Key Steps to Recalibrate Your Grocery Private Brand Strategy

Find out how you can take your private brand to the next level by optimizing product innovation, supplier visibility, and product transparency.

Content Summary

INNOVATING IN STEP WITH CHANGING CONSUMER TRENDS
ADVANCING SUSTAINABILITY
MASTERING PRODUCT TRANSPARENCY
ENABLING COMPLETE SUPPLIER VISIBILITY
COORDINATING CROSS-FUNCTIONAL TEAMS
SCALING OMNICHANNEL
BAKING QUALITY AND COMPLIANCE STANDARDS INTO THE PRODUCT LIFECYCLE
KEY QUESTIONS TO ADVANCE EFFORTS

Private brands are experiencing a surge in popularity as a significant share of consumers experimented with what was in stock and cost-effective in 2020. This recent trend in consumer behavior is changing the way food retailers market, source, produce and distribute private brand products.

Investing in private brands gives major retailers a leg-up on competitors that don’t exercise this lever. Now is the time to optimize your private brand strategy and technology approach to drive market differentiation and secure deeper customer loyalty.

In this article, we outline the most effective initiatives food retailers should consider when growing their private brands, including:

• Innovating in step with changing consumer trends
• Connecting broader sustainability initiatives with private brands
• Mastering product transparency and supply chain traceability
• Enabling complete supplier visibility and collaboration

Read this article and find out how you can take your private brand approach to the next level.

Consumers see grocery private brands completely differently now than they did just a few years ago. Instead of opting for private brand products solely as an affordable alternative, grocery shoppers now view these offerings as high-quality options that align with their evolving tastes.

The popularity of private brands exploded in 2020 after the pandemic motivated many consumers to seek out lower-cost products more likely to be in stock than their national brand counterparts. A report by McKinsey & Company found 80 percent of consumers who started purchasing private brand products during the pandemic plan to continue after the pandemic ends.

Research from IRI confirms the trend: “Small challenger brands and private brands have further encroached on national brands in overall share of the U.S. consumer goods market,” the firm stated in a report. The consumer goods industry as a whole grew 10.3% in 2020, with private brands accounting for 18% of that growth.

So what do these stats mean for retailers? Private brands are now a major driver of competitive differentiation and customer loyalty, helping to drive revenue growth and margins. Long-term investment in private brands will be necessary for sustained success in the food retail space moving forward.

Major retailers that had already made significant investments in private brand offerings saw a notable spike in sales after the pandemic hit. Kroger boasted $1 billion in annual sales from its Simple Truth brand for the first time in Q4 of 2020, (10) while Target’s Good & Gather brand contributed to over $2 billion in sales in 2020, along with three other Target-owned brands.

The big takeaway from recent market research is that retailers who are already heavily investing in private brands now have a leg-up on competitors that don’t exercise this lever. To stay ahead of competitors, these retailers need to continue to optimize their private brand strategy to secure deeper customer loyalty. Other retailers need to move quickly to avoid being left even further behind by taking direct control of their private brands and investing in the systems and processes to boost private brand innovation and agility.

This article spotlights how food retailers can quickly evolve and accelerate their private brand strategy through strategic technology and process best practices. It highlights key areas of focus for advancing grocery private brands. Those areas are as follows:

1. INNOVATING IN STEP WITH CHANGING CONSUMER TRENDS
2. ADVANCING SUSTAINABILITY
3. MASTERING PRODUCT TRANSPARENCY
4. ENABLING COMPLETE SUPPLIER VISIBILITY
5. COORDINATING CROSS-FUNCTIONAL TEAMS
6. SCALING OMNICHANNEL
7. BAKING QUALITY AND COMPLIANCE STANDARDS INTO THE PRODUCT LIFECYCLE

INNOVATING IN STEP WITH CHANGING CONSUMER TRENDS

Private brand food categories have become more nuanced in recent years, especially through more unique products and packaging. While product teams have certainly gotten more creative, this evolution is largely driven by consumers’ increasingly adventurous tastes.

This point is not lost on retailers. A recent private brands industry survey by FMI, The Food Industry Association, found that 83% of food retailers said new products and innovation are very or extremely important for retailers to grow private brands. The pandemic has shown consumer tastes and behaviors can change fast. Private brands need to adjust along with consumer trends to be successful.

