Private brand industry is 'ripe for collaboration'

The private brand industry is "ripe for collaboration" but needs to overcome some key challenges to find success here, said Bob Baxley, partner with The Partnering Group Inc. (TPG), Cincinnati, during a June 10 session held during the Food Marketing Institute's (FMI) FMIConnect Show in Chicago. The session — titled "Driving Private Brand Sales Through Collaborative Business Planning"— was based on a retailer-supplier research project TPG recently conducted via phone interviews (on behalf of FMI's Private Brands Council). That research uncovered nine "themes" worth noting on the current store brand collaboration front, including:

• Existing collaboration within the private brand arena is very limited. Baxley said every single one of the companies interviewed "was interested in improving that relationship," but they have few best practices to help guide them.
• Collaboration within perishables is a little more advanced than in other areas, he noted, likely because such items tend to be a little more complicated in terms of formulation, transport, etc.
• Suppliers tend to be reactive instead of proactive when it comes to meeting retailers' private brand needs.
• Suppliers also tend to be resource-poor, as retailers have "taken the margin out." But retailers are not necessarily willing to pay more to improve the situation, Baxley said.
• Opportunities to collaborate for supply chain optimization are plentiful.
• Private brands tend to get lost in category management programs. Although the best-in-class retailers TPG interviewed start with private brands and fill the category from there, most retailers treat private brands as an "afterthought" from a category management perspective, Baxley stated.
• True innovation remains a major gap. In some cases, retailers are creating "their own innovation," Baxley said, resulting in an inefficient "one-off" situation.
• Merchandising concepts are "stale and dated." Retailers tend to the old-school rule of placing store brand products to the right of the equivalent national brand. But retailers have a big opportunity to make changes here, he noted, and "change the way the shopper thinks about private brands."
• Brokers still have a transactional focus, making them less effective than they could be.

Baxley also noted that category managers still drive assortment and line reviews, with limited or no input from private brand in-house teams and private brand suppliers. Category managers tend to own promotion planning, space planning/shelf placement and forecast/demand planning, too.

"Communication of forecasts tends to be last-minute," he added, "resulting in inefficiencies across the supply chain."

And innovation is a "mixed bag," Baxley noted. In the worst case scenario, the retailers have no scheduled innovation reviews or pipeline for development. In the "better" case scenario, they schedule reviews for new private brand items, with the process typically driven by the retailer/broker — without supplier input. But in the best case scenario — where less than a third of interviewed retailers fall — the retailers leverage suppliers' new product development teams for a joint innovation pipeline and private brand strategy planning discussions.

But the industry has ample opportunity to improve the state of retailer-supplier collaborative planning. Peter Leech, managing partner with TPG, pointed to seven suggestions for improvement:

• Think strategy first. Leech said retailers need a detailed strategy that communicates both internally and externally what they are trying to achieve with the private brand program.
• Make private brands a focus in the category planning process.
• On the supplier side, bring insights to the retailer proactively and invest in the business. "It's a tough time to come back to an industry and say you need to invest," Leech admitted, "but you need to invest."
• Engage in private brand business planning that includes a vision, long-term goals, supply chain optimization opportunities and more.
• Form innovation partnerships that are built on trust. Such partnerships now are being seen between retailers and suppliers in Europe, Leech noted.
• Address the challenges related to "people resources." Much of the private brand talent is "aging out," Leech said, leaving a big gap to fill.
• Engage in culture and trust-building. "It really emanates from the top," Leech explained, noting that the high-performing retailers on the private brand side create and live a culture that celebrates that private brand.

For retailers wondering how to get started on the road to collaborative planning, Baxley pointed to some starting steps, beginning with an audit on the team's preparedness and ability to collaborate. They also should begin an internal dialogue with company leadership regarding strengthening the commitment to effective collaboration.

And identifying the right partner(s) is critical, he noted. From there, the retailer and partner-supplier should embark on a pilot project — which could be limited to just a key category.

"Once you get a pilot up and running, there's an awful lot of learnings" from which the partners could benefit, Baxley stressed.