April 2010 - VOLUME 3, ISSUE 2
SupplierPartnerEdition
Maintaining the Momentum
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SupplierPartnerEdition maintain the Private Brand momentum gained. This means integrating an own brand value strategy and message and a marketing plan that includes actionable strategies and tactics. This is why we at Daymon are calling 2010 the Year of the Supplier. We know you’re under the gun as retailers fight to maintain their margin. We know you have challenges and we are right there with you. We think vigilance will continue to deliver strong results for Private Brand in 2010. Research proves it: According to a report from the University of North Carolina’s Kenan-Flagler Business School which features Jan-Benedict E.M. Steenkamp the author of the now famous book, Private Label Strategy: How to Meet the Store Brand Challenge, 66% of U.S. consumers say they strongly agree that many store brands are excellent quality with 40% of consumers saying they often buy store brands instead of national brands. Let’s capitalize on this together. These economic times require greater attention from all of us. We hope you continue to think of us as a valued partner and thought leader. This edition is just one way we are trying to better communicate with you. But please, feel free to email me or any members of our team with comments, ideas or suggestions. Our mission is to help serve you better.
Maintaining the Momentum By Bobbi Gosselin, Executive Vice President
It seems everywhere you turn, there’s news about the recession. It’s better. It’s worse. People are trading down. Staying home. Eating out less. Looking at labels more. Cutting back on non-necessities and making compromises. We know consumers have changed their buying habits to the benefit of Private Brand. As Liam O’Connor from our Global Analytics and Insights Network team writes on page 7, consumers are viewing Private Brand value as more than just a reduction in price. It’s also about the added benefits and high quality. We know that national brands are actively fighting back with aggressive spending to reclaim lost market share. We can’t become complacent. Now is the time to remind consumers about the value of our Private Brands. Packaging Development Coordinators associates Emily Hruby and Jessica Ann Koontz refer to the new shopper mentality and how retailers are handling it as the “War in the Store” (see page 3). As the economy continues to improve, it will be important for retailers to reinforce this value and quality proposition to
IN THIS ISSUE The War is in the Store Differentiation Back to School Recovery Watch Recession Impact on Value Mindset Growing Up with Private Brands The Great Retail Evolution Reading List
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The War is in the Store By Emily Hruby, and Jessica Ann Koontz, Packaging Development Coordinators
Private Brand programs have seen unprecedented success as recent economic turbulence has led many consumers to shop for value-priced items versus high-priced national brands. “Many Americans are eating at home more often to save money during rough economic times, and ConAgra’s stock is up nearly 60% since the spring of 2009,” according to Ohio.com. In today’s economy, national brands can no longer afford to rest on their laurels… and they’re not. “Many companies with strong premium brands are anticipating a rapid rebound in consumer behavior—a return to normality, as after previous recessions,” reads a recent Wall Street Journal article with quotes by McKinsey & Co. “They are likely to be disappointed.” With national brands scrambling to hold onto their consumer base, Private Brands have come out as front-runners challenging traditional favorites for market share. In 2009, retailers saw significant increases in PB penetration and many forwardthinking retailers have taken advantage of this opportunity to rethink, rebrand, and repackage. Some examples of cutting-edge retailers include: Schnucks’ Culinaria brand and award winners The Fresh Market, Winn-Dixie, and Latvian retailer, Rimi. Kraft is an example of a national brand titan putting its money where its mouth is by increasing support for marketing
initiatives. Regardless of decreased national brand penetration, the push for Private Brand Inset and above: Two recent examples from innovation is no less rel- Daymon Worldwide Design. evant. Daymon Worldwide Design (DWD) has helped Private Brand retailers grow as contenders in this ring for over a decade. Tomorrow’s challenge for Private Brand retailers and suppliers is to maintain the momentum of increased customer loyalty. Private Brand retailers have upped the ante by partnering with suppliers with national brand equivalent (or better!) quality products supported by unique packaging and in-store marketing. In 2009, as reported by AdAge, “P&G profits fell 7% to $4.7 billion compared with the year before. Earnings per share slipped to $1.49 per share from $1.58 per share… For companies like P&G, the concern is shoppers won’t fully resume their [spending on premium national brands.]” National brands are Read More Online: running scared. The time is Wall Street Journal now to maintain the competiOhio.com tive advantage.
