Investing in Innovation for Private Brands to Combat Inflation and De-globalization

By: Doug Baker, Vice President, Industry Relations, FMI

With pervasive shifts in consumer trends and today's inflationary environment, food retailers and manufacturers can no longer rely on long-held assumptions when it comes to private brands. How can private brands retailers and manufacturers improve efficiencies and collaborate for success? Doug Baker of FMI joins Roger Davidson, founder, board chairman and COO at MaGi Foods, to discuss the importance of private brand innovation in today’s food retail landscape.

During your career in private brands, I’m sure you have seen the impact of inflation on consumers and private brands. What did you learn from past experiences and is anything different now vs. then?

I had the good fortune to begin my buying and procurement career at HEB in 1980 at the peak of the last great inflationary period. I managed the branded and private brand assortment for several key center store categories during a period where inflation reached 15%. This time around I am fighting the inflation battle from the other side of the desk at a large private brand and branded co-packer in central Texas.

There are many similarities then and now enabling me to get ahead of the inflation curve at MaGi Foods. But there are also key differences. In 1980 the brands had all the leverage with the retailers given private brands were less than 5% of sales. Over 40 years private brands have grown to exceed 20% of sales on average and 30% or more at key retailers shifting the leverage from CPG to retailers. That shift in leverage has made the interaction between suppliers and retailers much more dynamic over the last three years. 

You will be joining us for the Private Brand Summit, September 29-30, 2022, in Arlington, VA. Can you give us a preview of what your message will be and what you hope attendees will be able to take back to their organizations?

Beginning early in 2020 (at the onset of COVID) up until the recent peak of food at home inflation, private brands suffered share loss to the brands. Prior to 2020 private brands had been gaining about 50 bp of share per year vs. the brands. Now at the peak of inflation, the pivot back to private brand share gains returned.

I believe private brand shares will continue to grow in the years ahead but only for retailers who make the necessary investments in infrastructure and innovation. Retailers will also need to recognize and react to the de-globalization occurring around the world and its impact on supply chains and sources of supply for private brand products. They will also have to recognize the need for more vertical integration.

Register for the 2022 FMI Private Brands Summit to hear more from Roger at his opening keynote “The Impact of Inflation and De-Globalization on the Retail Marketplace”, Thursday, September 29. You can view the event’s full schedule here.