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Doug's Drift

Private Label and National Brands - A Group Effort

June 30, 2014

As retailers seek to grow their private label portfolios, gaining a stronger footing in existing categories and breaking new ground with fresh penetration into categories that previously didn’t have any private label representation, they inevitably face ongoing competition with national brands. This is a dynamic game with variables that shift and change depending on the given retail organization, banners, competition across channels of operation, geographical location, targeted store shopper demographics, tracked preferences for private label vs. national brands in specific categories, etc. And shoppers can prove a fickle bunch. There’s no guarantee that what works today in any given scenario will work tomorrow. Flexibility is a key factor in winning this game—and an ongoing willingness to never rest on your laurels.

But to see each and every product matchup as a private label vs. national brand race to the finish is short-sighted. It doesn’t include the big picture.

Often, overall category strength and diversity is what wins shopper loyalty. Both private label and national brands have potentially strong roles to play in almost every product category. And success will likely best come about through a concerted effort that includes strong collaboration between private label and national brands. The methods by which retailers will achieve these results will vary—and some of which have yet to avail themselves.

At FMI Connect and the Private Brands Summit back in June, PLBuyer organized a panel discussion to tackle some aspects of this very subject (see p. 10 for some highlights). While we addressed many of the possibly ways retailers can manage private label and national brands to achieve overall retail sales gains, one example cited by panelist Richard Gunn, executive vice president of merchandising and marketing at K-VA-T Food Stores Inc./Food City, is a strong case-in-point worth elaborating on here.

Richard noted that in his organization’s territory, Walmart has historically maintained a near monopoly on dog food via its Ol’ Roy brand. Food City just didn’t have anything in its stable to compete with Ol’ Roy. As a result, they were missing a strong anchor product that would regularly bring shoppers in the door to draw them to the pet products category (and fill their basket with other products while walking the aisles…).

K-VA-T/Food City’s solution was to resurrect its Chuck Wagon brand—but it didn’t do so in a vacuum. The retailer crafted a category-wide plan that involved a group effort between the retailer’s pet category managers—including the principals working on the reintroduction of Chuck Wagon—and suppliers and manufacturers of nationally branded pet products.

Richard noted that one of the keys to success in achieving a balanced, targeted approach to category growth is to understand where help is needed with any given brand, whether national or private. It’s a matter of fostering an ongoing dialogue with all business partners to keep top-line needs and priorities at a high level of awareness. In terms of its national brand suppliers, “if there is something that’s really important to them in their portfolio, some innovation that they want us to highlight, we need to understand what we need to do to grow the category,” he said, noting that nobody succeeds through product cannibalization. Collaboration is the pathway to success.

So when K-VA-T/Food City reintroduced its Chuck Wagon brand, Richard noted, “we brought in all of our pet suppliers and told them what we were planning to do.” They outlined the overall plan, target shopper demographics, existing and desired points of product focus. “Exposing them to the mission” was how he described it. He said that through the reintroduction of Chuck Wagon, they were not only planning on working to not only grow that retailer brand, but were seeking overall growth of the category. They didn’t want to cannibalize their own product portfolio—or anyone else’s. They were working to get new pet products customers into their stores, and once they hit that department, they wanted a strong set of products within the category to greet those shoppers—products that met their diverse wants and needs in terms of pet products today, products that would keep them coming back week after week, month after month. So they worked with their own folks and the national brands to “step up and play a role,” as he put it. In the end, he noted that the relaunch of the Chuck Wagon program proved very successful for the whole category.

This is a matter of discernment. It’s understanding your strengths as a retailer—given your current capabilities—and working with national brands to highlight their strengths. As more retailers put more overall branding and thought into their private label programs, it’s getting harder—from the shopper’s perspective—to tell what’s a private brand and what’s a national brand. And really, do shoppers even care one way or another? As our panel at FMI collectively noted, to shoppers today, these are all increasingly just brands. The shoppers don’t particularly care who makes them. They just seek products that meet their needs. And if concentrated category and shopper analysis discovers needs that aren’t being met by any brand—store or national—you’ve then identified an opportunity for development of a new private label product or line to step into the gap. The retailers who can successfully meet shopper needs across a wide range of product categories will find incremental sales increases through regular return business.

 Strategic category management that offers a well-rounded portfolio of private and national brands gets more total products into the shopper’s basket. And at the end of the day, that’s what this game is all about. 

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