Warehouse clubs: New-product hotspots
Progressive Grocer

JULY 01, 2002 Sometimes, the best way to get shelf space in a supermarket is to join a club—a warehouse club. An increasing number of CPG companies, especially small and mid-sized manufacturers, find introducing new products through warehouse clubs is the best way to get them into consumers' hands and quickly build brand recognition.

Membership clubs don't charge slotting fees, and they're often willing to try a new product in select locations to see how it is received before rolling it out chain-wide. "Unlike supermarkets, success in the clubs is not about paying to play, but about having the operational and marketing capabilities to apply to the club member, who is a combination of consumers, business, and foodservice," says Glenn Llopis, president of Power Insights Consulting in Brea, Calif. As a result, manufacturers strive to come out with products that are conducive to club members' needs. "Manufacturers really get rewarded for being a low-cost producer of high-quality goods at competitive prices," Llopis says.

"Quite a few brands have become household words and leveraged their success into traditional channels because of clubs," says Llopis. Among them are Coyote Grill frozen appetizers, Laguna Cookie Company, Glacier Mountain Creamery ice cream, Luna Rossa gourmet vegetables in glass jars, and Paisley Farms 4-bean salad.

Apple & Eve is another company that has had success with the clubs, but the channel is not without its challenges. "While clubs do not charge for slotting, when you look at their dynamics, it is still a tough environment," says Brad Angevine, marketing v.p. at the Port Washington, N.Y.-based juice company. "They might have up to 50 SKUs of beverages, while a supermarket will have upwards of 800. They might have one cranberry juice and one orange, so you have to prove your items are going to succeed."

"And clubs have a very, very, very short tolerance," adds Jeff Damiano, director of marketing. "If you're lucky it's a three-month window, and sometimes only a few weeks. They evaluate you very quickly."

Still Apple & Eve has done very well in the clubs. "We work real hard at it. They respect companies that are willing to be innovative, take risks, and do things quickly," says Angevine.

—R.T.

Glenn Llopis is president and CEO of Power Insights Consulting (www.powerinsights.com), a Brea, Calif.-based consulting firm that specializes in creating "value-based" brand platforms from traditional "commodity-based" product categories.