Earlier this week Tuesday, February 19th manufacturer ConAgra Foods presented its 2013 Consumer Analyst Group of New York Conference – rarely does manufacturer news make this site however the presentation on Private Brands, their evolution and their importance to Conagra by Gary M. Rodkin – Chief Executive Officer, President, Executive Director and Member of Executive Committee is worth some thought.
Let me move on to some remarks about private brands, which is a key element of our growth strategy and where we have the most news lately, given our acquisition of Ralcorp.
As you know from our announcement on the transaction, we are excited about the strategic attractiveness of this business. Store brands or private brands have outpaced branded food in sales growth. While there will always be some ups and downs, we expect that out performance to continue over the long term. The private brand opportunity is quite clear, given customer interests and consumer appreciation of value. This value mindset is here to stay regardless of macroeconomic trends. This is particularly true of basic goods and services.
We have great conviction about long-term private brand growth and know that there’s a long runway ahead, particularly in the U.S. The U.S. is far from a mature market when it comes to private brands, and we are extremely well positioned to meet those growing demands from customers and consumers. This is a real differentiator for ConAgra Foods.
Rodkin goes on to discuss the evolution of private label from generic to brand exhibiting a strong understanding of the changing dynamics or retailer owned brands and the ability to differentiate they provide.
A large part of the opportunity for growth is the fact that private brands provide great value and have come a long way in terms of quality and consumer appeal. These are not plain label generics and the reason we have been — we’ve started to call them private brands is because that’s exactly what they are. They know retailer-centric equities that are carefully managed and run to complement branded products and help grow categories.
Some people may still view private brands as cheap generics, like what you’re seeing on the left side of this slide. But that is absolutely not the way we see it. We’re focused on high-quality products that retailers can be proud to call their own, products that help differentiate the store’s brand equity, products that expand category appeal, products that help grow a customer’s top and bottom lines.
We’ve been building our own private brand offerings for quite some time. Our private brand’s footprint was nearly $1 billion before adding Ralcorp. Now adding Ralcorp, we are the largest private brand maker in North America with annualized sales of $4.5 billion.
So what does that really mean when we say bringing CPG experience to the private brand space? Bringing our innovations, packaging, category shopper insights, shopper marketing. All of these things can help our customers grow in new ways. Transportation, warehousing and supply chain expertise are also areas where there are synergies between consumer and private brands. And adding Ralcorp to our joint business planning will bring a greater sense of top-to-top strategic partnerships with our key customers.
And yes innovation is important
Leveraging our best-in-class innovation skill set, which cuts across a wide swath of product platforms, will certainly be a differentiator as retailers look to take their product offerings up market over time. This will clearly happen in a broader way. Just take a look at Tesco in the U.K., Loblaws in Canada or Trader Joe’s in the U.S.
Every Private Brand manufacturer should read Rodkin’s comments and take them to heart – they can simple provide commodities at the lowest possible cost or they can work with retailers to build Brands that differentiate. The later creates the opportunity to build strong relationships that are virtually RFP proof.
Source: Seeking Alpha