Stronger retailer-manufacturer partnerships are essential for store brands to keep the market share gains achieved during the recession and lay the foundation for continued growth as the economy rebounds.
Stronger retailer-manufacturer partnerships are essential for store brands to keep the market share gains achieved during the recession and lay the foundation for continued growth as the economy rebounds. That’s the prescription from a blue-ribbon industry panel in a new report, “Store Brands 2010: Post-Recession Strategies for Private Label,” by the Private Label Manufacturers Association.
To take a well-informed look at the future, PLMA invited about a dozen highly-placed store brand manufacturing executives to look at challenges and strategies that suppliers and their retail customers should pursue.
“Their conclusion was that there is both vast opportunity and peril for all store brand marketers,” said Brian Sharoff, PLMA President. “Acknowledging that the tailwind provided by the economic downturn will eventually end, the group nevertheless outlined a set of ambitious industry challenges for the new era. They stressed that the euphoria surrounding recent growth needs to be leavened by an understanding of the evolving real world relationships among retail chains, national brand suppliers and private label manufacturers.”
The report points out that despite widespread adverse economic conditions some national brands are more powerful than ever. They have grown share and sales during the last several years largely at the expense of secondary and tertiary brands, just as private brands have.
Among the key findings offered by the panel:
- Private label suppliers and retailers need to get on the same page with respect to their partnerships. Retailers are still reluctant to forge long-term commitments with suppliers who are tired of bidding out a contract only to see it soon disappear. Retailers should be willing to share the cost of innovation with suppliers and even with non-competing chains.
- Transparency on both sides must be the new mantra for the private label supplier-retailer relationship. Suppliers would do well to let retailers behind the curtain more with respect to their operations. Retailers need to appreciate that they are not only buying quality goods but also intellectual horsepower.
- Private label manufacturers should ask chains for more innovation in marketing and a fairer share of activity in merchandising dollars. Chains’ sharing of data with suppliers is also essential to private label growth.
- Store brand suppliers will be required to make many hard decisions. They should learn to say, “Thank you, but no,” to certain would-be clients and to scorecard all potential customers to determine a right-size fit.
PLMA says the executive panel overwhelmingly agreed that U.S. store brand manufacturers have become more sophisticated, more willing to ask retailers for higher levels of support across the board, more likely to pass on business that doesn’t fit their own corporate missions, and less inclined to put the price of goods at the top of the list when negotiating with retail chains.
The 2010 Roundtable is the first in the series to be comprised exclusively of store brand manufacturers. It included four former PLMA board chairpersons and senior executives who represented top echelon private label manufacturing companies in the United States. Several are firms that market both private label and national brands.