03.25.2009
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Private Label 2010: Redefining the Meaning of Brand
Why are consumers flocking to private label products in record numbers? Is the current economic crisis the stimulus behind the surge in apparent popularity? Can private label thrive without name brands?
The answers to these and many more strategic questions will be addressed in The Hartman Group’s Private Label 2010: Redefining the Meaning of Brand syndicated study.
Download a detailed overview for this study >>
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For more Hartman Group articles on LOCAL, click here..
03.26.2008 Searching the World for Local Products
02.27.2008 Consumer Understanding of Buying Local
01.24.2007 What Makes 'Local' Special?
07.14.2005 Is Buying Local the Real Deal?
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StumbleUponLocal Into Retail: Reinventing the Farmer
As with the organic industry (which originally was referred to as a “movement”) the grass roots movement responsible for the vast increase in local and regional farmer’s markets and community supported agriculture programs has begun to spawn sophisticated ventures that aim to reinvent small and regional agricultural producers by establishing marketing programs and distribution that encourage small-scale production rather than relegate it to treatment as a commodity. This takes place in light of the fact that consumer interest in local products has caught fire to such an extent that notions of freshness or local production now overshadow underlying, yet related worlds such as organics.
As we’ve noted previously, many of these markets are growing within the context of an overall transition within our culture, where consumers, no longer content with status quo legacy goods and services, are seeking out higher quality food products and experiences. Local products fall squarely within our cultural quest for higher order products and experiences.
To gain a deeper level of understanding on how local products may (or may not be) making their way into conventional channels, we asked Michael Rozyne, founder and co-director of Red Tomato, the following questions. Red Tomato is “a unique organization with one foot in the mission-driven non-profit world of sustainable agriculture, and one foot in the dynamic world of the marketplace.” (www.redtomato.org)
Do you find that retail interest in local products is high at this point, and do you feel that if a major retailer knocks on your door you'd have enough product to supply them? Or is it easier to work with smaller retailers?
I’ll start with retail interest in local. If you let the media answer that question, you would believe that there was an explosive growth in local interest around 2006. Yet my experience with it is that when I started Red Tomato in 1996-1997, I felt like there was already very strong retail interest and I had felt it in my bones a long time before that. I’ve felt that ever since then, it’s just been going up — but not explosively or dramatically — it’s only the public and therefore the consumer and media interest that exploded around 2006. As far as size of retailer, it’s not necessarily easier to work with the smaller retailers, if you look at our distribution chain, the bottle neck is the distributor: If we're selling to a large retailer like Trader Joe’s, we're really selling to their warehouse; technically they might not own it, but it’s their warehouse. When we work with a small chain, say six stores or even 20 stores, they probably won't have their own produce warehouse. So, to work with them, we have to work with their produce distributor, and that’s where life can get interesting and difficult.
So, the established chain of distribution is preventing expansion? Are you seen as competition?
In the beginning when we did our own distribution and did our own direct store door delivery with our own trucks, then we were seen as competition. That became a big problem. We ended our first relationship with a major retailer because we became viewed as competition to their main produce distributor. The more I learned about this, the more their position made sense. They hadn't been included in a constructive process. Now we focus more on working with and adding value to existing relationships.
Was there anything intersecting in 2006 that you think caused the growth in public interest in local?
It’s hard to put cause and effect together. I actually think there was a pressure building. It had to do with some impossible-to-measure level of reaction against globalization and a sensate desire for familiarity, and authenticity, which you've all written about as well as anybody. And then easier to pinpoint, obesity, and then the brilliant scientific breakthrough that acknowledged that there’s a relationship between health and food. Then there were the books by Michael Pollan and Barbara Kingsolver.
As consumers keep heading toward higher quality products, would you say that it’s the traditional distribution system that’s preventing local moving into mass retail?
Part of what prevents local moving into large scale retail is systems, and part of it is scale. The real challenge is how to preserve the identity of products as they pass through a warehouse. Interestingly, on our initial sales calls with large retailers we’ll sit and listen about all they’ve done with local products over the decades. And they’re not wrong, because some of the main commodities in any market are sourced locally. During the heat of summer, local goods are the cheapest products around and chains buy them and they’ve done this forever. At one major retailer, at the initial sales call we had the heads of produce and procurement going on and on about all they’d done for local — and they were right! We did both direct store door and warehouse delivery at this retailer and even at the beginning there was a lot of good will to make this work.
