Staying Power of Store Brands
What was once thought to be a fad appears to be here to stay. Private labels have been around for some time, but they really began to find favor during the Great Recession. Consumers, perhaps even begrudgingly, turned to store brands to stretch their limited dollars. In doing so, many shoppers discovered that high quality products could be had at a lower cost than national brands, which often need to bump up prices to cover their costs of marketing and shelf space.
While broad economic hardship has seemingly passed, the growth of private label continues. According to the Private Label Manufacturers Association’s 2014 Annual Private Label Yearbook, unit and dollar shares rose in grocery stores. Since 2011, store brands in supermarkets have gained three percent on an annual basis, and across the board, private labels across all outlets have grown five percent annually.
What’s more, a relatively young segment of the population has adopted store brands. Consumer research by Mintel shows that 63 percent of Millennials and post-Millennials are high users of store brands, with Generation X reporting the second-highest level at 55 percent. Retailers now have an opportunity to build loyalty that, in turn, has potential to supply regular sales and profits far down the road.
Providing consumers with a high quality product that rivals that of a national brand—at a cost savings—is certainly one of the best ways to start building loyalty. But quality doesn’t end with the taste, texture, or packaging of a product. Safety is of paramount importance. Product recalls cost companies significant time, money, and effort to execute, and the economic impact to the U.S. alone was found in one 2010 study to be $152 billion.
Given the many players in the production chain today, how can retailers and product purchasers assure the quality and safety of a food item?
Get to the Source
Being selective about production partners—from growers to processors and manufacturers—is critical. For products that rely on fresh produce from farm fields and orchards, it’s necessary to develop a clear understanding of the conditions under which ingredients are grown and otherwise produced in order to minimize risks of food safety hazards and assure the highest quality of final product.
Manufacturers and co-packers have a vested interest in a retailer’s process: Their own success depends on the reliability of their suppliers. Work with manufacturers that provide transparency into their methods for sourcing ingredients. They should maintain strict criteria for considering a source as well as documentation supporting the selection of a source.
A supplier compliance procedure should be rigorous. For example, Trailblazer Foods, which produces store brand as well as proprietary items, carries out regular, in-person supplier audits that involve touring a current or potential supplier’s operations in order to ensure that its selected ingredients meet strict food safety and quality requirements.
Audits provide an up-close view of a supplier to assess for best agricultural practices and verify that ingredients are produced, packed, handled, and stored in the safest manner possible. When timed well, visits may coincide with harvest, at which point the company can observe the care with which fruit is gathered and whether it’s being picked at its peak for the best flavor.
In addition, an audit provides the opportunity to verify that proper pre-requisite programs are in place to support a supplier’s Hazard Analysis and Critical Control Points (HACCP) plan. Numerous programs are up for review, such as pest control, sanitation, maintenance, waste management, recall and withdrawal, and Good Manufacturing Practices.
Just as important as dedication to creating a quality product is a sense of pride in operations. Visiting a site provides the chance to speak with key personnel. Not only does engaging in dialog offer insight to the product but it indicates whether attitudes are positive and that there is a true desire to be a part of a larger team.
Finally, the atmosphere and care on a farm must extend beyond the fields and on the road to the processing plants. Farms must put thought into logistics for transporting their fruit, ensuring that product is handled appropriately and kept at proper temperatures. Plans should be well thought out and economical.
Adhere to Stringent Examinations
With private label products, retailers risk their reputations on the quality contained within. And it’s not just quality that is a concern. Food safety is critical, and many retailers with their own labels are requiring certifications from all members within their supply and manufacturing chains.
In the last five years, for instance, several national grocers began to require all of their suppliers adhere to Global Food Safety Initiative (GFSI) standards. Meeting such standards provides a “high degree of confidence” in the design, implementation, and maintenance of food safety management systems. After fully and consistently implementing the requirement across all private label suppliers, the retailers are seeing a significant decrease in the number of recalls.
When selecting a manufacturing partner, develop an evaluation process that incorporates a review of documents and certifications. Such a step ensures that suppliers will be in line with a retailer’s commitment to providing quality, safe food products. As there is no overarching, governing body that certifies vendors and suppliers, it’s up to retailers and their manufacturing partners to establish guidelines for those interested in doing business with them.
For processors and manufacturers, GFSI standards are common and provide assurance of safe food management programs. In addition, the Safe Quality Food (SQF) certification program is recognized worldwide among those seeking a “rigorous, credible food safety management system.” With the recent passage of the Food Safety Modernization Act, all parties in the food supply chain will be required to pay heed to additional food defense measures.
When evaluating along the supply chain and assessing farms, consider Good Agricultural Practices (GAP). Following GAP may involve delving into farm sanitation or spray records. In essence, by taking the time to verify production, handling, packaging, and storage practices, the farm’s ability to produce safe, quality food will become evident.
During the evaluation process and facility or farm tours, request supporting documentation of an operation’s commitment to safety and quality. Documents may include policies, procedures, a HACCP plan, audit schemes, and results, as well as any pertinent certifications. Be sure documents are up-to-date, and be prepared to invest significant time in researching a potential supplier or vendor. Depending on the supplier, the produce, and any unique parameters for ingredients or handling, the process could take anywhere from several days to a couple of months.
A supplier evaluation program does not end with the initial approval. Rather, each supplier should be evaluated continuously to ensure that standards are maintained. Consider requiring annual updates of audit records and certifications. Also, revisit farms and facilities several times a season for greater assurance that safe, quality ingredients are received.
Price Drives Decisions
Price is a critical factor in any arrangement, but it is typically considered last in a three-tiered deal. Once suppliers are vetted for the volume of product required and quality standards are met, price must fit into a company’s model.
For private labels, price can be a sensitive issue. National brands tend to set pricing, and private labels typically sell at a 25 percent to 30 percent discount. If farmers are facing a difficult year, costs may be driven up. Retailers may need to accept reduced margins, consider offering their consumers less of a discount relative to major brands, or find a cheaper source for their ingredients.
To secure greater flexibility in pricing and availability, consider developing a stable of suppliers for any given commodity. If one is unable to fulfill a contracted amount, another may be able to make up the balance. Most processors allow for multiple suppliers, ensuring a higher assurance that end demand can be met.
Stay on Top of Special Requests
Consumers are increasingly seeking out foods with specific qualities: certified organic, kosher, vegan, and gluten-free are just a few of the overriding buzzwords on grocer’s shelves. For some consumers, their selections have a real impact on their overall health and well-being, so it is critical to find vendors and suppliers with reliable and traceable sources. Maintain any relevant certifications, in addition to those for food safety, to provide customers with documentation if requested.
Traceability is an essential part of the manufacturing process. The ability to follow a material or product through all stages of the supply and distribution chain is vital to consumers’ safety. A fast response to food safety issues not only helps protect public health and safety, but is instrumental in protecting the viability and longevity of an organization and its reputation.
For retailers of private label products, traceability also provides important information on the quality aspect of the finished good. If a particular product receives rave reviews, manufacturers can pinpoint the farms and their specific varieties that contributed to its superiority, allowing manufacturers to refine their recipes. Likewise, products that underwhelm consumers can be evaluated down to the suppliers, and recipes again can be tweaked to make a more palatable finished product.
Quality From Farm to Fork
Fundamentally, choosing a supplier comes down to need, availability, qualifications, and price. Within these parameters, there is room for implementing practices that can help protect the integrity of a sourced product and, ultimately, the final product delivered to consumers. Evaluate all partners closely and maintain a commitment to frequent audits to ensure quality from farm to fork.
Read the full article at Food Quality & Safety.