An even better choice?

A bad economy didn’t deter Loblaws’ luxury grocery gamble. Bacon marmalade, anyone?

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(Illustration: Gluekit)

The butter-poached British Columbia prawns sit elegantly atop an argan-scented mushroom ravioli, nestled with an Ontario artichoke puree and bacon marmalade, topped with a toasted almond oil emulsion. Crafted by a renowned chef for an invite-only dinner, to describe how delicious this dish is would require words equal to Neruda on love or Kingsley Amis on a stiff drink. It’s an exotic collection of flavours that achieve a down-to-earth heavenly end. It’s like someone hired a masseuse for each individual taste bud. And it’s President’s Choice. Wait…what?

This is a stark departure from how most of us try a new supermarket product, wandering over to the lady in the hairnet and latex gloves to taste whatever’s in her plug-in skillet before we shuffle off to the milk aisle. Loblaws gathered a smattering of fooderati at the Neubacher Shor Contemporary Gallery in Toronto last month to officially launch its new “affordable luxury” line of President’s Choice products. Dubbed “black label” for its distinct package design (although those words won’t appear on the labels, thanks to a Johnnie Walker copyright) the new look items will range in price from $1.99 to $21.99. Landing in 140 stores this October, it includes more than 200 products ranging from an eight-year old cheddar and gingerspiced chocolate sauce to bacon marmalade. But even the stylish launch party can’t erase the memory of certain economic realities.

The Canadian grocery market is highly competitive, and with consumers evermore conscious of every dollar spent, Loblaws, Sobey’s, Walmart and more are continuously battling to lower prices to keep warm bodies in the store. In his second-quarter earnings call in July, in which the company’s food sales were flat, Loblaws executive chairman Galen Weston said, “Unpredictable and competitively intense market conditions continue to put retail sales at risk.”

According to the Nielsen Co., the house food brands created for retailers such as PC, Sobey’s Our Compliments or Walmart’s Great Value, also known as private labels, are an $11.4-billion annual market in Canada. It’s into this fray that Loblaws last year decided to develop and launch its own line of fine foods to win over consumers who might buy the bulk of their groceries at Loblaws then head off to a gourmet food store for a handful of indulgences. The idea is to make Loblaws a one-stop shop for food snobs, where they can pick up both toothpaste and truffle oil. But in this era of austerity, where private-label goods are considered a bang-for-your-buck value proposition, and where cheaper increasingly means better, can the mighty President’s Choice get people to pay for luxury? Will bacon marmalade be Loblaws’ next Decadent cookie, or is this gourmet gambit too risky a bet?

Inside, the gallery has been transformed into a high-class dinner party. Guests like Dragons’ Den star Arlene Dickinson and Sen. Pamela Wallin mingle around the eight set tables and back into the open kitchen. There, celebrated Toronto chefs like Marc Thuet, Bertrand Alépée and Anthony Walsh alternate between feverish prep work and idle chatter with curious passersby ahead of the impending four-course meal. Artisanal pastry chefs Bobbette & Belle (Allyson Meredith and Sarah Bell) also sit, cheerfully fielding questions while hand-painting edible plates made of sugar on which their dark Venezuelan chocolate cake with hazelnut mousse, cherry shiraz compote and roasted hazelnut ice cream will be served.

The chefs were invited to Loblaws headquarters to browse the new line and select items to be incorporated into tonight’s meal. Alépée, a generously bearded Paris-born talent known for his work at the late Toronto bistro Amuse-Bouche and now freelancing as the Tempered Chef, says it was tough to make a decision because of all the options. “It’s always nice to eat a refined product, and I just think it’s great that this kind of thing will be more accessible,” he says, taking a break from preparing the B.C. prawn dish.

While a first in Canada, the idea of a major grocery chain getting into classy cheese and exotic oils is not a new one. In the U.K. and Europe, no strangers to recent financial hardships, supermarket heavyweights like Tesco and Carrefour successfully offered high-quality foods (known as “super-premium”) at the lower prices associated with private-label brands. It boils down to applying the proven private-label model—develop products and establish relationships with suppliers to cut out the cost of middleman brands and take a bigger cut of the profit margins—to increasingly high-end products.

Ian Gordon, vice-president of Loblaw Brands, says the new black-label line aims to fill a gap in the Loblaws offerings, adding the third tier to what many private-label producers refer to as a “good, better, best” portfolio of goods. There’s No Name, President’s Choice, of which Blue Menu is the healthier option, and now black label. “There is a 15% to 20% range at the top in the fine-foods area that we do not have an offering in for the consumer,” says Gordon. “It’s a niche we haven’t tried to talk to before now.”

Back at the dinner party, Loblaws product developer Jackie Hougham gazes down at her plate of cherry-laquered squab, with tatin of sunchoke, hickory foie gras and wilted umami greens—all featuring no less than six black-label products—clasps her hands together and let’s out a deep sigh of pride and relief. “These are my babies.”

In a typical year, a Loblaws product developer might work on up to 50 new items. Hougham is largely credited, along with vice president of product development Maria Charvat, with getting all 213 new black-label products to market in about nine months. It helped that the bulk of the new line are single-ingredient foods like olive oils, chocolates, cheese and pastas, as opposed to something like lasagna, but unearthing tasty products and reliable suppliers that fit the company’s vision on such a tight timeline is still a Herculean task.

