May 12, 2015

Growing Brand Equity and Supplying Store Brand Programs


Private label and store brands have dramatically increased over the last decade. This offers manufacturers an opportunity to examine their current product portfolio and market. As you have probably noticed, everything from fresh, frozen and refrigerated foods, beverages, snacks, shelf-stable groceries and ingredients of all types are now available in store brands. This has caused Branded Marketers to step back and evaluate their current positions and make critical decisions for their company's product line-up and retailer supply relationship.


Why Retailers are Building  Retailer Brands

  • Brings value to retailer by creating a distinction from their competitors and clearly identifies their products and services for current and potential customers.
  • It’s easier to negotiate lower costs on store brand products.
  • Can readily purchase direct without distributor middlemen and import overseas product.


Because private label programs have enjoyed much success and approaching about a quarter of grocery sales, retailers are now more likely to choose as partners those manufacturers who are willing to support private label product roll-outs. Food manufactures that supply retailer and distributor organizations with private labeled products are reporting strong sales growth.

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By examining the nature of your category, competitive manufacturing capacity and initiatives, your own product development process and capacity will provide guidance. This information will assist in deciding on how your company might participate in a store brand program. Your response should include consideration on manufacturing capacity for a particular item and we will consider three basic categories (commodities, unique, and revolutionaries) for building your response:

3 Basic Categories in Building Your Response


Commodities
  • Milk and Dairy products especially fluid milk.
  • Fresh eggs.
  • Cold and Allergy Tablets along with vitamins.
  • Sugar
Unique products
  • Specially Meat Snacks
  • Taco Mexican Dinner Kits
  • Organic and Local Harvest
Revolutionary products
  • Kraft Bagelfuls
  • Unilevers Pro-Activ Yogurt
  • Aronia Fruit Juice
  • Batter Blaster
The larger the universe of manufacturing plants capable of producing an item, the less likely you will benefit from selling a branded product into the set without some unusual and special differentiation and purchase by the consumer.
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Definition

Store Brand products are generally not supported by manufacturers with trade spending or advertising to consumers. That function is left to the retailer and their marketing arm and budget. The consumer recognizes the store brand as part of the product mix of the retailer and will anticipate a particular level of quality and determine purchase opportunity. Therefore, traditional budgeting and overheads of a branded product do not adequately reflect the nature of costs associated with Private Label suppliers. The specific marketing costs, packaging design, and product development costs are radically different from branded product manufacturing and marketing.


As your product portfolio migrates down the curve to commodity status over time as all products eventually fall, you should maintain and continue to advance new revolutionary items. Invest in product enhancing attributes and new manufacturing practices that will result in your companies continual brand success. Developing revolutionary breakthrough products can be expensive. One area to drastically save on development of revolutionary product breakthroughs is to license or purchase products, patents, and intellectual property from outside of the company.  Proctor and Gamble and Nestle both are moving fast in this direction. The Swiffer Wet Jet® and Forceflex Bags® are examples of the results of this process.
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Summary

Retailers are moving fast to develop and enhance their portfolio of store branded merchandise.  Manufacturers should carefully consider the portion of their portfolio for commodity style items that can easily and quickly deploy into the store brand channel alongside their branded unique and revolutionary items. The avoidance of store brand manufacturing with retailers not only shrinks the dollar volume opportunity but weakens the potential for a strong and viable supply relationship with the retailer. Gather all the necessary information on your market category, the retailers efforts, and your product line-up to determine your best strategy in this environment.

What actions are you taking to grow your business? Send a note or comments to tim@timforrest.com. Also, follow me on Twitter. I want to hear about your success!




What actions are you taking to grow your business? Send a note or comments to Tim, also follow me on Twitter and see my retail photo notebook.. I want to hear about your success!

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