The global span and complex technology of today's business world demand a new level of background and expertise at all levels of the grocery supply chain. As private label's role in the branding and individuation of supermarkets grows, retailers and suppliers must develop a shared knowledge base from which to launch their respective priorities. From an educational perspective, private-label manufacturers have generally been regarded as lagging behind the national brands. Often lacking the financial resources to support extensive training programs and advanced degrees, the industry relies largely on a narrow and specialized skill set. Although well equipped to handle the specifics of store-brand operations, many within the industry feel these parochial boundaries have become a liability in an increasingly competitive marketplace.
Some organizations within the industry are taking a formal approach to the problem -- offering educational programs to employees and members -- yet some believe the issue should be addressed outside of the classroom. Ralph Jacobson, managing principal of business innovation services at the West Coast-based division of IBM Global Services, put broad, industry exposure at the crux of the matter. With literally thousands of consumer packaged goods manufacturers, he said, the challenge has always been to find a uniform level of competence when working with retailers.
"More than anything, this is a supplier enablement issue," said Jacobson. "You've got a lot of mom-and-pop organizations, and it can be a struggle to get the relationship between the retailer and the supplier going.
"This is not necessarily about formal education. It's about industry exposure. The top five to eight national brands have a tremendous amount of exposure, and that simply educates them about the business."
While on-the-job training may be an invaluable asset, a more structured learning environment -- whether through workshops or degrees -- will also help further an educational agenda. According to Jacobson, it has only been over the past several years that supermarkets have begun to place a greater emphasis on higher education, actively recruiting business majors and creating corporate planning positions for them.
The challenge remains in attracting young people to the unglamorous world of retail, and convincing the more conservative industry factions of the need. While Jacobson sees grocers continuing to break through the education barrier that has traditionally surrounded their industry, he has also witnessed a resistance to change and technological expenditure. In the tactical world of grocery, the bottom line is the only effective approach, he said.
"You've got these premier manufacturers starting to see the need for education in a more competitive business world," he said. "The challenge is to make it tangible so the retailer can bite it off in edible chunks. Whether it's going to school, or collaborating more closely with my private-label supplier about things they can do throughout the supply chain to bring down my cost of goods, how is education going to pay the bills?"
Paying the bills on relatively low margins is always an issue for private-label suppliers. That preoccupation with cost can be a problem when it comes to investing in employee education.
"The economic arena of the private-label supplier generally doesn't support education and creativity," said Bill Bishop, president of Willard Bishop Consulting, Barrington, Ill. "It drives for low cost and a commodity kind of response."
Yet despite prohibitive financial considerations, more manufacturers and trade groups are beginning to spend the money. For example, the Private Label Manufacturers Association, New York -- in conjunction with St. Joseph's University -- held a four-day executive education program in May of this year. The curriculum was designed specifically to address the needs of private-label manufacturers and others responsible for store-brand management at retail and wholesale.
Ned Dunn, the former president of Harris Teeter, held the CJ McNutt chair in food marketing at St Joseph's and had a large hand in the program's development.
"The margins in the private-label business have traditionally been dramatically less than those on the branded side, and so there was a lot less to work with," he said. "But I think there's more interest in education now, particularly on the teamwork side of it. Suppliers and retailers are working together more closely to come up with promotional plans that would be of mutual interest."
The basic purpose was to bring attendees up to date on what is going on within the industry, said Dunn.
"We tried to get suppliers to look at the supermarket through the eyes of the retailer."
The seminar was primarily geared toward the needs of suppliers, but Dunn feels that future collaboration between retailers and education consultants in the interests of a more retail-focused discussion is not out of the question.
"What we are talking about is the best way to be successful in the face of a changing consumer, and how this changes the way food processors and retailers are going to market," he said. "There may be programs specifically tailored to any segment of that group."
One of the program's primary goals was to shed light on the trend toward store branding, and what this means for private label.
"If the store is a brand, then quite a bit of its reputation is riding on its private label," Dunn explained. "Private label is no longer just the best price."
According to Dunn, this places an additional burden of quality and consumer awareness on suppliers as they attempt to satisfy the needs of individual chains.
"The supplier has to understand what that retailer is all about and how that retailer has positioned itself," he said. "Who is the retailer's target customer, and how does the retailer target that customer?"
In addition, suppliers must be attuned to fundamental changes in consumer habits and how people approach selling the changing consumer. Higher levels of education, different working patterns and the aging baby boomer are just a few of the factors contributing to an increasingly diverse demographic map, he said.
"This market requires much greater segmentation," he said. "You cannot be all things to all people. That is the retailer's quandary."
Peggy Davies, director of retail private-label business for McCain Foods USA, Oak Brook, Ill., -- who attended the PLMA's program -- said consumer information is critical, and her company is making a concerted effort to use the resources at its disposal.
"The power is in the hands of the retailer," she said. "They have all this data from frequent shopper programs, and we're not making the most of this data."
Indeed, customer relationship management may be the defining characteristic of success in coming years. According to Jacobson, the technology of business intelligence is vast and ripe for the private-label market. The data is available, but it has not been thoroughly mined.
"Many of these programs present marketing and merchandising education. They should go deeper into current CRM technology and processes that use the data already being collected.
"The more education a private-label company can give their people to understand these technologies, the better they will understand how best to market to these retailers," he said.
Davies -- who brought a product representative and a salesperson with her to the PLMA's seminar -- was impressed by the way the curriculum accommodated varying degrees of knowledge and experience, and considered it a valuable experience. In her opinion, education is an avenue for the private-label industry to further explore.
"We need to increase our knowledge base, and reach out to the people who can help us do that," she said.
