How long does it take to achieve innovation?
That may seem like a strange question, because an innovative idea can develop in a split second. However, to really achieve innovative outcomes, a high level of commitment is needed. That takes time and requires collaboration with partners.
The U.S. food industry has experienced increased collaboration between retailers and manufacturers in recent years at a time of great disruption in the business. Collaboration has helped trading partners face a range of challenges, from shifting consumer behaviors to intense retail competition. It has taken a number of forms, from greater sharing of data to deeper discussions on how to work better together.
Effective collaboration hasn’t marked every relationship, but when it works well, collaboration can produce striking outcomes. Some partnerships have grown to the point where retailer and supplier leaders appear to be working together as colleagues rather than merely partners. This is a good indicator, in my opinion, of relationships that can produce real product innovation.
However, collaboration has run into challenges on the private brand side. Too often retailer-supplier interactions in that space have been transactional rather than collaborative. The 2017 Food Marketing Institute Power of Private Brands research delved into this topic and pointed to the importance of treating suppliers as partners.
“True innovation requires collaboration between retailers and manufacturers on product development, but the private brands industry has a special challenge in this area. Manufacturers are hesitant to develop deep partnerships without bigger retailer commitments. Retailers need to agree to longer term working relationships to justify manufacturer investments.”
This was an important topic of discussion at the recent FMI Private Brands D.C. Summit in Washington D.C.
A new category management approach was unveiled: “Category Management 2.1: The Store Brand Opportunity.”
It aims to boost private brand performance by moving away from a purely transactional mindset. It stresses the importance of creating “Disruptional Differences” with products and brands. The initiative is a partnership between Food Marketing Institute and Wisner Marketing.
I had a recent discussion with Jim Wisner, owner and president of Wisner Marketing, who pointed to the challenges with transactional buying. This includes the fact that the best vendors may not participate, because transactional programs don’t produce longer-range relationships and tend to raise vendor costs. A better approach, he said, is to understand the true costs, and then collaborate to produce value.
Product innovation is often a result of this deeper interaction. It starts to happen when trading partners ask each other some crucial questions, Wisner explained.
“What does the consumer find annoying? How can we redefine the product? How can we make the product or its packaging better?”
Wisner’s roadmap is a good one to explore, and even to embrace as a resolution for the new year. Deeper relationships are likely to produce more meaningful innovation. Suppliers can bring more valuable resources and engagement to these ongoing partnerships.
It takes time to change mindsets from transactional to collaborative. Nevertheless, it’s needed more than ever at a time when retailers are focusing more on premium private brand and taking their strategies beyond me-too approaches.
Collaboration won’t succeed, however, unless retailers treat suppliers as partners on the same team. This includes sharing performance data with them based on customer feedback and other measures. It will enable suppliers to serve as fully-informed resources to retailers, which is when the magic begins to happen. Suppliers can notice early-stage problems with product performance, and identify unique ways to boost performance that may not be on the retailer’s radar.
Retailers have the responsibility, as well, of measuring the performance of suppliers and being transparent about the findings. Products need to deliver on their promises. Suppliers deserve to know how they are doing.
Private brand is becoming a differentiator rather than a follower. It’s hard to imagine how it can move to the next levels without more collaboration to ensure all partners are working to innovate and maximize performance for consumers.