There has never been a more rewarding - or challenging - time to be an own-label supplier. On the one hand, the big four are ramping up their own-label ranges in a bid to stop cash-strapped shoppers defecting to the discounters - so there's a lot more business to be had. On the other, the focus on value means manufacturers must be more competitive on price to secure or retain supply contracts - and may have to endure a blind bidding process to do so [The Grocer, 11 April, p12].
Buyers' expectations have never been higher - which is what makes this year's Own-label Suppliers of the Year all the more impressive. Judged by leading buyers from the nation's supermarkets, wholesalers and buying groups according to their quality of produce, reliability of supply, category management and NPD, this margin-squeezed, credit-crunched bunch has met increasingly tough price negotiations while offering great service.
The 16 category winners will now go head-to-head for the title of Own-label Supplier of the Year at The Grocer Gold Awards at London's Dorchester Hotel on 17 June.
While that is the ultimate accolade, the record number of responses from the retail and wholesale buyers polled means just making the shortlist was an achievement. And, given the highly competitive nature of the market, it is perhaps no surprise
that suppliers in only three categories managed to hold on to their 2008 crowns, with Premier Foods accounting for two of those.
Premier, which was singled out by one buyer for "understanding our needs", reaffirmed its position as top own-label supplier in canned foods and bread & morning goods.
The other returning victor was Tangerine, which was voted best own-label confectioner for the seventh year in a row.
"Confectionery is seen as an everyday luxury, but our proud tradition of focusing on quality is helping us during these challenging times," says Tangerine Confectionery managing director Chris Marshall.
Another former winner (from 2007) was Arla Foods, which last year lost out in the dairy & yellow fats category to Robert Wiseman. It was praised by one buyer for being "very customer-focused and proactive, approaching us with new ideas that will develop the category, as well as working with us to develop our own ideas".
Arla says the onus has been on it to identify consumer trends in the recession, which has led to it simplifying its own-label offer.
"In a volatile economic environment, where consumer behaviour is less easy to predict, our retail customers are looking to us to recognise shopping patterns and adapt our supply chain to respond to these fluctuations," says Arla milk and cream trading director Ash Amirahmadi. "We've dedicated more resources to category management."
In the current economic climate, the consumer is not necessarily looking for lots of NPD in own-label dairy produce, he adds. "They are looking for simple ways to cut the cost of shopping without compromising on quality. This is a great opportunity for dairy products, which are an essential ingredient in home cooking," Amirahmadi says. "We have seen increased sales of some dairy products as more consumers eat in and become more adventurous in the kitchen."
While buyers admit there is a focus on lowering prices, many say NPD still plays an important role in their categories.
"Price matters, but if we don't bring innovation to the customers they are going to get bored and go somewhere else," says Waitrose central buyer Stephanie Chafor. "We've got to keep challenging ourselves and put forward the best products possible to the customer."
Greencore, winner of the chilled foods and ambient meals categories, has encouraged NPD in the sandwich category. This has been welcomed by buyers and has led to the launch of limited-edition products.
"We have seen the creation of exciting and original bread variants such as raisin & pecan, carrot & cumin and honey & oat," says one buyer. "Greencore is excellent at category management, account management and NPD. It has also been working hard to improve the quality of bread, and direct results from this work have been recognised."
Greencore has consistently achieved a service level of 99.8% into store on a short shelf-life product range, according to the buyer.
Think recession, and think the rise of own-label brands. However – as revealed by The Grocer last month – the reality isn’t quite that straightforward. Research by TNS showed that while budget own-label sales were up 44% year-on-year for the 12 weeks to 22 February, premium own-label sales had fallen by 3.1% as consumers traded down to value own-label products or premium branded equivalents, which many perceive as superior products.The trend has also been identified by Mintel, which believes premium own-label (such as Tesco Finest, Sainsbury's Taste the Difference, Asda Extra Special and Morrisons the Best) has stopped growing and is now in decline.The fall in sales hasn’t gone unnoticed by premium own-label suppliers. “We’re seeing plenty of evidence of consumers trading down from premium own-label to brands and the core label offer,” says one. “I believe there will be a squeeze on space available for these type of products over the next 12 months and the range development will be very limited.”While some suppliers expect retailers to start encouraging consumers to trade up in the near future, this one isn’t optimistic. “Promotional activity on premium own-label will be more intense this year as it fights to regain market share,” he adds.
"Smaller companies are suffering on many levels - particularly when it comes to cashflow. As a result, service levels can be affected," suggests Beege Bourne-Whittaker, commercial director at Glennans, winner of the crisps, nuts & snacks category. The Staffordshire-based family producer is lauded by buyers for its "consistently good quality" in one of the most competitive categories.