Advertising Age
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Differentiation: Still a Top Priority for Retailers and Suppliers By Marc Lower, Senior Director - Innovation
Most retailers and suppliers experienced sizable Private Brand growth through 2009 due in part, to the recession. But the national brands are fighting back.
We are seeing dramatic increases in promotional activity as national brands take a stand to buy back share. Historically, the industry would have set in motion a process to respond in kind with Private Brands. This ultimately impacted margin for both retailers and their suppliers. Savvy retailers and suppliers recognize that a thoughtfully differentiated Private Brand assortment can do a lot to strengthen the Private Brand portfolio and reduce the need to go toe-to-toe, dollarfor-dollar with the national brands. Deeper spending by the national brands will put significant margin pressure on those Private Brand products sold strictly as an emulation at a lower price. Additionally, in light of the aggressive pricing by retailers such as Wal-Mart and Aldi, some retailers are struggling to be priced competitively with many of their similar Private Brand products. As a result, many retailers are looking for Private Brand products that compete with national brand products, but are not an exact emulation of the national brand. Terms such as national brand comparative or NBE plus, are being used to describe products that compete directly with leading national brands but have some point of distinction that consumers will perceive as better. This is the same strategy that CPG companies use when they bring a new product to market that competes with a leading national brand in that category. For example, the Schick Hydro debut in April 2010 competes with Gillette’s Fusion razor. This product will target the same consumer with the same needs but has a different look and feel. Another example: When Dyson came on the market with better vacuums that never lose suction. Hoover, Bissell and others were quick to respond with their versions of the same cyclonic technology. As retailers continue to develop their Private Brand franchise and build consumer loyalty, they are looking for differentiation with their product assortment. In the past, this was accomplished through the development of premium brand tiers or sub-brand programs. But today, many retailers are looking for their first tier products to have some meaningful point of difference to the leading national brand.
The Schick Hydro, left, competes with the Gillette Fusion, right
This is being done with unique flavors or fragrances, packaging, convenience, or health and wellness features. There is great benefit to suppliers with this strategy. When national brands reformulate, depending on the new features, there may be less need for the Private Brand to reformulate given it is not a direct emulation. Designed properly, the national brand may be compelled to catch up with the Private Brand! At Daymon, we continue to evolve our analytical tools and services to better understand consumer attitudes and behaviors that help identify potential product opportunities. Our online panel, Be Heard Worldwide, is a great example of how we develop a direct line of communication with consumers to conduct cost-effective strategic and tactical research. Be Heard Worldwide consists of individuals from all over the United States who have registered to share their opinions on a variety of topics that are pertinent to our business partners. The panel will have 25,000 members by Q2 of this year, and will continue to expand in size in future years. It’s a fast and efficient way to speak to targeted consumers. Insights gleaned from the panel not only help with product development, but also product positioning and marketing strategy. We believe creating first label products with a unique point of difference can be a tremendous opportunity for our industry and a great way to increase Private Brand share. For more information, please contact your business development team category director in the Stamford Resource Center.
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Go Back To School Strengthen your competitive advantage with Courses from Daymon U By Tricia Wise, Senior Manager, Daymon University
Maintaining your company’s brand equity, competitive edge and sustainability is challenging at any time, but none more so than during this current economic downturn. As a result, organizations need to constantly develop new strategies for strengthening their operations, productivity and associate acumen. To help you in your efforts to bolster your business operations, Daymon University offers three different educational opportunities for our Partners. The classes and their session dates in 2010 include:
tailers and Suppliers. This provides participants with meaningful and well-rounded discussions on the Private Brand industry, and is certainly also an opportunity for you to provide your perspective and learn from associates in various channels of trade. If you are interested in attending Daymon University in 2010 and would like to receive a copy of our brochure, please contact Tricia Wise at twise@daymon.com or 203352-7831.
