Albertsons Companies, Inc. (ACI) Earnings Call Transcript & Summary

Greetings, and welcome to the Albertsons Insights Own Brands Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Melissa Plaisance, Group Vice President of Treasury and Investor Relations for Albertsons. Please go ahead.

Good morning, and welcome to the second installment of Albertsons Insights, a series designed to bring information about selected topics to the investment community. Before we begin, let me remind you that this presentation may contain forward-looking statements, details of which can be found in our filings with the SEC. Let me remind you also that these statements are based on current expectations of management and are not predictions of actual performance. Please refer to our recent filings on Form 10-Q and the risk factors that are listed there. Albertsons undertakes no obligation to update or alter any forward-looking statements except as required by applicable law or regulation. And so let me move on and share with you that with me today are Geoff White, Chief Merchandising Officer; and Chad Coester, Senior Vice President of Own Brands, to tell the Albertsons Own Brands story. Geoff?

Thanks, Melissa, and good morning, everyone. For those of you that I've met in the past, great to hopefully hear from you today. And for those that I haven't met, looking forward to meeting you live one day. My background is varied, but with 40 years with our company. I spent lots of time both at retail and merchandising roles and actually ran our Own Brands team before this role. So I know them very well. So our goal today is to share our story with you and really show you how powerful our brands are and how they contribute to our company's overall success. Our team's aspiration is really to be the reason our customers choose to shop with us. And we have positioned the portfolio to drive sales growth, and it has done that by outpacing the market for 3 consecutive years. And that -- and it brings with it a margin that is 1,000 basis points better than our national brands. We are absolutely winning with our customers with thousands of high-quality items across hundreds of categories and the key growth driver in many of these categories. The team is built like a CPG and its customer first-focused, building category and brand strategies that drive overall growth. And the team is focused as well in all the right areas, in innovation and new items, total omnichannel and EMEA, all driving towards a 30% penetration goal. So our Own Brands is a $14 billion business, and a portfolio that provides products for all customer segments and lifestyles. We position it as a growth engine versus just an entry-level price point. And it has incredible breadth and depth to drive that growth and fits all customer needs. We have $4 billion brands, with Signature SELECT, our mainstream grocery brands; Signature Café, our deli food service brand; Lucerne, which is our dairy brand and over 100 years old; and O Organics, which is an incredibly strong organic brand in the entire market. In the last 4 years, we have consolidated down to 9 power brands, really helping us with brand awareness, and then a full remodel of our packaging from a typical store brand to a design that now competes in every single category. And our brands are powerful enough to carry a category. We are a top 3 manufacturing close to 50% of all categories across the store, and some great examples of these, and they are all outpacing total market growth. We have close to a 50% share in our packaged salads in our produce department. We have north of a 60% share in our dairy cheese program -- portfolio. We also have a 23% share in a really emerging plays in coffee pot. And that's a 23% share with only 7% of the SKUs, which really proves we have the right quality. The frozen pizza is another great example where we have a #1 share, which is a really high-profile category. And we have that with the breadth of brands and products that cater to multiple customer segments within the category. We have value corner for our budget conscious shoppers, to our incredible quality and value with our Signature SELECT pizzas and to being really on trend with innovation with our Open Nature cauliflower pizza crust. So our Own Brands is a key component in driving customer loyalty and satisfaction. 100% of our most loyal customers have Own Brands products in their baskets. The Own Brands customer is incredibly valuable to us as well. These shoppers make 16 more trips a year and spend over $560 more during that same time frame. We're also growing across key shopper segments, and outpacing the market penetration gains for 3 years in a row, which has given us incredible and great leverage in our margin that is advantaged over national brand by 1,000 basis points. We see continued strong growth on our path to a 30% penetration with a few divisions already pushing close to that number. So Chad will share with you our growth areas, but a few examples is extension -- of our growth areas is expansion of our brands into new categories. Our organic shoppers can now buy O Organics laundry detergent, our first non-food item in that brand. And as customers continue to care about what they put into their bodies, they also care about what they use in their environment and more so today. So we are expanding beyond food with our Open Nature brand into categories like pet and health and beauty and with products like sun care and in oral care. Own Brands will also play a key role in our meals initiative using our state-of-the-art culinary center, staffed with expert chefs and product developers, driving innovation and partnering with key suppliers to launch meals across every shoppers budget. So our team is built like a CPG. Our business model is very similar to a CPG that drives really powerful brands. So one key component of that is innovation and new items, and that's been a big part of our success story. The team is able to build innovation strategies at the item level, at the category level as well as across emerging consumer platforms across multiple brands. Our plant-based efforts are a great example of that, as we have north of 50 items with tons of innovations still coming in the future in dairy, meat and bakery. The team is very customer-driven, focused on satisfying shopper needs and drivers of choice. So where CPGs have a tough time growing a category, the Own Brands team can step in and do that. Frozen meals is a great example. They were able to bring meals that were full flavor, indulgent and world cuisine in a category that was really driven around weight management and diet control, and they were able to drive the entire growth in the category. The team has also really built around speed. This team really understands the customer and can launch a product from idea to shelf in 20 weeks. That's right: idea to shelf in 20 weeks. And because they're built like a CPG, they're focused on all the right areas to drive growth with rapid innovation. We also have an internal sales force that drives execution across all our divisions. This team really keeps us honest, and we do what's right for the customer. Every single one of our items must earn its way to shelf and be contributing to total category growth and profitability. We will also continue to build our brands, especially in divisions where these brands are relatively new. If you think about the merger with Safeway and Albertsons, these brands were not in many areas like Boston and in Philadelphia. And we'll continue to build the brand through marketing and merchandising events to build awareness and drive the growth of them. So we care about our customers. We care about giving back to our communities in which we serve, and we care about our planet. And our Own Brands portfolio is one of our key anchors in our sustainability initiatives. We have a robust responsible seafood policy and program that leverages third-party partners and a software traceability system to ensure our products meet our policy. We are well on our way to reaching our goal with our Waterfront BISTRO and seafood items that are already 100% in compliance with our policy. These items qualify for our Responsible Choice logo, which we've rolled out to help customers identify our most sustainable seafood products. Also in 2019, we launched our plastics pledge to minimize plastic and packaging waste and educate customers about recyclability. As part of this, 100% of our Own Brands product packaging will be recyclable, reusable and compostable by 2025. We've already launched some great consumer-facing products in alignment with this goal, such as our eco picnic compostable product line. We just recently completed our sustainable coffee challenge commitment for 100% of our organic coffee to be Fair Trade-certified. A portion of the proceeds from each of our Own Brands Fair Trade-certified products helps us to improve worker livelihood and has raised more than $2.5 million in community development. So I'm incredibly proud of the team and really proud that the industry is recognizing their work. The team has won dozens of product level awards, cumulating with the Store Brands Magazine naming Albertsons Company's Retailer of the Year this year. And the team is hitting on all centers. With that, I'll throw it over to Chad to dive into some growth.

