Let’s mash up two insightful news pieces and see what we get.
-- Story 1: Branded food processors are fighting off store private labels, usually by dropping prices or giving more food for the same price.
-- Story 2: Women are more risk-averse than men, research shows.
Not exactly news flashes but both pieces, from veteran journalists Stuart Elliott of the New York Times and Jason Zweig of the Journal, pull out fresh insights.
Now apply the lesson of one article to the other. Women are most families’ food chooser. Mom makes out the grocery list, even if sometimes she hands off picking to her spouse. Does Mom care about lowest-price? Sure. But, we now know, not as much perhaps as she cares about food safety. Preserving her family’s health is vital if sometimes costly, whereas food isn’t always the most expensive item in a family's budget to begin with. So most women may reason, ‘Minimize all food safety risks to my family first. Don’t skimp.’
Branded manufacturers should ratchet up their promotion of 'higher quality and lower risk'. Branded manufacturers have spent decades building reliable, closely monitored supply chains (at necessarily higher cost than private label ones typically) that enhance their quality and guard their image. The best of these quality-control systems reach all the way back up the chain to checking on raw ingredients. Meat packers like Tyson’s and Perdue can practically give you the blood tests and biography of the cow or chicken whose products you’re eyeing in the supermarket cooler.
Retailers, on the other hand, are new to this back-end product supply management dimension. In my experience even those with established private labels are not doing as much as they need to on supply management. Few of them really want to bear those costs anyways. And frankly, supply concerns shouldn’t be their business. Retailers have more than enough to do managing their customers’ in-store and post-purchase experiences. Sourcing and merchandising something as basic and packaged as a safe box of lotion-enhanced facial tissues is not a challenge to be sneezed at.
Independent, national brand managers’ goals should be to help the public understand the safety benefits of their end-to-end value chains. And of course, they should work hard to maintain and improve those systems' integrity. Operations of upstream partners must be open to inspection – and monitoring must in fact be performed. They need to raise the bar on retailer private label systems - they really can’t afford to dig into the distribution system like that.
Brands that try to compete on price are like generals who fight this war with strategies from the last one. In war, the result is Pickett’s Charge or the Maginot Line. In business, it’s self-commoditization. Why go there?
Deep channel expertise (supported, not overshadowed, by advertising!) is the ultimate reason for existence of a branded producer.