We recognize we have to change the in-store experience
Target to double Made to Matter natural & organic collection as part of food 'reinvention' plan
Speaking to analysts on the firm’s Q4 earnings call last week, Cornell said: “This year’s collection will double in size compared to last year, delivering more than 200 new and exclusive products from 31 leading and upcoming brands.
“The Made to Matter collection remains one of the most prominent and active examples of Target’s focus on wellness, offering guests a selection of natural, organic, and sustainable products across multiple categories.
"In 2014, sales of the brands featured in our Made to Matter collection [which includes brand such as Plum Organics, Annie's, KIND, Cascadian Farm, Justin's and its own private label Simply Balanced range] grew twice as fast at Target than they did elsewhere in the market.
“While overall sales in the natural and organic industry are growing rapidly, sales of these categories at Target are growing even faster, outpacing the industry by 50% in 2014.”
Almost every household that shops at Target buys natural and organic products, and more than half of them indicate that they’d prefer to purchase natural and organic products when available, and consumers want "unique and differentiated products", he added. “These guest insights are reinforced by their behavior in our stores.”
We have to change the in-store experience and make sure our food merchandising complements the great experience we create at Target
Asked where food fitted into Target’s overall portfolio and strategy, he said: “Food is very important to our guests. And they’ve confirmed that with us as we’ve gone back and researched the food category through the eyes of the guest recently. We all know food trips drive traffic. And we want to make sure we complement our signature categories with guests that are coming to us for the great food products we can curate."
But he added: “We recognize we have a lot of work to do in food. Kathee [chief merchandising and supply chain officer Kathee Tesija] and I were recently out in the market together. We spent several days visiting our stores, looking at competitive food retailers as we begin to build our reinvention plans for food.
"We recognize we need to make changes to our assortment, Made to Matter.... to deliver more organic, natural, gluten-free items...
“We also recognize we have to change the in-store experience and really make sure our food and grocery merchandising compliments the great experience we create at Target. So it's a critically important area of opportunity. We won’t get there overnight. It will be a multi-year transition. But food is going to play a very important role in complementing our other signature categories and making sure we drive traffic to our stores, in to our site.”
Fresh food drives traffic
He added: “Fresh is a very important part of food, not only traffic and number of trips for our guests, but just in terms of what’s important to them, in terms of wellness. Fresh food plays a very important part.
“Both in Super Target as well as in P Fresh format, it centers around our assortment, how fresh the product is, and ways that we can improve upon that, the presentation showing abundance in that great product."
In the fourth quarter, Minneapolis-based Target, which operates 1,790 stores, posted a 13.4% rise in earnings before interest expense and income taxes (EBIT) on a 4.1% rise in sales to $21.8bn. Food accounts for more than 20% of sales.
However, pre-tax losses topped $5.1bn owing to the costs of exiting Canada, a market in which Cornell recently concluded that Target had little chance of operating profitably “at least until 2021”.
Target will provide more information about its food strategy on Tuesday March 3 (CLICK HERE for details).