Topco Uses Cooperative Model to Support Members Against National Competitors
Complete Topco Coverage
Talk with the team at Topco headquarters, and to a person, the commitment to its retail members is clear. Product development is the most obvious part of the relationship, but numerous other factors make the cooperative invaluable to the regional grocers it serves.
The biggest challenge facing Topco members is the competitive landscape, where they battle against national brick-and-mortar retailers along with e-commerce specialists that continue expanding their presence in the grocery world.
To gain insight into the important role Topco plays for its members, Jeremy Gosch, CEO and chairman of West Des Moines, Iowa-based Hy-Vee; Pete Van Helden, president and CEO of San Bernardino, Calif.-based Stater Bros. Markets; and David Rice, CEO of Salt Lake City-based Associated Food Stores, all shared insights with Progressive Grocer's sister publication, Store Brands, into how the cooperative helps level the competitive playing field while also providing top-quality private label products that members may otherwise be unable to access.
Store Brands: Why is the relationship between Topco and its retail members important?
Jeremy Gosch: We’ve been with Topco for 20 years. When the relationship started, we were trying to figure out how we would be sourcing products long-term. Today, as a committed member, our relationship with Topco allows us to compete with others that are much bigger than Hy-Vee. And this allows our customers to save money and win as well. Working with Topco also allows us to punch above our weight in areas such as private label and fresh. For us to be able to create a consistent brand that offers great value and premium quality is a huge win — and a huge win for our customers. To me, that’s what being a member of Topco is all about. Working together as members/owners to find solutions that meet the needs of the group.
Pete Van Helden: When I joined Stater Bros. in 2013, I had no experience working with Topco. It was a new concept for me coming from my prior life at Albertsons. In the years that followed, I learned a lot about what Topco provides and how beneficial it is to be a member. They represent the little guy, and in today’s ever-changing world, where size matters more than ever and we’re seeing mega-mergers, they allow us to do things we really couldn’t do on our own. Whether it’s negotiating the best prices, to marketing support and so many other things, Topco is a great help to Stater Bros.
David Rice: The relationship between Topco and its members is important, because the more we work together, the more success we’re going to find together. Topco isn’t a vendor. Topco is all of us. And the more we’re committed, the more we’re engaged and the more we’re involved, and the more we team to make things work, the more success we are going to have. Topco is mission-critical to our ability to compete, since it gives us scale. But it also gives us shared knowledge and camaraderie between the different companies who help each other. That’s a big deal, too.
SB: What does Topco bring to your company that allows you to be more competitive?
JG: They bring us the opportunity to get into categories that need scale. One example is paper. If Hy-Vee were to go out and try to do a private label paper program, we probably would not be able to do so. And even if we were successful in developing a paper program, we would not be able to have the quality and variety of products that Topco can offer. There is so much work that goes into building a private label program, from research and design to branding and so on, that is needed to build a successful product selection. We need to come together and create brands across several categories that will allow us to compete against the big retailers and win.
PVH: If we didn’t have Topco, there are certain product categories for which we would not have a private label selection. We recently had a supplier of cottage cheese drop us because our volume wasn’t big enough for them to do business with us. If it wasn’t for Topco, Stater Bros. would not have a private label line of cottage cheese. We then brought in the product under the Food Club brand, and we again were able to offer a private label line of cottage cheese. While we had little advance notice from our previous cottage cheese supplier, in other cases when we see something like this coming, we’re able to work with Topco and put a transition plan in place.
DR: The foundation of our relationship with Topco is the selection of private brands they offer. But they also have an incredible program for support items [shopping bags and other items] and store suppliers that are vital to running our stores. And that is all part of the value proposition Topco offers.
SB: Topco’s membership includes retailers from all parts of the United States. How do you feel they’re doing in meeting the needs of each retailer?
JG: Topco members in California or Virginia, for example, are not going to find suppliers in certain categories on their own, whether it’s nonfoods or center store. For a regional retailer, finding a supplier of frozen potatoes is challenging. But those are the things Topco can do for us. We all want the best-quality products at the best price as we look to create the best value for our customers. That is something [all Topco members] are aligned on. That is part of the partnership of the group, is trying to figure out how we can create value for everybody in the group.
PVH: The move to having committed members had a major impact and allowed Topco to work with top suppliers and negotiate. Having volume from committed retailers allows Topco to source products that are good for all members. The vast majority of the volume of products that go through Topco is from committed members. This is what has made Topco a much stronger organization.
DR: First of all, they have a great team with high-quality people. They also do a great job of promoting collaboration among members, and they embrace feedback and engagement from members. That allows them to continue improving whatever product and service we may need. They do an outstanding job of collaborating with [members] and developing products to meet our needs.
SB: How have the evolution of private labels in recent years and the continued product development efforts from Topco impacted your business?
JG: I’ll use Crav’n Flavor as an example. When you look at cookies and crackers in private label, we had Dunkaroos that were a really bad knock-off of Oreos, and we sold none. When you look at the categories that Crav’n is in, the product development team can do brand research and design packaging according to the target demographic we’re looking to reach. The key is getting a quality product at the right price. As a group, we’re committed to Crav’n Flavor, and the result is that we’re able to get quality products that I would say exceed national brands and succeed in categories where we have failed before. For us to have opportunities to get into categories with items the customer wants, with a marketing plan behind it and with attractive packaging, that’s a win for us.
PVH: I’ll go back to the challenge we had with cottage cheese. Once the supplier cut us off, I didn’t have a lot of options and would have only been able to carry the product sold under national brands. I don’t have the resources to develop a private label line of a certain product. I would need more overhead to get something like this done. But all that work gets done by Topco.
DR: We’ve been a Topco member since 2012, and in those years, we’ve become more and more interested in Topco’s programs to allow us to have the scale to stay competitive with private label. We found ourselves being viewed as a smaller retailer by suppliers and were losing the ability to have store-brand products under our own brand. It was around 2017 when we made the jump to Topco, which turned out to be the best move we ever made. We became fanatics about Food Club and Topco’s other private label brands, and we continue to grow penetration levels of private labels.
SB: Looking ahead, what are the important areas for Topco to work on as the company continues evolving and growing?
JG: When you think about things such as retail media, procuring products, supply chain, supplies for the stores, and pharmacy, these are areas that Topco touches today, but there’s no end in sight in terms of growth opportunities. As long as the group can bring ideas together in an agreeable fashion and discuss what we want to bring to market, there is a lot we can aggregate for value. Plus, there are other areas in terms of technology we can discuss and aggregate different resources that will help Topco’s retail members. As we go head-to-head with the Krogers and Amazons of the world, we need to create scale on a variety of things that help keep all of us competitive.
PVH: We’ve got a lot on our plate at the moment. What I think we’re doing now around Food Club is a big deal for a couple of reasons. We didn’t have much Food Club product on our shelves in prior years, but we’re moving in that direction. Other members have a lot of Food Club on their shelves, and the brand is now making a change with labels and ingredients. The brand is becoming very attractive for companies like mine that haven’t been big players in Food Club. We’re also doing new things around Crav’n Flavor as it continues to grow as a brand. Our cookies, crackers and chips did well. So there’s plenty to keep us busy.
DR: When looking at an area such as technology, there continue to be rapid changes, and keeping up is a challenge. The larger retailers have an advantage, given their scale, but working with Topco on an issue like technology can also keep us competitive. Some issues can be complicated to figure out, but Topco gives us a place as regional retailers to come together and develop solutions.
