Private label is booming, and with the slow pace of economic recovery, we can expect this to continue for some time. Consumer habits – including having ‘downtraded’ to private label during tough financial times – are now ingrained. It’s unlikely that national brands will ever recover that lost ground.
This perfect storm is creating increasing opportunities for private label. This is good news for private label manufacturers and for the retailers because the direction of travel for private label is in trading-up consumers: and in so doing, retaining consumer loyalty while increasing prices to national brand levels.
My expectation is that at PLMA in May, manufacturers will be talking more about premium products, leading in product innovation and delivery of segmented, niche solutions for targeted markets. If not, then they are missing the economic opportunity of the whole generation. Manufacturers, take note: now is the chance to shift your business from being price driven to being value driven.
As a buyer, if I had a $ for every time a manufacturer had started its pitch with… ‘we focus on quality of product’, I might be sitting sunning myself, drink in hand in the Bahamas. Of course you focus on quality (and by implication not price – although we know at the end of the day, that’s been the driving force in for many years). I have yet to meet a manufacturer who says, ‘we don’t give a damn about quality, we just get the products out as quickly and cheaply as possible’.
Manufacturers which are significantly more successful in being commissioned in long term private label contracts focus on VALUE. For many this is a very challenging concept to address. Value is something that is perceived only by your customer, and is a combination of tangibles and intangibles. The drivers to delivering value are derived by having a better understanding of your customers’ business model and targets and delivering the solutions they need to hit those targets.
Practical examples of this might include: reducing the developmentdelivery cycle time for bringing new products to market, cross-docking deliveries implemented as an SOP, meaningful assortment exclusivity and unique packaging solutions.
When challenged, most manufacturers say we already offer all of these ‘services’, and therein lies the rub. If at the delivery end, a manufacturer sees providing additional solutions as a list of services, the customer will NEVER see them as value propositions. Repackaged, however, as a segmented directed, niche proposition the value will immediately be seen by the customer.
It’s quite logical really. Consumers have responded positively to more sophisticated, value rich products in the private label assortment. The customers who commission those products will respond equally as positively to value rich commercial propositions from manufacturers.
Richard is an expert in global marketing and an acknowledged strategic brand leader. He currently heads the private label division at one of the largest retail pharmacy groups in Europe. He’s held senior management positions in A brand CPG companies and led international marketing and strategy teams across CPG, consumer durable and business services companies. He’s also the European client partner for a leading brand excellence training institute which delivers brand and communications courses to Fortune 500 companies. Richard is dedicated to bringing the discipline and science of brand marketing and marketing communications to private labels, empowering them to cultivate critically essential marketing management competencies to lead them to build leadership brands. [email protected]
