Q&A: Club store trends

Mike Bilder, president of contract packager Peacock Engineering in Itasca, IL, talks about the interplay among major food manufacturers, club stores, and contract packagers.

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PW: Who are some of your major customers?

Bilder: We package for a lot of major food companies, putting primary packages into a club-store multipack or into a buy-one/get-one-free pack. BJ’s, Costco, and Sam’s are the three dominant club store players, and each wants its multipack to look unique. So with the same breakfast bar or oatmeal package, for example, we may be doing a 32-count for one, a 36-count for another, and a 38-count for the third. This drives traditional food manufacturers crazy. They don’t have the equipment or flexibility to handle those kinds of varieties, nor do they want to invest the capital it would take to allow them to do it in house.

PW: Why are large food manufacturers so obsessed with clubs?

Bilder: A lot of it has to do with market share. They’re willing to go into the club stores practically at cost if it means maintaining market share. Some of this is driven by stock prices, which, in the case of a consumer product manufacturer, may be driven to some extent by the perception of dominance in the marketplace. The thinking is that increased market share will eventually translate into earnings. But an earnings increase accompanied by declining market share is usually not viewed favorably in the marketplace.

PW: What new trends are you seeing?

Bilder: In the past year or two, one thing that has helped our business considerably revolves around slotting fees that food manufacturers traditionally pay a retailer when they want the retailer to carry a new product. Club stores and convenience stores ordinarily don’t charge slotting fees. So some food manufacturers are launching new products in club and convenience stores to build consumer awareness and acceptance. Then they can go to traditional retailers with some market leverage that might reduce or even eliminate the slotting fee.

PW: Any new packaging materials you’re trying?

Bilder: We do a lot of cartoning here, and one thing we’re looking at right now is using Z-flute corrugated board as a replacement for cartons made of E-flute. The Z-flute is less expensive yet it still offers good structural properties. —PR

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