Target in test mode with food

by Eric Schroeder
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Target is shifting its approach from that of a grocery business into that of a food business.

MINNEAPOLIS — Trial and error. That’s the approach Target Corp. is taking as it shifts its approach from that of a grocery business into that of a food business.

The Minneapolis-based retailer has spent much of the past six months talking about its food business, going so far as to hire Anne Dament in April as senior vice-president, merchandiser, with the specific job of “leading the strategic repositioning of Target’s food business.”

Target is using its Made to Matter collection of better-for-you products as the base for its food program. The retailer has increased the number of vendors involved in the program to about 30, up from 15 last year. And just last month Target began marketing the Made to Matter products in the rear seasonal area of its stores, leading to “really fantastic results,” said Kathee Tesija, chief merchandising and supply chain officer.

“There was a marketing campaign that went along with that that really resonated with the guests, and then the in-store presence helped make it easy for them to find when they came to the stores,” Ms. Tesija said during a May 20 conference call with analysts.

Kathee Tesija, chief merchandising and supply chain officer for Target.

Ms. Tesija said Target believes 30 is about the right number of vendors for the Made to Matter program, but acknowledged the retailer is still evaluating the program.

“We launched the new vendors this spring, so we’re still analyzing those results,” she said. “The guests will guide the work. The important part about Made to Matter is that while these brands might be carried elsewhere, we have exclusive product with meaningful innovation within the program within Target, and that’s what’s really resonating with the guests.

“They recognize those brands are at Target and they love to buy them. But they come looking for those new exclusive, really innovative products. So I think keeping the number at a reasonable amount so that we’re sure that we can drive that right innovation, it’s very much a partnership with us and these suppliers, so I think we’re in the hunt with the right number.”

Specific to its food repositioning, Brian Cornell, chairman and chief executive officer of Target, said the retailer is using 2015 “to test and learn.” He said Ms. Tesija is taking a hard look at the key food categories Target should compete in, as well as assortment and merchandising strategies the company should consider.

“This is not about how fast we make the changes,” Mr. Cornell said. “We want to make sure we really have a chance to test, learn, get the feedback from the guest. So then as we move into 2016 and beyond, we move forward with confidence. And with the confidence that the guest has guided us through the changes we’re going to make. So we’re clearly focused on it. The team is making very good progress. But we’re in that test and learn and validate environment right now, and you should expect to see much more unfold as we get into 2016.”

Net income at Target Corp. in the first quarter ended May 2 was $635 million, equal to 99c per share on the common stock, up 52% from $418 million, or 66c per share, in the same period a year ago. Sales increased nearly 3% to $17,119 million from $16,657 million.
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