Fierce competition in the grocery sector means that own brand products – far from being the inferior cousin of their national brand counterparts – have become the battleground for retailers to differentiate themselves.
While price still is, and always will be, an important driver for vast numbers of consumers, no supermarket wants to be stuck in a race to the bottom fighting for market share. This is why they have invested so much in developing their own ranges, focusing on choice, quality and provenance.
In recent years, we have seen a significant increase in the importance of premium own brands and retail success, particularly in grocery, which now demands that these brands drive both footfall and margins.
These brands will play a key role in how consumers view the retailer, so it is still important that it is clear what the brand’s key feature is. For example, is it a low price or value for money? Or does the brand prioritise high quality and innovation?
Whatever the objective, retailers are dependent on their suppliers to create products that consistently deliver against the brand promise. Long gone are the days of ‘white label’ products which are simply re-labelled with the retailer’s name, so collaboration between suppliers is essential to create competitive products that are specific to the retailer.
It is no coincidence that Aldi and Lidl, which stock almost entirely own brand goods, have been quick to respond to demand for products that are plant-based, organic, free-range, locally-sourced and/or contain whole ingredients. Just as important are the ethical and environmental concerns that have prompted retailers to reduce single-use plastic and emissions and source more Fairtrade suppliers.
The big grocers in the UK have certainly not lagged behind either, innovating new ranges in line with evolving consumer trends and tastes.
For these products to be successful, they need to compete against national brands, which have the advantage of a single team working together on sales, marketing, product management, production, operations, and quality, often all in the same office.
For example, where a retailer may have a team of 10-20 technical managers with responsibility for consistency and compliance, a retail own brand team will have the unique challenge of replicating this process for hundreds or even thousands of products across a number of categories.
This is where working together with own brand suppliers becomes critical, uniting the retail own brand team and its suppliers into ‘one team’ or ‘one business’, as Dave Lewis, Tesco’s CEO, refers to it. It is impossible for own brands to compete with the resources behind national brands without collaboration with suppliers.
Working together as ‘one team’ with effective supplier engagement means it is no longer 10 or 15 technical managers, but a team of potentially hundreds of people throughout the supply chain working together to ensure products are competitive and deliver on consumer demands.
Whether they are buying national or own brand products, shoppers increasingly want supermarkets to be transparent and justify any claims made. It is a minimum entry requirement into a competitive market and those who cannot tell the story of where the ingredients came from, or whose branding is misleading, are likely to come under fire in the press.
Transparency is arguably less of a challenge for national brands, particularly those with smaller product ranges manufactured in their own factories. Supermarket buying teams, on the other hand, work with hundreds of suppliers, who operate farms and factories around the world – so how can they ensure each one not only meets the standards expected but also innovates?
One problem is there is no industry-wide definition of transparency (unlike say, Fairtrade or Soil Association), although Nielsen’s is a useful one. Its researchers found that consumers generally want transparency around sustainability, processing claims and ingredients.
To address this problem effectively, retailers and suppliers need retail intelligence – from sales, returns and feedback in market research, customer service and social media – to determine what people really want.
By identifying trends early on, manufacturers can develop their products, adjust their processes and create the point-of-difference retail customers and consumers want. A light-touch approach from retailers gives them the freedom to innovate, in line with agreed standards.
Achieving true transparency means engaging with suppliers at every stage and empowering them to become pioneers.
The problem with wholesale change, as we have seen, are the unintended consequences that sometimes follow. Rather than demanding manufacturers remove an ingredient or a type of packaging, it is surely better to incentivise them by committing to longer-term contracts, particularly where investment in new machinery and product development is required.
Whatever promises retailers make on sustainability, provenance and processing, their message must be underpinned by a commitment to transparency, since this is what drives improvements in the first place. This demands a strong relationship with suppliers because when they feel supported, they will naturally go the extra mile to ensure their produce is the best quality it can be.
For further information on S4RB, including its supplier engagement services, visit: www.s4rb.com
