Takes Two To Tango

Store brand innovation requires a true partnership between retailers and suppliers across the entire supply chain — from sourcing to stocking.

When it comes to store brand innovation, retailers don't have the deep pockets of a Procter & Gamble or Kraft Foods. And because a store brand buyer often deals with multiple categories and thousands of SKUs, it's nearly impossible to innovate in every category without some outside help. Enter the expert: the private label manufacturer.

Howard Brandeisky — vice president, global marketing, innovation and customer solutions with Elgin, Ill.-based John B. Sanfilippo & Son — says innovation requires retailers to move beyond the transactional handshake to develop a true collaboration and partnership with its store brand manufacturer.

"The supplier needs to believe that the retailer is dedicated to working with them so they can recoup their significant investment, and the retailer needs to trust the supplier as the expert in their category," he says.

Find unmet needs

In product development, innovation is about understanding consumers' needs and identifying "white space" on shelves, says Beth Wierzbicki, marketing manager with Carneys Point, N.J.-based Clement Pappas & Co.

"From there, private brand R&D teams can formulate/develop products that meet these needs and help fill white space," she says.

Development of a unique store brand product that meets needs unserved by the national brands is accomplished by "blending the best form and function attributes" of more than one national brand product, says Steve Pankow, executive vice president, sales and marketing with Duluth, Ga.-based Associated Hygienic Products (AHP). This process requires a broader category and product perspective.

"Retailers and suppliers must be willing and capable of brand building with a focus on effectively delivering the function that the consumer is looking for (e.g., taste, texture, fit, absorbency, aesthetics, scent, etc.) rather than just trying to copy the design, the formula, the delivery system, etc.," Pankow explains.

This strategy is especially effective for store brands in categories with multiple national brand leaders, Pankow notes. For example, Minneapolis-based Target Corp. worked with AHP to create a diaper under the up&up brand that combines the best features (form) of both leading national brands while delivering performance (function) that rivals all national brands.

On Target's website, mothers leave rave reviews about the diaper, discussing their satisfaction with not just the low price, but also the superior absorbency, leakage protection and fit. This combination of form and function allows the brand to stand on its own merits and build overall brand loyalty and equity, Pankow says.

Speaking of combinations, retailers could partner with a manufacturer of high-equity brands to create innovative products through cobranding. For example, Issaquah, Wash.-based Costco Corp. — understanding the equity of the Campbell's brand — teamed up with the Campbell Soup Co. of Camden, N.J., to create a line of soups bearing both the Campbell's and Kirkland Signature names.

Some manufacturers use more than their brand name to add value to a partnership with a retailer. For example, Coffee Bean International (CBI), Portland, Ore., uses its own coffeehouse to discover new trends and test new coffees.

Public Domain — which opened in the heart of coffee-loving Portland a little more than a year ago — allows both CBI and its retailer-partners to discover "new and interesting trends that come into a category when they're still just available to people who are most passionate about … discovering new ways to appreciate the coffee," says Alison Rosenblum, CBI's brand manager.

The retailers, in turn, could help bring the new concept to market, educating the "mass consumer."

Forget the fads

While looking for trends, it's important to know how to spot and ignore what might only be a fad. Jim Wiegmann, executive vice president of Brewster, Ohio-based Shearer's Foods, says his company did business with one retailer where they separated what was fleeting from what would still be big 12 to 18 months later.

"And if you don't look out far enough, you spend a lot of time and materials and effort on something that's already passé," he says.

But fad or not, when production time arrives, not all retailers can foot the bill — customizing a product to gain a competitive edge often requires economies of scale. Pankow warns that the more unique ingredients or attributes a retailer requests (packaging, raw materials, designs, etc.), the higher the manufacturer's cost becomes.

"Smaller-volume retailers will have a more difficult time securing high levels of customization without paying a premium or diluting the margins of their supplier," Pankow says. "If there is a reasonable cost-sharing approach and a willingness to work toward a national brand standard — rather than an equivalent — unique products and packaging can be designed and delivered that set the retailer apart from their competitors."

