Brand Finance’s analysis of 55,000 publicly listed, branded companies worldwide found that although their total enterprise value dropped from US$116.6 to US$94.8 trillion between January and April, it bounced back to $121.0 trillion in September, demonstrating how brands matter to business.

While the global economy as a whole is forecast to contract by -4.4% this year (IMF), branded companies that convey trust to consumers, like Apple, Amazon, Microsoft, Tesla and Visa, have already bounced back from the decline caused by the COVID-19 crisis to record growth of 3.8%.

Brands are among the most valuable assets in a company, accounting for around 20% of total business value on average, according to Brand Finance.

Commenting, Dagmara Szulce, Managing Director of IAA, said: “This report shows us that the importance of brands increases during times of crisis, and that is why we are launching our global multi-channel campaign, Why Brands Matter. Brands communicate the origin, quality and authenticity of a product, but they also convey trust, identity, pride, passion, creativity, innovation and optimism. Strong brands restore consumer confidence, and brand competition can rebuild economic strength. We call on governments and brand owners around the world to work together to create an environment that gives consumers the confidence to invest in brands that matter to them; to foster an environment where brands are protected, nurtured and allowed to fulfil their full potential.”

The report shows how and why brands are a powerful tool for economic revival, allowing consumers to quickly identify the companies and products they like or differentiate between them. Brands are there to protect consumers from the risks that are posed from unregulated, illegal and counterfeit products, giving consumers peace of mind in their purchasing decisions.

David Haigh, CEO of Brand Finance, said: “In times of crisis, brands – especially those most valuable and strongest in their categories and markets – become a safe-haven for capital. Like gold or fine art during past economic downturns, nowadays well-managed, innovative, and reputable brands are what the global economy turns to in the hour of need. There can be no better evidence for why brands matter than the role they have already played and will continue to play in the post-COVID recovery.”

Source: IAA

As the year winds down to a close, we’re taking a look back at some of the best advice beverage experts and entrepreneurs have shared with BevReview readers in 2020.

Using Qualitative Research to Support Your Brand

When change and uncertainty increase, it’s easy to get caught in a spiral of indecision. Dan Read, Beverage Strategy, Innovation, and Design Partner at Root & Branch Global, shared how strategically gathering the right data can give beverage brands the actionable insights they need to move forward faster, with clarity and measurable evidence.

“A well planned and executed study will shine a light on how a proposed proposition is performing against the key dimensions that determine the real-world success of new beverages hoping to break into a market.” -Dan Read, Root and Branch Global

Building Relationships

A common theme emerged when industry leaders shared advice for persisting during uncertain times: creating connections. Relationships and collaboration came up over and over again as essential tools to build a resilient beverage brand.

For Andy Stallone, CEO of SAS Sales and Marketing, it’s about leveraging the connections he’s fostered to gather the information he needs to keep moving forward.

“I know I can call on any of the people in my network, even the ones I compete with directly, and find out what they’re seeing,” says Stallone. “We’ve built relationships and trust, and we help each other out.” -Andy Stallone, CEO, SAS Sales and Marketing

Mike Schneider, CMO of BevNET, notes that open communication is a two-way street where sharing information is just as important as listening.

“Brands and suppliers have the opportunity to talk openly about where they are and what they’re doing during this time,” says Schneider, “It’s not just the scientific and technical information people are looking for right now. We need people to state the basics because they’re shifting, and we all need to know what they are as they change so rapidly.” -Mike Schneider, CMO, BevNET

Practicing Patience

Innovation is an essential part of the beverage industry, but it doesn’t outweigh the importance of strategic, organic growth. Industry veteran, Vanessa Walker, reminded us that taking a long-term view and maintaining sustained focus on a category before creating a new one can benefit consumers and the industry.

