Through a special arrangement, what follows is a summary of a current article from Private Label Buyer, presented here for discussion.
During the past couple of years, many retailers have invested serious time and money in private label product enhancements and innovation. The national brands, meanwhile, have been losing more and more sales to these store brand alternatives, thanks in part to a down economy that has consumers seeking out value.
But the current national brand vs. retailer situation does not necessarily have to play out as an "us against them" scenario. According to panelists in a Sept. 29 webinar hosted by Willard Bishop, "co-opetition" -- the act of competing and cooperating at the same time to achieve mutual success -- might be in both parties' best interests.
Andy Abraham, vice president of Our Own Brands for Supervalu and a webinar panelist, said he believes many national brand manufacturers have a good idea of what retailers are trying to accomplish with their private brand programs today.
"I think the real question is, how well do they accept it?" he explained. "And to that end, it's really only to the degree that it doesn't impact their current brands or their current way of thinking."
Whether they accept this new reality or not, national brand manufacturers must make sure their products are still relevant to the consumer, Mr. Abraham said, and not redundant on the shelves, as retailers step up SKU rationalization efforts.
"I'm going to use an analogy," Mr. Abraham added. "A few years ago, Alex Rodriguez wanted to play with the Yankees as a short stop. And he had to rethink, 'Well do I try to throw out the other shortstop, or do I just play third base and, therefore, have a different role on the team?'"
A-Rod, of course, is still playing third base for the Yankees -- and the national brands also need to rethink their game plan so their offerings do not go head-to-head with retailers' brands. Differentiation is a key part of successful co-opetition.
As a retailer, Abraham sees co-opetition opportunities not just in product differentiation, but also in actual production.
"There are a number of folks that have considered themselves a branded or a branded-only company that have figured out the way they can deliver value to the retailer is not only through their brand, but also through producing or creating the flavors and the favorites that we want -- to hold their volume, essentially, and make it a better acquisition cost for us," he said. "It's a lower cost for them, ultimately, [when] they push more volume through their production facilities."
Another retailer panelist who said he would love to do the same is Anthea Jones, senior vice president of store operations for BI-LO. In addition, he said shared promotions such as a "buy a national brand item, get this private brand item for free" sale can help drive private brand trial while boosting sales of national brand items at the same time.
Discussion Questions: Should national brands help retailers grow their private label offerings? Should national brands produce and/or promote store brands? In what other ways should national brands get involved in private label strategies?