Supervalu Makes Late Entry in Organics with High-Margin House Brand

Whether Supervalu's introduction this week of a line of organic products is meant as a long-term play or is a simple case of trend-mongering, the nation's third-largest grocer is a straggler.

Even Wal-Mart, the country's leading grocer, has been offering organic products for years â€" first in 2001 with dairy and produce. In 2006, it made a major push into the organic market with a full selection of products. Kroger, the nation's No. 2, made similar moves in approximately the same timeframe. Supervalu had tried to offer organics through a separate chain called Sunflower Markets. But after experimenting with that concept with five stores in the Midwest, it gave up in February.

Still, though it is late to the game in offering a complete line of organics at its major outlets, Supervalu -- which owns several chains including Cub Foods, Albertson's and Jewel-Osco -- is playing it smart. The new line is a store brand, called Wild Harvest. That will allow it to offer organics, which are generally more expensive, at reduced prices -- about 15 percent less than they normally sell for, the company says. And it will enable the company to boost the amount of self-branded products it sells. Store brands carry higher margins, and it's a segment where Supervalu has fallen behind its rivals.

Supervalu also runs a wholesale operation, so it has the infrastructure in place to deliver the products to its own stores in a timely fashion â€" an important consideration in selling organics, where freshness is more important than usual.

Given that sales of organic products has been increasing steadily since the early '90s, it would appear that it is more than a trend. But Supervalu's introduction of Wild Harvest, coming at this late date, "is a decidedly 'me too' move," says Rich Duprey of The Motley Fool, and likely won't "add anything more than an incremental boost in revenue."

Still, it's something Supervalu had to do, and should have done long ago.