Taking an agile approach to innovation is key to ensure businesses can quickly respond to shifting trends in the marketplace or adjust to new moves by competitors. While it’s important to take a thoughtful approach to innovation, it’s equally necessary to move fast to capitalize on market trends. Collaborating with suppliers to get products to market quickly can make or break new or reformulated products.

There isn’t a single magic bullet for success. Instead, there are multiple steps retailers need to pursue to make progress with innovative reformulation and new product development. Here are some of the most important steps:

• Capturing: insights about consumer needs from multiple sources, ranging from sales data to supplier input
• Gathering: and recording innovative product ideas that can eventually be shared internally and with suppliers
• Identifying: which suppliers — current or new — are the best candidates for innovative products and getting them involved early in the ideation process
• Sharing: detailed instructions with suppliers about a product, quality, and packaging requirements
• Making Sure: suppliers are pre-qualified against the food safety requirements of target markets
• Ensuring: suppliers understand how new products need to align with a retailer brand’s image and standards
• Executing: product development with suppliers and making changes in real-time, such as pivoting quickly on ingredients and packaging based on consumer testing

Succeeding and leading with private brand innovation requires sophisticated software tools that can manage detailed product information, automate processes, enable workflows, and support collaboration with suppliers. Reliance on manual processes will slow down efforts, limit throughput, and lead to potentially serious errors.

Bamboo Rose’s technology solutions are helping retailers such as Loblaw accelerate private brand product development and innovation across a range of brands and categories. The solutions support advanced ideation, reformulation, quality and compliance adherence, and collaboration for innovative product development.

ADVANCING SUSTAINABILITY

Consumers are increasingly focused on environmental concerns such as product origin and product and packaging sustainability. The events of the last year have only accelerated consumers’ concerns around the healthfulness and safety of the products they buy for their families.

A 2020 Boston Consulting Group survey of more than 3,000 people across eight countries found more concern during the pandemic about environmental challenges and more commitment to adapting behaviors to support sustainability. This growing commitment has major implications for the business community, BCG said.

An essential step in this process is making sure suppliers are on board with each retailer’s ESG requirements and providing visibility into their ingredient sources and processing facilities. Achieving this collaboration requires retailers to build strategic relationships with suppliers and make use of systems that drive trading partner connectivity and effectively manage detailed information about products and packaging.

On the product side, a retailer might, for example, communicate to suppliers that fish products need to come from sustainable sources accompanied by vendor certificates. For packaging, the retailer may specify details such as post-consumer recycled paper and require a relevant certificate from the vendor for packaging materials.

3K+ People across 8 countries are more concerned about the environment.

Food retailers are increasingly taking action to improve their environmental social governance (ESG) strategies. Among the imperatives is having the ability to manage the traceability of ingredients throughout the supply chain. Retailers aim to build consumer trust, proactively anticipate ESG-related government regulation, move towards recyclable packaging, and achieve all this while still enhancing financial results.

Increasingly, consumers want retailers to drill even deeper. For example, they are no longer interested in just knowing that a package can be recycled. They want to know additional details, such as how much post-consumer recycled content is incorporated in a package. They may also want to know if there is a forest certification related to sustainability.

Beyond consumer pressures today, government regulations regarding traceability and sustainability of products and packaging are increasing globally. These regulatory pressures are already driving food retailers to make significant technology investments to ensure they’re fully prepared when the laws are enacted.

Bamboo Rose emphasizes the importance of adopting a sustainable sourcing strategy across the business community by leveraging a multi-enterprise platform. This approach incorporates ESG goals into broader business initiatives and engages all members of the supply chain community around the hybrid delivery of shared value and sustainable practices.

MASTERING PRODUCT TRANSPARENCY

Consumers make decisions on products based on factors such as taste, price, healthfulness, ingredients, and quality — and they have increasingly high expectations. Private brand retailers need to be focused on those details – which directly relate to activities such as traceability, transparency, compliance, regulatory adherence, claims certifications, and quality assurance.

In large part, consumer loyalty is about trust. Consumers trying private brands for the first time want to know they can trust that the product contains high-quality ingredients. Providing complete and accurate information about ingredients and sources through multiple channels gives retailers an advantage over those who make this information hard to find or offer incomplete information on product packaging.

Consumers want to feel secure knowing their fruits, vegetables and packaged food products pose zero risk to themselves or their family,” she said. “Considering all this, transparency and traceability have become two of the most important factors driving brand reputation and risk reduction for food retailers worldwide.” – Sue Welch, CEO of Bamboo Rose. On the growing consumer expectations about product transparency that were relayed in a trade magazine article.

