Noddle Says Price Pressure To Increase
Former Ahold USA and Daymon President Allan Noddle on Friday told a crowd of private label executives that the greatest effects of the recession on the industry were still to come.
Noddle said the resulting consolidation within the global retail grocery industry will leave four or five retailers dominating business – he named Walmart, Carrefour, Tesco, Aldi, and Amazon.
“So what’s the big deal if there’s four or five dominant players?” he said. “These guys are going to put tremendous pressure on the supply chain to lower costs.”
Noddle was the lead speaker at the Private Label Manufacturers Association’s annual executive leadership conference, held in Palm Desert, Calif. this year. The retail veteran said pricing would be the longest-lasting impact of the Great Recession.
“Since the global recession, food retailing has been a tough business,” he said. “The only way to increase revenues is to lower prices.”
He highlighted the transition of the industry from generics to private label to private brands, which he says is the common phrase in use by retailers today. He traced the final evolution to Canada.
“That’s when a Canadian company changed the strategy from private label to private brands, and that was Loblaws in Canada, and that was President’s Choice,” Noddle said.
And he expects that the adoption of private label items by consumers since 2008 will continue as they begin to accept private brands as their own.
“When people changed their habits, as they did in the global recession, guess what happened? They maintained some of those habits,” he said. “They like private brand and they’ll continue to buy private brand.”
As for the future, Noddle said it was a global story, but a different one than most know. Rather than focusing on Brazil, Russia, India and China for growth, Noddle said the real stories would come from CIVETS – Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. Companies that will bring global sourcing and pricing to the next future as Japan, China, and India did to recent generations.
Smart retailers, he said, are seizing the chance to provide uniqueness and differentiation through their brands, adding to their customer experience and loyalty along the way.
“When you get this image as a retailer you are on your way,” he said, “because it’s very difficult for competitors to duplicate that.”
On the manufacturers side, Noddle said value and pricing would be key, with the efficient and effective manufacturers staying in business and the rest falling by the wayside.
“Today the retailers, generally speaking, are much more susceptible to cleaning out categories on the B and C brands as retailers figure out they don’t need all these brands,” he said. “You should be working with category managers at every retailer to figure out what your private brand role is in every category.”