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Private Label, Healthy Mainstream Products, Efficiencies to Drive Wild Oats Growth

NEW YORK -- "No one would argue that V-8 juice isn't healthy." So said Wild Oats Markets' c.f.o. and s.v.p of operations, Ed Dunlap, during a presentation yesterday at the Banc of America Securities 2005 Consumer Conference here at the New York Palace hotel.

What Dunlap was referring to is his company's strategy to attract more mainstream consumers by bringing in more traditional, albeit healthy, SKUs to some of its stores -- specifically, its Henry's Farmers Market units, which don't abide by the strict guidelines that the Wild Oats branded stores do.

Wild Oats will be adding 10 percent to the SKU count at the Henry's units, with such brands as Pepperidge Farms, and gourmet items. "The important thing to consider is that the products still connote wellness," he said, "but they are more familiar to the mainstream shopper."

The company's private label strategy takes almost the exact opposite tack, reaching out and touching consumers outside of the store. Last year, Wild Oats began offering its corporate branded products on Peapod, Ahold USA's online retail site, as well as in a store-within-a-store concept in the latter's Stop & Shop stores.

"The Peapod strategy went far better than we expected it to go," said Dunlap. "The average basket size for Wild Oats customers was $160, and we boosted Peapod's average basket size $9."

More importantly, the retailer is expanding its brand to new consumers through the strategy. "There are no strong organic brands in the market," said Dunlap. "We're taking our private label brand outside of the natural foods channel."

This year, Wild Oats plans to extent its reach via Peapod outside Chicago, and will have 400 new products with which to accomplish this."

Internally, Peapod plans to seek margin improvement through the use of technology, as well, through the use of backdoor receiving practices and using labor scheduling technology.

Moving forward Wild Oats plans to build 12 new stores in 2005, while resetting 10 and possibly relocating two more. "We ended 2004 with $40 million in cash and investments, and have an untapped credit line of $95 million," said Dunlap. "There is a significant opportunity for expansion."
-- Joe Tarnowski
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