Thank you, Geoff. Good morning, everybody. Again, my name is Chad Coester. I lead the Albertsons Own Brands team. I'll give you a little bit about my background, and then we'll dive right into the content. I started my career with Albertsons Safeway in 1995 in our Northern California division inside our stores. Since then, I've held multiple positions, including procurement, eCommerce operations, marketing and merchandising, systems and processes. And I spent 4 years with our self-manufacturing team. In 2017, I was selected to take on the responsibility of Group Vice President of Own Brand Sales and Marketing. And in 2019, I was identified to take on SVP of our Own Brands team. I'm very proud of this team, excited to talk to you about our story. Our Own Brands has a clear mission to clear -- to drive profitable category and department sales growth, fueled by our shoppers' loyalty. And our shoppers have told us, Own Brands is very important when choosing where to shop. Our Own Brands are seen as extremely good value, with quality similar to our national brand partners. And Own Brands improves their perception of price for the total store. And we're growing. Over the last 10 weeks, Own Brands has increased households to the portfolio, basket penetration and household spend per trip. And we're going to continue to grow. We have significant runway for growth, focusing on the following 3 areas: Exciting our customers with on-trend innovation at the speed of their demand, filling white space faster than our national brands; maximizing our growth through an omnichannel approach, focusing on underdeveloped division and sustaining our accelerated growth position on our eCommerce platform; and finally, leading in meal solutions. In the following section, you're going to hear examples of the team's ability to pivot quickly with innovation plans that answer new consumer behavior trends. As Geoff alluded to earlier, it's about speed. The team is nimble. We can respond immediately. And our shoppers are looking for value and convenience now more than ever. She's looking to stretch her dollar and make every shopping trip in-store or online as efficient as possible. And our family and value pack portfolio is delivering. Own Brands family pack and value pack items have double dollar sales over the last 3 years. We recently launched a variety of value pack items in COVID spiking categories. A few examples of those are: Signature SELECT value pack, [ Bistro ], Signature Care family size pop [ drop ] 200 count and Signature SELECT flushable wipes. With seafood consumption pre-COVID being predominantly in restaurants and with this less of an option now for our consumers, we're seeing a spike in our seafood at home. Waterfront BISTRO, we recently launched 10 new value pack finfish items. These items are sold in value pack size, but they're individually wrapped inside, allowing the shopper to control portions. Our Waterfront Bistro growth rate is nearly 50% year-to-date and is outpacing the department. Lastly, Signature SELECT coffee pods are the top-selling items in the coffee pod category. Our shoppers are consuming more meals at home, which has boosted the demand of our cooking and baking ingredients. We're continuing to see in this space -- increases in this space, and we're offering a broad portfolio across -- to cover all of the customer segments and their need states. As consumers are looking to prepare more authentic restaurant-style meals at home, we're seeing significant growth in our Own Brands items, helping our consumers against delivering against this expectation. Signature Reserve pasta sauce imported from Italy is up over 50% year-to-date. Complemented with our full line of super premium imported pastas, tapenades, olive oils, balsamic vinegars, makes a fantastic Italian meal for home. Another example is our Signature SELECT brand of authentic Asian meal components. We recently launched 14 items across cooking sauces, coconut milks, curry paste, seaweed and noodles. Our complete line of Asian components is outpacing the category's growth. Another example of staying ahead of the curve by satisfying on-trend consumer needs is with our holistic wellbeing and plant-based products offered in our O Organic and Open Nature brand. These items are designed to satisfy the needs of our health conscious consumer. She's making positive choices every day for her family and herself. Our offers have different lifestyle needs that require different dietary needs: gluten-free, sugar-free, grain-free, keto, among others. We'll stay ahead of trends, launching industry leading innovation, offering a wide range of products that satisfy our consumer needs. And we'll do that by leveraging our lifestyle brands. In October of this year, we were first to market with a private label line of cooking sauces to help consumers who follow healthy lifestyle with a flavorful meal solution. Our 4 Open Nature items: Tikka Masala, Lemongrass Basil, Korean-style Bulgogi and Cilantro Lime taste amazing. These items have clean ingredients, low net carbs and net sugars and