DU 320- Directing a Successful Private Brand Business; August 9-12; This class focuses on Best-in-Class practices for developing strategic alignment, collaborative relationships and innovative thinking skills that drive successful Private Brand initiatives. DU 321- Discovering the Power of Private Brand Category Planning; May 3-7; This class was redesigned in 2009 and focuses on the key components necessary for developing an effective Private Brand category plan and includes a new Brand Management component. DU 322- The Innovation Skill Builder; April 19-22; This class was launched last September and is new to our portfolio of offerings for our Supplier Partners; this course increases participants’ understanding of the behaviors, politics and best-in-class practices for developing an innovation culture in the work environment. In order to enhance the learning experience and provide a variety of information and perspectives for participants, our faculty represents a cross-section of Private Brand industry experts with diverse professional experience within our organization. Participants will have the opportunity to learn from our Daymon Executive Leadership Team, Daymon Board Members and a number of our senior level Daymon associates who offer expertise related to different channels of trade, assorted product categories and industry knowledge. Our participants also represent a diverse mix of backgrounds, and include Daymon associates, Re-
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Recovery Watch By Ron Shirk, Senior Analyst, GAIN
If you thought the recession was hard to figure, try the recovery. For most of 2009, the mantra for recession watching could be taken from Bravo’s Project Runway reality show. “One day you’re in. The next day, you’re out.” Recovery watching needs a new mantra. Recession to Recovery Along with other major economies, the U.S. made it “out” of recession in the second half of 2009. Among the 30 largest, only Spain, Greece and Denmark have yet to emerge. Being in recovery is good, but not nearly like being back to full strength – quantitatively or qualitatively. Emerging economies are expected to recover first, particularly China, India and Australia, where slowdowns never turned into recession. Developed countries and especially consumer economies face a longer and more difficult climb back. Shopper Behavior Post Recession In the last days of the U.S. recession, some retail analysts expected a timely if not quite speedy rebound. In this view, recessionary shopper behaviors could be grouped as “fads,” presumably short-lived, and “trends,” with the potential to last into the recovery. At the same time, Daymon’s recession white paper raised another possibility, stating, “With expenses looking to increase while incomes lag, consumers will feel as much or more of a squeeze during recovery as during the recession itself.” As for shopper behavior, “signs point to a post-recession where ‘learned’ behaviors are likely to be extended and may well become entrenched.” A new study from Booz & Company supports this view. New Marketing Imperatives (February 2010) finds consumers evenly split between thinking their financial situation will get better, worse or stay the same in the next year. As such, there is “little tendency to revert back quickly to pre-recession behaviors.” Instead, the size of the recession and resulting anxiety have “hard-
ened frugal behaviors” which are likely to “remain persistent for the next few years.” Other studies have found over half of U.S. shoppers practicing a range of frugal behaviors, with Sticking to shopping lists (62%), shopping around for price (57%) and using coupons (56%) the most prevalent. Instead of being fads or trends, these behaviors show evidence of becoming habits. Outside the U.S., UK consumers are shopping around for price (58%) and buying more items to cook from scratch (56%). In Japan, Cutting back on non-essentials (60%) and buying fewer premium brands (52%) top the list. In Brazil, shopping around for price (80%), sticking to shopping lists (69%) and starting to shop at discounters (62%) are out front. In each case, these are the leading, but by no means the only changes in shopping patterns that are showing “legs” in the post-recession. Outlook for Private Brands As consumers and economies recover slowly, Booz & Company and Daymon agree that Private Brands are in a good place. The Booz study notes, “The shift to Private Label has accelerated… The shift to Private Label Consumers are havhas accelerated… Consuming a good experience ers are having a good exwith Private Label and perience with Private Label would need a reason and would need a reason to to switch back.” Folswitch back.” lowing this shift across Booz & Company Study categories, the report finds, “the highest levels of brand switching were posted in categories with an abundance of Private Label alternatives (household products and food at home).” The opportunity to build on this success is real, so long as Private Brand suppliers and retailers ensure that consumers have more reasons to switch and no reason to switch back. While the recession is technically over, the challenges of meeting value expectations for shoppers at all income levels, of withstanding fierce competition and of profiting (literally) in an unforgiving business environment will endure. The best mantra for recovery watching may be “the real test comes now.”
