[Image of: RetailWire Logo and Tagline (for print)]

BUSINESS TIPS

IRI:
Shopper-Centric Execution
ChannelAdvisor:
Online Selling Strategies
RR Donnelley:
In-Store Marketing
LoyaltyOne:
Enriching Customer Relationships
 
[13 comments]

Is there a role for retailers in a brand fight?

August 13, 2014

There is a nasty fight going on in the pet food category, which brings up the question of whether retailers should take sides when brands squabble.

Specifically, an up and coming pet food brand called Blue Buffalo has been touting its ingredients and comparing them to the ingredients in Nestle Purina products, among others. Unsurprisingly, Nestle Purina isn't happy with that — so much so that they have sued Blue Buffalo. (If you want to get a customized view of what this squabble is all about, click here and scroll to the bottom of the page to use the "compare brands" feature.)

This is a bit of a David and Goliath story, as Purina has been in the pet food business for 120 years and, according to Bloomberg Businessweek, controls about one-third of the pet food category in the U.S. Blue Buffalo was started in the early 2000's, but appears to be growing rapidly.

The nastiness back and forth is more intense because the U.S. pet food category generates $20 billion in revenue annually, according to the Bloomberg Businessweek story, and consumers have increasingly been treating pets like true family members. So, in short, ingredient claims matter. The founder of Blue Buffalo, Bill Bishop, did well as a founder of SoBe and decided to start a pet food company with high quality ingredients while his dog Blue battled cancer.

Bishop analyzed the market, commissioned research, worked with vets, and introduced pet food with expensive and "natural" ingredients, along with extra nutrients. In-store representatives, outside investment, internet and TV ads helped Blue Buffalo break through the clutter.

Some of Blue's advertising is targeted at large manufacturers and compares ingredients, giving the impression that Blue Buffalo has "natural" ingredients such as meat, vegetables and fruit, while the products of large competitors contain yucky sounding stuff like chicken necks, feet and intestines. With the premium pet food market growing to over $10 billion in sales from less than $5 billion in 2000, no manufacturer wants to be taken to task about their ingredients.

Purina has aggressively defended its pet food, showcasing its labs and headquarters to reporters and having an outside lab test its food to show it doesn't contain some of the nastier ingredients Blue Buffalo claimed in its ads. Purina alleges that Blue's products contain some byproducts, in any event. Purina has noted that it makes all its own food, whereas Blue outsources theirs to contract manufacturers. And now, both sides have lawyered up and are ready for a bigger fight.

Purina, meanwhile, defends ingredients such as corn, which has come under criticism of late, but has recently introduced a new line of natural pet food called Purina Beyond, which does not have corn, wheat, soy, poultry by-products, artificial flavors, artificial colors or preservatives.

Discussion Questions:

Should legal and PR battles between brands affect how retailers treat them? Should shelf space allocation be based solely on tangibles such as sales, profit and turnover?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Do consumers rely on retailers to make sure that quality claims made by brands sold in their stores are truthful?

Comments:

I started to say that unless a product is harmful, retailers should stay out of the fray, and then remembered that many retailers sell cigarettes. So, let's just say retailers should stay out of brand battles.

Shelf space is rarely allocated based solely on tangibles such as sales, profit and turnover, with many retailers making significant sums from slotting fees and promotional allowances, making it difficult for new brands to gain a footing.

Retail is never going to be a perfect world. Retailers can help themselves by carrying products that consumers want and avoiding brand squabbles.

[Image of: View Braintrust Panelist button]
Max Goldberg, President, Max Goldberg & Associates

There are a lot of questions here. 1.) First, the poll question: Do consumers rely on retailers to make sure that quality claims made by brands sold in their stores are truthful? I don't know, but I don't. 2.) Should legal and PR battles between brands affect how retailers treat them? Not the battles themselves, but the results will have an effect on sales (See #3). 3.) Should shelf space allocation be based solely on tangibles such as sales, profit and turnover? Why not? That's business, isn't it? 4.) Court fight? If Blue Buffalo is small, they'd better a.) be accurate in their accusations, b.) have "acceptable" ingredients in their own products and c.) have deep pockets for a big fight whether they win or lose.

[Image of: View Braintrust Panelist button]
Naomi K. Shapiro, Strategic Market Communications, Upstream Commerce

I would suggest that retailers stay on the sidelines and let the manufacturers fight this one out. All the retailer can do is lose if they take sides. The job of the retailer is to supply the consumer what they want and help and if they want to grow their business. Be an educator, not just a supplier. In the long run, they need to give the customer what the customer wants and will buy.

[Image of: View Braintrust Panelist button]
Mel Kleiman, President, Humetrics

Pets like Fido and Fluffy have become more pampered, health-minded and more controlling of their owners. "No more unhealthy table scraps for me."

New healthy brands are trying to invade the 120-year-old sales territory of Nestle-Purina and attempting to get pets to say, "No more yucky chicken necks in my dish." Such new human nature, to be commanded, must be obeyed. That's why lawyers, vets, PR folks and the government get involved and then attempt to drag retailers into this quagmire. Unless pet sampling comes into vogue in stores, let's let retailers stay with tangible guidelines.

[Image of: View Braintrust Panelist button]
Gene Hoffman, President/CEO, Corporate Strategies International

Retailers should focus on what they do best, namely, make available to customers their needed products at fair prices in a clean, convenient and customer-oriented environment. Stay out of the legal and PR fray between competing brands and concentrate on the above.