are certified gluten-free. There's a number of growing consumers looking for ultimate protein sources. Most products in this space focus on consumer sustainability needs. Through additional research, we've identified consumers are also looking for simple ingredients, which is why we're launching our line of plant-based products that combine taste, sustainability and clean labeling in our Open Nature and O Organics brand. You will find these products across all of the categories such as meat, dairy, frozen, our supplements and our snacks area. Open Nature patties grinds -- patties and grinds, these items just launched September of this year. Not only are these items taste great, but no preservatives or artificial flavors or colors. Patties and grinds are the entry point for plant-based consumers and represent the largest portion of sales mix. We have plant-based innovation in the pipeline for 2021. Winning in the holidays throughout the year is another key initiative to driving incremental sales. Our seasonal program is a treasure hunt to surprise and delight our shoppers. These new and onetime items create a sense of urgency, encourage our shoppers to put one more item in the basket before they're gone. A few examples of these successes are our Signature Reserve cookie tin from Europe, a premium cookie collection featuring 15 variety of the European-crafted cookies, including donut hazelnut cookie, almond florentine biscuit, cocoa heart, [ promo ] cookie stick. This is great for the family and a great gift during the holidays. Another example, our Signature SELECT coffee blend variety pack. The variety pack is meant to have something for everyone in the household. It contains some of the top-selling traditional dark and light roast, but also holiday favorites like pumpkin spice and peppermint mocha. This is highly incremental. A 40% of the households purchasing this product last year were new to the category at Albertsons, and over 84% of the sales were incremental. Maximizing growth leaning on an omnichannel approach starts with our stores, focusing on our underdeveloped divisions, building trust, brand loyalty with our shoppers. We're going to do that by leaning on our high -- our portfolio of high-quality products at a great value. We'll support that by mass and targeted marketing efforts to drive trial and awareness. Today, we have divisions that are close to this target, giving us confidence in our ability to reach 30 over across the entire company. Another priority is sustaining our accelerated growth on our eCommerce business. Current performance has been outstanding. Own Brands has doubled sales versus a year ago and outpacing our national brand. Our growth is fueled by expanded assortment while building loyalty through targeted rewards programs and offers. This provides us yet another opportunity to surprise and delight our new shoppers with welcome kits and free item innovation. Our Drive Up & Go expansion also lends itself to increase Own Brands growth. We'll have 1,400 by the end of this fiscal and 1,800 by end of fiscal 2021. Our consumers are looking for easy and convenient, high-quality meals that taste great and require limited to no preparation. We are reimagining our in-store destination, offering easy and exciting experience while rebuilding digital and touch points along the way that meet our customer at their -- along their meals journey. Short-term vision deliver affordable, high-quality, tasty approachable products, all with an enhanced customer experience that drives convenience and ease. This will require enhancing and optimizing our assortment. We'll focus on omnichannel experience, preparing foods in new and innovative ways both on a national and local culinary trends. Building on what we know through our meals program in our United division. We are prepared to solve at-home restaurant meal solution needs and offer option for today's cooking fatigue. Savory Skillets, our most recent launch. Ready-to-cook meals that are easy and convenient, healthy and great-tasting. This is another great example of the team's ability to pivot. Originally launching in a bulk product solution, we turned and moved this to a finished packaged goods product, aligning with today's consumers' confidence. And these are easy and convenient skillet to plate in 10 minutes. Clean label, no antibiotics, no artificial flavors or colors, no preservative, aligned beautifully with our Open Nature brand. And again, taste great, chef-inspired meals, ready-to-cook that the whole family will enjoy. Own Brands is the reason our customers are choosing to shop our stores. We will drive sales and margin growth. We are winning with our highly exclusive portfolio of brands and products. We truly operate like a CPG company with powerhouse brands. We are customer-driven. We have an internal sales team that drives execution across all of our divisions. And we have a clear path forward, exciting our customers with on-trend innovation, maximizing growth through an omnichannel approach and leading in meal solutions. Thank you for your time today.

