Target Bites At Walmart's Grocery Share With New Private Label Brand

Retail behemoth Walmart Inc WMT derives more than half of its business from grocery sales, and rival Target Corporation TGT is looking to steal share through the launch of a new private label brand, CNBC reported Monday.

What Happened

Target will begin selling food products in mid-September under a new private label brand called Good & Gather, according to CNBC. The brand will have a portfolio of 2,000 items ranging from milk and eggs to frozen veggies, salad mixes and more.

Three-quarters of Target shoppers buy at least one food item when visiting stores, Stephanie Lundquist, head of food and beverage at Target, told CNBC. 

But grocery accounts for just 20% of total sales, as the store isn't viewed as a destination for food in the way some of its competitors are. 

"Grocery is the one spot in their stores they haven't fixed yet," Brian Yarbrough, an analyst at Edward Jones, told CNBC. "But they are in a much better spot than they were four or five years ago."

Why It's Important

Target may have Walmart in its crosshairs, but one analyst said this may not be the best idea.

Neil Saunders, managing director at GlobalData Retail, told CNBC that Target does a "reasonable job" in selling consumers "everyday things you need."

The food space is known for lower margins, and instead of challenging Walmart's share, Target needs to differentiate by selling "great products" and "reasonable prices," he said. 

"There is room for Target to nibble away at the market," Saunders told CNBC.

What's Next

Target's new brand will phase out its existing brands Archer Farms and Simply Balanced and part of Market Pantry, CNBC said.

The new Good & Gather brand will occupy more shelf space in stores as management prioritizes its own private-label goods over national brands.

Target said it expects the Good & Gather initiative to become a multibillion-dollar brand over time one of the company's largest private labels.

Target shares were higher by 2.14% at $86 at the time of publication Monday. 

Related Links:

Momentum And Discipline: The Street Weighs In On Walmart

Baird Sees Entry Point In Target Ahead Of Q2 Print

Photo courtesy of Target.