June/July, 2002

From the Editor

Boars Head Revisited

A consumer visiting many of the finest supermarket deli departments in the United States could easily think a concessionaire operated these departments. So prominent is the Boars Head signage that it implies some kind of Boars Head operating, management or ownership role.

That is neither surprising nor necessarily bad. It is a marriage of mutual convenience. Boars Head has established a reputation for producing high quality products, and supermarkets looking to brand their delis as upscale find it convenient to piggyback on Boars Head brand equity to establish an image for the deli department.

Boars Head, noting its special position in the scene of deli suppliers, has continually broadened its line, now encompassing many meats, cheeses and condiments. In many cases, this line extension is squeezing out other brands because the stores, having signed up on the Boars Head program, consider most of the Boars Head line an automatic carry. So it is an easy call to throw out some other guy’s mustard or horseradish sauce, for example, to make room for Boars Head.

Boars Head deserves all the credit in the world. It built this business with good products and good promotion. Boars Head was shrewd about its business. For example, the Wal-Mart Supercenters division is the fastest growing supermarket chain in the country, indeed in the whole world, but you won’t find Boars Head products at any Wal-Mart deli.

This isn’t because Wal-Mart wouldn’t want the product. In its produce departments, for example, Wal-Mart sells the very best brands – Chiquita, Dole, Del Monte, you name it. If Wal-Mart could piggyback on the Boars Head brand, it would do it in a minute, as it does with Chiquita bananas. But Boars Head made a strategic decision not to sell to Wal-Mart. In doing so, Boars Head was acting to protect the margins of its supermarket customers and, like Tommy Hilfiger or Polo, trying to protect the brand against discounters that might cheapen the image.

But although all this is strategically artful, the whole point begs the question of whether deli meat, cheese and condiments can be treated as a high fashion item and whether supermarkets are right to invest so much in the Boars Head horse and, finally whether Boars Head elected the right filly for the race.

After all, the problem with going so prominently Boars Head is that a supermarket does nothing to build its own reputation or to encourage a consumer to choose its Boars Head deli over some other supermarkets’ Boars Head deli.

One would think that supermarkets, many in the food business for the better part of a century, have built up substantial equity in their own brands. And to the very substantial extent that deli is best viewed as a foodservice operation, the decision to abandon product selection and just turn over most of the department to a single supplier is quite questionable.

To a significant degree, what distinguishes foodservice from retail is that foodservice makes judgments and selection for the benefits of consumers. As such, selling one brand of carefully selected roast beef and another brand of carefully selected turkey is also a way of building up a store’s brand equity because it communicates that the store’s buyers have used their expertise to search the world for the very best.

There is also some question as to whether the Boars Head strategy of keeping out of the discount operations will really work in the long run. In the short run, it certainly builds the business because supermarkets, scared to death of Wal-Mart, run to Boars Head to offer a product that can’t be easily price-compared. Long term, however, one has to feel that in selling things like sliced meat and cheese, product quality and value will win out. After all, the brand of meat on somebody’s bologna sandwich is hardly the making of a status symbol.

The self-service supermarket has long been the dominant mode of distribution for food products, but today there are other alternatives. Every drug store now has refrigerated pegboard-type hooks selling deli meats and cheeses, and the supercenter has proven itself a wildly appealing concept. Wal-Mart, K-Mart and Target all see this concept as a growth vehicle.

In electing to protect its current channel of distribution, one has to wonder if Boars Head might have chosen the wrong horse in the race. After all, if Wal-Mart’s efficiency and culture allows it to make Boars Head products available less expensively, Wal-Mart may be doing Boars Head a favor, and Boars Head may want to align itself with the growth area in the food business.

Of course, not all opportunities last forever. Wal-Mart has quietly begun rolling out its own private label deli products. Wal-Mart likes to sell brands – it is the easiest way to demonstrate to the consumer that it offers the best price. But Wal-Mart is very experienced at using private label to offer exceptional value when branded manufacturers won’t sell to Wal-Mart. There are a lot of companies that wish they had cast their lot in with old Sam Walton, whose rural discount operation is now the world’s biggest corporation and has made many suppliers very rich along the way.  DB