Target Pumping Up Its Image with the Right Food

Target (TGT) is advancing its food strategy on multiple fronts, betting its P-Fresh mini-supercenters will give consumers more reason to shop its stores while adding new products that provide more value for cash-conscious consumers.

Although the retailer has lately revealed initiatives that support it's reputation for fashion, recession or no, Target made food and price savings to the consumer a particular focus of concern in its most recent conference call.

In that third-quarter conference call, CEO Gregg Steinhafel said the company would build on its roll out of 100 P-Fresh stores this year. As opposed to the retailer's Super Target supercenters, the P-Fresh discount stores add only a limited number of produce and meat items to an expanded food department. However, P-Fresh offers well over 100 refrigerated and frozen food doors, which is more than most supermarkets maintain, and an extensive selection of groceries. Clearly, Target is focusing on new opportunities as it considers how to operate its stores. In his comments, Steinhafel made an interesting aside about the prospects for P-Fresh. It has only existed for a couple of years, first as a two-store test then as manifest in the 100-store roll out. Referring to P-Fresh as a bet rings true, as it turns out. He said in the conference call, as transcribed by SeekingAlpha:

While it is still relatively early to make a definitive judgment on this format, we continue to be very pleased with our initial results and feel confident enough in its future potential to extend our rollout to an additional 350 stores in 2010.

By carefully evaluating the number of items in each category, this enhanced assortment includes 90 percent of the food categories and approximately 60 percent of the SKU's available in a Super Target store, and the concept incorporates unique fixturing and visual elements that clearly convey our commitment to a credible food offering in a general merchandise format.

We've committed to remodel about 350 existing stores in 2010 at a total investment of just over a billion dollars. In concept, about half of this investment is to add P-Fresh features to these stores and the other half is devoted to other enhanced merchandising concepts and to a general freshening of these stores, consistent with the objectives and magnitude of our remodel program in each of the past several years. Overall we might reinvest something like $2.5 billion of capital in our business in 2010, up from about $1.8 billion or so this year. While it is still relatively early to make a definitive judgment on this format, we continue to be very pleased with our initial results and feel confident enough in its future potential to extend our roll out to an additional 350 stores in 2010.

So new from the retailer is Simply Balanced, a food line that's rolling out as part of Target's Archer Farms premium private label. Simply Balance makes a better-for-you-on-a-budget proposition to the consumer with 70 products that range from pasta to deli soups to frozen pizza. Simply Balanced must meet standards for calorie, fat, saturated fat and sugar content, be free of artificial flavorings and synthetic colors, and have zero grams trans fats.

One problem Target has had over the years is developing food operations that would mesh with and, the company certainly hoped, enhance a retail brand it has meticulously created and maintained. The company has made a number of changes in display, brands and merchandise assortment as it tried to find the right fit for food. But the Target brand is in flux these days as the company tries to persuade consumers of the value a store visit affords. The evolving circumstances made food a convenient means of addressing everyday consumer needs in a recessionary period when they have been buying less clothing and home furnishings. As a result, food has become increasingly compatible with the polish the retailer has been putting on its image. P-Fresh, with its limited perishable food assortment, is designed as a convenient, price-competitive alternative to a supermarket stop after a Target visit. Simply Balance â€" simply being a word that the retailer uses to intimate that it is being trendy at low cost, as in the Simply Shabby Chic home furnishings brand â€" addresses shopper concerns while suggesting they won't have to pay more for better.

Target's enthusiasm for its food initiatives may be about something more than the recent improvement in its numbers. The company may finally feel it is making food fit the brand more closely and in line with its style as evolving, and, for Target, that would be encouraging.

More about Target's emphasis on price and value in a forthcoming post.