Topco Storebrands December 2024

Founded in 1944 as Food Cooperatives Inc., the company in 1950 would merge with Top Frost Foods as the two organizations were well matched in the services each offered to their respective members. The merger led to a new corporate name — Topco. Its founders likely could not envision the size and scope of the company today along with the impact Topco has on its members and millions of shoppers across the country. The privately held company provides aggregation, innovation, and knowledge management solutions for its food industry member-owners and customers, including grocery retailers, wholesalers, and food service companies. Topco leverages the collective volume, knowledge, and commitment of these companies to create a competitive advantage in the marketplace by reducing costs and offering winning business-building capabilities. In this special section celebrating Topco’s 80th anniversary, Store Brands spoke with key company executives and board members who discussed the impact Topco has on the grocery business today and the opportunities for growth in the years ahead.

Starting as a small cooperative to deal with product shortages during World War II, Topco today has nearly $18.3 billion in sales and is celebrating its 80th anniversary.

A View From The Top An interview with Topco CEO Randy Skoda

Expanding Horizons An interview with Topco VP Katie Waeltz

An interview with Topco Board Members Jeremy Gosch, David Rice and Pete Van Helden

Topco CEO Randy Skoda discusses the company’s evolution and the role it plays in helping regional grocers stay competitive

A View From The Top

For the past 80 years, Topco has been serving the needs of regional grocers and their customers by allowing smaller chains to remain competitive in the face of growing competition from national powerhouses. Today, the grocery cooperative is an $18.3 billion privately held company that touts itself as providing aggregation innovation and knowledge management solutions to its members, who include grocery retailers, wholesalers, and food service companies. Topco can leverage the collective volume, knowledge, and commitment of these companies to create a competitive advantage in the marketplace by reducing costs and offering winning business-building capabilities. The big change in the company happened nearly a decade ago when Topco launched its commitment initiative. By having members commit to buying certain levels of products from Topco, the company was able to work with product suppliers to obtain better pricing on a host of items. As Topco celebrates its 80th anniversary, its President and CEO Randy Skoda spoke about the company’s evolution and the growth opportunities that lie ahead.

As Topco turns 80, can you give us an overview of the company?

Topco has talked a lot about commitment. As we celebrate our 80th year, it’s important to understand how Topco operated for its first 70 years. We were strictly a voluntary cooperative, which meant that a grocery could buy whatever they wanted from us one day, and then the next day buy something different or buy direct. Operating as a voluntary co-op, we had to sell each member individually and were not able to go to market as one. When someone such as Walmart goes to market, they do it with three things: a lot of scale, a single spec, and a single decision point. Topco for years was going to market with a lot of scale, but individual members make their own decisions about products and all have different specs. We worked to change how we went to market for products. While we still serve voluntary members, the real benefits are for those members who have committed to Topco. The committed members say they are going to buy 95% of their store brands through Topco. This allows us to make decisions about products and have the power of the purchase order. That has been a game-changer as we’ve become a much more strategic customer to our suppliers.

Those Topco committed members have grown their volume through Topco by more than $8 billion. They saw value in pushing more chips to the middle of the table and allowing Topco to go to market on their behalf. But it’s a unique organization in that they partner together and leverage Topco to work on their behalf. I think many of our members would tell you they would not be around as regional retailers if they didn’t partner with each other. At the end of the day, Topco is a platform that is jointly owned by these retailers and wholesalers where they decide to partner together and execute through our platform. They are pooling resources to do things that they probably couldn’t invest in on their own. Now, they join together and grow their businesses.

The move toward having members commit, is that the main reason sales have jumped as high as they have in recent years?

Our top 20 members account for a little less than 80% of our volume. We have 46 members in total currently, and 35 of those members are committed. Those committed members represent 91% of our business.

Are there certain members that drive a large percentage of Topco’s business?

We do take the competitive overlap very seriously in the sense of making sure we’re not discussing things that would run afoul of antitrust rules or anything else. When we’re sharing things in a group setting, we’ll separate our members by regions so there’s no overlap in conversations and our members can be confident that they are sharing information with others who are noncompetitive. And you’re right in that we’ll have people sitting side by side carrying the same brands, but they have realized that the guy across the street is not the real competitor. The real competitors are Walmart, Kroger, and Amazon. You know, if you think about Amazon, they are taking volume out of every one of these markets. The products just show up at someone’s house. At the most senior level, our members realize that their fellow Topco member is not the enemy. They are all fighting against the bigger guys.

It’s an interesting dynamic since you could have members in one room who are also competitors. But it seems to work without any problem.