Price and quality are "two values firmly locked hand in hand", says Bourne-Whittaker, who claims multiple retailers are now demanding more behind-the-scene commitment in terms of overriders, marketing and new store opening support. "This is further compounded by significant demands on promotional activity," she adds.
Bourne-Whittaker urges retailers to give smaller suppliers a fair chance to not only promote reasonably but showcase their products. She flagged up Waitrose in particular for the way it deals with smaller suppliers.
It's a point Waitrose is understandably keen to expand on.
"In our Market Town stores, in Buckingham and Brackley, we have gondola ends dedicated to local and regional products," says Chafor, adding that they are all from very small suppliers.
"We believe in longevity and good supplier relationships," she adds. "We will always try to work with our suppliers to get a mutually beneficial end result. Because of that I think suppliers are keen and willing to work with us."
Support works both ways, of course, and some category winners came out on top thanks to their ability to be flexible to the needs of retailers and wholesalers.
"Because of the environment we are in and because of the inflation we're seeing, we need as much support from suppliers as possible to pass on to our members and hopefully the consumer," says Nisa-Today's trading controller David Lunn. "Fredericks Diaries is one company that helps us achieve this. With ice cream, it is the ability to be flexible with supply - no matter what the weather may bring - that's important," he adds.
"We have a very focused range but offer flexibility with our recipes and case size," explains Fredericks Dairies marketing manager Jacqueline Walters.
"It is something we find retailers are taking advantage of more as their needs change. The biggest opportunity over the next 12 months for own label will continue to be value propositions. As we have pioneered and dominated the choc ice market, value in this sector is very much our strength."
Other suppliers agree that most opportunities for growth lie at the value end of the own-label market.
"At the moment there's a lot of value-engineering going into product lines. It's less about actual NPD and more about manufacturing products at the right cost," explains one.
The supplier, however, foresees a move by retailers back to more premium lines over the next year.
"Retailers will eventually want to start adding market value back into their businesses. Consumers will also start to get suspicious and sceptical about the quality of the products if the price of some value lines gets any lower," he claims. "At this point it will become our responsibility as a supplier to drive innovation and the growth of premium products."
Another thing that separates the cream from the rest of the crop in this year's survey is a supplier's ability to understand the needs of the wider retail market and adapt accordingly. To really get this to work in these difficult times for the benefit of both parties - and ultimately the consumer - Deloitte head of retail Tarlok Teji says a spirit of collaboration must exist between buyers and suppliers.
"Supply pressures and the issue of credit insurance have brought into sharp focus the need to work together much harder to ensure the consumer is getting value," he explains. "Retailers and suppliers should be collaborating on everything they do.
"Retailers need to have some degree of comfort around the fact that suppliers are working hard and innovating - producing things that retailers and consumers can benefit from," Teji adds.
"And on the other side of the equation, suppliers need to have the assurance that retailers aren't going to de-list them, and that they are genuinely interested in taking NPD to market."
Collaboration is the watchword for 2009, and those suppliers that are aiming to be the best in their respective categories 12 months from now will do well to remember that.
Halewood International produces an eclectic mix of branded and own-label alcopops, beers, wines and spirits, and hasn't been afraid to innovate. "In the past 12 months we have faced increased competition, increased raw material costs and a rapidly shrinking economy," says a company spokesman. "We've managed to meet these challenges by working more closely with retailers, while providing them with consumer research and NPD."
Despite making some four million sandwiches every week for retailers, Greencore has not lost the ability to get the detail right, say buyers. The Irish ready meals giant is also praised for its high levels of customer service and willingness to to grow NPD through a series of 'innovation days' for buyers. "We try to put ourselves in a position where we are able to grow the category together with our customers," a spokesman for the company says.
Biscuits & Cakes
Premium shortbread maker Dean's has come a long way from its beginnings in Helen Dean's family kitchen. Pipping the likes of UBUK for top honours in the biscuits & cakes category, the company has continued to innovate through the downturn and last September launched an oat biscuit range in flavours including sultana & heather honey and coconut & treacle. "Flexible with great NPD ideas and strong market knowledge," enthuses one buyer.
The UK's biggest food manufacturer won the bread bakery category thanks to its consistently reliable service. The Hovis and Sharwood's owner has fostered a communicative relationship with its customers, says one buyer, who was also impressed with its faultless delivery. "Premier is our biggest and most reliable own label-supplier, with excellent standards of business execution," he says. "It understands our needs especially well."
The roots of Premier Foods' business lie in manufacturing canned food, and most of the supermarket own-label canned fruit and vegetables seen on the shelves of the major multiples will have been manufactured by the St Albans-based company. "We have never had any problems dealing with Premier Foods and the company has consistently provided a service with professional and efficient communications," says one buyer.
