Interview with Steve Fay from Private Label Buyer.

PLB: How has the Definition of quality evolved over the years?

Fay:  As little as ten or fifteen years ago quality in large part for private label food products was simply an issue of safe products that fell within a relatively broad range of similarity to brands.  There has been a great deal of effort on the part of retailers and manufacturers to reach beyond the broad and subjective and get down to tightly defined and objective measures of product quality.  For example, ten years ago we never considered a full spectrum light environment and color checks to see if we fall into a defined parameter for finished product color.  Now we have a full spectrum light room and checking finished product color is a part of our total quality emphasis regimen.  As a co-packer for some major brands we are constantly inoculated with initiatives from some of the best and brightest quality assurance people in the world. When they institute good ideas it ultimately becomes standard practice for private label products as well.  The other area that I believe has revolutionized quality is the computerization of our processes.  In the not so distant past, many functions were the art or skill of an individual.  Now the range of variance in process is nearly infinitesimally reduced by computerized monitoring. For example, in our process lines a product cannot be cooked over or under a certain temperature, our computer will shut the line down if it does.  The number of quality initiatives and continual improvements that have occurred in the last several years is perhaps the most significant in modern food manufacturing history.

PLB: What is the key to attaining the necessary balance between cost-effectiveness and high quality?

Fay:  Like your first question, this could take pages and pages of answers.  At least in our product groups there has been a tendency among the brands to expand margin by cutting quality.  Frankly, that has emphasized costs over quality.  It has sometimes led to some interesting dilemmas for both our retailer partners and us. Shall we continue to deliver highest quality goods or should we follow the brand leader.  In several product groups we have in our product catalog products we have previously made that are superior to what we are presently making.  I will tell you this, the retailers that have opted for quality in their store brands rather than follow like lemmings over the cliff have faired better than those who did not.  The other single biggest issue that has made us able to deliver quality cost effectively is growth.  We like many other private label companies have simply grown up. Volume mitigates cost. We have bigger, better equipment delivering more widgets and thus we can keep pricing down while keeping the quality high.

PLB:  How can retailers make consumers understand the quality level of their program?

Fay:  Another great question. I believe this strikes at the heart of a critical issue in the food industry. The balance of power between retailers and huge consumer products companies has been a swinging pendulum for decades. Many, perhaps most retailers are configured for and dependent on the largess of the large branded companies.  They depend on brand dollars to fill the “buckets”.  The system is set up to be driven by the branded companies and not the retailers. It is my opinion that with the exception of only a very few retailers there is very little expertise in the management, marketing and promotion of store brands.  There are some valiant efforts now being employed to change that but it has been a paltry effort historically. Not until retailers limit their addiction to brand dollars will they even begin to adequately market their store brands.  The first and best way retailers can make their consumers understand the quality of their goods is to actually have it. Second is to package it in an appealing way. Third is to emphasize their store brands, promote them and not let the national brands run rough shod over the top of their program.  If these things are done consistently and the value equation for the consumer is maintained, store brands will continue on the growth pattern they have enjoyed for several years.

PBL:  Does quality imply ‘cutting edge’ and not just national brand equivalent?  How challenging is that?

Fay: I believe I alluded to this point in an earlier question.  Unfortunately, not many retailers have shown a great deal of inclination toward breaking past the national brand equivalent.  Those who have are building a valuable brand franchise for themselves.  Those who have are making great strides in differentiating their store as a brand.  To make a long story short, this is a challenging area.  I empathize with the retailers on this. Their staffing and their traditional role in getting products in consumer’s hands is something other than building cutting edge products.  It takes a special retailer to seriously step beyond operating stores and running logistics systems and embrace the marketing challenges of being ‘cutting edge’.

PLB:  How important is it today to have a premium tier of private label?

Fay:  Although the answer to this could change with economic conditions, I believe the future is bright for this class of store brands.  All indicators for the foreseeable future is that there is an expanding set of consumers who are aging, who have more disposable incomes and are looking for products that delight them rather than simply fill them up. If the ethos or desired brand image of the store is premium quality then delivering premium private label seems like a natural part of that strategy.

PLB:  What do consumers expect out of quality private label? And how have those expectations changed over the years?

Fay:  Today’s consumers of private label or store brand expect value with little or no diminishment of quality.  We have done a great job as an industry of turning around what was nearly universally ingrained perception that store brand is inferior to national brands. Our history stretches from black and white or yellow and black generics to true national brand equivalents. Certainly our retailer partners who have led the charge in defining their expectations for store brands deserve the credit for turning this around.

PLB:  How can manufacturers and retailers work together to maintain quality in the industry?

Fay:  The initiatives of the last few years in regard to e-bidding and the resultant margin compression for manufacturers is probably one of the more counter productive things that has been done.  Quality has a cost.  Costs come in the form of credentialed QC personnel, in capitalization for technology and equipment and a host of other things that cost money.  An environment that has manufacturers gasping for their financial lives is not going to set the stage for investment into the things that create quality as an output.  Retailers need to value quality in more than words only.  In the private label/store brand manufacturing community we serve and the retailer leads. If the retailers demand quality with all of its attendant costs, I am confident that we will produce it.