Okay , Melissa, back over to you.

[Operator Instructions]

Yes. And this is Melissa Plaisance. The operator is also named Melissa. I just wanted to mention, while we'll have other forums to discuss the business overall, we ask that the focus of the Q&A today be on our Own Brands business. And in addition to Geoff and Chad, Vivek Sankaran has also joined us for the Q&A. And please proceed.

Our first question comes from the line of Edward Kelly with Wells Fargo.

This is actually Stephanie on for Ed. Just to start off, you mentioned private label being a $14 billion business. How much of that is fresh versus center of store? And then are there any specific categories, banners or geographic regions, you would call out that are underpenetrated currently that might be able to create opportunities as you approach that 30% target?

Absolutely, Stephanie. It's Geoff. I'll take pride in myself. Sorry, Melissa. Stephanie, great question. So we do not disclose kind of the difference in our penetration rates between fresh and center of store. But I would tell you, both are growing tremendously. So there -- and we still see a long runway of growth in both areas. With regard to geographies, we see lots of growth still left there. Like I said in my presentation, we have banners where these products are relatively new to the consumers, and they are still discovering them. So in the -- what I would call the original Albertsons banners, these areas are growing tremendously and more than probably our more mature places -- geographies. So lots of growth to be had there. And then from a category perspective, we still see lots and lots of white space, especially with our O Organic and our Open Nature brands. Both of them are going tremendously and outpacing total store sales. And we see lots of expansion into what I would say new categories for both those brands as we kind of fill out the basket for customers that choose those types of lifestyles.

Okay. And then just as a follow-up, given the recent rise in online grocery, I was wondering if you could go into a little more detail around how consumer behavior or perception around private label differs online versus in-store. Obviously, some of the dynamics around like shelf placement and price comparisons and stuff, that stuff is different online. So I guess what are you seeing out there? And how has your private label strategy shifted at all in order to accommodate the recent rise in online grocery.

Chad, why don't you take that?

Absolutely. Stephanie, thank you for the question. As I mentioned in our presentation, we are seeing tremendous growth on our eCommerce platform. And it really is driven by awareness. When you think about a customer being able to sit down and look through our products in front of her instead of going up and down the aisles, that awareness is really allowing her to see this wonderful portfolio of products. And we're just seeing a ton of takeaway-from-home there; excited about our current growth and the rollout strategy we have for both [indiscernible] and eCommerce.

Our next question comes from the line of Karen Short with Barclays.

This is actually Renato Basanta on for Karen. So our first question is on margins. Overall during the pandemic, we've seen promotional activity, vendor activity coming down somewhat on the branded side. So just wondering if you could sort of tell us what the margin differential has actually been during the pandemic versus that 1,000 basis points that you've talked about? And then if you could help us out with some color on the margin ranges across your various Own Brands, that would be helpful.

Geoff, why don't you take that?

You bet. So Renato, nice to meet you. So our 1,000 basis point differential has stayed steady through the entire pandemic. So we haven't seen any deterioration there even with the promotional mix changing in more national brand promotions. With regard to the mix that we have, it -- of course, it varies by department. You can imagine that more commodity-based items maybe have a smaller margin differential, though definitely an advantage there versus our consumer packaged goods, but it all blends out at 1,000 basis points. And...

That's helpful. And then just curious about any challenges you may have encountered in your Own Brands business during the pandemic? Maybe anything to speak to with respect to capacity constraints, plant efficiency or raw material sourcing or anything like that? And then how you may or may not be addressing any of those issues as the pandemic situation continues to evolve, any color there would be appreciated.

Right. Sure. So this portfolio experienced similar to what our national brands did, definitely a huge spike in demand that drove supply issues across certain categories. Not everywhere, but in certain categories. Our suppliers have reacted very well and supported us incredibly through this entire thing, where we'd actually, I would tell you, had better service level from our Own Brands in certain categories versus our national brands. So there has been the issues, like you said, with raw materials. We saw it with aluminum cans and those types of things. But things have kind of become more of a steady state outside of really highly impacted categories. We saw paper kick up again 3 to 4 weeks before Thanksgiving. We have a very strong portfolio on paper. We're working closely with our supplier to really drive efficiencies through a, what I would say, the best-selling SKUs to be able to stay in stock for our customers. So really proud of the supply base and our manufacturing to -- that has really helped us with supply during the entire pandemic.

Our next question comes from the line of John Heinbockel with Guggenheim.

Guys, 2 quick questions. More secularly, right? If you think about opportunities to improve the profitability of Own Brand further, maybe touch on that. Pricing, procurement, manufacturing, are there opportunities? Number one. And then number two, if you think about -- I don't know if it was mentioned. If you think about new item, new item introductions, is that -- the new item portfolio, is that generally accretive to margin or not because those items haven't yet reached scale in terms of your ability to buy them and sell them?

