Should Independents Give Up on Big Brands?
Big box stores and large supermarket chains have historically been able to offer better prices on consumer packaged goods, in part because they get better deals due to volume and partly because they are more efficient.
Independents and smaller chains can't move new items to the shelf as quickly as the big guys because they have more steps in the process. Wholesalers are often involved and smaller grocers rarely get direct attention from branded manufacturers. Center store, while problematic for all supermarkets, has particularly been an issue for the small players that struggle to compete on price.
Although a recent study from the National Grocers Association reported that independent grocers represent $130 billion in sales from 21,000 stores, consumer product manufacturers really don't look at it that way. For one, there is no systematic way to reach independents like there is with a big self-distributing chain. So independents have suffered, typically offering a smaller selection of branded items, often at a higher price. Consumers often do not find new items in independents until well after they are on store shelves in large chain competitors.
Meanwhile, a recent IRI study says big CPG companies are failing to grow as fast as smaller companies. Real innovation often comes from smaller CPG rivals, as well.
With all this going on, I can't help but wonder what would happen if independents quit playing the game, trying to push water uphill, and paid more attention to the perimeter and niche CPG brands that might draw in more profitable shoppers.
Indies wouldn't entirely abandon the center store, but make it more of a differentiated, convenience section for shoppers needing to fill-in one or two branded items. This way, independents could focus on meat, seafood, deli, dairy, produce, prepared, regional, and gourmet foods. They could present themselves as the true fresh alternatives to chains, developing better relationships with regional brands and local produce suppliers, while reconnecting with their communities.
Sure, stores taking this approach would lose volume, but they could make it up with more profitable customers and higher margin items. It won't work for all stores in all areas, but it seems to me that independents should take another look at the game they have been losing and play a different one.