“To keep the beverage industry a viable place for great new beverage ideas to grow, we have to stop swiping left and moving on so fast. We need to look for richer stories and trends. We must be realistic about what the journey looks like for most beverage brands and encourage strategy and patience over unreasonable risk and unrealistic speed.” -Vanessa Walker, CPG Executive

Securing Your Supply Chain

At the beginning of the pandemic, many companies realized just how vital and volatile their supply chains are. In the beverage industry, supply chain stability is critical and affected by everything from product perishability to commodity pricing and inventory quality and safety requirements. Steve McCullough, Vice President of Business Development at BevSource, shared how beverage companies can take straightforward steps to secure their supply chains, preparing them for whatever lies ahead.

“An optimized and resilient supply chain can serve as a source of stability during a crisis, becoming a source of competitive advantage that will strengthen your beverage business in the long run.” -Steve McCullough, Vice President of Business Development, BevSource

Embracing E-Commerce

COVID-19 has increased online beverage sales faster than anyone predicted. Before the pandemic, early-stage beverage companies might have built out other channels first, expecting to add an e-commerce strategy later. Delaying online is no longer an option, but as Florent Hacq, Founder of Acwire, shared, getting online doesn’t have to be complicated, especially when you focus on your customer.

“At the end of the day, you want to offer customers different options,” says Hacq. “They may buy directly from your website if you offer specific incentives, or they might want to add your product to their shopping cart when they’re buying other groceries from an e-commerce platform. The idea is to be where the customer is.” -Florent Hacq, Founder, Acwire

Choosing a Mindset for Success

This year brought new challenges to life and business. Janet Johanson, CEO of BevSource, reminded us, it’s not adversity that defines us, but rather how we respond to it. We may not have control over the circumstances, but we can adjust our perspective and approach to stay resilient and proactive even during the most difficult times.

“By choosing the best of the options in front of you and keeping things in perspective, you can turn your short-term losses into gains that will help you build a stronger and more sustainable beverage business.” -Janet Johanson, CEO, BevSource

While 2020 may not have played out how we predicted, this year brought opportunities to learn and come together in new ways. We are thankful for the opportunity to grow with you and look forward to continuing to provide fresh insights, ideas, and inspiration to fuel your beverage journey.

The original article was published in Beverage Industry Blog.

So how do you scale up without losing momentum?

In an industry dominated by giants like Coca-Cola, Starbucks, and now GT’s Kombucha, how can your startup hope to not just survive but thrive in this highly competitive market?

Choose your co-packer wisely

Your startup’s initial deal with your co-packer or the company that handles the packaging of your products is arguably the most important business relationship for scaling up. This business agreement will determine the safety and quality of your product, the protection of your intellectual property, and ultimately, how efficiently your startup can grow.

Indeed, Food Dive’s guide to choosing a co-packer suggests not only ensuring that your co-packer has state-of-the-art facilities and health practices, but also that your agreement has ample room for growth. Make sure that you appropriately limit your co-packer’s access to your brand’s copyrighted formula, and that both parties are mutually agreeable to scaling operations up or down as necessary. The key to choosing the right co-packer and drafting the right agreement is to aim for not just mutual profit but operational flexibility.

Prioritize e-commerce

While traditional business models consider e-commerce or online selling as an ‘alternative’ channel, e-commerce is taking a larger and larger share of the revenue pie. This is particularly true for food and beverage companies who have been largely affected by new health and safety protocols due to the global pandemic. In fact, CNBC reports that while Americans did 3% of their grocery shopping online prior to COVID-19, the new normal saw that number jump to 15% during the peak of the worst economic event of the century. “E-commerce has democratized the opportunity for customers to find brands,” says Elliot Begoun of TIG, a customized accelerator company that helps natural-product brands to scale properly. “They want to know about the companies behind products, and are more active in the purchase process than ever. We advise all the brands we work with to be e-commerce enabled.”

Consider forming an LLC

In a nutshell, a limited liability company (LLC) is generally the most conducive business structure for small businesses looking to scale up. The LLC structure combines the flexibility and quick decision-making powers of sole proprietorship and partnerships with the liability protection of corporations. Not every state allows for LLC formation, but Michigan does, and investors in the beverage industry have already taken advantage of this fact.

