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BrandWeek reports that Safeway’s two new brands – “O Organics” and “Eating Right” – have the potential of generating $1 billion in sales over the next two to four years, and that the company believes that it could be onto something “magical.”

According to the story, “Introduced in 2006, the O Organics food line generated sales of $300 million last year and is expected to bring in $400 million in 2008, per Safeway. Eating Right, which bowed last spring, is on track to hit $200 million in sales this year. With expanded distribution that includes the company's plan to begin selling the products in rival U.S. supermarkets this fall (they are already in retailers overseas), these healthy numbers could be just the beginning.”

While other retailers are pursuing similar strategies, Safeway is perceived as having the edge in repositioning “its vast array of private label products under a unified brand message (and) setting an example for the entire industry.” And the company’s timing is nothing if not propitious – the economy is down, and people are looking for products that meet their financial circumstances but also provide a measure of nutrition and taste.

KC's View:
In so many ways, Safeway seems to be pursuing a strategy of developing products that will build sales in places other than its own stores. That’s what it is doing by selling these two lines of foods, and by developing a line of gift cards that are being sold everywhere, and by working on health care solutions that go beyond its own labor force. That’s fascinating…and CEO Steve Burd deserves kudos for looking around the corner and trying to see what other people may not be seeing.

Now, I think there is a pretty good argument for why Safeway’s rivals should not be selling any of these products, from organic foods to gift cards. But that doesn’t mean that Safeway shouldn't keep working this side of the tracks.