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Recession Impact on the New “Value Mindset” By Liam O’Connor, Global Analytics and Insights Network
There is no doubt that since the start of the “Great Recession” in 2007 the United States has been in its worst economic state since the Great Depression. The eco-
nomic crisis has been linked to several factors such as the deregulation and securitization of real estate mortgages, the collapse of large financial institutions, the war in Iraq, and unemployment being over 10% for the first time since the mid 1980’s. As a result of the recession, consumers are beginning to develop new behavioral habits as they eat out less, reduce spending on favorite activities and entertainment, cook more from scratch, and buy more Private Brands. While these new behavioral habits are expected to continue even as the economy improves, consumers are now viewing value as more than just a reduction in price. It’s also about the added benefits and quality that value products can provide. Since the start of the recession in 2007 the face of the conventional value consumer has evolved. Value consumers were traditionally seen as lower income families driven by economic need living in struggling towns and rural areas. They would frequently shop in value channels, were less concerned about eating healthy, and lived paycheck to paycheck. They looked at value solely for the competitive price point as more economic pressures developed. However, consumers of all backgrounds have been impacted by this recession and many have developed a new “Value Mindset” that have made them scrutinize each purchase decision while assessing the costs and benefits across the board. Therefore, value may now be defined through convenience, healthier choices or meal solutions and not just price! Today’s “value” consumer has expanded outside traditional value to include retailers’ other Private Brand
programs including National Brand Equivalent, Premium, Natural & Organic, etc. These new value consumers now include higher income families that are well educated, live in affluent suburbs. The economy has forced these consumers to purchase in larger quantities, bargain hunt, reposition luxury, and earn money through saving. The recession has caused these new value consumers to think more about adjusting shopping habits to meet future goals such as saving for retirement or being able to afford to send their kids to college. These shopping habits are most likely going to stay with these consumers to help ensure financial security in the future. As the economy continues to improve, it will be important for grocery retailers to reinforce their value proposition with consumers. ConAgra Foods CMO Joan Chow, who interviewed with Brandweek this February, believes that post recessionary consumers are “still going to be concerned about value, so the habits consumers formed during the recession will stay with them in the future.” In order for grocery retailers to maintain the Private Brand momentum gained during the recession they must deliver an integrated own brand value strategy and message to their associates and consumers. They must identify true category solutions and market them with actionable strategies and tactics. I f retailers can successfully l eve rage their own brand value proposition with their consumers, Private Brands will continue to grow and maintain share in the future.
Today’s “value” consumer has expanded outside traditional value to include retailers’ other Private Brand programs…
Sources: Brandweek February 2010. Nielsen Consumer 360 Conference. Economic Advisor. Spectra Infinet. December 2009.