[Image of: View Braintrust Panelist button]
Richard J. George, Ph.D., Professor of Food Marketing, Haub School of Business, Saint Joseph's University

Retailers have two obligations that must be balanced in dealing with manufacturers in such a situation: 1.) to their customers, they must offer and promote the best quality products for the money and 2.) to their owners or shareholders, to capitalize on trends in order to gain market share and increase customer value.

The key, in this situation, is to assess the validity of the claims and determine whether or not these claims will result in a shift in the business. Legal and PR should be included only as a source (biased) of information.

[Image of: View Braintrust Panelist button]
Mark Price, Managing Partner, LiftPoint Consulting, Inc.

A nice reminder that retailers should be concerned about what consumers think, not suppliers. If a pet food retailer sells both brands then it has already determined that the quality of each brand is up to their own retail brand standards.

A battle that brings the brands to the forefront of customers' minds should be leveraged. Where are the taste tests? Ask the dogs to decide!

[Image of: View Braintrust Panelist button]
Christopher P. Ramey, President, Affluent Insights

I am an independent pet retailer and proud of it! I allocate shelf space first for those brands that I can believe in and feel good about feeding to my own animals as well as recommend to my customers. Both my own pets and my customers rely on my knowledge and expertise to make available high quality foods.

Of course sales, profits and turns make a difference, but there is a limited amount of shelf space. The average independent pet retailer is just 2500 square feet. Between high rent, lower margins on pet food than other categories and all the confusion and mythology surrounding pet food, the independent retailer must pick and choose. In my store we stock five different brands, for different reasons. We will special order anything available through our regular distributors to ship in with our regular weekly shipments.

Blue Buffalo has been a wonderful partner over the past 12 years, driving customers into the stores in search of quality foods not found on the grocery aisle. It should be noted that Blue will open its own pet food manufacturing facility in the very near future. It should also be noted that most of the high-end foods do not own their own plants and that should not automatically be a negative feature.

Legal and PR battles in the news affect consumer perceptions. To that end, a retailer must be prepared to discuss the issues in the news, and rethink the store assortment as necessary. In the wake of recalls in 2011, 2012 and 2013, there are several brands no longer in my store. Between the loss of consumer confidence, the costs to me in handling and processing the recalled food—in one case twice in eight weeks—not to mention the actual behavior of the companies in question, they lost their space in my store. These brands were replaced by brands that I can rely on for quality and safety.

Connie Kski, owner, Animal Fair Pet Shop

Kroger posts comparisons of their pet food ingredients with their mainstream competitors at their stores to promote value. Looks like they are borrowing some of Blue Buffalo's tactics. However, their main claim is being as good for less.

In terms of by-products, there isn't anything inherently wrong with eating chicken necks, feet or intestines. In fact, if you want to make chicken soup, chicken feet and beaks are some the best things to use to make a good broth. Many cultures eat animal intestines. People have become too far removed from their own food sources, much less understand what's good for a pet. In some respects, this whole argument is silly.

Ultimately, let the consumer decide what they want to buy and leave space allocation based on the tangibles. Blue Buffalo will not be getting any extra shelf space on my account. I tried Blue Buffalo for my cat and it gave him diarrhea. Needless to say, I'm not a fan and won't be a repeat customer.

'RetailRetell'

The retailer decides how to run the business. If the retailer chooses to align with one over another, there are business consequences (positive and/or negative). The retailer chooses how it wishes to represent itself to their target shopper. As for "should"—there are no "shoulds" here (people have been "shoulding" on retailers for far too long). However, it is permissible and may be encouraged IF it is strategically relevant.

Similarly, shelf space allocation is to be done by whatever is strategically appropriate for that retailer. There is "sense" in doing it by sales, profit, and turnover. However, it is not the ONLY way nor is it necessarily the recommended or preferred way for all retailers. Business decisions are best made based on business strategies and goals. Determine what those are first—then make the tactical decisions to support that (not the other way around).

[Image of: View Braintrust Panelist button]
David Zahn, Owner, ZAHN Consulting, LLC

Retailers should react to the consumer only.

[Image of: View Braintrust Panelist button]
Joe Nassour, Chief Technology Officer, RetailTactics

Retailers should focus on what retailers do—their customers' needs. Service them in the way they desire and avoid such battles affecting them.

Space allocation is primarily done via quantitative business variables and does not factor "soft" factors like consumer perceptions.

Retailers will need to balance these factors and at the same time avoid getting between brand battles.

[Image of: View Braintrust Panelist button]
Mihir Kittur, Co-founder and Chief Innovation Officer, Ugam

This is a manufacturer's battle, and retailers should let it stay that way. Retailers have one priority and it's to make sure they are carrying the products that their customers want. It's up to the brands to influence the shoppers' decision-making. The one way in which I could see a retailer getting involved is if they feel that a particular brand is more in keeping with their own brand image. If that is not clear, better to let the dust settle and just make sure consumers can buy what they want.

[Image of: View Braintrust Panelist button]
Alexander Rink, CEO, 360pi

Search RetailWire
Follow Us...
[Image of:  Twitter Icon] [Image of:  Facebook Icon] [Image of:  LinkedIn Icon] [Image of:  RSS Icon]

RetailWire's
Getting Started video!

View this quick tutorial and learn all the essentials...

RetailWire Newsletters