Manufacturing home brands in Oz

My son is just finishing a two year advertising degree. He is creative and passionate about the role of the internet in messaging for brands, is media and commerce savvy – and hates writing.

Sadly for him, his second year of the advertising degree is 100% journalism, looking at the role of the traditional media in the marcomms mix.

To help him along his journey, and having met several of his “journalism” colleagues, I cite the growth of new publishers like SmartCompany.com.au as a wide reaching and newly relevant publisher of news and views. It isn’t News Ltd, Fairfax or CNN, but it is what CNN was to the 24 hour news model almost two decades ago. It is far reaching and avidly followed by people like YOU!

I say this because in Australia over the past three years this blog has been followed by around 200,000 people every week, and is read by a whole load of other people who live outside the country – in the US, Europe and Asia.

Some months ago, I was stopped in a hallway in Dallas, Texas by a local guy from San Antonio who told me he reads this blog every week.

Last week I received an email from a guy based in New York who I respect immensely. He works with retailers building their own brands and had read the blog last week around Industry Minister Kim Carr’s comments on the growth of Woolworths’ own brands.

Howard Davidson works with some of the top retailers in the world, across many retail sectors including mass, grocery, membership/club, department store and big box specialists.

To protect the client confidentiality, I have edited his email slightly, but broadly below is his take on what has happened in the US and the opportunities it has opened up for manufacturers based in the US (not Asia), in supporting this growth of retail own brands in the region.

“Kevin, I’ve been reading your blogs, and the latest one struck a nerve. I’ve been deeply engaged in a personal consulting project for (a major retailer’s) private label bath tissue. The product is now being made by a major branded goods bath tissue, as the retailer continually looks to suppliers to provide the very best quality products at the best price. This is how they deliver on the trust (their retail own brands) have earned with their members.

Much of their product across their range of categories is US-made, not because of favouritism but because US manufacturers understand the opportunity and work hard to deliver against the retailer’s requirements. Certainly if all things are equal, the retailer will go with the US-made product versus foreign.

The point is that private label today has an important place in the shopper’s eco-system. Poll any shopper and you will hear impassioned discourse about the quality and value of their retail own brand products – from tuna fish, to trash bags, to muffins, to olive oil. As the quality of private label continues to grow and retailers recognise, not just the profit margin, but THE VALUE of their own brand, foreign-sourced product that exists, based on low price and poor quality, will be replaced by that which better serves the image and requirements of the brand.”

What Howard is flagging, is that traditional high quality manufacturers of brands that we know and love are also manufacturing for retailers to support their own brands.

These products started as evil low cost and nasty products that we were embarrassed to be seen buying. You will remember the very first retailer own brands that were “basic” or “black and gold”. Well, they have grown up because high quality branded manufacturers now manufacture for retailers.

It used to be a case of: “If it doesn’t say Kellogg’s on the box, it isn’t Kellogg’s in the box.” Well that’s all changed. The retailer own brands today have huge value, and the companies who manufacture for them are high quality companies that are often based in the retailer’s own country.

Still cynical we can do it in Oz?

Last week the man who built one of the best retailers in the world, Sir Terry Leahy, bought a UK-based manufacturer of own brands for Tesco. Leahy built Tesco into the global retailer it is today. I like to think I did my part too as a young man, racking down shelves in Tesco in Stockport, England 30 years ago. He joined the board of a major venture capital company and his first move was to buy the company that makes Tesco’s own retail branded ready-to-eat meals. Why? Because it is a well run UK-based developer and producer of high quality food.

Around Australia and New Zealand there are local and internationally owned companies who just do this. And they have a great future in Australia, so long as they innovate and produce high quality items that we as shoppers want to buy.

The future of manufacturing in Australia is fine, so long as we have the humility to learn from some of our larger and further advanced cousins.

In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands. CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.