Target to replace Archer Farms, Simply Balanced with new flagship food brand

For years, analysts have been waiting for Target to make a bigger statement in food to help differentiate it from others in the highly competitive grocery market.

On Monday, the Minneapolis retailer finally revealed one of its cards: a new flagship private-label food brand called Good & Gather that will replace its longtime store brands Archer Farms and Simply Balanced. The more value-focused Market Pantry line will be reduced as well.

The new line will be Target's largest in-house brand across its store with more than 2,000 products to be rolled out over the next 18 months. It is expected to become a multibillion-dollar line and is the latest example of the Minneapolis retailer's strategy to develop and refresh its brand portfolio to offer more items consumers can't find anywhere else.

With Good & Gather, Target expects to increase its overall penetration of private-label sales in grocery, signaling that some national brands might get less shelf space in the process.

"We did a ton of guest research" in developing Good & Gather, said Stephanie Lundquist, who stepped into a newly created role of president of food and beverage at Target in January. "One of the things we heard is that they're time-starved, so they want ease and convenience. They don't want to have to worry if there are ingredients or additives they don't want. But above all else, they want great taste at an affordable price."

With those guiding principles in mind, Target stepped up the rigor of its taste-testing and hired more food experts and scientists to help develop the products. Those employees worked out of a new test kitchen at the company's Nicollet Mall headquarters.

The new line, which has been in the works for a couple of years, will be free of artificial flavors and sweeteners, synthetic colors and high-fructose corn syrup. Some of the products will be similar to their Archer Farms and Simply Balanced counterparts, with some upgrades. For example, the lime flavor in the Simply Balanced sparkling water was reformulated to taste better in the Good & Gather version.

Other products are completely new and are aimed at better addressing the changing tastes of today's consumers, such as avocado toast salad kits (with the mini-toasts serving as croutons) and beet hummus.

"We have some tried-and-true products within our owned brand portfolio that our guests absolutely love," said Lundquist. "But we also saw an opportunity to make it a lot easier for them to shop our food and beverage area by having a flagship brand, and that makes it a lot simpler to know what they're getting."

Private-label brands, which tend to be cheaper, have been growing in popularity in recent years, particularly as their stigma has faded, especially among younger shoppers, and as retailers have improved their quality. Sales of private-label foods have risen 11% since 2015, compared with 4% for national brands, according to the market research firm Nielsen.

Store brands also are more profitable for retailers than selling national brands.

In the past few years, Target has launched more than two dozen new private-label brands across apparel, home decor, electronics and cleaning supplies as part of a multipronged strategy to reinvigorate its business. In some cases, the new brands have supplanted old ones, as was the case with A New Day and Wild Fable replacing Mossimo and Merona in women's clothing. Others have covered new ground for Target, such as Heyday, a line of tech accessories aimed at Generation Z shoppers.

"This is another step in the right direction," Scott Mushkin, an analyst with Wolfe Research, said of Good & Gather. "One private-label brand is not going to make a grocery business … but the general idea is a very good one."

Of course, it will depend on the quality and execution, he said, adding that Target continues to struggle with keeping items in stock.

Moody's analyst Charlie O'Shea said the new brand should drive more traffic to stores and produce higher margins.

But supermarket analyst David Livingston was not as impressed, noting that Target has a small single-digit market share in groceries outside of Minnesota, where the retailer has full-size grocery outlets known as SuperTargets.

"It's just a lateral move," he said of Good & Gather. "They're just changing the name, but it's still the same thing."

Target started expanding its grocery offerings about a decade ago, hoping that having more fresh meat and produce would drive more trips to its big-box stores. But they became a weak spot as leaders acknowledged its grocery aisles were more of an afterthought than a destination. Its offerings are not as broad as Walmart, the largest grocer in the U.S., nor as niche as Trader Joe's. And the space has seen other developments, such as Amazon buying Whole Foods two years ago.

In the past few years, Target has made several investments to improve its grocery aisles. It has hired dedicated grocery teams in stores and in district field offices. It has updated the in-store displays and lighting in the grocery departments as hundreds of stores have been remodeled, a change that Target says has led to a sizable lift in sales. And it has increased its craft beer assortment and introduced new exclusive brands of value-focused wine.

It hired Jeff Burt, a Kroger exec, to oversee the merchandising side of the grocery business 2 ½ years ago. Earlier this year, it recruited another leader from Kroger, Frank Bruni, to oversee the grocery supply chain.

And in January, Target CEO Brian Cornell tapped Lundquist for the new grocery president position to bring the grocery merchandising, supply chain, financial planning and operations together under one leader.

With the increased focus, Target has posted seven straight quarters of sales growth in food and beverage and has been gaining market share in the category. It's one of the top 10 grocers in the U.S., with grocery accounting for about 20% of its $75 billion in annual sales.

"It's a big frequency driver for us," Lundquist said. "When we look at the guests that shop our stores, 75% have a food and beverage item in their basket. And when they do, those baskets are two times larger than the 25% that don't have a food and beverage item."

Kavita Kumar • 612-673-4113