Cheshire-based Morning Foods, which boasts of having "oat milling expertise that dates back to 1675", beat off competition from industry giants such as Nestlé and Weetabix to take the honours in the cereals category. The supplier was singled out for its reliability of supply and product quality.
"This company has delivered the most reliable availability consistently and maintained the highest quality standards," says one impressed buyer.
Greencore's second category win hasn't come easily. In its recent annual report, the company said the ready meals market was the most difficult area in UK convenience foods. And last autumn, chief executive Patrick Coveney claimed the company was "under pressure from the make-your-own-lunch trend". But this wasn't reflected in its 2008 financial performance - sales for its convenience food arm were up by 8% to €863.9m (£780.7m).
Crisps, nuts & snacks
Recent own-label launches from Glennans, the largest manufacturer of pan-fried vegetable crisps in the UK and Europe, have featured premium packaging that emphasises product specifications. "Attention has been given to natural flavours and succinct pack information," says commercial director Beege Bourne-Whittaker. "Although own-label only represents 11% of the premium crisp sector, consumer trade-down has boosted retailer own-brands."
Seven-times category winner Tangerine says it continues to follow its philosophy of using only natural colours and flavours and, where possible, removing unnecessary salt. "The major private-label customers are now virtually 100% on board with this process," says MD Chris Marshall. "This will remain a key focus for us to improve the confectionery offering. We are also working with our customers to meet their targets in packaging reduction."
Dairy & yellow fats
It hasn't been an easy year for the dairy giant, which posted below-expectation full-year profits in March. It has, however, reclaimed top spot in the dairy & yellow fats category after losing the crown to Robert Wiseman last year. "Arla has consistently delivered on butter business," claims one supplier.
"It has driven margin in a commodity-driven market and reduced waste at Christmas through planning and engaging all the relevant support functions."
With more than 80% of the own-label choc ice market, Fredericks claims its success in supplying the major retailers is down to its service levels and the way it has built up long-term relationships. It prides itself on a focused range and the ability to be flexible around recipes and case sizes.
"Despite last summer's poor weather, Fredericks worked with us to support all types of initiatives and keep ice cream in consumer minds," says one buyer.
McBride won for its depth of range, proactive approach to category management and high-quality products. "I voted for McBride because of its collaboration in remodelling our private-label range and work in developing our discounter range," says one buyer. The company, which reported a 47% fall in pre-tax UK profits during the second half of last year, is set to complete a restructuring programme that includes relocating to a facility in St Helens.
Despite its well-documented problems (the company owes £48m and breached a debt covenant last year), one buyer says Typhoo is "committed to deliver the best own-label products at the best prices". The tea-maker says it eyes gaps in the category closely and is aware that the value end of the market is growing rapidly. "Rather than just manufacturing a product, we take as much care of the retailer's brand as our own," says head of marketing Chris Hall.
Meat, Fish & Poultry
Dutch food giant Vion takes the plaudits for its commitment to low-cost production and its ability to offer strong consumer insight to each customer. The company employs 18,000 people worldwide,
producing fresh pork, beef, lamb, poultry, bacon and sausages as well as frozen potato products, vegetables and fruit. It recently restructured its abattoir and sliced cooked meats operations at the Malton and Haverhill pork processing plants.
"McBride offers NPD to match major brand launches," says one buyer. The company continues to be affected by raw material price increases, but CEO Miles Roberts is confident it can ride out the storm. "We are dedicated to private label - we only work for the retailers and all our investment goes towards that," he told The Grocer in September. "We would hope that in these exceptional circumstances we can successfully pass on these external costs."
Own-label mineral water and juice supplier Radnor Hills may not be the biggest name in this competitive category but its service levels, and particularly its flexibility, were a cut above some of its more esteemed rivals. "Despite being a smaller scale supplier, its level of professionalism, responsiveness and service is to be applauded," says one buyer. "Flexible, approachable and innovative," is the verdict of another.
UBUK was named Own-label Supplier of the Year at last year's The Grocer Gold Awards.
The company won praise from buyers for its strong account management and excellent NPD in the biscuits & cakes category. The 16 category winners from this year's survey will be entered into The Grocer Gold Awards 2009, held at London's Dorchester Hotel on 17 June, where they will compete to become best own-label supplier.
At last year's Gold Awards Marc Bolland accepted the Grocer of the Year award on behalf of Morrisons and PepsiCo was crowned top branded supplier. This year will see the addition of three new awards: Discounter of the Year, Specialist Wholesaler of the Year, and Exporter of the Year. Email email@example.com for tickets and more information.