrugate is the minimum standard.” Trays should be flexible and able to be merchandised “by the short or the long side” of the RRP. Kroger said they also want to be able to use packaging for off-shelf display locations that can later be moved back to the shelf after the promotional cycle.

Ideally, Kroger executives said the RRP should “enhance and reinforce the product brand. Generic marketing messages are permitted on the lip, but short-term promotional messages or flags are not.

In his presentation, Hayman said RRP is “an industry initiative that is not going away” and that Loblaw and its suppliers must “work together to do it right the first time . . . and innovate to drive sales and brand recognition.”

Similar to Kroger, Loblaw has a RRP toolkit, and Hayman called on manufacturers to “learn from what is out there and works, identify cost-neutral solutions and consult with [Loblaw] before you make any changes.”