As a global brand consultancy, Lippincott has worked to develop new private brands such as the recent Paperbird and Bowl & Basket lines at ShopRite, and also has history with Walmart going back to 2007, refreshing elements around the retail leader’s private brands.
Sitting down with Store Brands, David Mayer, senior partner, brand strategy, Lippincott, discussed what life is like now for private brands inside the coronavirus pandemic and also what life might look like after.
Below is an edited version of Mayer’s conversation with Store Brands’ executive editor Dan Ochwat.
Store Brands: How would you describe the current state for private brand manufacturers and private brands?
David Mayer: Prior to the pandemic, private brands were having a moment in the sun. The onset of COVID-19 has only reinforced the need for them.
Traditionally, the industry relied on physical location as the dominant driver of choice, but the growth of digital and deep discounters spurred a need for change. It became a competitive necessity to be truly unique and deliver stronger bottom-line economics, meaning private brands are now a critical source of competitive advantage, versus only a less expensive alternative to a national brand.
That’s unleashed tremendous creativity as we’ve moved from a wholesale model to building true CPG capability in innovation, sourcing, branding, merchandising and marketing. For the companies willing to invest, they’re seeing strong returns. The choice facing many companies is whether to grow incrementally from today’s starting point or whether to fund a transformation of their portfolio and build the organization to support that. We believe that the transformational path will ultimately be more successful.
Even if businesses are doing well, now is the time to pilot new ideas that anticipate where future consumer needs might be.
Store Brands: What would you say the next two to three months will look like?
David Mayer: Retailers need to be planning for a breadth of possible outcomes, whether a rapid return to business as usual or the prolonged dance between shelter-in-place and re-openings. There are clearly questions around the role of deli-counters and bars going forward; share of digital and the role of click and collect or drive-through.
What we can be certain of is that with all the disruption, many companies have been forced to innovate or face going out of business. Even if businesses are doing well, now is the time to pilot new ideas that anticipate where future consumer needs might be (for example, meal solutions).
With the unprecedented level of unemployment, a recession is likely. That will increase the proportion of shoppers looking for better value. A strong private brand that can deliver a quality product at a better price is going to be essential, not just for our economy, but to help millions of Americans living through incredibly challenging times.
Store Brands: As the economy struggles, how do retailer private brands innovate?
David Mayer: Value will be more important than ever, but we’d also benefit from recognizing the differences in why people shop. In the past, this was primarily driven by demographics and basket behavior. The rise of marketing technology now allows us to operationalize an attitudinal lens. That allows us to identify and serve different interests. These can include seeking out new flavors to discover, wanting healthier choices on a budget, or enjoying comfort eating above all else. If we can understand the “why” behind the “what” of consumer behavior, then we can tailor our innovation and our marketing to meet those different needs.
Store Brands: Is there an advantage to being a private brand in this current climate and how?
David Mayer: Absolutely. As younger brands, they typically aren’t as tied to decades-old recipes that, while tasty, no longer meet the need for cleaner ingredients and healthier living. They benefit from greater marketing efficiency from use of owned media, e.g. store and website. Also, as private brands typically span more categories than a national brand, the opportunity to basket-build once you’ve secured the initial relationship is greater.
Store Brands: How should private brand suppliers adjust product innovation, packaging based on trends such as an increase in digital delivery and e-commerce?
David Mayer: E-commerce remains stronger as a replenishment versus discovery channel. Research from Civic Science suggests that shoppers have been underwhelmed by their digital experience, so we expect for many to return to the physical store once circumstances allow. I would focus on replenishment items and consider options such as larger pack sizes and refill packs. Larger pack sizes also open up the possibility for some crafty marketing, using the pack itself as a billboard to hero other products in the range.
The other place to innovate is meal solutions. It is likely that restaurant dining is constrained for a long period. One of Domino’s key innovations was keeping the pizza piping hot to your table through smart packaging. That’s an area that is crying out for innovation in the private brand channel.
Store Brands: Are there any other key trends private brand manufacturers should be aware of?
David Mayer: There are certainly too many to do justice here. Typically, private brands have waited until a trend has become established at retail and then applied with a fast-follower approach, meaning private brands may take 18 months before they can serve an established market. We’re seeing that change as private brands get more sophisticated at identifying trends while they are still nascent through social listening; observing trends in other markets, e.g. casual dining; and a number of other techniques that accurately forecast future demand 12-24 months before we see material sales at retail.
Store Brands: Describe the commitment manufacturers, retail associates and fulfillment teams have been making to keep product moving. What would you say to them?
David Mayer: I’ve been in awe of how the industry has coped with serving customers at a scale of demand that’s truly unprecedented. Particularly, given the personal challenges to health and welfare that every person has been dealing with. We’ve always been passionate supporters of our communities and current events have demonstrated the depth of that commitment. When we look back at this time, I think companies and associates can feel proud of the role that they played supporting the nation.