Prioritizing label accuracy can also reduce the likelihood of costly product recalls, as labeling errors account for about 50 percent of all recalls. When this inaccurate information includes undeclared allergens, the consequences for consumers can be extreme and lead to reputational damage for the retailer. Beyond label transparency and regulatory adherence, product artwork is also a huge component of private brand strategy. Teams still using manual processes to develop new products often don’t see label information (ingredients, allergens, nutritional facts, product claims, etc.) until the first draft of the artwork is reviewed.

Uncoordinated feedback from team members can lead to multiple artwork revisions until all errors are corrected. If this cycle of version control and rework sounds familiar, that it’s time to consider a better way of working.

Some retailers rely on brokers and wholesalers to develop and source their private brand products. This reliance on these partners introduces major risk. Retailers need complete information about what’s going into products and where they’re processed if they are to maintain their brand standards and ensure regulatory compliance. But private brand teams could easily get lost in a sea of data without sophisticated systems for entering, aggregating, and accessing information. This is where Bamboo Rose can help.

ENABLING COMPLETE SUPPLIER VISIBILITY

Collaboration across the supply chain makes everything from product ideation to delivery easier and less time-consuming. But aggregating basic supplier data like location, contact info, plant locations, and products, and accessing audit records and reports can be difficult for retailers. There are a lot of moving parts and disparate systems where this data is stored. Ensuring retailers can take full advantage of digital, traceable collaboration can make these common tasks a lighter lift for all involved.

When retailers establish complete supplier visibility, they are better equipped to develop deep, strategic relationships with their suppliers. Strong supplier relationships enable retailers to trust their partners, while also gaining the tools to verify that partners are following through on all facets of their contracts, meeting KPIs, maintaining accountability to specifications, achieving quality standards, and continuously assessing and improving on all facets of the product.

Tight collaboration with suppliers also allows retailers to achieve true agility. As a result, retailers can develop and bring products to market faster and win new customers. Ultimately, it’s important to keep in mind that private brands are a reflection of the retailer – not the supplier. As a result, the onus is on the retailer to ensure suppliers meet standards and expectations and share pride in the products they’re bringing to market. Having a platform that engages, tracks, and drives value for suppliers is crucial for retailers who want to maintain product quality while also fostering strategic supplier relationships.

COORDINATING CROSS-FUNCTIONAL TEAMS

Enterprise retailers often struggle with internal team silos that delay communication and hinder success. These organizational challenges are often brought on by distributed stakeholders, disparate software tools, and disconnected barometers for success. This is especially relevant for large retailers building private brand products, given all the partners, tasks, and required skill sets involved in this complex and high-risk development process.

If this process had involved more data visibility across the organization from the start, issues could have been identified earlier and adjustments could have been made in real-time. Similarly, a retailer category manager or product manager can share data with the quality assurance team and iron out any concerns even before vendors get involved. Software-driven visibility enables cross-functional retailer teams to learn from each other in ways that support ongoing improvement.

Here is a nightmare scenario that can result from poor internal communications:

A private brand food retailer’s product development team spends a couple of months creating a new item, by working with suppliers on specifications and ingredients. After all this work, the result is shared with the retailer’s compliance team, which rejects the product because of an issue with its ingredients formulation and destination market.

Breaking down silos often involves getting into the weeds of organizational workflows and company culture. Consider the example of how product-related content and artwork are managed in private brands. Retailers need to transparently share this information with many people and departments across their organization. In one example, regulatory affairs leaders at the retailer may need to collaborate internally with an editor to review technical and “romance” marketing copy that will appear on product packaging. This kind of collaboration is hard to achieve and scale without a platform hub that provides visibility by keeping track of artwork, content, reviews, and ongoing annotations — and is configured to understand each organization’s workflows.

Likewise, external communications are crucial. Retailers need to leverage data simultaneously from across their partner ecosystems. They need to aggregate this data in a central place rather than rely on disparate, disconnected systems.

The multi-enterprise architecture of the Bamboo Rose platform has allowed Loblaw to facilitate cross-organizational transparency. For example, Bamboo Rose has given the company’s QA team the ability to promptly share essential GFSI (Global Food Safety Initiative) documentation and vendor performance data with all relevant employees. Additionally, by making QA certification data easier to access, Loblaw buying teams were able to bring fresh produce to shelves as soon as it was in season – a major differentiator for grocery store shoppers.

