Is transparency next for grocery private label?

Discussion
Source: traderjoes.com
Dec 02, 2016
Denise Leathers

Through a special arrangement, presented here for discussion is an excerpt of a current article from Frozen & Refrigerated Buyer magazine.

Should food retailers tell customers who makes their store brands?

Some market watchers believe they need to start considering it.

“Private label has been really hesitant to share what’s inside the product or where it came from,” says Steven Howell, client services manager for North America at Solutions 4 Retail Brands. But in this day and age, if you’re not saying, consumers will assume the worst.

“The notion that ‘I can put my trust in a particular product because it’s from big brand X’ has been flipped upside down in more and more categories,” explains Bob Shaw, president of Concentric. Today’s consumers want to know exactly who makes the products they buy, and that’s hurt the larger CPG companies to some degree, he says. But it’s also hurt store brands sold under one big private label. In both cases, consumers are savvy enough and have seen enough recalls not to trust the product just because they trust the brand.

A greater focus on transparency — and other factors such as food safety, animal welfare, etc. — could help retailers move beyond value, national brand equivalent and premium to get private label growing again, believes Mr. Howell.

Some strategies retailers can use to boost transparency include improving their own quality standards and utilizing more “captive brands” like Trader Joe’s does that don’t carry the same name. “If you put your name on everything, and everything comes from 900 different unknown companies at various quality levels, you’re going to lose some trust with the growing number of consumers who care about some of these values,” says Mr. Shaw.

Private label marketing may benefit by moving from broad brand-building to a narrower focus, especially around larger categories where volume is high enough to justify marketing a particular line on its own. Mr. Shaw suggests, “So tell consumers why your frozen vegetables are superior, why they should switch to your orange juice and why your ice cream is such a good value.”

DISCUSSION QUESTIONS: What are the pros and cons of bringing more transparency to grocery private labels? Would the challenges and/or risks offset the benefits?

Braintrust
"The more store brands promote their attributes in the same ways as national brands, the more they will be called on by the shopper to be transparent."
"While transparency is never bad, I wonder how many people actually care when buying a private label product. "
"...if it means “outing” the companies that provide the private label products, it goes against the whole point of having private labels."

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10 Comments on "Is transparency next for grocery private label?"

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Ken Lonyai
BrainTrust

I agree with Steven Howell, ” … if you’re not saying, consumers will assume the worst.” It’s especially true among Millennials who fit the L.A.T.T.E. ( local, authentic, transparent, traceable and ethical) mindset, and they are the growth market.

Shoppers generally don’t look for private grocery labels unless they’re looking to save money. Nowadays with the number of corporate scandals and recalls, it’s an easy leap for shoppers to become skeptical of exactly how store brands are capable of selling a cheaper product. Transparency can alleviate those concerns by spelling out ingredients, sources, processes and ethics and, in doing so, build both trust and loyalty. It can be a big win because those products are store exclusive, but the huge caveat is that store brands must offer products that walk the walk and are indeed in alignment with the shoppers that value transparency. No GMO QR codes here!

Dr. Stephen Needel
BrainTrust

While transparency is never bad, I wonder how many people actually care when buying a private label product. I’m putting my trust in Kroger and Publix when I buy their private label products. I don’t know that enough people care or would know enough about the private label manufacturers to make a difference.

Lyle Bunn (Ph.D. Hon)
BrainTrust

The temperature of the ocean of consumer scepticism is rising, in particular related to food. Confusion turns to concern quickly now after flip-flops on what we should or should not eat, concern over GMOs, pesticides, hormones and irrigation as well as processing methods. In most non-raw food choices, labeling has a negative impact on the pleasure of purchasing and so incremental changes to transparency are bad for grocery retail. A new level of providing information that establishes brand credit for “good” attributes is the remedy. The technologies of shelf-level display and interface with mobile will enable this information-based engagement.

Richard J. George, Ph.D.
BrainTrust

Transparency has become the customer mantra for quite a while now and the fact that it is being applied to private label should come as no surprise. However, this demand for transparency in terms of producers of private label is a double-edged sword for both retailers and manufacturers of private label. While the article focuses on retailers, there may be more of a potential downside for the for the CPG company wanting to use excess capacity to make private label. Now consumers will know that they make the store brand as well as their own national brand. Consumer and brand confusion may reign. I am reminded of the adage, “you can make it with class or make it for the mass, but you can’t do both.”

Ron Margulis
BrainTrust

There were more pizza makers offering gluten-free pies than traditional ones at the Private Label Manufacturers Association Annual Conference last month. There were many more certified organic posters on the exhibit floor than ever before — just about every other booth it seemed. And even the traditional stalwarts of the store brand industry were featuring non-GMO products.

Overall, the more store brands promote their attributes in the same ways as national brands, the more they will be called on by the shopper to be transparent.

Ben Ball
BrainTrust

Let’s take this as a two-part question:

  1. Should private brands exercise the same level of “transparency” in terms of fully labeling contents, ingredients, processing, etc.? Yes.
  2. Is there a benefit to private brands disclosing who co-packs the product for them? Absolutely not. The value of a brand is the trust consumer’s place in it. Do you want to consumer to trust Publix? Or General Mills? Consumers already know that a number of private brand items come off the same production lines as some other brand in the category. But there is no benefit I can see to declaring that on the private brand product. And I suspect doing so would push a number of national brand manufacturers to leave the private brand co-packing field altogether.
Jeff Sward
Guest

Transparency should be a win/win. Transparency is a differentiator and a validator. And I would think information is more important for groceries than for many other products. I don’t just want to buy hamburger, I want the leanest possible hamburger, and I know I have to pay a premium for that. Low-sodium, low-fat, gluten-free — it’s all about information and transparency. Quality and value aren’t there just because somebody says so. Transparency is the validator. Look at Everlane in apparel. Customers are loving their “radical transparency.”

Joel Rubinson
BrainTrust

I think it would be a real wild card to the known national brand. It cheapens the brand a bit and actually might harm rather than help trust (“What do you mean you can sell your laundry detergent for 20 percent less if I buy it under the Stop and Shop name?!”).

Craig Sundstrom
Guest

With all respect to Mr. Shaw, “today’s consumers want” is a phrase that implies — falsely in my view — they’re some monolith all thinking and demanding the same thing. I doubt it (more cynically I could say it’s a claim made by supporters when little real support for their idea exists).

As for the idea itself — and by “idea” I refer to listing the manufacturer, not the broader concept of “transparency” — it seems fraught with problems, like how to avoid confusing the large number of people who don’t even realize there is (another) manufacturer. What would happen if — or more likely when — a store contracts with someone else? Should the consumer be led to believe it’s not the same? The whole concept seems to undermine the very idea of private label: that the store IS the brand.

Naomi K. Shapiro
BrainTrust

If it means providing more information and details on content and origins, fine. But if it means “outing” the companies that provide the private label products, it goes against the whole point of having private labels. Too much transparency will hurt both the grocery using the private labels as well as the manufacturer. And also keep in mind pricing and competition. Pricing intelligence shows that it’s more difficult to match prices or create similar products to compete under private labels which grocery chains need in their competitive armories.

wpDiscuz
Braintrust
"The more store brands promote their attributes in the same ways as national brands, the more they will be called on by the shopper to be transparent."
"While transparency is never bad, I wonder how many people actually care when buying a private label product. "
"...if it means “outing” the companies that provide the private label products, it goes against the whole point of having private labels."

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