That’s a great question. The decision to become a committed member of Topco comes from the very senior level of each member. What happened over the years is there’s turnover in senior management. When a new CEO comes in, they may have never heard of Topco or understand why they need us. It’s an educational process. We have had instances where we have spoken with the new CEO, and once there was an understanding of our role, the CEO doubled down on our relationship with the given member. And when inflation hit the industry, we had some large voluntary members reach out to have deep discussions to find out what they were missing. During times of a value economy, it becomes crucial to have good products at good prices. Quite frankly, the economy served to drive members who weren’t heavily engaged with us to become more engaged because they needed to find new ways to survive. We also get a greater benefit by bringing more scale to the organization. Even if our members have stores across the street from each other, they understand that by growing the co-op they’re all going to win.

How do you get the noncommitted members to change and become committed?

We have an incredibly strong insights team that uses national insights and regional insights to identify opportunities. We work to tap into emerging trends and make products available to all our members. But we also know the West Coast is different from the Midwest or East Coast. Our team does a really good job of developing products that target specific regions. We’re fortunate to have a diverse membership that allows us to do different things. We also represent store brands when talking to the category manager. A CPG representative is likely to downplay the need to have some private label products, but we’re there with insights to talk about why it’s important.

With members across the country, how challenging is it to develop private label products that meet the needs of customers at each of those retailers?

One of the growth opportunities we have is how we do more with our existing members. National brands are one opportunity. While we’re doing some pilot programs, we buy next to nothing as it relates to national brands. If we could buy those products on behalf of our members, Topco could almost double our business without having to come up with one new product. We would just need our members to be engaged with that idea. So that’s one significant opportunity for us. We also see food service as a big opportunity. Not only can we supply deli products and food such as chicken, but we can also supply the cooking oil needed by food service operations to prepare the food. When you look at most retailers, their food service and retail operations are completely different and they don’t buy their commodities together inside the store. For example, the retail side buys sugar and the food service side buys bulk sugar, but they don’t work to buy all that sugar together. We’re working through some of those things, and we think there’s big scale there.

When you look toward the future, where are the growth opportunities for Topco?

Consumers today are focused on finding quality products at a strong value, and many have turned to retail private brands to meet this growing need. Recognizing the opportunity to expand its own brand product lines, Topco is in a unique position to help its 46 retail members provide their shoppers with storewide money-saving solutions that also offer quality and uniqueness. While product development is the focal point for the cooperative, the company is also paying close attention to packaging design and has taken steps to market its own brands to consumers across the country. Katie Waeltz, vice president of Center Store Category Management and Insights with Topco, shared her insight on the changing private label marketplace and how Topco has evolved its efforts to meet the needs of consumers.

Topco VP Katie Waeltz shares how the co-op is reinventing private bands for today’s savvy shopper

Expanding Horizons

COLLECTIVE IMPACT

Learn more in these interviews with our executives and board members

First and foremost, we compete by partnering together and aggregating to ensure that Topco members have high-quality solutions for their shoppers every day. Our sourcing teams are relentless in their pursuit of the best cost and are keenly aware of the commodity triggers that can bring cost down – and they champion those every day. We continue to innovate with new items, brands, and solutions, of course. And we’re consistently recognized in the industry for excellence in innovation and design. We also innovate in redefining solutions that we have provided to shoppers for years. We’ve been able to reposition our packaging to be more relevant to shoppers, focusing on the elements they value and highlighting those for easier decision-making at shelf. Also, coming out of the pandemic, suppliers were hesitant to do shippers and displays – labor is expensive, and carrying inventory on displays can be challenging. So we shifted gears to say we still need these things, but not every day — some shippers and displays can be featured during key selling seasons only. Being able to speak with our suppliers about innovating, even where we already have existing items, has properly positioned us during peak seasons and been another lever to help us compete.

What steps can Topco take to compete with the ways national brands can push back to regain some of the shelf space they have lost to own brands?

There has been an elevated and added consumer appreciation for own brands. The days of a white box and a black label are gone, and own brands stand for value and quality. These are brands that have meaning and have a connection to shoppers. But it’s been a journey. The pandemic stressed the supply chain everywhere, and it provided an opportunity for own brands to shine with shoppers who perhaps in the past would never consider them. Coming out of the pandemic, shoppers were presented with high inflation and there was this push-pull between national brands and own brands. At Topco, we have been able to navigate those challenges and changes, and it has evolved the way we understand shopper behavior and the solutions we provide to our membership, enabling them to be competitive in the future.

What is the current state of Topco’s private label business?

There is still the shopper that has a certain dollar amount in their pocket and at any given time is making trade-offs at the shelf every day. Own brand products can serve their needs. There is also a segment of customers that have become increasingly loyal and fanatical about the own brands they buy. They trust these brands for their families and they have a deeper connection to the brand – in own brands that’s often a balance between value and quality: Not only is it a good value, but I also trust the brand to deliver for me and my family. Once they have that brand trust in a given category, they are willing to try products from that [own] brand in other product categories. We’ve been able to deliver on the value side and with some of the bigger equity things as well.