Retailers must exercise particular caution on the packaging side, says Steve Fay, executive vice president and sales team leader with Roscoe, 111.-based Berner Food & Beverage. Equipment costs — even for parts to adapt existing lines — literally can cost millions of dollars.

"Oftentimes, this area becomes a combination of a manufacturer's willingness to embrace the project, packaging companies being willing to share in costs of equipment, and retailers willing to give very strong and enduring support to the packaging innovation," Fay notes. "This is probably the highest-risk area."

Wierzbicki adds that stock packaging often is necessary because retailers and manufacturers cannot afford the cost and minimum runs associated with a custom package. This reality makes label design — which is less costly than custom designing an entire package — all the more important, especially in categories such as juice.

"There are opportunities for retailers to gain input from manufacturers regarding how to best optimize the marketing message for the product and to ensure that the design works in tandem with the communication of a product," Wierzbicki says. "Retailers have a few split seconds to capture the consumer with their label while they are shopping … so it is important to make sure that the label is working as hard as it possibly can to grab the consumer."

Rethink merchandising

But innovation isn't only about product or package development — retailers need to understand how to properly merchandise store brands. And merchandising goes beyond the creation of marketing programs or elaborate displays — it can be a big hassle when store personnel aren't giving enough attention to what's going on at shelf level, Wiegmann says.

"We're up against a national brand that's in those stores probably twice a day, and retailers and manufacturers realize that our number-one issue is merchandising," he explains. "How do you improve merchandising without increasing cost?"

Shearer's recently developed a training video to help a retailer-partner educate employees about how to better merchandise a cobranded product. Wiegmann says the video takes a holistic approach to merchandising: from the manufacturing facility to the retailer's warehouse, from the warehouse to the stores, and from the stores to the shelf. The efficiencies realized post-training were incredible.

"For a small investment, we got the multiplying effect of all those store personnel knowing what to do now," he says.

Nuts about Innovation

As a premier supplier of national brand and store brand snack, baking, cooking and produce nuts in the United States, John B. Sanfilippo & Son Inc. (JBSS), Elgin, III., knows a thing or two about innovation. In fact, "innovation" is a key word in the company's mission and vision statements. And in November 2010, JBSS became the proud recipient of Progressive Grocer's Store Brands magazine's 2010 Supplier Pacesetter award in the category of R&D/Concept Development/Production Innovation.

The proof is in the products. For example, in late 2009, JBSS rolled out two innovative snacks for private labeling: crunchy baked nuts and pearlescent nuts. With its crunchy baked nuts, JBSS starts with the finest almonds, peanuts, cashews or pistachios. The company then coats the nuts lightly with honey/wheat flour and bakes them to form a crunchy, crispy shell. Varieties include Oven Roasted Pistachios with Rosemary Garlic Seasoning, Oven Roasted Almonds with Jalapeno Cheddar Seasoning and more. For the pearlescent nuts, JBSS takes high-quality nuts, pours on a delicious chocolate coating, and adds customized, colorful glazes to make either Silver & Gold Dark Chocolate Covered Almonds or Violet Dark Chocolate Covered Peanuts.

On the packaging end, JBSS introduced a cutting-edge PET snacking canister in November 2010. The canister — which is 40 percent lighter than traditional composite cans and may be recycled or reused — allows customers to see the product inside before purchasing. This development places JBSS as a leader in nut packaging innovation.

And on the production side, in March, JBSS received the U.S. Environmental Protection Agency's ENERGY STAR Partner of the Year award for excellence in energy management. The 2011 award recognizes the manufacturer's overall corporate efforts in reducing its carbon footprint. Over the past three years, JBSS developed resource conservation teams at all five of its facilities. The company conducts annual energy assessments at each of its plants to help establish a baseline and set both short-term and long-term goals to reduce its use of water, nitrogen, electricity and gas.

To learn more about how you can partner with JBSS to innovate your store brand program, call 847-289-1800 or visit www.jbssinc.com.

We're up against a national brand that's in those stores probably twice a day, and retailers and manufacturers realize that our number-one issue is merchandising.

— Jim Wiegmann, executive vice president. Shearer's Foods