Earlier this year, Charter Capital Partners LLC which is a Grand Rapids-based investment bank created Charter’s Papa Fund LLC to fund a craft rum distiller in Florida. Through this special purpose LLC, 18 Michigan investors raised $1.33 million for Papa’s Pillar Rum in less than a year – a feat that would be more challenging for a corporation or a sole proprietorship. Indeed, a guide to forming an LLC in Michigan details how a new company’s articles of organization and operating agreement can be used to determine any special purpose for that new entity. Whether it’s creating an LLC for investments or turning your partnership into an LLC to prepare for scaling, it’s attainable in Michigan. Either way, it’s best to consult with a business law attorney to determine your next best step.

These are just some of the key steps you can take to ensure that your beverage startup can scale efficiently. Find your ideal co-packer, focus on e-commerce, and learn the ins and outs of restructuring your business for growth. Keep these tips in mind and you’ll be on the way to becoming a big player in the beverage industry.

Written by Robert E. Garza

To help companies prepare for the UK leaving the EU, minimise disruption and to stay up to date with key developments, the British Brands Group is launching a programme – Brands for Trade. The programme is open to suppliers of all sizes, whether or not members of the Group, and covers three key themes: regulatory preparedness, customs and intellectual property.

Developed in collaboration with specialist organisations in each of the three key areas, the programme comprises: training modules; Frequently Asked Questions; updates on recent developments; a free IP Health Check; and a fortnightly email update. The programme is available at a one-off fee of £489 + VAT after which all the information is available at no further charge to all those in the subscribing company who wish access.

The training modules cover five essential areas:

1. The Regulatory landscape, compliance with UK and EU rules – with a particular focus on food, cosmetics and general products
2. Incoterms 2020
3. Rules of Origin and Commodity Codes
4. Customs declarations (import and export) and clearance
5. Intellectual property

The component parts of the programme are all designed to be practical and business-focused and will be delivered by experts in their respective fields:

• Regulatory: Bloom Regulatory Ltd (Olivia Santoni)
• Customs: Export Unlocked Ltd (Richard Bartlett)
• IP firms: Including Bird & Bird, Brandright, Bristows, Gowlings WLG, IP Together, Irwin Mitchell, Lewis Silkin and Withers & Rogers

The training is applicable for all management involved in this transition including supply chain experts, sales & marketing professionals and general managers. Each session is delivered live online and then available on-demand so subscribers can learn flexibly. The Programme itself will run for six months with regular updates on the relevant changes.

Full details can be found at their website.

What is Shelf Life? 

Shelf life is the period during which a beverage is stored and sold without significant loss of quality or functional properties. Shelf life differs from an expiration date, which is the date after which a product should no longer be consumed, either by operation of law or by exceeding the shelf life for perishable goods. A beverage’s shelf life is an essential indicator of the quality or loss of quality in a product. The producer is responsible for determining shelf life.  Certain beverages may have regulations or standards specific to their industry for the usage of “sell-by” dates and “best-by” dates.

What is a Shelf Life Study? 

Reliable “use by” or “best before” times cannot be determined by guesswork or by copying a competing product’s shelf life. Shelf life testing is customized to your product and the information you need to measure and control. A shelf life study is a scientific process for determining the length of time a product will meet specific standards in relation to parameters such as microbiology, taste, appearance, nutrient levels, and aroma.

Some of the ways beverage manufacturers leverage a shelf life study include:

• Improving product quality and shortening time to market
• Ensuring product efficacy throughout its shelf life
• Making sure that combined ingredients within a formula remain stable over time
• Verifying your formula’s compatibility with the packaging you’ve selected
• Making sure your formula does not degrade in a way that compromises the safety and purity of your product
• Exploring ways to lengthen product shelf life
• Defining the storage conditions required for your beverage to maintain quality over time

Testing will vary depending on the product, storage conditions, and any claims on the product. Although each shelf life study is unique, the overall process is the same.

