Private Label Buyer

Answering the Call

July 1, 2005

Answering the Call
By MOLLY STRZELECKI
Insight from the 2005 Category Colonel winners
Everyday there are issues that plague and enhance the private label industry. To keep our readers well-informed as to how these issues are playing out, PL Buyer reached out to this year’s Category Colonel winners for their insight. Who better to ask than those regarded as the best of the best when it comes to private label?
Most manufacturers agree that promotion of private label needs to be kicked into high gear, moving away from traditional merchandising and truly calling out the benefits of their store brand and creating better consumer loyalty.
While much of the feedback received was positive, there are still some concerns within the private label industry. For example, so much of decision making is still driven by cost, and the idea of a win-win partnership between retailer and manufacturer remains a nice idea, but not really happening in the actual day-to-day dealings.
But good or bad, the opinions of this year’s Category Colonels can only help both retailers and manufacturers have a better understanding of each other, creating harmony within the private label industry.
In order to obtain these results, PL Buyer surveyed the 2005 Category Colonel winners, asking them to respond to various questions and rank them on a scale of 1 – 10, 1 meaning “disagree strongly,” and 10 meaning “agree strongly.” We included the average and individual ratings. See what some of the winners had to say:
Win-Win remains more of a fantasy than a reality. 5.8
Too many retailers are worried about short term and will not invest in business. If we spend $1.00, the retailer expects 98 cents. (9)
There are some retailers that actually value the win-win scenario. They realize that it helps to develop a long-term relationship that is beneficial to both parties. A reliable supplier that provides high quality in its products and service levels is a valuable asset to a retailer. (7)
Win-win is a mindset and a goal. In order for a business solution to be successful for both the short-term and the long-term, a win-win should always be the goal. Practically speaking, the goal should always be ‘win-win-win.’ No business solution will have any long-term success unless a satisfied consumer is part of the objective. (3)
2. Retailers are willing to pay for quality. 5.6
Retailers have the ability to request different quality levels for different labels. (7)
Retailers are lowering their quality standards for better pricing because the trade is not making the margins they did a couple years ago and they are looking to lower their cost of goods. Unfortunately, the manufacturers are all looking at higher costs and must pass on these costs in the way of price increases. Therefore, price has become more of an issue as of late. (7)
Retailers are willing to pay for value. (7)
Retailers have difficulty determining the quality/value/price relationships. We always attempt to point out the differences in product sourcing, differences in manufacturing and packaging…also, forget about quality when you start talking online auction! (3)
3. Technology has taken the personal element out of doing business. 5.0
Although it has made an impact, face-to- face will trump technology. (6)
Technology has allowed both sides to become more efficient. The personal element still exists, but both sides are attempting to do more with less resources and that makes the frequency and quality of personal contact more challenging. (8)
E-bids have been deleterious to the private label business. Customer ‘claims’ that price is only one of many factors, but we all know it’s coming down to low price. (8)
Store brand products remain a relationship business. Those manufacturers do the best that are able to penetrate a retailer’s organization and develop relationships with people in a variety of functional areas. And, a strong relationship can get you a little better selling price (around 25 cents per case on average). (3)
4. Retailers are demanding more service than they were five years ago, and we are able to meet those needs. 7.9
As corporate brand programs assume a more critical role with retailers in all channels of distribution, the environment becomes more competitive and the level of quality and service escalates on all levels. Only those manufacturers that truly partner with the retailers and understand what excellent service means to them can excel in this area. Not surprisingly, retailers place higher expectations on their suppliers to help them achieve their quality/value goals so it’s incumbent on us to adapt with the changing times so we make every effort to ensure that we are able to meet those needs. (9)
In our industry, many principals are not able to keep up with all the demands. Margins are being squeezed and demands are increasing. (10)
5. In-house brokers have been good for the private label industry. 5.2
In-house brokers have become a conduit for the retailers, more often emphasizing retailers’ needs at the expense of the category or the manufacturer. (2)
It has given private label more attention at the account, but not sure that it has helped the manufacturer. One would have to question does the in-house broker work for the retailer or the manufacturer? (3)
6. Retailers are more wilLING to work together achieving quality thanthey were five years ago. 5.9
Some retailers are willing to work with us to achieve quality, but the majority do not. (6)
As consolidation happens, quality is more and more important to the retailer. There is more to lose. (8)
The business environment continues to evolve and create pressure on manufacturers to deliver higher service levels on all “fronts” within the business relationship. The ability of manufacturers to drive costs from their business and become more efficient is paramount to improved manufacturer service. (10)
7. Price is king, and drives all decision making. 6.4
We wish that price will always be a part of decision making but not the drive behind the decision. Everyone has learned that pricing can only play second fiddle to quality. Price does not always make a product fly off the shelves; it is ultimately decided by the consumer of the product and is a mix of value/quality and the price they are willing to pay. (7)
Ludicrous. (1)
Only if every other aspect is on a level playing field. (7)
8. Premium tiers are critical to successful private label programs. 5.5
Premium tiers are especially critical if consistent growth in the category is expected or desired. (7)
Premium and super-premium categories continue to grow consistent with a ’baby boom’ generation that has grown up with high standards, image consciousness and more disposable income than ever before. Offering great value at various quality levels is the key to capturing the highest household penetration levels for private label products. (10)
Depends on the category. If the category has a very dominant national brand, the tiers are not effective. (3)
9. Retailers should promote private label with more innovative merchandising beyond the traditional methods. 8.5
Absolutely. This is their brand. It distinguishes them from their competitors. They are not just merchandising a product, they are merchandising their stores. (10)
Why let the brands have the stage? Private Label 101 would point to retailers showcasing THEIR products in THEIR stores to THEIR consumers! (10)
Since successful private label programs are based on much more than the price gap and because the quality is evident in most programs, corporate brands are true ‘brands’ in every sense of the word. They can benefit from supporting innovative merchandising tools to draw attention and awareness and attract new consumers, as well as continue to support their loyal following. (7)
10. There are no boundaries to packaging innovations within private label. 5.8
When a private label product sits beside a dozen name brands on the same shelf, any ability to differentiate or convey a sense of quality to the consumer can be supported by innovative and creative packaging. (10)
Don’t expect suppliers to pick up the cost for the innovations – this should be a shared development cost used to drive and expand the business. (10)
There are boundaries to packaging innovations, due to volume requirements to get into a package. A brand has an easier time changing the packaging, they have one label to move. With in-store brands we have many labels. In addition, the retailer is not always willing to pay for increased costs of packaging. (4) PLB