YES! Private label food manufacturers can develop stronger, more profitable relationships with supermarkets … Here’s How.
When you’ve worked with private label food manufacturers for more than 15 years, you get a pretty good understanding of how the industry works. During that time there have been many conversations with countless senior executives around the challenges of a supplier-based relationship, which due to their nature, is weighted heavily in favour of the food retailer rather than the private label manufacturer.
So, is it possible for private food label manufacturers to have their cake and eat it? Could they forge closer, more meaningful ties with the retailer? Is it possible to move away from price-based decisions and create closer, better, enterprise style relationships which improve business well-being and profitability?
My view? A resounding YES. It is not only possible … It is very achievable!
However, to create more profitable closer relationships with the retailer, the private label food manufacturer has to be prepared to do things differently. In short, it means those who want to become, or those who want to stay industry leaders must be prepared to shake off some limiting beliefs.
Ask yourself, is it the retailer who is stuck in a limiting mindset when it comes to their supplier relationships, or is it the private food label manufacturer? Could it be that as a private label food manufacturer, it is your change that will be your cure? That your change will bring about a happier, healthier business?
You see, experience shows that whenever discussions turn to changing the retailer relationships from cheapest cost possible, to one based on value, the same barriers always come up. Everyone say’s “No matter how many times unique product innovations are presented, the retailer always defaults to cost as the key reason for rejecting a compelling product proposition”.
Sure, everyone recognises price will always be a key driver, but does it always have to be the decisive one?
But there is hope. Marketing technologies have dramatically changed the retail landscape in recent years. The good news is, these changes have created real opportunities for the private label food manufacturer to leverage an improved retailer relationship.
The clues lie in the traditional relationship between the brand and the retailer. It’s here that the ambitious private label food manufacturer can use the changes driven by technology and social media to turn this seemingly intractable situation to their advantage!
We’re all aware that a brands focus is on developing new products along with a compelling ‘reason to believe’. They message the consumer on why they should buy their (branded) product as opposed to the competitors.
The retailer is not in the business of promoting specific products. How could they? A major supermarket can carry more than 40,000 products. That is why their focus lies in the category tiers in which products sit. Any retailer marketing tends to concentrate on shallow and broad reassurance messages around good (value); better (core); best.
This diagram demonstrates how a brands narrow and deep niche-based strategy fits in with a supermarkets broad tiers.
Here’s how a private label food manufacturer can benefit from this situation.
So, the brands focus on product innovation and selling the benefits to the consumer in order to drive sales through retailers. For their part, the retailers’ focus lies in distribution and consumer relationships. The retailers don’t do product innovation. They see product innovation as the role of the brands, and product development as the role of the private label food manufacturer.
Yes, there are occasions when the retailer will indulge the private label food manufacturer in discussions around product innovation. However, these are usually confined to annual/range reviews. Here, the exercise is more about the private label food manufacturer taking the opportunity to demonstrate their broad category understanding, and how they have their ‘finger on the pulse’.
Retailers are conservative and cautious by nature. They find it extremely difficult to take the risk of listing unproven product concepts. Especially when asked by private label food manufacturers who the retailer sees as operationally led rather than marketing led.
Historically, there has been no reason for the private label food manufacturer to be visible to the consumer (…those that are, are brands!) To the consumer, the private label food manufacturer is simply an extension of the retailer. This scenario is self-policing. Any direct relationship between consumer and the private label food manufacturer would be construed a threat by the retailer.
Happily, this element of the status quo need no longer be the barrier it once was! By using the changes in the marketing landscape to deliver compelling product propositions, an ambitious private label food manufacturer can raise their retailer relationships to a higher level… from buyer to board, and along the way eradicate cost as the key differentiator.
The perceived wisdom is that the development and marketing of innovative products for the major retailers is the domain of the brands. But this is no longer an excuse for the private label food manufacturer to hide behind.
So, How does a private label food manufacturer go about offering tried and tested new product innovation to the retailer?
The old way of relying solely on comments and insights from focus groups and commissioned consumer research has reached its sell by date. The process can no longer be relied upon as a barometer of future success. And as anyone in the polling business trying to forecast political events has shown, the general public takes a perverse delight in saying one thing, and then doing the complete opposite!