Chad, why don't you take that one?

John, I'll answer your first question. When you look at opportunity, absolutely, our manufacturing plants provide us a ton of scale and leverage when it comes to some of our most price-sensitive categories when we think of milk and bread. And then when you look at innovation, we look to drive scale across the divisions as soon as we launch to drive same premise, best cost available and best value proposition for our shopper. As Geoff alluded to in his presentation, we have to earn our way to the shelf. So we start that conversation and that education process very early in the innovation pipeline.

And John, I'll add a little bit more color, if you don't mind. So we also -- in our portfolio, cost is king, right, be able for us to continue to offer that price gap that drives our customer decision as well as the penny profit that comes with it. We have an incredible sourcing team that is continuously working on cost efficiencies, cost negotiations. And it is just a continuous cycle of going through all of that. We're constantly analyzing the portfolio to make sure that we have the right cost, offer the right value. If we're not able to do that, we actually get out of the item and move on because we know that our position on the shelf is growth driver, high-quality, but as well as that entry-level price point that offers value for our customers.

And maybe as a follow-up to that, when you think about pricing, right? I know it varies by category and by item, but -- and you've got the information to think about elasticity. But how satisfied are you with the pricing today, right? Because I know I've heard in the past that people have raised private brand pricing and units have not gotten hurt, right? In some categories, maybe they improved because the quality perception got better. Where are you with that in terms of being able to optimize pricing up and down?

Yes. Our Own Brands portfolio is part of our overall pricing evaluation that we are constantly doing. We start with looking at customer first to make sure that we offer her value and as well as having the proper price gaps to our national brands. So I would tell you, we don't look to raise our Own Brands pricing. We look at to be what is the right value for our customer, what is the right gap to national brands, what is the right price points that drive volume so we can continue to leverage scale and keep our costs at the right way. So it's multifaceted, but it's always built around what does the customer need and what is the right price point for our customer.

Our next question comes from the line of Kate McShane with Goldman Sachs.

I wondered if, just kind of at a higher level as you pursue your Own Brands strategy, is there any conflict with how you pursue your alternative revenue strategy for the -- within your relationship with the CPG companies.

Geoff, do you want to try that?

Yes.

Take that.

Yes. Absolutely. So I don't see that as a conflict. We -- okay, we look at this as we are a house of brands. And I'm sure you've heard Vivek say this many times, it is incredibly important, especially today for our customers, that we have a breadth of assortment that they can choose from so they can stop once to fill their baskets and their pantries. So as we look at innovation and how it fits into our category growth, we are always looking for the white space. So like I said, our O Organics and our Open Nature brands really are -- have a long runway of growth that don't necessarily really compete on the highest level with our national brands. But as people choose those lifestyles, we're able to fill those. So I don't see a conflict. Our brands will always be very complementary to what the strongest national brands have to offer and -- which is incredibly important to our customers with regard to having a breadth of assortment.

Okay. And on one the slides, you have put up some numbers around growth over the last 10 weeks. I just wondered, why that measurement specifically? Was there a big change from what you've seen over the last 10 weeks versus what you saw previously? Or had those been new introductions? Just curious for a little bit more background behind those numbers.

Chad, do you want to take that?

Yes, absolutely. Kate, thank you for the question. I wanted to share with you just trends that are happening relatively now. They are similar to the trends previously, not a significant change. Just wanted to give you some color of recent growth.

Our next question comes from the line of Chuck Cerankosky with Northcoast Research.

Good morning, everyone. When you're looking at product development, how far away from the national brands are you willing to go? That is, where you're not necessarily putting on the shelf an analog of the national brand.

Chad, why don't you take that?

Yes. Chuck, thank you for the question. As Geoff mentioned, we will push the envelope where our customer is asking us or willing us to go, especially with O Organics and Open Nature. We want to provide that full basket solution for USDA organic offerings in our free-from positioning. So we have pushed the envelope there, and we'll continue to do that, certainly.

Will you -- sorry.

And sorry. A great example of that, Chuck, would be is many CPGs are launching alternative plant-based products in the meat department right now. Many of them have taken kind of a mainstream approach. We took the approach of a free-from approach. So we're able to offer a product there that has a short ingredient deck, free from lots of different types of chemicals and those types of things. So very complementary in the category that kind of targets more of a consumer making lifestyle choices beyond just the plant-based efforts.

When you're doing that type of thing, does that help the margin because the product isn't necessarily directly comparable to -- I'm just pulling this out of the air -- Jif Peanut Butter in taste or look, but has some other attributes you can focus on?

Yes, absolutely. We have what I would call guardrails with regard to what we believe -- what we know our price gap needs to be as well as the penny profit that it would bring to a category. So before we launch any items, we make sure that we're able to satisfy those guardrails to make sure it's going to be successful on the shelf. So yes, it is accretive to margin.

Our next question comes from the line of Robert Moskow with Crédit Suisse.

