3 keys to keeping private label suppliers competitive
In August, Daymon released its Private Brand Intelligence Report, which found that 9 out of 10 consumers trust private brands as much as they do national brands.
Those statistics are not surprising based on the trends we have been monitoring in our own business — Catania Oils, a leading processor and packager of plant-based oils in the United States and provides private label olive and vegetable oils to retailers across the country.
Consumer behavior has been significantly altered by the pandemic, and it’s hard to predict whether that behavior is temporary or permanent. With online shopping increasing, and customers focused on more price-conscious options, private label brands are emerging the winner in this race for customer brand loyalty. However, building and maintaining that loyalty creates tremendous pressure on private labelers to deliver an equal or higher quality product than their national counterparts.
There are other hurdles facing private brands too, like competing for shelf space with national brands — whose penetration rates are higher than their private brand competitors — and bearing full responsibility for all marketing and advertising costs to bolster brand awareness as a trade-off for receiving dead net pricing from suppliers.
How can suppliers help private label brands succeed in this new environment? Here are three important factors:
Diversification: Because our business model incorporates three distinct divisions — bulk, retail and food service, we have the ability to fulfill orders that other suppliers, for example, those who focused solely on retail businesses, can’t. This diversification can be a key differentiator for store brand suppliers.
During the pandemic, for example, the slowdown we experienced in our food service business was offset by the increased demand among our retailers. As customers began quarantining and cooking every meal at home, they began hoarding products — resulting in empty supermarket shelves. National brands that set their budgets for the year at the end of 2019, could not possibly have anticipated what was to come in 2020, and as a result, could not keep up with the growing demand for specific products and struggled to fill the growing number of orders.
Flexibility: One of the benefits of diversification is the ability to be flexible with customers whose orders may have changed dramatically from pandemic shopping. While deliveries were slow to move on the food service side of our business, and payment restructuring discussions were happening, it afforded us the opportunity to extend greater flexibility to the retail side of the business, which required additional shipments or to break up the order by the truckload with several different oil products. Like other suppliers, we had more product on hand but could be flexible and handle custom orders based on the new level of consumption.
One-stop Shop: Make it easy for retailers. One way Catania can offer dead net pricing to customers is through an investment in a printing company that works directly with us to help our customers design labels for their products or modify their packaging as needed. We have also invested in vertical integration of packaging and blow molding to create a quality bottle that’s more attractive than those offered by standard oil packaging. Packaging innovation can be a major factor in staying ahead of national brands. For retailers that are concerned about lowering the carbon footprint, we also developed a “Bag in Box” technology which is made of 100% recyclable cardboard and contains an airtight bag to keep the oil fresher longer. But more than innovation, the key is being able to fulfill the entire process in one place. It ensures a smoother process for the retailer versus some national competitors.
Private brands have come a long way from the stigma once associated with ’80s generic brands (remember the stark white box with black lettering). We concur with Daymon that private brands are growing — and suppliers that offer flexibility, diversification and a one-stop-shop will see their business, like ours, double by 40% to 50% compared with 20% to 30% in prior years.