PUSHING STORE BRANDS

JAMES TENSER

FORT WORTH, Texas -- There's nothing generic about store-brand marketing.

The retail branding proposition has expanded to encompass a rich mix of skill sets, ranging from product design and formulation, to advertising and promotion, to management of information technology. The range of skills required tests the resources of even the largest and most powerful supermarket retailers.

For the small cadre of companies that used to be described as "private-label brokers," this shift at retail has meant a redefinition of their own businesses, said Herb Pease Sr., chairman of Marketing Management Inc., who founded the firm in 1966.

"We are a full-service store-brand marketing company," said Pease in an interview at his company's sprawling, modern headquarters. The company also operates 47 local offices across the country.

In the past three years, MMI, a privately held corporation, has been aggressively reinvesting its cash to expand the set of skills and services it can offer to retailers in support of their store-brand programs, he explained.

Today the company is providing services to retailers in six key areas: product procurement, marketing, inventory management, quality assurance, creative and design services, and information-technology consulting.

"Our core business is store-brand marketing," said Pease. "This provides the funds to support good quality assurance, information technology and design. Those monies we pump back into our departments help the industry to grow. In the last three years our services have grown with us."

He added, "We want to be as good as the best in the industry. Not many [private-label] manufacturers have the staff."

Said Randy Hurr, MMI executive vice president, "Many manufacturers have just enough resources to make the product and get it to the distributor. We make resources available for the retailers to execute strategy."

As a company that dwells in the middle of the relationship between the manufacturer and the retailer, it is crucial that the supplier sees the value MMI adds to the transaction, said Herb Pease Jr., president of the company. "That's a key point. When we show our capabilities to suppliers on their visits here, they walk away saying, 'we had no idea you do all this.' "

Central to MMI's strategic objectives, said Hurr, is to create the most flexible possible programs so retailers can incorporate them into their own business strategies.

"What we do economically is, we take the resources created by store-brand suppliers -- commissions that are usually paid to other brokers. We pool those together and we help design a marketing plan that supports the strategy of the retailer. The funds that we collect go toward developing that strategy," he said.

A portion of commission dollars is invested in the form of a market development fund that is accrued based on a retailer's total store-brand purchasing through MMI. To the extent that the retailer puts those funds to work building its store-brand program, the company reasons, sales volume will grow to the benefit of both MMI and its store-brand suppliers.

Development of the MDF program is one way MMI has undertaken to try to help drive growth in the store-brand business, said Ted Wilson, chief financial officer. A large part of his department's job is to ensure that the right amount of promotional monies gets circulated back to retailers and that it is properly spent.

"Our job is to collect commissions, establish MDF and make it available to our accounts for them to request," Wilson said. Retailers must provide some proof of performance with their invoice -- usually evidence of private-brand promotions.

The MDFs come directly from MMI commissions, he said. "This is a value-added program. There are no preferences -- the deal is the same everywhere, consistently applied."

He said MMI has recently installed a new system for dealing with commissions, which tracks billions of dollars in transactions, and reports back accurately on the accrued marketing funds.

One way MMI encourages its retailer partners to maximize the effectiveness of their MDFs is through the flow of marketing information. The company has established a competency in information systems and computer-based communications, using an intranet based on Lotus Notes software to ease the movement of and access to sales and category data.

Suppliers and customers can access the data flow through the Internet, using MMI's Supplier On-line Network, or SON (www.mmihome.com). The available data includes "targeted" reports based on syndicated category sales data from Information Resources Inc., Chicago, which MMI has been authorized to resell to its suppliers and customers since last May.

"This gives them access to what they otherwise could not afford. It helps private-label companies compete vs. national brands," said Mark Smith, a manager in MMI's marketing services department. MMI's 673 active principals were the first to be offered these services, but the company expects to offer the IRI reports across the entire industry.

The company also employs a team of marketing professionals who develop a wide array of suggested marketing programs and merchandising ideas for retailers, which are distributed in monthly booklets or on-line.

For at least one large retail group, Ahold, MMI produces a custom-published magazine, Lifestyle, which evolved as an expansion of MMI informational brochures designed for the point of sale. The project, which kicked off in January of this year, has three more issues scheduled in 1998.

The pooling of resources also helps support MMI's up-to-date quality assurance lab, which performs systematic testing of store-brand products pulled from retail shelves and helps design new product attributes based on panel research and focus group data. Here again, the company can provide a level of competency that few of its suppliers could sustain.

In the packaging studio, dozens of graphic design professionals coordinate some 25 store-brand design programs, encompassing 45,000 stockkeeping units, said Linda Evans, vice president of labels and packaging. MMI uses its accrued buying power to assist customers in negotiating prices on packaging, and it employs computer-supported tools for managing this to customer requirements.

All of MMI's capabilities are focused on delivering not just private-label products to retailers, but a comprehensive marketing system, which can drive sales volume for the entire supply chain. As executives here frequently noted, the manufacturer may pay the commission, but the retailer is increasingly in control of the fate of store brands.

"That's the way the industry is changing," said Wilson, the chief financial officer. "The power is moving from the wholesaler, who once sat in the middle dictating terms to the little guy retailers."

Wilson added, "Now that power is shifting to the retailers out there who are pulling all that through. They are becoming big, sophisticated, well-managed professionally managed companies.

"We see more initiative coming from the retailers because of this professional management.

In next 10 years you'll see guys stepping out and taking leadership, and driving marketing concepts as opposed to this me-too-ism, follower mentality."