As consumers continue to increase the amount of private label products they purchase, what is driving the movement? Is it still economics or are there other factors at play?

Private brands have become more ubiquitous, so everyone is buying products sold under private brands for different reasons and to meet different needs. What’s becoming more interesting is how you appeal to certain groups of shoppers. Take Gen Z, for example. They’re digital natives, they often build brand trust through influencers, they’re the most ethnically diverse generation and they seek authenticity. What surprised me about Gen Z is they’re still making a lot of decisions in-store, at the shelf, and based on some of the key factors that many generations before them did. So while they are different, there are some key principles that remain consistent for them.

Have there been any noticeable changes in terms of demographics with who is buying private label products?

Randy Skoda, our CEO, says this all the time, “The best thing about Topco and our biggest strength is that we have 46 independent retailers, and the most challenging thing about being a co-op is that we have 46 members with different strategies.” Our most successful strategy has been our ability to secure commitments from our retail members upfront. We also use qualitative and quantitative research with their shoppers. We seek to understand our members’ shoppers and what they are seeking from their grocery store. This supports the development of new brand strategies and new items. When we have concepts for new products, we communicate with members to garner interest in what we are proposing. Once we reach a critical mass, we move forward to deliver an assortment of hundreds of new items each year across edible, nonedible, and fresh.

Topco currently has 46 members. What type of feedback or input do you receive from members in terms of developing new products or cycling out of other products?

We had a similar issue with our frozen pizza supplier a few years back. At the time, we had so many different brands that we became difficult to work with from the supplier perspective. They loved the partnership and we had a great relationship, but we weren’t efficient for them. Changing the lines to switch out packaging or a formulation slowed them down and they had other customers that had larger scale. Instead of walking away from the category altogether, we then asked the supplier if they would consider retaining our business if we could aggregate into one brand. Enter, Crav’n Flavor. We quickly did shopper research and aligned on the brand Crav’n Flavor that launched in frozen pizza, and we were able to get our members to come together. They were able to have a meaningful pizza program with quality equal to the key national brands they were carrying. We also shared the potential to take the Crav’n Flavor brand into cookies and crackers and allow the total assortment to expand from, on average, six cookie varieties to 30 varieties. This would allow our members to have private label products that were similar to popular name-brand products already on their shelves. The brand continues to evolve in the categories where it’s most relevant to our members’ shoppers, and we’ve got a few more new segments that we’re excited to launch in 2025.

Some Topco members have shared examples of product suppliers cutting them off because they don’t buy enough products. Does this open new opportunities for Topco to put its private label products in more places and build national brands?

We’ve been built on a foundation of partnership and aggregation to enable our members to stay competitive against the large national players in grocery. I think with any organization that’s associated with delivering high-quality food products to shoppers, there’s also more at the core of what we all do. Food is a reflection of ourselves and our shoppers. It can bring families together and help them celebrate good times and navigate hard times. Being part of that is meaningful. We must keep that front and center with the initiatives we offer. We serve a much bigger purchase, and I don’t know that is necessarily seen when you see Topco on the door in Itasca. The nature of our model is very behind-the-scenes. We serve our members and their banners, meaning Topco isn’t necessarily a company that the larger public is aware of, and when you start to unpack what we do, it’s pretty special.

It also feels as if the services Topco offers — notable among them its broad range of private label products — play a major role in keeping local grocery stores competitive with larger retailers.

If we could get all of our members to commit and partner together on key initiatives, I think we would be unstoppable. Our members know their communities better than anyone in the industry and are a force to be reckoned with. I look forward to continued growth in member brands, Topco brands, and innovating.

As you look ahead, what are the opportunities for growth?

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. 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 megamergers, 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. 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.

Why is the relationship between Topco and its retail members important?

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 Hy-Vee; Pete Van Helden, CEO and COB of Stater Bros. Market; and David Rice, CEO of Associated Food Stores, shared insights 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.

Topco’s cooperative model supports members against national competitors

Strength in Numbers

Jeremy Gosch

David Rice

Pete Van Helden

GOSCH: 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. VAN HELDEN: 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. RICE: 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.

What does Topco bring to your company that allows you to be more competitive?

GOSCH: 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. VAN HELDEN: 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. RICE: 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.

Topco’s membership includes retailers from all parts of the U.S. How do you feel they’re doing in meeting the needs of each retailer?

GOSCH: 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. VAN HELDEN: 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. RICE: We’ve been a Topco member since 2012, and in the years 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.

How has the evolution of private labels in recent years and the continued product development efforts from Topco impacted your business?

GOSCH: 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. VAN HELDEN: 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. RICE: 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.

Looking ahead, what are the important areas for Topco to work on as the company continues evolving and growing?

Pete Van Helden

David Rice

Jeremy Gosch

Strength in Numbers