CPGmatters: Trading Partners Call for Commitment to Best Practices
Through a special arrangement, what follows is an excerpt of a current article from the monthly e-zine, CPGmatters, presented here for discussion.
Are betters days ahead for store brands?
That depends on trading partners. Executives attending the 2008 Annual Meeting & Leadership Conference of the Private Label Manufacturers Association (PLMA) in Tucson, Ariz. recently called for manufacturers and retailers to affirm their commitment to best practices as a means to help propel the next surge of growth.
"It used to be that manufacturers were preoccupied with product quality, making sure that store brand products were at least equal to the leading national brand competitor. This goal has now been accomplished," Brian Sharoff, president of the association, said in a presentation.
"But to realize the full potential of store brands, manufacturers and retailers must become more innovative and creative," he said. "Some private label programs are already adopting this new approach. You can see it in Safeway's O organics and Eating Well health-oriented ranges, as well as Kroger Co.'s licensing agreement with Disney for children's products and the steady stream of creative new food products offered by Trader Joe's."
In a session titled "Worst Practices: What Not to Do and Why We Do It Anyway" a panel of experts identified three critical issues as practices that can stand in the way of private label growth:
- Over-reliance on price, which subverts retailers' efforts to create high quality private label programs;
- "National brand equivalency" as a fixation on "me-too" private label, even after a number of retailers have demonstrated they have the capability to do better than national brands;
- Retailers subordinating private label to the promotional strategies of the national brands, rather than building their retail franchise by promoting private label first.
Attendees were especially cautioned against complacency amid projections of tough economic times ahead.
"It is a myth that consumers temporarily forsake national brands in the face of higher gasoline prices, inflation and eroding home equity," said Bill Bond, vice president of Willert Home Products and Chairman of the Board of Directors of PLMA. "Just as soon as things improve, this myth implies, consumers will flock back and again be happy to pay a premium price for the national brands they love."
"But private label's success was never an effect of hard times and cheap prices," continued Mr. Bond. "Rather, it has been a hard-won consequence of consumer confidence built up over years of high quality, consistency, product improvements, innovation, packaging and marketing commitment on the part of leading retailers to the development of their brands."
Discussion Questions: What do you think are the worst practices in retailers' private label programs? Do you agree that it's a myth that consumers forsake national brands for private labels in tough times?