Up the slides, I thought that the skillets and the refrigerated meals were the ones that looked pretty revolutionary, especially if you reset the shelves in that manner. How many stores do you have that are reset that way with that much of a footprint? And how quickly do you expect to roll it out to more banners? And then I had a quick follow-up.

Geoff, why don't you take that?

You bet. So thanks, Robert. The -- our United program is probably our most mature area. They've been working on this for a couple of years and has been incredibly successful around their ready meals program. And they have an assortment that is both ready-to-eat, ready-to-cook and ready-to-heat, and offers incredible value to our customers. We are, just now, understanding kind of what that looks like within the rest of the organization, so more to come from us soon there. With regard to our Savory Skillets, we just started launching the 1st of November, so we're in the early stages of that. But early results from that have been incredible and far exceeded our ROIs that we had planned there. So really excited about our multifaceted meals program. As we look at meals in general, we believe that -- well, we know that to really be successful here, we have to compete beyond the grocery spend. We're looking at the whole $1.8 trillion food and beverage industry and building out something that was really strong, both digitally-enabled and in-store experience and offerings. So lots to come with us on meals, and I think we'll be ready to share something with you sooner than later.

Do you think your...

Geoff, this is Vivek here. If I can add, am I right, though, that in Savory Skillets, we had a rollout pre pandemic, and then the team has reengineered the whole thing given the pandemic because we've got a different configuration going up, which is what you're rolling out since November.

That's correct. Yes. Originally, it was built to the bulk program. People are shying away from bulk products. So we pivoted and went to a package product, and it's been very successful in its early days.

Got it. Are you targeting share out from restaurants with that item? Or do you think it's more in-store or frozen meals that had that share amount?

I would tell you it's -- I think it's a combination of both, Robert. I think that there's ease and convenience of a meal from skillet to table, and it's incredibly high-quality as well, so it can mimic a restaurant site meal.

Okay. And my follow-up was you had one slide that showed that your market share for private label was 25% essentially in 2018 and '19. I didn't see a year-to-date number for it. Is it lower because it's supply chain constraints? And if so, in 2021, could there be like an acceleration above your normal pace just because of the supply chain issues in 2020?

Geoff?

Yes. Thanks, Melissa. So Robert, yes, we have not released a number. I would tell you, we improved incrementally as we've kind of moved throughout the year. So we don't see this as what I would call a consumer -- a shift in consumer preference, but more just driven by supply. And yes, in 2021, we do feel as supply kind of comes back to a more regular state, that we see the growth patterns that we've had pre pandemic to start to kind of kick in again.

Our next question comes from the line of Robby Ohmes with Bank of America Merrill Lynch.

My question is on the marketing as private label. I was curious, looking beyond COVID-19 and looking at, for example, Simple Truth at Kroger, they were very aggressive marketing that brand and really created a perception that it was a really almost a CPG brand rather than people really realizing it was an own brand or a private label brand. Are you guys -- where is your marketing levels at for O Organics and Open Nature? And is there any changes or increases or anything you guys are looking at doing?

Geoff, do you want to start on that?

Yes. Sure. Robby, great to hear your voice. So if you look at our O Organics brand, our consumer feedback often comes back as them thinking it's a national brand, which is great for us, right? You get that reputation, that credibility of a national brand, and it resonates with our customers tremendously. We have, what I would tell, the team has a very small but efficient marketing budget to drive trial and awareness. They do a lot of that activation, both digitally and in-store. We see a continuation on that. We've seen great returns from the budget that we've set aside for the Own Brands team. And they really bring it to life, both, like I said, in-store and digitally, through merchandising and marketing events. So we'll continue on like we have done in the past, and we've seen some great gains from it.

That's great. And then just and just another question was just on the -- when you look at your plant-based penetration versus the competition, is Albertsons way behind the other larger players? Or do you just have a lot more room there? Or do you think you'll eventually over-index versus the competition? Like how do you see that playing out?

So versus total market, we over-index in plant-based. Before, what I would call the trend that happened in the meat department, we have been incredibly strong there, Robby, both in our produce departments and plant-based like tofus and soy-based products, as well as in our dairy cases with nut-based milks and alternative melts and those types of things. So we have already started and had a high index and really gone after kind of the meat alternative. We have dedicated sections in our meat departments now. We are outpacing rest of market on growth tremendously and see a long pipeline, not only of Own Brands innovation, but national brand innovation, to continue on that. Plant-based will be a key segment of growth for us.

That sounds great. And then just one last quick one. On sourcing, you guys don't do anything in-house, I don't think, right? So is there any thought of ever vertically integrating more similar to what Kroger does?

I'm not sure exactly -- I want to make sure I understand your question.

Owning manufacturing.

Right. So we have 21 plants right now that are focused in areas like dairy, bread, ice cream that does really well for us. We opened up a refrigerated fresh soup plant about 2 years ago down in Riverside, California. So where -- the categories that we're in right now are really driven off of what I call, for the most part, highly price-sensitive categories that really give us that cost leverage. So we are vertically integrated in the right places right now.

Our next question comes from the line of Scott Mushkin with R5 Capital.

