Private labels have given retailers a chance to create new profit centers, but they’ve also introduced a number of risks, including those associated with product recalls due to safety or quality issues. To minimize risks, it’s important for retailers and product purchasers to partner with manufacturers who can demonstrate a commitment to food quality and food safety. In addition, buyers will need to find manufacturers who can deliver the goods in terms of meeting specific needs as well as pricing limitations.
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.