Target, long the “cheap chic” destination for clothing and home furnishings, is trying to spruce up its grocery business at the expense of some of its big processed food suppliers by capitalizing on consumers’ growing preference for organic and natural foods over packaged foods.
“Natural and organics has been growing mid-teens now for eight to 10 years,” says Brian Yarbrough, an analyst with Edward Jones. “And the center of the aisle, the cereal, the chips, the cookies, the crackers, the soups of the world — they’re barely seeing volume growth at all.”
A Wall Street Journal report says Target will do less to promote packaged foods suppliers such as General Mills and Campbell Soup Company. That may mean less space on shelves and in circular ads.
Target spokeswoman Molly Snyder would only confirm the accuracy of quotes from CEO Brian Cornell. He told the Journal that mac and cheese isn’t getting eliminated altogether, “but clearly assortment is being shaped around what consumers are looking for.”
Sean Naughton, an analyst with Piper Jaffray, suspects Target shoppers might see more items like craft beers or specialty organic foods.
“I think they would like to create a little more uniqueness inside the store,” Naughton says.
Doug Waxson of St. Paul, Minnesota, already sees more appealing products at his local Target.
“My wife’s noticed they’re starting to carry some things she ordinarily gets at Whole Foods or a co-op, like some higher-quality lunch items and frozen items,” he said. “It seems like something that they’ve started to get better at recently.”
Analysts caution that Target won’t be dumping packaged foods altogether. But they say it probably will nudge out some of the big food companies’ products in favor of its own private label brands.
Yarbrough says the situation will make things harder on big food companies, whose sales are already suffering.
“Once they shrink the shelf space,” he said, “it’s going to pressure sales for the next year.”
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