Store Brands

NOV 2016

Store Brands delivers unprecedented strategic and tactical information needed by retail executives to develop and support compelling, differentiated store brand programs to build customer loyalty.

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Top of Mind 1 4 Store Brands / November 2016 / uring a time of negligible population growth –– with millennials slow to have children but eager to try new and exotic products –– retailers cannot propel private brand sales simply through low-risk line extensions. "Because there's not a lot of population growth, retailers are looking to innovation, and we're seeing an enormous amount of what's called 'rapid prototyping,' " says Todd Maute, a partner with New York-based design consultancy CBX. How could retailers be more innovative in the store brand space? Although the national-brand- equivalent tier still resonates with many consumers, market research has shown that millennials –– many of whom still live with their parents and have considerable discretionary income –– care about transparent sourcing, corporate social responsibility and the avoidance of ingredients they consider to be harmful. These priorities and misgivings, coupled with millennials' more adventurous, multicultural food and beverage preferences, create opportunities for retailers to develop new must-have premium brands, lines and SKUs. And with any luck, some of these new products will go viral on social media. Among private brand owners, "there will always be the 'fast followers,' " observes Doug Baker, vice president of private brands for the Food Marketing Institute (FMI). "But if we can start finding those gaps where consumers have a need we can fill, that's going to create longevity and a breath of fresh air for private brands. Many retailers are trying to do that, so they are stepping outside the box of what private brands have done for so many years." Retailers face a number of challenges, however, when it comes to rapid development and deployment of groundbreaking private label brands, lines and products. "Speed to market, in my opinion, is critical," Maute says. "But a lot of retailers have very large [private brand] programs –– with as many as 2,000 to 5,000 SKUs. To execute 5,000 SKUs can take years. By the time you're done, you have to start all over again." Smaller launches –– of new and different store brand lines and products –– also face hurdles, Baker notes. One of the challenges is guaranteeing the volume that many manufacturing partners require. Another obstacle to a rapid launch is the complexity of the private brand supply chain, Baker points out. Retailers typically work not only with manufacturers, but also with packaging design agencies, pre-press firms, logistics companies, marketing and branding agencies, and many other vendors. A cumbersome, time-consuming approval process for any proposal or change can drastically reduce the speed to market. What could retailers do, then, to streamline the branding process and bring their own lines and products faster to store shelves? The answers range from reconfiguring corporate infrastructures to more effectively leveraging new technologies to communicate with outside vendors. Dedicate groups to store brands Maute recommends that retailers have dedicated private brand groups –– with a deep understanding of category dynamics –– that are responsible for the entire branding process. "It starts with a commitment to infrastructure within the retailer," he explains. "Each retailer is structured really differently. Sometimes merchandising owns private label. Sometimes marketing owns a piece of it, but merchandising owns another piece of it. And sometimes there are freestanding groups that own it and collaborate." Retailers with dedicated groups tend to have more streamlined processes in place and realize, for example, that "how people shop for laundry detergent is very different from how they shop for cereal," Maute says. Such retailers Faster to market Retailers should better leverage dedicated own-brand teams, consumer insights and new technology to streamline the branding process. By Carolyn Schierhorn

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