Target Takes Aim at a Boost from Food

For a long time, Target Corp.'s target has been just above Walmart.

The Minneapolis-based retailer has long honed an image for its stores as places that carry everything Walmart does, with quality a notch higher. It has bolstered this image with unique, strategic product lines, sometimes dubbed "cheap chic," like apparel and durable goods collections designed and/or endorsed by the likes of Michael Graves and Martha Stewart. Target becomes "Tar-jhay."

Archer Farms was Target's first store brand, established in 1995. Today it is as recognizable and sought after as many national brands.

Target is trying to carry this strategy into grocery. It started offering food in 1995, the year it opened its first Super Target store. Originally, food was sold simply as a way to get shoppers into the stores and expose them to more profitable durable goods. Now Target is the nation's fourth-ranking grocer by dollar volume. Food, at 20 percent of sales, is its second biggest segment (behind "household essentials") and its fastest-growing one.

Target plans to evolve its grocery both outward and upward. An initiative to expand its food offerings, especially in perishables, was rolled out in 2009. This initiative, called PFresh (for "prototype"), is basically a remodeling program that shifts about 10,000 square feet of a store's space to food. This allows it to carry 90 percent of the food categories, and 60 percent of the overall SKUs, of a Super Target, and makes the offerings more visible and attractive.

The 2009 PFresh rollout comprised 108 stores and was an immediate success. By the beginning of this year, about 1,100 Target stores had PFresh food sections. The initiative contributed to a 2.7 percent increase in comparable-store sales in 2012 over 2011; some analysts estimate that PFresh stores saw an average sales gain of 6 percent.

TIERED APPROACH

Target's grocery offerings are increasing in sophistication as well as size. Like most major grocers, the company realizes that not only is private label vital to success, but a varied and tiered approach is best.

The first Target private label brand was Archer Farms, an upscale brand introduced in 1995, when Target was first getting into grocery. On the economy end of the scale, Target offers Market Pantry, a line of more than 1,900 items priced at up to 30 percent less than national brands. Other Target store brands include Sutton & Dodge USDA Choice Angus beef; Wine Cube boxed wine in popular varieties like Merlot and Cabernet Sauvignon; and up & up, a non-food line that includes household cleaners and personal care items.

Target's niche has long been as a slightly upscale mass-market big-box retailer.

Now Target is adding to its private label lineup with Simply Balanced, a new line of organic and natural products. Simply Balanced is, in a way, a spinoff of Archer Farms. The line debuted this summer with beverages and snacks like corn chips.

The Simply Balanced line is key to an overall expansion of Target's natural/organic food offerings. The company has vowed to eliminate all GM foods from its stock by the end of next year, and plans to increase its organic offerings by 25 percent by 2017.

As Target has improved its grocery layout and inventory, it has, for the first time, sought to put food up front in its marketing. For most of its history, Target's advertising has centered on apparel and special offerings . An ad campaign that started at the beginning of this year seeks to marry the worlds of fashion and food by poking fun at the former: A fashion model struts by exploding boxes of baking mixes resting on pillars, then crushes an egg in her hand, while a voiceover whispers, "Dominate that PTA bake sale. The everyday collection, by Target."