Rethinking Financial Controls to Foster Genuine Growth in Private Brands
As we step into the new year, it's customary to reflect on past successes and evaluate missed opportunities. In the realm of private brands, however, this reflection is often clouded by an overemphasis on disparate financial metrics—sales, margin, units, days of supply, EBITDA, and gross margin. These can narrate vastly different stories about our businesses. Is this what we really should be focusing on?
Last year, many companies vowed to prioritize specific metrics like EBITDA or total sales, only to see focus drift as the year progressed, with sudden fixations on year-over-year margin rates or other less critical metrics. This misalignment not only confuses strategic direction but can critically hamper growth potential by tying teams up in data analysis paralysis.
For 2025, we need a clearer vision. It’s essential to design our objectives upfront and identify a select few metrics that truly reflect our progress toward those goals. While monitoring other indicators is prudent, they shouldn't provoke knee-jerk reactions or lead us on time-consuming detours that divert attention from our strategic targets.
An overabundance of metrics can stagnate a business’s health and progress. A daily focus on fluctuating numbers offers little room for teams to drive substantive changes in pricing, promotions, or investment strategies. Instead, the constant fits and starts in private brand investment—whether in price, margin, inventory, or promotion—this pervasive cycle of 'go, stop, go'—detracts from the calm, focus, and intention required to realize the business's true potential. Such achievements are unattainable if we are forced to chase continual improvements across every metric simultaneously.
Moreover, it’s critical to recognize that private brands are often unfairly benchmarked against national brands, which benefit from additional resources like slotting fees, promotional dollars, and merchandising support. These disparities can skew the financial metrics, making it even more imperative to develop bespoke financial controls that accurately reflect the unique challenges and opportunities of private brands.
Consider unit growth, which not only enhances negotiation leverage with supply partners, lowering costs and potentially reducing shelf prices, but also, depending on the category elasticity, allows for increased margins. This is a clear example of how a nuanced approach to financial metrics can directly benefit the business.
It is about balance. Business owners must manage the numbers, but relentless day-to-day, week-to-week scrutiny is unnecessary. Strategic flexibility allows management to adjust to real issues and opportunities without being beholden to an oppressive regime of metrics.
So, let's breathe and recognize investment for what it truly is—an expenditure today for manifold returns tomorrow. We are all in this for the long haul, after all.
This year, I urge CEOs and senior leaders to regroup and take a one- or two-day strategic retreat to deeply understand last year’s performance. With your private brand leaders, review your sales and unit movement, your brands, categories, and products to clarify your 2025 goals. Often, we push forward without pausing to think critically about our business—its successes, its failures, and the reasons behind each. Understanding these elements will allow you to reposition effectively and set a strategic course that fosters real, sustainable growth.
Jill Dearing, founder & CEO of Dearing & Company, leverages her extensive experience in the grocery, food, and private brand industries to drive innovative solutions and strategic transformations. She can be reached via email at [email protected] or visit www.dearingco.com.
