Private Label is not the friend you think you need

 

This will be unpopular and comes without evidence ,but with plenty of experience.

With retailer private label in grocery on a long term upward trend and dependant on country,category and retailer market profiles ,reaching national  market shares of  50% is not uncommon. Against this backdrop  it is easy to see the manufacture of private label as a smart business  move. My experience in Multinationals over 30 years suggests the complete reverse. 

Suggested benefits  : 

Improves customer relations and this enhanced  relationship helps our brand as well

Consumers know , like and trust  private label  and they also  have a strong purchase price  and value advantage over most brand leaders.

If we don't someone else will/ we're locked out of eg 50%of the market, a non brand retailer.

Helps overhead/capacity management. 

Considerations against:

I never experienced private label being profitable,  even  at Gross Profit level. 

Does not improve account profitability or payment times.

Customers request open book costing  and proprietary recipes at sharply reduced prices.

Difficult to protect proprietary  recipe or technical secrets .

Contracts are under regular review,  yearly at least in my experience, so prices cannot easily be raised. Contract volumes are often divided between several  suppliers.

Requires a dedicated business  team of sales ,marketing ,product development  ,supply chain  people. Regulatory burden on factories is higher than internal only. 

Volumes can be very high, and managing capacity peaks and troughs,especially if you lose the contract. beware large  write offs on eg new designs,inventory .

Rarely delivers brand benefit  as retailers also have separate teams.

Reduces internal focus on building our brands.

Literalism schism

Consumers don't care about your brand  or your new clever creative idea for the new ad. 

Consumers and   bosses  often  take new ideas ,especially advertising  ,literally in my experience  .

This makes  bold creative leaps much  harder  to bring to market, and partly explains  why so many  vanilla ideas /ads provoke only indifference, thereby generating  limited returns...  and increasing the chances of stand out work cleaning up .

The marketing and creative team is  far more vested in and exposed to their work than anyone else who may come across it will likely ever be,literally. Literalism schism..

Harming customers is a business model

I spent years believing and defending the notion that having a business model which sought to damage the health of its customers would be bad for that business ,never mind morally reprehensible.There are obvious exceptions of course , like drugs cartels.

 I worked in packaged foodstuffs almost all of my career , long a target of negative sentiment, sadly sometimes deserved. 

If we just look at the business world and leave the politics aside, which is not as straightforward as it might apppear there are a few notable examples in fields I know nothing about which do suggest that insufficiently regulated businesses are as dangerous as unaccountable governments when it comes to the health of nations.

 Currently the public debate in the UK centres around the windfall profits of energy producers combined with limited government response pushing significant numbers of UK households into potential energy poverty in the coming months as consumer prices reach record and unaffordable levels. 

The opiod crisis in the USA has been rumbling on a few years now.

Raw sewage in UK waters thanks to privatized utilities and rolling back of legal safeguards.

The dangers of social media platforms when it comes to protecting the mental health of in particular the young, vulnerable and impressionable.

The dangers of online platforms facilitating the spread of falsehoods be they political , medical or economic.

The legalization of adverts for online gambling and alcohol.

The role and responsibilities of food and drink companies in trying to help prevent the spread of obesity and related health issues such as type 2 diabetes .

The decades long fight by the tobacco industry to disassociate smoking from the incidence of various cancers.

All the above pose potential if not real risk of harm to customers. 

These examples suggest to me at least that some businesses do not have the health and wellbeing of customers at the top of their priorities, just limitless profits.

It starts at the top ,sadly, with governments choosing to subject in particular more disadvantaged citizens to life threatening hardships directly through economic ,medical and social policies.

Maybe harming your customers is a business model after all.  Maybe I need to revisit  my views on purpose...