What are retailers really looking for in private label and bulk suppliers? To answer that question, Clive Donaldson, Wine Sourcing Manager at Wm Morrison Supermarkets (“Morrisons”), talked about the role that private labels play in his company’s overall business strategy.
As Donaldson notes, the starting point for understanding private labels is simply being aware of the different options that are available. His company, for example, offers both “own brand” private label products (where the retailer’s name appears on the label) and “exclusive label” private labels (without the retailer’s brand appearing on the label).
There are four reasons why private labels are so important to retailers such as Morrisons. First and most importantly, says Donaldson, they are a way to stand out from the competition. Private labels help to differentiate retailers since not all retailers can offer exactly the same products. Secondly, private labels can help to build customer loyalty. They also help to deliver real value to the end customer, giving them the perfect trade-off between price and quality. And, just as importantly, private labels announce “who you are as a retailer and what you stand for.”
That being said, many private label distributors make the fundamental mistake of trying to sell them to the gatekeepers (i.e. the retailers) instead of trying to understand what the customers really want. As Donaldson highlighted several times, it’s what customers want that’s so important. “If customers want to buy the products, we will want to buy the product,” says Donaldson. It’s not any more complex than that. If you know what customers want, and also keep in mind the overall strategy of the retailer and what it is trying to accomplish, you will be successful.
However, as Donaldson also notes, there are two “red lines” that all suppliers will have to observe if they hope to be successful. The first is quality assurance - they need to have the right processes in place to guarantee a minimum level of quality, says Donaldson. The second is reliability - they need to be there, year in and year out so that retailers can count on them.
To guide potential suppliers in how to sell to retailers, Donaldson outlined a few basic rules to follow. For example, suppliers should be self-aware: they should know their strengths and weaknesses, and focus on areas where they have the greatest expertise. In addition, suppliers need to be flexible. They need to keep in mind that retailers - especially large supermarket chains - may have upwards of 20,000 products to track, and wines comprise only a relatively small set of all these products. Donaldson gave the analogy of supermarkets being massive oil tankers and private label suppliers being tiny speedboats much more capable of making fast turns in response to changing market conditions.
Finally, as Donaldson points out, private label suppliers have to understand how to structure their business model according to the needs of retailers. Private label is inherently a “cost-up” business where there is no brand premium. That doesn’t mean that private labels are always the cheapest products, but they are built from the bottom up, with retailers choosing how to build in more expensive features to their products. In fact, says Donaldson, some of the most popular private labels at Morrisons are those that are priced higher, mostly because they deliver so much value to the consumer.
About IBWSS Events:
The International Bulk Wine & Spirits is an annual trade event organized by Beverage Trade Network in London (IBWSS UK) and in San Francisco (IBWSS SF). It is the biggest gathering of bulk wine, bulk spirits, private label, contract brewing and contract manufacturing industry. Buyers who are looking to buy bulk wine or bulk spirits or develop their own private label brands will be able to connect with the right partners and unlock new channels of growth.