The only evidence that matters is that gained in a real commercial setting, where people vote with their money.
The trick is to carry out ring-fenced; minimal investment, low risk and low-profile market testing. This all takes place prior to revealing anything to the retailer. The aim is to provide the retailer with hard factual verifiable evidence to support the product innovation and gauge future demand.
So rather than presenting the retailer with a dazzling basket of untried and untested product ideas at range reviews (what we at The Finer Detail call ‘shock and awe’) the innovation will come with a level of reassuring (compelling, even irresistible) consumer traction.
This bold approach to redefining the retailer relationship is possible due to a transformed marketing landscape. A hinterland once based on big budgets spent on broadcast media is now a multifaceted, technology driven, dynamic space.
As a Private Label Food Manufacturer here are 4 low cost, low risk ways you can prove a product innovation
These examples just scratch the surface around ways you can use new and emerging communication technologies to strategically change the relationship with your retail clients.
Just observe how artisanal challenger brands can get off the ground and rise to prominence, often on what’s seen as purely the drive and force of the founder’s personality. Once you peel away the founders’ veneer of boundless energy and vision, the process is simple, measureable and more importantly, replicable.
By using a similar approach to the start-up brands, the private label food manufacturer can build a compelling case for new product innovation. Any strategy for gathering empirical consumer evidence could include;
- Searching out the appropriate opinion-formers and influencers in the blogosphere (and more importantly, their followers). Seek their endorsements and encourage them to evangelise about the product.
- Open a pop-up shop to showcase and research the innovation amongst consumers. This could be in one of the many pop-up food villages that are appearing throughout the country, say Pop Brixton or Trinity Leeds.
The great thing about pop-ups is their cost-effectiveness to set up and run, as they only need manning at peak times. From a marketing perspective, pop-ups are all the rage, so come with inbuilt marketing kudos.
In a similar vein, Timeout has established a curated food emporium in Lisbon, Portugal. The vetted offerings range from vendors selling slices of exotic pizza through to premium champagne and oyster bars. There are plans to roll out this format across other territories.
Using the Timeout concept to market test your innovation offers a huge benefit. Since Timeout run the show under their own brand, the anonymity afforded means all the usual marketing activities and investment associated with new product launches i.e. branding, fixing product formats, packaging, and consumer marketing messages can be put on hold.
In this scenario, the insights revealed by the trial would inform future product branding and marketing activities.
- An alternative to a fixed pop-up could be a food truck? This would follow the target audience to the events they attend. Some investment would be needed in entry-level branding and messaging,
The great thing about a food truck strategy is that you can act like a start-up, because in this format, that’s what you will be.
- A crowdsourcing strategy could be employed to develop the innovation. By tapping into the thoughts of the masses about your idea, crowdsourcing significantly saves on the time and other resources required when gaining this information. At the same time, it will generate significant consumer interest and loyalty towards your product.
When you present your product innovation over social media platforms, crowdsourcing can be a great way of generating free marketing and publicity.
Big does not mean best!
The private label food manufacturer that develops proven product innovations exclusively for retail clients, give themselves and the retailer an edge over their respective competitors. (A completely opposite approach to the brands, which see the retailer as a convenient somewhat generic channel to market)
For the more visionary private label food manufacturer it doesn’t stop there. They can take this low-cost, precision marketing approach a step further and claim the category high ground. See diagram 2
Is there any benefit in being top of a downward trajectory?
What real sustainable value is there in simply being the cheapest supplier? Knowing the frequency in which private label food manufacturing business is won or lost on price, to stay that way is a race to the bottom.
Surely the best alternative is to change your relationship with retail clients. By taking on the responsibility of delivering proven product innovation you change everything. By offering the retailer exclusive own brand, category defining products, you will create the opportunity to move the conversation from buyer to CO level.
All the ingredients are in place in the digital and marketing landscape for the ambitious private label food manufacturer to step up to this challenge. What’s more, the good news is that fundamentally your business does not change… what changes is the way it is perceived by the retailer.
To find out more and explore ways you can change your relationship with retail clients contact Valentine Tomin today
[i] Adams, J. (2016, July 19). The Benefits of owning a food truck.
[ii] Floren, C. (2012, July 21). The advantages and disadvantages of using crowdsourcing to improve yourE-commerce business.