As part of my daily work to develop this blog , I read, actually I read a lot, blogs, corporate reports, twitter, newspapers anything I can get my hands on that might be relevant to Private Brand. As a part of this routine I came across an article published yesterday on Forbes.com titled: “How To Keep Your Products On Shelves When Retailers Slash SKUs,” Ken Harris wrote the article. Who according to his bio at the end of the article is a managing director at Cannondale Associates, a sales and marketing management consulting firm and CEO of Kantar Retail Americas, a division of WPG Group.
According to the article: in the first six weeks of 2009, Cannondale Associates received phone calls from three different manufacturers informing them that they had been dropped by major retailers. Retailers like Wal-Mart, Kroger, Stop & Shop and Walgreen’s all have sku optimization programs, which could reduce their sku’s by 10% to 30%.
The article goes into detail attempting to understand why and how these decisions are made: “Is it segmentation work? Velocity? A straight-line item reduction?” It goes on to give a laundry list of factors mostly financial that retailer’s use in this process.
Interestingly, the value of the brand and the quality of the products are not mentioned in the article. All to often manufacturers create products and label them with little understanding of branding and little investment in branding. When lunch meat cases are stacked with hotdogs seven brands deep is it any wonder that grocers believe they can take better advantage of a portion of the space, to build their own brands and increase their margins.
How many hotdog brands can you name?
How many hotdog brands do you care about?
A healthy mix of both national brand and Private Brand is vital to most retailers. The trick is to build brands that are meaningful to consumers and that complement the retailer’s mix.
In these tough times even the national brands that engage consumers, have degraded their value by resorting to discount pricing. Breyers Ice Cream is on BOGO somewhere everyday of the year. Coke is always on sale. Tide always has a coupon and a sale.
National Brands that are truly engaging are often necessary to the American retailer. If they can take the next step and build partnerships with retailers both Private brand and national brand will succeed and grow.
The article concludes with this warning:
In an era where major change is the daily diet, no company is exempt from initiatives that will profoundly affect their business. Some manufacturers are ill-prepared to handle retailers’ shocking overtures to eliminate whole categories or product ranges. Consider this fair warning. If you believe the philosophy that a good offense is a great defense, it’s time to start investing in brands to make sure that the doomsday scenario never affects your categories.