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PL Buyer's eReport July 8, 2008

July 9, 2008
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Top Performance in a Down Economy
A new report discusses the state of the CPG industry and the most successful practices.
 
In June, the Grocery Manufacturers Association (GMA), Washington, D.C., released a report on the state of the consumer food, beverage and packaged goods industry. The report, "The Food, Beverage and Consumer Products Industry: Achieving Superior Financial Performance in a Challenging Economy 2008," was conducted by PricewaterhouseCoopers LLP for GMA, and takes an insightful look at current opportunities and what lies ahead for the industry.

Despite a challenging economic climate, the report says, U.S. consumer products manufacturers experienced 10.6 percent sales growth in the past year. The report also says that agile consumer product companies can achieve growth by adopting successful practices in key strategic areas, including sustainability, which can enhance a company’s bottom line and shareholder value.

Herb Walter, consumer packaged goods and retail advisory partner at PricewaterhouseCoopers, told eReport editors that private label manufacturers can benefit from several of the strategies discussed in the report.

"Private label can play into the single or multiple formats of retailers because they can match the private label with the demographics of the consumers in a given geography," Walters said. "They might have more flexibility for managing the input costs in the sense of getting the right formulations that are the most cost-effective, where a national brand may be locked into a recipe or a formula that they are not anxious to move from in spite of some of the input cost measures."

The report includes a chapter that details how to increase value and manage costs through joint manufacturer and retailer efforts, a concept Walters said could benefit the private label industry.

"Private label gives reality or positioning to the collaboration argument and the collaboration trend within the retail consumer space," Walters said. "It’s a way that manufacturers can effectively work with the retailers to deliver products that are tailored toward the consumer and the retailer’s prime target."

Additionally, private label manufacturers might have a leg up with transportation efficiencies, Walter noted, if they are supporting nearby regional retailers, with the ability to deliver on a more cost-effective basis locally rather than shipping products across the country or internationally.

"For some private label manufacturers who have the right relationship with their retailer and the right locations and production facilities," Walters said, "there is some real potential here."

Our Take: Retailers that customize store brand products for specific demographics -- based on a collaborative relationship with their suppliers -- are apt to find themselves a step ahead of their competition.



Eye on Health

A Finger on the Pulse of Health & Wellness Education
Manufacturers are missing an opportunity to educate.
 
A recent survey by Chapel Hill, N.C.-based PULSE Health & Wellness Initiatives found that food manufacturers are not meeting the needs of healthcare professionals in regard to communicating the health benefits of their brands. Sixty percent of the 896 healthcare professionals surveyed said that food companies currently do not provide adequate information about their products for consumers to make healthful purchase decisions.

"As consumers take a more active role in managing their own health and wellness, they are increasingly turning to healthcare professionals for guidance, including specific brand recommendations," said Linda Leikin, PULSE Health & Wellness Initiatives co-founder and CEO. "Manufacturers need to educate healthcare professionals about the health benefits of their brands just as much as they need to educate consumers."

Leikin added that healthful brands seeking the success Kashi and other brands have achieved might invest in mass-media vehicles to increase consumer awareness, but still are missing the opportunity to earn the endorsement of a healthcare professional -- "the kind of authoritative voice consumers trust and seek out."

Our Take: Some national brands have benefited from endorsements such as the American Heart Association’s heart-check mark. Why not store brands as well?



Industry Insider

Multi-Channel Mindset
Retailers are looking to multi-channel formats despite a recession-like atmosphere.
 
A recent report from the Aberdeen Group, Boston, Mass., states that despite rising infrastructure costs, small retailers are realizing the importance of moving beyond a single channel. According to the report, 55 percent of small retailers indicated that multiple sales channels -- meaning in-store, catalog and online -- are more profitable than a single channel.

Ideally, small retailers should increase their cross-channel shopping options gradually for consumers. Customers commonly defer larger retail purchases such as consumer electronics, general merchandise or other specialty goods, performing comparison shopping research on the Web and through catalogs before they actually purchase the item.

The report also indicates that price is no longer the primary differentiator for small retailers, and that consumers are seeking brand affinity and convenience in purchase, exchange and return activities similar to a mid-size or large retailer across all channels.

By using strategies such as operating with a centralized inventory, fulfillment and merchandising planning and allocation; creating a process for tracking, measuring and monitoring multi-channel performance metrics; and planning and executing coordinated cross-channel product promotions, a small retailer will -- in all likelihood -- integrate its channels at an equal or higher level than its counterparts, the Aberdeen Group wrote.

Our Take: Multi-channel shopping no longer refers to only brick-and-mortar structures. Consumers increasingly are looking to the Web to learn about and purchase new products. Are you taking advantage of this key channel to tout your private label offerings?


Bits and Pieces

What’s News in Private Label
Among the most notable retail and private label news:
  • Safeway Inc., Pleasanton, Calif., announced the appointment of Diane M. Dietz as executive vice president and chief marketing officer. Dietz, who comes to Safeway following a 19-year career with Procter & Gamble, will oversee the company’s marketing, merchandising, manufacturing and distribution functions.
  • According to a June 27 article in the Business Courier of Cincinnati, Cincinnati -based Kroger Co. is looking to its Kroger brand products to help boost sales. The article stated that the more than 14,000 Kroger brand items are already boosting Kroger’s total sales and profits, and Kroger is picking up market share even as other supermarket chains are losing it to Wal-Mart and other discount retailers. It went on to note that Kroger executives cited store brands as one of the reasons the company had strong first quarter results that topped Wall Street’s expectations.
  • An article in Reuters UK noted that Bentonville, Ark.-based Wal-Mart is sourcing more produce sold in U.S. supercenters and Neighborhood Market stores from local farmers. This year the company expects to source about $400 million in locally grown fruits and vegetables from farmers across the U.S., in an attempt to offset rising transportation costs that are driving up food prices.
  • Topco Associates LLC, Skokie, Ill., announced the appointment of two new executives. The company named Audrey Jakel vice president of human resources, and promoted Steve Schmitchel from director of sourcing to vice president of TopSource, Topco’s not-for-resale program. Jakel comes to Topco from The Nielsen Co., where she served as senior vice president, human resources. Schmitchel has been with TopSource for almost four years, Topco said.

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