So mine's a little bit more kind of, I guess, broader in nature. So you obviously have some great brands, the O Organics and the Open Nature. But I was wondering if kind of the center kind of right down the middle, we've seen target come to market with a good and gathered brand. And if you kind of look across grocery, I'd say that kind of middle-of-the-road private label brand has not been, I guess, marketed or really a lot done with it in most of grocery. So I was wondering if you guys could talk about any plans you might have in that area as you look forward over the next couple of years?

Geoff, do you want to start? And Chad, you can...

Sure. You bet. Scott, our Signature SELECT brand, which, for the most part, is our mainstream grocery brand, represent...

That's what I was referring to, yes.

Yes. Just shy of 50% of our overall portfolio. So it is incredibly strong. It covers across multiple categories. And what we have done with it in the last 4 or 5 years has really transitioned it from that entry-level price point, which is still really key in this, to really offering a high-quality mainstream brand. And we've seen growth because of it. Our repeat purchases in many different categories, once we kind of made sure that we had that high quality, improved from it as well. So -- and then as well as what we did with the package redesign, we're able to design it where the -- it's not -- it has a tag on it that shows the consistency of the brand across the store. But the elements of the package design really compete in a category. So if you saw our ground coffee, and I can send you pictures, ground coffee in our coffee sections, it really brings to life the excitement of the different flavor profiles on that. So we're really elevating the brand in the center of store through packaging designs, quality improvements and really negotiating the right cost to get that to still have that entry-level and that value for our customer. So that's how we kind of see the positioning and the growth of it.

And Chad, don't we also feature some of those items in just for U and so forth to get it in front of the customer.

Yes, Melissa, we do. It's definitely one of the key brands that we drive along with O Organics and Open Nature. And Scott, just to build on that, I'm really proud of the work the team did, as Geoff mentioned, freeing up the packaging to really compete to fight for its space on the shelf. The packaging looks phenomenal on our Signature SELECT brand, and it's really showing in our numbers.

And how much of the portfolio you guys have altered the packaging? All of it? Or is it still in process? I think I'm going to check out my local Acme to make sure I see...

Yes. So all of the products went through agnostic when we came together as a company so that it could expand across the entire portfolio of our banners and really drive sales and profits in every category.

So [indiscernible].

It kind of broken up. [indiscernible]

Sorry, let me help with some clarity, I apologize. So yes, when we merged, we went to an agnostic brand. Since then, we've really changed the package design, like I said, to be more, what I would call 21st century CPG-like. Scott, there were probably -- there are certain areas that we decided not to redesign the packaging in GM, but the vast majority of the portfolio is complete now.

Our next question comes from the line of Michael Montani with Evercore ISI.

I just wanted to ask, first off, on the price point. If there's a certain level of kind of incremental price value that you want to convey to the consumer versus national brands that you could share at a high level? And then I just have a follow-up.

Melissa, you want me to take that one?

Sure. Take it, Geoff. Just take it.

Yes, great. So like we said in our presentation, that we have some guardrails with regard to what we believe is the right price gap to either national brands or a price point that offers value in the category to make sure that not only do we accomplish that, but it gives us the right amount of turns with these products to continue to be able to leverage our cost. When we launch new items, those guardrails come into place to make sure that they -- these items will be successful in a category. So price point is a key driver of not only products that are on the shelf and do they -- are they able to be successful, but as well as in our new innovation.

Okay. And then if I could, just in terms of some of the categories. I was just trying to dig into gasoline. First of all, was that part of the $14 billion and the 25%? Or would that be kind of incremental to that? And then health, wellness and beauty, I was curious to see kind of what the penetration would be today. And then over time, how that opportunity stacks up to the 30% target?

Sure. So we -- go ahead, Melissa. Sorry.

No, go ahead.

So we don't -- we do not include fuel in our numbers. So that penetration rate does not include fuel. That would be the same that other retailers do. So we're aligned with that. With regard to health and beauty, we see a long runway of growth there. To be honest with you, we are just getting going there. We're in a category that we had, I would say, we're steady, but not best-in-class. But we believe, now with the new consumer behavior changing as they're looking for one-stop shop, that these categories where we had not high penetration rates, customers will be looking for value from us and we'll be able to innovate in those categories. So there is a game plan longer term for that.

Our next question comes from the line of Joe Feldman with Telsey Advisory Group.

I had a couple, with regard to the own brand customer, where you said they spend more and they shop more often. Is that because they are just generally more loyal to you guys? Or is it that they are actually more affluent consumers that visit more frequently? Or I just wanted to better understand what might help drive that.

Right. So we define a valuable Own Brand consumer based on how much of their basket is contribute -- how much Own Brands contribute to their total basket. These soft shoppers, honestly, they're definitely across the entire spectrum, not only at our most loyal, but in other segments as well. And they both -- and again, across kind of budgetary pieces. It's everything from our most budget-conscious consumer that's looking for value, but as well as, like you mentioned, Joe, are most affluent. Chad talked a little bit about our Signature Reserve and our line of Italian products. And these customers are a big part of the success of that line, and we would consider a lot of them a heavy buyer of Own Brands products. That just goes to both the trust that the customers have in our products, especially as they replace restaurant meals that we -- with high-quality products we're able to offer them.

