NORTHLAKE, Ill. -- It's private label vs. national brands. The competition is heating up today. The battleground is the supermarket, where retailers are launching new labels to joust mightily on the same shelf with their traditional meal ticket: national brands. In the thick of this escalating competition, why would a successful private-label buying/marketing co-op start a program to distribute national brands to the supermarket trade?
"Some people think it's a conflict, but it isn't," says Paul "Tuck" Jasper, president
and chief executive officer of Shurfine-Central Corp. here. "What we're trying to do is get consumers from competitive stores into ours."
In other words, help small retailers get better prices to compete against big buyers such as Wal-Mart. Also, Jasper said Shurfine-Central developed the National Brand Network to help brand marketers work more closely with this segment of the supermarket trade. "Of course we want to sell private label," he says, "but we also want to sell the national brands of the manufacturers that work with us."
For the supermarket trade, the goal is better prices by combining the buying power of 33 midsized wholesaler customers supplying 12,000 retail stores. For brand marketers, the goals are increasing case movement through Shurfine-Central customers, and building brand awareness at retail. By the numbers, the program has been a success. In 1992, when the network began, 15 manufacturers took part for a total of $10 million in business. This year, 25 manufacturers will participate and volume is projected to be about $256 million. Shurfine-Central itself posted a volume of $773 million in the year ended in June 1993. Its well-rounded private-label program includes two primary labels (Shurfine and Ultimate Choice); two second labels (Price Saver and Saver's Choice); a perishables label (Shurfresh); a club pack (Shurvalue), and a new upscale line of products based on award-winning recipes (Award Winner). The company's venture outside the world of private label, says Jasper, has turned into a win-win situation for brand marketers and the supermarket trade. "We're working with manufacturers to move more of their product through our customer base," explains Jasper. "We're bringing the independents under one umbrella, and that's never happened before. We're giving tools for our customers to work with the vendors, and vice versa."
By bringing all customers under one umbrella, Jasper says the network gets better pricing for them.
"That one little store in Nebraska can get the same pricing as the Wal-Mart he's competing with down the street," says Jasper. "We're just giving our customers another tool to work with." To avoid duplication of products in the network, Shurfine limits the manufacturers taking part. In other words, once Coca-Cola joins, the network won't sign up Pepsi. Jasper doesn't mince words about what he expects the network to accomplish. "We will increase the case volume of our customers. That's the promise we make to the national brands," he says.
The methods of doing so include bulk purchases, cross-coupon tie-ins, and various incentive and promotional programs. Here's a rundown of how they work:
"The block buy is one of the strongest programs that we have run," explains Bryan Sinner, manager of the National Brand Network. "By using the volume of all Shurfine-Central customers, we are able to achieve one large buy, which gives our NBN manufacturers better efficiencies and cuts their cost," he says. "The result is higher case movement. These cost efficiencies are then passed on to our retailers and ultimately to the consumer. The volume buy gives our retailers an extra edge within the marketplace."
Examples of successful block buys have been Lever Bros.' Lever 2000 bar soap, and its Ultra Snuggle and Ultra All. With Fort Howard Corp., the block buys have been Soft 'N' Gentle Bath Tissue, Mardi Gras paper towels and the Green Forest line of environmentally friendly paper products.
Incentive programs are another way to increase case movement and bring down the cost at retail, according to Sinner.
"This is done by taking the case movement of a specified time frame of the year prior and increase that case movement by a percentage for that same time frame of this year," he explains.
"When the percent increase is achieved, the National Brand Network participating company then in turn rebates the network so many cents per case, which is then in turn delivered back to the customer," he says.
For example, when the network increased the business of Vlasic Foods by a certain percentage on pickles and olives, the company planned to return 50 cents a case to the network. When the program was over, the network actually increased the pickle business by 27% and the olive business by more than 55%. The rebated check to the network was passed on to those customers achieving their objectives, according to Sinner. Cross-Company Tie-Ins
The cross-company tie-in is a program of cross-couponing, cross-merchandising and cross-advertising designed to create excitement at retail. "The best way to move cases at retail is to give yourself as much exposure as possible within the store, and by making your products stand out from your competitors," explains Sinner. "We do this by developing cross-company tie-ins."
In January 1993 the network ran its first cross-coupon program with Dean Foods and its dips along with Shurfresh Potato Chips. A 15-cent instant redeemable Dean Dip coupon was affixed to each bag. The potato chips then were merchandised in front of the dairy case for easy shopper access to both dips and the chips. With this tie-in, Barrel O' Fun, the Shurfresh snack supplier, doubled its sales on the chips for that time frame over the previous year. Dean Foods had a redemption rate of 11% on the 15-cent coupon. Other examples of tie-ins have been a 30-cent instant redeemable coupons for Borden Cheese Singles on Shurfresh Hamburger Buns from network member Metz Baking Co., and a 50-cent instant redeemable coupon for Lever's Ultra Snuggle on Shurfine Bleach. "We've averaging an 11% redemption rate," says Sinner. "It's the best value for the dollar.
Four times a year, the network holds national promotional programs under a common theme or event. In the past, these events have included the Super Bowl and the college basketball championships.
This year the themes are Shoot For Values (a storewide promotional event to tie into the basketball season from January to March), Front Porch Favorites (a promotion that ties in with outdoor activities and warmer weather, designed to run April through June), Grand Slam of Savings (ties into baseball fever from July through September) and Holiday Helpers (ties into the fourth-quarter holidays).
"This avenue is to provide manufacturers an opportunity to promote their branded products through a uniform network program and help build their brand identity at retail," explains Sinner. Sums up Jasper: "It moves product. That's what we told them we would do."