SCALING OMNICHANNEL

In 2020, consumers quickly and willingly pivoted to buying groceries and consumer goods online. While this is an exciting evolution in customer expectations for food retailers, many grocers were caught flat-footed.

Online sales of grocery products have surged during the pandemic, and this growth has endured in 2021. Total U.S. online grocery sales reached $9.3 billion in January 2021, up from $8.1 billion in November 2020 and $6.5 billion in March of that year, according to the Brick Meets Click/Mercatus Grocery Shopping Survey.

Retailers are urgently stepping up efforts to boost e-commerce capabilities while maintaining margins. According to FMI data from its 2020 Power of Private Brands report, 83% of retailers expected to boost private brand strategies for eCommerce in the wake of the pandemic. Meanwhile, 76% of retailers view home delivery/click and collect internet sales as a major growth opportunity for private brands.

A key part of a great online buying experience is ensuring consumers have easy access to all the information they need before making a purchasing decision, from ingredients to allergens to nutritional value. Health-conscious consumers who can’t find accurate product information online will quickly opt to shop elsewhere. Providing complete, accurate information about ingredients and product origin online gives food retailers a competitive advantage as more and more consumers move to online buying channels.

The imperatives for private brand retailers, however, go beyond just enhancing product information in online buying channels. Most of these retailers are just learning to support multiple selling channels operationally.

Supply chain transparency and agility gives retailers access to complete product and sourcing data, enables businesses to track inventory across stores and distribution centers, and allows retailers to intelligently allocate product across buying channels to drive great customer experiences while maintaining margins.

The quick pivot to online grocery shopping in 2020 allowed a select few retailers with aggressive digital strategies to grab even more consumer market share. For food retailers and grocers to keep pace, they must invest in supply chain and order management technologies that support the first 10,000 miles in the delivery process as well as the last mile.

BAKING QUALITY AND COMPLIANCE STANDARDS INTO THE PRODUCT LIFECYCLE

In the food industry, quality and compliance standards cannot be an afterthought – knowing food products are safe is top of mind for consumers, so it needs to be top of mind for retailers and suppliers. Regulations around food safety are only accelerating. In 2020, the Food and Drug Administration (FDA) announced it is taking a “new approach to food safety” to keep pace with the evolving production methods, reformulations, and delivery methods. The FDA is now focused on food safety standards that leverage technology to create a “safer and more digital, traceable food system.”

To keep pace with regulations as well as consumer expectations, retailers need to make sure their private brand products meet all safety, quality, and compliance standards from the very start of the product lifecycle. According to Fair Trade USA, consumers are 79 percent more likely to select products with a stamp of approval from Fair Trade signaling ingredients are high-quality and workers are treated ethically. This trend proves that consumers want grocers to prioritize healthy products, sustainable farming, ethical working practices, and fair compensation. Mitigating risk across the supply chain by holding suppliers, vendors, and national brands to strict regulatory standards in real-time helps retailers satisfy the demands of today’s consumers.

Loblaw used the Bamboo Rose platform to easily meet its internal compliance objectives and fulfill regulatory requirements. The major food retailer streamlined vendor management and product compliance complexity by aggregating all relevant data across product categories. Now, Loblaw’s Quality Assurance team can track and record vendor collaboration and compliance in a single, unified platform to ensure data accuracy, vendor accountability, reduced compliance risk, and reduced administrative complexity.

Having the ability to trace products back through the supply chain significantly reduces regulatory risk, lessens the financial impact of product recalls, and gives consumers a window into the origins of the food products they’re buying.

KEY QUESTIONS TO ADVANCE EFFORTS

This article outlines key areas of focus for advancing grocery private brands. However, it’s hard to move forward on all fronts at once. Retailers should start by evaluating how the major points in this paper relate to their own private brand operations. Here some key questions to consider in making these assessments:

• Is my private brand strategy driving innovation, and market differentiation, and meeting consumer expectations?
• Has my business kept up with the technology investments needed in areas ranging from new product development to supply chain management?
• Do my systems support deep connections with private brand suppliers and the broader business partner community?
• Are my systems effectively supporting the management of traceability, transparency, compliance, regulatory requirements, claims certifications, and quality assurance?
• Are my business processes adequately digitized to allow for agile and profitable support of online customer buying channels?

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