So, beyond this one retailer, is it safe to say that many retailers have been sourcing local for decades?
Yes. They didn't need a continuous stream of product necessarily, because having it was what made sense at the moment. Yet, they had a perception that they were contributing to the region’s agriculture. Typically, there’s way too much of many commodities in a region at the height of the season. So, you have to ask, ‘What makes a local program a local program?’ If it’s the height of the season and the market is flooded and everyone’s selling it, it’s very murky. Much of our work is about ‘decommodifying’ local products, getting the story of the farms to the consumer.
You were just saying that you are trying to keep the farmer’s face on a product and carry that through to a major retailer, whereas in the past, that retailer might have sourced product from any number of farms throughout a region with no real connection to the specific farm?
Basically, that’s true. Major retailers would certainly have relationships with particular suppliers (growers) and often would buy direct from them. So, a large chain would be buying from the Vineland auction in southern New Jersey, and in that case there’s little identity to that product, and they might not know other than it’s just part of the Jersey Fresh program, end of story. They'd have the potential to preserve identity, but for the most part they weren't. They just wanted to make sure the item was the right grade, quality and they dictated the price.
That’s interesting. You're basically describing that they were in local sourcing for many years, but their marketing has not been in keeping with what’s happening now. No face on a product, no story?
There were attempts over the years. Here in New England, major grocers tried television advertising with growers, as poster children, they’ve tried that. These retailers knew there was something in local way before the current era. But the curious thing is, while that was going on, I would hear stories from growers (suppliers) about what relationships were like, and for most growers they were not good. I quickly got a picture that these are not stories they were allowed to tell for fear of losing everything they’ve got.
So, in the end the tale about local into retail is mainly about distribution?
Yes, and about preserving value and identity for the farmer. What happened to relationships over the years was that growers’ wholesale relationships in the 1960s and 1970s went from being their bread-and-butter to “gee, we better invent other avenues or markets or else we’ll be dead.”
Because they kept getting squeezed on price?
Sometimes cut out, some squeezed and cut out...and trust diminishing between growers and wholesalers.
So, you’re saying that locally grown products were treated as commodities?
Yes. Increasing retailer power, increasing retailer margins, increasing pressure on growers, with growers getting what we call the remainder price — which is kind of what’s left over after everybody else’s needs are met other than the grower. In the 1980s and 1990s you have rapid development of direct marketing, and in the end, it’s the market of last resort; By direct marketing, I mean all the ways a grower sells directly to the consumer and the grower has to become their own retailer.
Red Tomato has sophisticated marketing programs in place for products like “EcoApples” in New England. What else are you doing with growers?
One of the most important things we’re working on is what we call the “Dignity Deal” for growers, which is our version of fair trade for produce (Figure 1). This is the deal that we’re constructing on behalf of the grower and while it really only appeals to the sustainability office within a retailer, it’s our statement for growers covering social, economic and environmental aspects of their operations.
For our Eco Apple program, we produce a custom version of our tote bag with the identity and story of each orchard so consumers know exactly who grew the apples they are buying.
Take Away
Even in the current economic downturn, public interest in local products dovetails with consumers’ ongoing desire for higher quality products and food experiences. In the case of local, this means consumers feel good about supporting regional farmers while reaping the benefits of products they see as fresher, better tasting, produced closer to home and often, good value. While the distribution of local into large-scale retail is only at a starting point, the underlying values that consumers seek in such products (e.g., stories of production, transparency, quality, etc.) are already being translated back and forth between growers and retailers by new, innovative ventures like Red Tomato.
Consumers Go Local
for Quality
Local has grown to be a hot cue for quality. What does the term “buy local” mean to today’s consumer? Pulse Report: Consumer Understanding of Buying Local presents the current consumer view on the meaning of “local” and the motivations for buying locally produced products and brands.