Hougham’s bright blue eyes light up at the mention of any black-label offering in the same way others might when asked about a new puppy. One of black label’s key selling points is the story behind each product, where it’s from, who produces it and why it was chosen. Hougham enthusiastically recounts how the stuffed pasta comes from the oldest manufacturer of stuffed pasta in Italy, or enthuses about the small Israeli winery that supplies the cherry shiraz wine jelly. “Each product has a story to tell,” she says. For the fiorelli pasta, for example, Hougham wanted to find the best dry pasta available. This obviously led her to Italy. Most major manufacturers produce steel or plastic cut pasta, but for the black-label fiorelli Hougham wanted the much more highly regarded bronze die-cut, which leaves small abrasions on the pasta surface, creating a more complex texture that holds sauce more effectively. Mass producers also often use cheaper imported wheat. “It’s exciting for us to say that the wheat is from Italy, a single variety of semolina, and the water used in production is from the Italian Alps,” she says.

Charvat, Obi Wan- Kenobi to Hougham’s Skywalker, has been developing products at Loblaws for 23 years, after being recruited by former president Dave Nichol from South Africa, where she worked for the supermarket chain Woolworths (no relation to the American company), renowned for its private-label goods. Charvat and Hougham scoured the globe for new ideas, during their usual trips to fancy food trade shows in San Francisco, New York, Paris and Italy, as well as cruising markets and specialty shops across Canada. In many cases, they had specific types of product in mind—their radars were set for anything with trendy items like ginger or bacon in it—but other products just struck their fancy, like the cherry shiraz wine jelly. The search also included staking out gourmet shops like Toronto’s Pusateri’s to see first-hand what was selling and what was sitting. A further challenge was finding suppliers who could meet both Loblaws’ supply demands and quality control. “We wanted to find unique artisanal items, but more often than not it’s those items that have extremely short shelf life and made in such small quantities that it wouldn’t be feasible to have them producing products for 140 stores,” says Hougham. “It’s also about consistency. We need consumers to know that the box of crackers they buy today will taste the same as the box they buy six months from now.”

Product development at Loblaws headquarters in Brampton, Ont., includes a daily two-hour meeting called Group, presided over by Charvat, where developers from various branches and areas of the business bring ideas to the table for tasting and evaluations. To benchmark each black-label candidate, similar products are brought in. “We seldom looked at just one product on the table,” says Charvat. “One could be from Whole Foods, the other from Pusateri’s, the other from the fancy food show, another example from the U.K., another from Italy. There was always a comparison.”

Less common items like the hickory-smoked olive oil were judged by getting company chefs to cook with it, such as in grilled potatoes. “That was like, Wow!” laughs Charvat. “We also made a variety of salads with it, and I must say, the guys in the group went nuts for it. They just loved it.”

That’s exactly the reaction the company is hoping to get from consumers. And just as the idea of high-end private-label products is nothing new, neither is Loblaws’ nose for a successful formula. The global supermarket industry is worth billions upon billions, but it’s still a small world. Ideas are constantly being traded and tested across international borders. Before launching President’s Choice in 1984, then-president Nichol took inspiration from all around the world, including a plucky upstart in the American West called Trader Joe’s. As Nichol told Businessweek in 1995, “I stole the name and concept of Trader Joe’s Insider’s Report for President’s Choice. (Loblaws ended up buying the name from Trader Joe’s two years later.) It is safe to say that President’s Choice owes the majority of its success to Trader Joe’s.”

Similarly, the new black-label products’ distinct package design takes obvious cues (same colour-coded font on black background) from a 2003 private-label design for fellow Weston-owned supermarket holding, Britain’s upscale Selfridges.

Retail expert Ed Strapagiel, executive vice president at consultant group Kubas Primedia, says Loblaws’ established track record of private-label success as well as President’s Choice’s high brand awareness among consumers puts it in an enviable position to launch a new line. “If you’re Loblaws or any supermarket right now, there is big pressure on value, private labels and couponing, but it’s a very crowded marketplace,” says Strapagiel. “There is room for better-quality private-label goods, particularly when you look around and all your competitors are rushing the other way.”

There are even those who say that the recession has actually helped the luxury food market. Consumer studies in the U.K. have revealed frugality being more widely embraced with shoppers making savvier decisions, such as buying the low-cost value canned tomatoes and trading up to a super-premium olive oil. “They’re being very careful of spending habits, but they’re still looking to treat themselves on small luxuries,” says Natalie Berg, global research director for Planet Retail, a U.K.-based research and consultancy firm.

Because the new products will only be available in 140 stores initially, don’t expect to see Galen Weston Jr. on TV shilling for PC black-label mulling spice anytime soon. There are no plans for a national marketing campaign. Instead, a more targeted digital effort aims to tell the story behind the products and serve up ideas on how to use them. What would you put umami paste in? Exactly. A recipe app for smartphones and the iPad and BlackBerry PlayBook tablets will help answer the question.

While it is a limited rollout, the company is banking on the black-label line’s potential. Company officials are certainly confident enough that plans for a Phase II of black label are already in motion. Seeing as Tesco is raking in sales with its upscale Finest line in the U.K., particularly in ready-made meals, and France’s Carrefour Group has opened an entire gourmet store in Belgium specializing in meals, perhaps it’s no big secret what Canadians can expect next.

There’s obviously no guarantee this experiment won’t end up a Memories of Market Miscalculations. But if international trends are anything to go by, and in the private-label game they typically are, Loblaws’ foray into the finer things bodes well for the PC brand in differentiating from Walmart and other race-to-the-bargain-basement competitors while drawing back those consumers whose wallets have wandered higher up the food chain.

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