Keeping watch
In a perfect world, a retailer would source all of its store brand products from reputable private label suppliers and then realize a decent margin on those high-quality offerings. Todays world, however, is far from perfect, with unscrupulous manufacturers taking shortcuts or engaging in deceptive practices that could threaten any retailers reputation and bottom line.
From mislabeled olive oil to tainted pet food, North American retailers have seen their share of store brand product fiascos – and taken steps to help prevent others. But Europes recent horse-meat scandal serves as a reminder that no retailer can be too careful when it comes to protecting its investment in its brand.
Its costly to replace a bad product, says Gregory Thomas, vice president, procurement advisory for BravoSolution, Chicago.
But \"whats more damaging, in terms of cost to repair and impact on profits, is the negative consumer perception of the quality of the specific product and, in turn, the brand,\" he stresses. \"When you layer all of this on top of the relatively slim margins in the retail industry, you cant afford to have this happen. If shoppers do not believe they are getting the best products at the right places, they will go elsewhere.\"
The good news? According to Thomas, the horse-meat-related meat quality issues are unlikely to cross over to North America because of the strict regulations in place.
The bad news? Items such as olive oil, juices, honey and milk are still fodder for adulteration here by unscrupulous suppliers, he says.
And other products sourced from overseas also could be problematic, notes Steve Osborn, business innovation manager for Leatherhead Food Research, Leatherhead, England.
\"Fish authenticity is always likely to be an issue since many white fish, once filleted, look the same – especially in chowder or pie,\" he says. \"And with constantly improving transport and international trade relations, fish species and origins open themselves to temptation.\"
Moreover, Osborn says, high-value products such as olive oil and products with protected designations such as Parmesan cheese and Parma ham continue to be at risk. In these cases, the issue is not adulteration, he adds, but authenticity.
\"The danger now arises that if more authenticity testing is needed, the cost of food will be pushed up further and increase the temptation to adulterate,\" Osborn says.
Protect yourself
Although its unlikely that retailers will be able to eliminate all cases of product adulteration or inauthenticity, they certainly could take steps to mitigate risk. And most of those steps are tied to effective supplier-relationship management, Thomas explains.
\"It is more than a good relationship – it is making sure that you are taking more control of the products you buy and are overseeing the procurement and manufacturing processes of your key suppliers,\" he says. \"You should have, at a minimum, a Supplier Code of Conduct that a top executive of all key suppliers is expected to sign. It needs to be thorough, and while it cannot prevent adulteration or mislabeling, it puts them on notice that you are watching.\"
Contractually, retailers also should have the ability to review, on a periodic basis, suppliers manufacturing processes, Thomas adds, as well as lab results from ingredient testing.
Because some products represent more potential risk than others, Osborn believes risk evaluation should be part of the process as well. He adds that third-party monitoring will bring \"subjectivity and honesty\" to monitoring activities.
\"I would also suggest ... hiring a third-party lab, if you dont have one in-house, to periodically test some of your products to ensure they adhere to the labeling and the formulation you have contracted to,\" Thomas says. \"Most importantly, dont just put these things in place – exercise them.\"