What’s Albertsons Up To?

There is a fine line between wine brands. One is successful, another is not, and occasionally (often?) the quality of the wine is not the key issue.

Besides the obvious ones such as package design, the efforts of a wholesaler to represent the brand, and high ratings, one of the elements that is hard to calculate is the effort put forth at the retail level. Do retailers get behind the product with regard to point-of-sale material? Do they emphasize the brand in their advertising and consumer-direct marketing? How much in-store support is there?

All that is a minor consideration when the retailer owns the brand. It’s a given.

Mitch Oddo, vice president, liquor merchandising/procurement, is heading up the latest wine initiatives recently launched at the Albertsons chain nationwide (including drug store divisions Sav-On, Osco and Jewel-Osco).

That, in a nutshell, is one of the key strategies behind the supermarket chain Albertsons developing a series of wine brands that will be exclusively sold at retail at its own stores. And the reason, besides profit potential, is the ability of the chain to get to know the product better and thus get to know the consumer better.

The concept started with imports, and now includes domestic lines as well.

“What we’ve determined is that the import wine category tends to be very confusing to the average consumer,” said Mitch Oddo, vice president, liquor merchandising/procurement, who is heading up the project for Boise, ID-based Albertsons.

“Imported wine is a hard category to shop for, other than the big brand names, like Rosemount, Lindemans and Bella Sera. Quite frankly, there are too many labels out there. Our goal was to expand. But at the same time, we wanted to make life easier for our customers in the import sector.”

One of the big keys here is that Albertsons, a 2,300-store chain, also will be able to market the wines not only at Albertsons, but also at its three drug divisions, Sav-on, Osco and Jewel-Osco. In all, the chain has 1,245 alcoholic beverage licenses, Oddo said.

Albertsons is not particularly wine industry savvy, Oddo indicated. It is not involved in the wine business. So in developing this strategy it contracted with Winery Exchange Inc., a corporate brands and private label development company that is based in Novato, CA, in northern Marin County.

Fast-growing Winery Exchange, founded in 1999 by wine professionals Peter Byck, Phil Hurst, and John Crean, has offices in Sydney, Australia; Auckland, New Zealand; Santiago, Chile; and Mendoza, Argentina as well as in five U.S. states. It develops brands that it controls with excellent wine making.

Technically, the brands that Albertsons has developed are owned by Winery Exchange, but they are exclusive to the chain. That includes distinctive label designs that include a style guide on the back label.

Albertsons has contracted for three separate brands, said Oddo.

* Origin. This is a line of imports from various countries, a German Riesling, a Shiraz from Australia, a Pinot Grigio from Delle Venezie, an Argentinian Malbec, an Australian Chardonnay, and a Sauvignon Blanc from Marlborough, New Zealand. All but the New Zealand wine ($13) are in the $9 range. Oddo added that the company will bring in Reserve wines from Australia and perhaps Chianti in the future.

* Jenica Peak. This is a domestic line of wines mid-priced at $10 or less. The line focuses on the primary “popular” varietals of Merlot, Cabernet Sauvignon and Chardonnay, many with a coastal influence.

* Q. This line is almost entirely from Sonoma County for now, though plans include having a Napa Cabernet Sauvignon. Wines will be priced individually. “We went through various names and concepts, labels and names, and Q was one of the names our group came up with,” he said. “It was unique.” The line will contain a Merlot, a Chardonnay and a Cabernet. Like Gallo of Sonoma, Winery Exchange focused on Sonoma County’s Dry Creek Valley in developing the brand.

Oddo admitted that with more than 1,000 outlets for this program, filling the pipeline with sufficient amounts of wines that are uniform from market to market poses a challenge for Winery Exchange.

“It’s always a challenge to acquire the amount of wine we need for each program,” he said. “The key aspect here is uniformity. When you’re in California, the wine has to taste the same as the wine you tasted in Florida.”

I asked Oddo if he expected any bleed-off of sales from other wine products the chain now carries.

“The only cannibalization we will have long term is through natural attrition. A lot of retailers are over-SKU’d, and many of them are going to continue to support the national leaders, like Yellowtail. But this allows us to do an itemization analysis and get a better return on investment.

“The idea is to eliminate those SKU’s that don’t carry their own weight.”

He said it’s not just in wine that Albertsons is doing this. It has developed an upscale food brand called Essensia, a line of foods in which, he said, quality is outstanding and price is fair.

To promote the wine program with regular Albertsons’ customers, the company is in the midst of using its vast “club” list to distribute 500,000 mailers, directed at “our top wine consumers,” announcing these wines. There are three distinct mailers, one for each brand.

“The goal is not only to make money, but to focus on the fact that they are exclusive to Albertsons.”

He noted that in each of the three programs, some of the wines will be in limited supply, and he hoped to get the message to consumers that if they find a wine they particularly like, that they should return to the store where they bought it and pick up more because in some cases availability on some items will be limited.

View of the wine department at an Albertsons in Boise, ID, where the chain’s headquarters is located.

“We will buy very limited short-lot varietals,” he said. “We want our consumers to view this as an opportunity. We want to find something new and unique. It might be there today, and might not be there tomorrow.”

He said the chain will employ various marketing strategies to implement the full program for all three new lines in the spring of 2004, and by fall, “every time we come out with new items, we will announce them to the trade and to our consumers.”

In some cases, he said, a limited-availability wine might be from a famous-name winery, which will not be identified. But some savvy consumers might be able to guess who made the wine.

“Advertising will help us get the word out, and of course there will be substantial POS/signage.”

Further promotion entails entering the wines in major U.S. wine competitions. “Gold medals really help get the word out about the quality of these wines,” he said. “That will be a major part of the programs.

One key aspect of in-store sales is that consumers receive a 10% discount on six bottles or more; the program includes a new six-bottle carrier, a sort of wine suitcase.

Each year, the mix of wines on a store-by-store basis will be determined by a computer analysis of sales patterns for that store and demographic region. As such, Albertsons will be developing a track-record analysis that will produce “internal data of what we sell in each market, in each store. We are very sophisticated in that regard, and that will tell us, ‘Where is the business going to be in the future?'”

Albertsons also is working on expanding the concept with a line of French wines. One such item on the horizon is a private-label Champagne that will be great value to the consumer, priced about $20 per bottle.

Moreover, the chain is looking at a parallel high-end spirits segment. The company already has Six, a vodka positioned against Absolut, and two high-end tequilas and a flavored rum.

Oddo said the company would not reveal volumes bought or sold.

He emphasized that the company will seriously consider small lots of high-caliber wines for the lines. “We cluster the stores by the demographics, so for example in Scottsdale, AZ, there may well be higher-priced products and a wider selection than we would offer in downtown Phoenix.”

And for the capper, Oddo said, even as early as this program is, Albertsons.


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