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Growing Up with Private Brands WIC foods may very well be a young family’s first introduction to Private Brands By Anne Hubele, WIC Program Manager
The Women, Infants & Children (WIC Program) is the USDA’s thirdlargest food and nutrition assistance program, accounting for 10% of total Federal spending on food and nutrition assistance. Congress appropriated $7.3 billion for WIC in 2010, of which an estimated 70-75% will go directly toward food purchases in retail stores across the country. Just over 9 million people in the U.S .receive WIC benefits each month. Slightly more than half of all infants and about a quarter of all children ages one to five in the U.S. receive food benefits from the WIC program. Children have always been the largest category of WIC participants; approximately 50% of program participants are children age 1-5, 25% are women, and 25% are infants. The importance of the WIC market is not lost to the 50,000 retail stores who are authorized vendors in the U.S. today. Unfortunately, the monstrous size of this opportunity is sometimes overshadowed by the WIC program’s tremendous complexity. State agencies are responsible for authorizing retail vendors, determining minimum retail inventory requirements, containing costs through retail price monitoring, and determining State WIC eligible product SKUs and sizes. And for retailers with stores across multiple states… well, that just multiplies the complexity. Despite its executional challenges, the sheer size of the WIC program, along with the target demographic of new and growing families, makes this a critical program to the success of grocery retailers, and a phenomenal opportunity for our Private Brand suppliers. In 2009, after nearly 40 years without a significant change, the USDA expanded the foods provided to low income families through the WIC program, adding fruits and vegetables, whole grain options, jarred baby foods, and foods to accommodate a more diverse population such as tortillas, soy milk and tofu, in addition to the milk, eggs, cheese, cereals, juices, peanut butter, canned fish, and infant formula already provided. Implementing these changes was a daunting task not only for retailers, but for the states themselves. As states look to simply their own programs, more and more often they are looking to allow the WIC shopper to select ‘any brand’ that fits the nutritional requirements, among both national and Private Brands. And, even better, as WIC agencies look to serve a greater number of participants within their budgets, authorizing only ‘least expensive brands’ becomes a
more attractive option. Already in categories like milk and eggs most states allow only the store’s least expensive brands. WIC foods may very well be a young family’s first introduction to Private Brands. Incorporating your brands within the WIC program can help to establish them as fixtures in the pantries of new and growing families. How do suppliers capitalize on the WIC opportunity? By focusing on the following areas: 1) Know the USDA’s nutritional requirements: Information can be found on USDA’s website. 2) Check the product sizes: States are looking to maximize the quantity of food they provide to WIC families, and they make decisions on sizes that allow them to do that without exceeding the USDA-established maximums. 3) Get ‘on the WIC list’: Work with your retail customers to assure that the products you have in the marketplace fit the applicable State WIC requirements, and be sure the products are then submitted to the State as part of the States food list review process. Sound complicated? Daymon has dedicated resources to the Private Brand WIC opportunity; contact me at ahubele@daymon.com or 812-459-2095 and we’ll help to be sure your products are poised to capitalize on this large and growing market.
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The Great Retail Evolution: Capturing Tomorrow’s Consumers, Today. By: Janine M. San Juan, Associate Marketing Manager
The global retail world is evolving and retailers must embrace this shift in order to remain relevant and competitive. In response to difficult times, consumers are closely monitoring their budgets and are experimenting with Private Brands. According to a survey of 50,000 grocery shoppers released by BrandSpark and Better Homes and Gardens, 40% of shoppers reported they are buying Private Brands rather than brand names. Many shoppers are finding that sugar, shredded cheese and milk offered under store brand labels cost up to 40% less and often taste as good as nationally known brands. Nielsen reports that unit sales of PB goods have jumped 8% since 2007, while brand names have declined roughly 4%. Private Brands are posing a threat to national brands, obtaining share from name brands that have held their leading position in the marketplace for decades. The report also indicates that 63% of shoppers surveyed plan to continue purchasing Private Brands after the economy rebounds. This is the opportunity for retailers and Private Brand manufacturers to maintain the momentum and hold on to the consumers they have. There are several strategies that can be employed to strengthen the relationship with consumers today to better position their brands for tomorrow. First, retailers need to fully understand who their consumers are and what motivates them. The consumer should always be at the heart of any retail strategy. Second, retailers must manage their portfolio of Private Brands as brands and deliver PB products that satisfy consumers’ needs, wants and desires. If strategies are executed successfully, a retailer’s Private Brands can serve as a key differentiator from their competition, further strengthening the relationship with consumers. They should also focus on improving the quality or assuring the quality is constant. Creating a unique, enjoyable and consistent experience with the brands is highly important during this exploratory stage. Developing innovative and consumer relevant platforms is another strategy. Focusing on the end-user benefits will fuel differentiation and growth. Lastly, retailers must communicate the functional components (price & quality benefits) that Private Brands deliver AND the emotional benefits that help build a successful relationship with consumers. Executing this message through an integrated communication strategy utilizing multiple touch points reinforces the brand’s message and allows retailers to connect emotionally with consumers. These touch points can include informational media (i.e. TV, print, radio, web), interactive or social media and in-store engagement to relate to your consumer and drive customer involvement and participation.
