People
____________________________________________________________________________________
In Europe, private brand accounts for 30% of grocery sales. In the U.S., the number is 19%. The gap is closing, however, and the coming shift in market share represents $100 billion in sales. The regional grocers that capture their share of private brand growth will be the ones that 1) commit to an identity; 2) develop a compelling flagship category or item; and 3) build the engine to scale. In this series, we discuss key considerations for each stage of growth.
____________________________________________________________________________________
Grocers elevate private brand from side project to strategic pillar when they support the program with dedicated people and deliberate processes.
Following the launch of the flagship — which we discussed in Part 2 of this series — the program should have great momentum. To sustain it, the grocer will need to build systems, and the most critical components will be people and processes.
On the people side, grocers must define roles and responsibilities. On the process side, they must establish timelines and structures. Detailed frameworks in these areas create the accountability needed to ensure quality, encourage innovation, and enable speed.
Building systems starts with examining the current assortment — including the flagship — and evaluating capabilities, identifying bottlenecks, and testing repeatability.
If grocers scale before they have a strong operational foundation, product quality wobbles, branding drifts, and credibility erodes fast.
Grocers who proceed purposefully at this stage, on the other hand, will reap the benefits of speed when it counts: in category reviews, new product development, vendor collaboration, and more.
People
A mature private brand program is the innovation engine of the company. It drives continuous evolution, meets customer needs, and supports differentiation. It’s a high-stakes endeavor, and it requires dedicated resources who focus on these areas as top priorities.
For that reason, many grocers who successfully leverage private brand establish a Center of Excellence, concentrating talent and ensuring strategic focus and tactical execution.
Defining the roles
They build in-house capabilities in category and product development; sourcing and quality assurance; in-store execution; branding, packaging and marketing; and analytics. Centralizing these functions — regardless of where they’re placed in the overall organizational structure — allows for end-to-end ownership of the process.
It’s not uncommon for grocers to be daunted by the scope of building a dedicated team for private brand, but this upfront investment is what equips the program for long-term impact.
The vision is for private brand to be a strategic pillar of the business, and strategic pillars cannot be outsourced.
Setting expectations
As grocers consider where in the organizational structure private brand should be placed, they must understand that every option comes with pros and cons. Setting up private brand for success will mean increasing its shelf space, ad space, marketing presence, manpower and more. Category-level budgets will need to be adjusted to allow private brand to develop into a competitive option, and the disruption of the status quo will result in conflict.
To minimize that conflict, leadership needs to be transparent about the goals for private brand; acknowledge how its prioritization is expected to impact sales and margin in the short term and over time; and clarify roles, responsibilities and decision rights.
Building the team
A private brand program has much in common with a startup, and the people charged with leading it should embrace that dynamic. Grocers should look for the following characteristics as they assign existing personnel and make new hires.
Grocers shouldn’t confine themselves to traditional retail hiring pools as they build this team; brand specialists or professionals with CPG experience can be great fits in these roles and bring different yet highly relevant perspectives.
Integrating the operation
Too often grocers let private brand exist in a silo, which relegates that team to an advisory role in category management decisions rather than giving them true agency. For private brand to reach its potential, it must be thoughtfully woven into the merchant organization. When that happens, strategic decisions at the top can permeate into category management processes.
Processes
Grocers with leading private brand programs don't waste time reinventing the wheel every time they launch a new product, range or brand. They adhere to carefully crafted, comprehensive, end-to-end processes — scrutinized and revamped during the flagship phase — for category reviews, new product development, vendor collaboration, go-to-market and other critical components of the business.
Shorter timelines
The advantage of this approach is the ability to be more responsive to the needs and desires of customers. Investing time upfront in creating scalable, repeatable processes is what allows new products to go from design to debut in as little as nine months instead of the 20-24 months that is common in the industry. It’s what enables 3-5 category reviews to happen simultaneously so that 30-40 categories are being studied and refined every year.
Fidelity to brand identity
These processes keep packaging, quality control and marketing standards for private brand consistent for categories across the store. They shape and guide vendor selection and collaboration. Establishing brand and product guardrails is never the most exciting part, but none of the fun product development will be as successful without it.
Ability to keep up with the customer
The traditional grocery environment doesn’t support the speed at which a compelling private brand program must be able to respond to shifting consumer trends. Relying purely on a calendar tied to national brand resets means new products aren’t added when they’re at peak relevance. Timelines are frequently pushed to give preference to holidays and promotions.
Clarity on accountability
Too often, progress gets stalled when decision-makers delay. The lack of a centralized project management team means a lack of clear ownership at each step — and therefore a lack of the accountability that is needed to keep momentum and move projects forward.
Strategic pillar
Creating a private brand program that delivers an advantage over peers in the long term requires some transition and discomfort in the short term. For grocers intentional about the people and processes they put in place to underpin the program, however, private brand will be not only a stronger contributor but a primary driver of differentiation and growth.
Bringing private brand to the center of the business is no small feat, but it can have a transformational impact. Historically, proximity alone could win grocers a certain amount of business, so it was sufficient to offer an assortment heavily reliant on national brands and very similar to what was offered by competitors. Today, grocers must cultivate a unique assortment to win trips, and private brand will play a leading role in that evolution. It’s both a remarkable opportunity and a massive undertaking.
To validate this approach, executives need only look at which retailers have gained market share and how effectively they have leveraged private brand to deliver the “whole package” of value consumers are seeking — quality, innovation and affordability.
Retailers should expect more shift in share ahead; customers are revealing what they want, and non-traditional channels are the ones lining up to give it to them.
Grocers who haven’t yet moved with conviction in this area can still catch up, but the window is closing fast. It’s time to act.
Want more? Here’s additional private brand insight from our team of grocery experts.
How regional grocers capture the $100B opportunity — Part 2: Develop the flagship
How regional grocers capture the $100B opportunity — Part 1: Commit to an identity
The $100 billion opportunity for U.S. grocers
The (enormous) Private Brand Opportunity — and how manufacturers help grocers realize it
