Safeway Makes Store Brands Available to Competitors

If a grocer’s store brand is doing well, why not farm it out to competitors? Everybody wins: the grocer, obviously, by expanding its market; and the competitors, which can fill in the cracks of its own private-label product lines, or introduce store brands if they don’t have them.

That’s what Safeway has in mind as it plans to roll out its O Organics and Eating Right products later this year to chains nationwide.

And what better time to do it than when demand for organics and “healthy” fare is being dampened somewhat by higher prices? Safeway’s lines are often priced considerably lower than similar products at, say, Whole Foods.

According to AdAge.com, which first reported Safeway’s plans this week, both lines have done well. O Organics racked up sales of $150 million in 2005, the brand’s first year. That was “well past the critical $100 million benchmark for new products,” AdAge reported. This year, O Organics is expected to generate more than $400 million in sales. Eating Right (”engineered to provide specific health benefits,” as AdAge puts it, though I surely don’t), should draw $200 million in sales.

Consumers are avoiding Whole Foods, where prices are too high even in good times. But they still want organic and “healthy” foods. Safeway, says Lynn Dornblaser of the market-research firm Mintel, is “very clever to do this” right now.