FD Buyer: More Smaller/Regional Brands at Grocery?
Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Dairy Buyer magazine.
In an August survey, FD Buyer asked a number of supermarket frozen and dairy retail executives to rank a variety of statements on a scale of one to 10, with one being "disagree strongly" and 10 being "agree strongly." One explored whether an increasing amount of smaller/regional brands would be heading to the food channel.
Specifically, the statement was, "I will seek more smaller/regional brands to gain differentiation in the year ahead." Responses bunched at the high and the low extremes, but the average came to 5.2. Not many retailers are neutral on this one — you either believe this is a good idea or you don’t. Retailers were about evenly split on whether local brands outperformed the nationals.
One naysaying retailer who voted with a "1" said SKU rationalization is still ongoing, and "I only carry locally relevant regional brands with five percent or greater brand share." Another pro-local regional retailer who voted with a "10" said, "Larger, consolidated retailers cannot stay close to the customer."
Said another who voted seven, "Part of our marketing campaign is supporting local, so some small vendors are in one or two stores near their farms. This goes against SKU rationalization, but supporting local is an important differentiator for us."
FD Buyer also asked three editorial advisory board members of the magazine to weigh in on the statement.
Bob Anderson, formerly of Walmart and now president of Store Brand Consulting, Rogers, AK, was most doubtful, voting a "2." Said Mr. Anderson, "Unfortunately, small and regional brands may take the biggest hit here for several reasons. If it were up to me, I would push these versus carrying more national brand SKUs, as they add better value and point of difference."
More optimistic was Dan Raftery, president of Raftery Resource Network, Antioch, IL, who voted a "7." Said Mr. Raferty, "I’d be inclined to carry these, so I can differentiate from competition and become known for quality products."
Johnny Harris, formerly of Harris Teeter, now president of Johnny L. Harris Consulting, Fort Mill, SC, likewise saw advantages to promoting local products. He said, "This is necessary when a retailer moves into a new market. It is imperative that they carry local milk and ice cream products." But he was less confident that a shift would happen, voting "5."
Discussion Questions: How can retailers find the proper balance between SKU rationalization and greater differentiation? What should guide their decisions regarding smaller/regional brands?