Got it. And then another kind of related question, are you guys seeing any trade down because of the spike in COVID and lack of stimulus right now? Or are you seeing trade up within categories? Either way would be of interest, I think.

Can I take that?

Sure, Vivek.

Yes. We're seeing both, interestingly, right? We're seeing people buying value packs. These are larger packs. And then we're also seeing people buying better cuts of meat. And so we're seeing a little bit of both. What's hard to tell at this point is what's motivating the larger packs. It's also probably because there's 4 people at home eating every meal versus 2 people before. And so we're seeing a little bit of both, honestly. I haven't seen a pattern that indicates a sudden change in buying behavior.

Our next question comes from the line of Brandon Cheatham with Citi.

It's Paul Lejuez, actually, from Citi. Two questions. One, you mentioned seafood, I think you called out as one of those categories of private brands that have performed well during this period. I'm curious if there are certain categories that have not performed well within private brands, where folks are looking a little bit more for national brands during this period? And then second, this question has kind of been asked about specific categories individually. But I'm kind of curious if just taking a high level, bigger picture view. If I ask what are the categories that tend to penetrate the highest from a private brand perspective versus those that penetrate lowest. I'd be curious how you would lay that out from -- on a spectrum. And where do you kind of over-punch your way versus under-punch as you think about those very highly penetrated categories versus those that are lower?

Geoff, why don't you take that?

Sure. So Paul, I'll make sure I chunk this off properly. So we've seen tremendous growth in many categories. Where we haven't the growth that we would expect is probably the categories that either have the most -- the highest supply issues. Or in there's a few categories that I would tell you are more regulatory-driven with regard to what we talked about, bulk foods. So our bulk foods are certain areas in our store that customers are just shying away from, and that's why we pivoted like on Savory Skillets to make sure that we're able to give them packaged goods. There's just this stigma around people touching product that is more self-served than it is package-driven. So that's probably more of a driving factor than it is actually moving to national brands. The second question you had with regard to where we're strong and where we think we have opportunity, I mentioned a few in my presentation, there were some really key consumer categories where we have significant high penetration and still be able to carry the category and drive growth. So dairy cheese is a great example of that. In SNAP nuts, we're able to do that as well. Packaged salads in our produce department, we have seen that. So lots of different categories where we are highly penetrated and be able to drive the growth. In some of the underpenetrated categories, a lot of it has to do with just the strength of national brands. And I'll give you an example. We launched about a half dozen SKUs a couple of years ago of Signature Reserve ice cream. It was developed in-house. It was made in our plan. It was the most incredible ice cream you could ever taste. I mean that wholeheartedly. And it was a -- we were competing with Häagen-Dazs and Ben & Jerry's because they just have the lion's size of the share. We weren't able to crack that code. The brand recognition, the brand trust of both Häagen-Dazs and Ben & Jerry's, it was incredibly difficult for a private label to get in there. So after about 18 months of trying, we just cut bait and moved on. So not all of our innovation is incredibly successful. But because we can move so fast launching it, we can move incredibly fast as well as getting out of it. And we test and learn from those different types of areas.

Okay. And we've got one last question.

Our final question comes from the line of Steve Caputo with BMO.

This is Steve Caputo on for Kelly Bania at BMO. My first question just was around sort of the opportunity you have with new customers that might have tried your Own Brands for the first time during the pandemic. Could you guys provide any metrics or details about how many or what size of that market is? And what your plans are to try and retain those as we move post COVID next year in the future?

Geoff, why don't you take that?

Sure. Steve, yes, many, many new customers to our category, again, excited for that. We are including Own Brands in what I would call more of a broader retention strategy, that we're making sure that our customers shop a breadth of categories like they did in the past. And then a lot of it's coming from that as we have a core set of customers that are discovering new categories and, of course, the value in those categories. So the products have done well with our new customers, and we are definitely targeting them as well.

Okay. That's helpful. And as we look sort of at your peers, Own Brands has been a thing that's highlighted across sort of the space. Could you talk about how you sort of benchmark yourself to your peer group? And sort of how you think you're doing relative to them?

Right. So we really focus on our customer-first before we focus on our peer group. As Chad explained, our customers have a thirst for high-quality products that offer value. So we kind of work backwards from our customer-first with regard to our innovation and our -- the lineup that we carry. We definitely measure ourselves against rest of the market with regard to penetration growth and share growth. And that's a key metric for us to make sure that we know that we're doing all the right things. So it's customer first, measured against the rest of market and making sure that each one of the brands and products are driving both sales and profitability within the category. Those are the 3 biggest elements.

Okay. Well, I want to thank everyone for participating in this call today and for your interest in Albertsons Companies. Appreciate it, and have a good day.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.