Implementing long-term marketing strategies are more important at this moment when consumers are not loyal to any grocery store or any brand. They are loyal to savings. Discovering how a retailer can offer the functional benefits of savings, and also deliver the emotional benefit of having a little extra to buy your family the things they love will better position retailers’ brands as the preferred brand of tomorrow. Retailers must first establish an emotional long-lasting relationship with the current shopper in order to convert them to loyal consumers.
Today’s consumer comparison shops more than ever.
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Keeping Competitive Stay on top of your business game with one or more of these books, recommended by Grace Filipak, Senior Manager, Information Resource Center. More Loyal Customers: 21 Real World Lessons To Keep Your Customers Coming Back
by Kevin Stirtz According to one study, a 5% growth in customer loyalty can lead to a growth in profits of anywhere from 25% to 95%. This book gives you real-world examples and advice on how to get started.
Our Iceberg Is Melting: Changing and Succeeding Under Any Conditions
by John Kotter, and Holger Rathgeber In every facet of life, change is king. But learning to cope with changing situations requires forethought, planning, and cooperation. With eight succinct, easy-to-apply steps, author John Kotter sets out the actions most essential to enacting your company’s response to evolving conditions. Cool rules for swimming to safe waters.
Outliers: The Story of Success
by Malcolm Gladwell Gladwell’s gift for spotting an intriguing mystery, luring the reader in, then gradually revealing his lessons in lucid prose is on vivid display here as the author takes you through numerous case studies ranging from Canadian junior hockey champions to the robber barons of the Gilded Age.
Good to Great: Why Some Companies Make the Leap... and Others Don’t
by Jim Collins In what Collins terms a prequel to the best seller, Built to Last, this worthwhile effort explores the way good organizations can be turned into ones that produce great, sustained results. At the heart of the findings is what Collins calls the Hedgehog Concept, a product or service that leads a company to outshine all worldwide competitors, that drives a company’s economic engine and that a company is passionate about.
How the Mighty Fall: And Why Some Companies Never Give In
by Jim Collins Decline can be avoided. Decline can be detected. Decline can be reversed. Amidst the desolate landscape of fallen great companies, Jim Collins takes it all one step further, asking: How do the mighty fall? Can decline be detected early and avoided? How far can a company fall before the path toward doom becomes inevitable and unshakable? The author confronts these questions, offering leaders the well-founded hope that they can learn how to stave off decline and reverse their course.
The Momentum Effect: How to Ignite Exceptional Growth
by J.C. Larreche Larreche draws on new research and powerful case studies to demonstrate the stunning role of momentum in value creation. You’ll learn how to create new value through a momentum strategy and build the leadership competencies to deliver highly profitable growth over time.
Built to Last: Successful Habits of Visionary Companies
by Jim Collins, Jerry I. Porras Drawing upon a six-year research project at the Stanford University Graduate School of Business, Collins and Porras took 18 truly exceptional and long-lasting companies and studied each one in direct comparison to one of its top competitors.
“DAYNEWS – The Supplier Partner Edition” is published by Daymon Worldwide, 700 Fairfield Ave., Stamford, CT 06902. For more information, contact Bobbi Gosselin at bgosselin@daymon.com or 203-352-7508.
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