Step 1: Review Formula and Storage Conditions

For your shelf life study to be accurate, your beverage should be made in a way that reflects normal production. These could be samples from a pilot facility, or samples from a full production run. Bench tops samples may not be representative of a true production run (due to scale-up error). Shelf life is impacted by ingredients, type of product and product claims, packaging, temperature exposure and handling, and expected usage after opening.

Step 2: Identify Factors for Safety and Quality

After reviewing the formula and storage conditions, the required organoleptic quality and food safety standards need to be outlined. Any legal claims, such as nutritional content, will also need to be factored into testing for any nutrients that may degrade over time. The testing program for a product will depend on customer and legal requirements and should follow accredited testing methods.

Step 3: Testing

There are several methods of testing that can be used to help determine a product’s shelf life. Two of the most common are the direct and accelerated testing methods.

Direct method: The direct method is a combination of real-time studies that involve storing the product under conditions similar to those it will face on the market while monitoring its properties over regular intervals of time. While this method is extremely accurate, it takes a long time to conduct.

Accelerated method: Accelerated testing modifies conditions such as pressure and temperature to accelerate spoilage reactions in a beverage. These tests help predict the behavior of a beverage under certain conditions. Using accelerated tests, brands can predict how environmental conditions and variations in ingredients will impact the end product’s properties. Although it can produce results three times faster than the direct method, the accelerated process carries some margin of error because the modified conditions may create reactions that would normally not take place on the shelf.

Most shelf life studies include both food quality standards as well as organoleptic quality standards. In addition to microbiological analysis, the product will also undergo sensory testing to ensure properties like taste, smell, and appearance meet requirements over the specified time.

Step 4: Analyze Results and Set Shelf Life

The final shelf life study report verifies that your product is shelf-stable and establishes time parameters from production, distribution, sale, and consumption. A shelf life study should also extend beyond the actual expiry date to ensure that your beverage is safe beyond the expiry date marked. qual

Shelf life testing will need to be re-validated if you make any changes to your formula or production methods.

Shelf Life Study Considerations 

When leveraged correctly, a shelf life study can deliver valuable information to help you make informed business decisions and protect and enhance product quality. Large retailers are increasingly requiring third-party shelf life tests from the manufacturers of the products they carry. There is no one-size-fits-all solution when it comes to shelf life testing. Your approach should reflect your unique product, lifecycle stage, data requirements, budget, and time table. Working with a skilled laboratory team that has experience with similar products will ensure a testing design that meets your objectives while avoiding unnecessary costs.

Are you ready to explore shelf life testing for your beverage? Schedule your free shelf life testing consultation with one of our lab technicians today.

Learn more about our full service testing facility: The Lab-Powered by BevSource.

Original article was published in Beverage Industry Blog.

Here drinks strategy, innovation, and design agency, Root & Branch, discuss some significant trends that will impact consumer attitudes and behaviour around beverages in a post-Covid world.

LIVING SUSTAINABLY

Photo by Thom Holmes on Unsplash

The current crisis has produced a major and much trumpeted, albeit temporary, cut in carbon emissions. Analysts predict the largest ever fall in CO2 output as physical economic activity ceases or moves online across the globe. As we start to think about ‘getting-going again’, much is being made of the opportunity to ‘build back better’. Governments have the power to support the recovery of cleaner industries at the expense of carbon-heavy ones. Consumers broadly buy into the idea that we have ten years to save the planet from the negative effects of climate change. As the environmental lobby regains momentum, and as consumers regain the capacity to listen, it’s a safe bet that carbon reduction will increasingly be a hygiene factor for all consumer goods companies.

All beverage brands can respond positively and profitably to the sustainability challenge, and there are many areas of the value chain and brand marketing that can be examined from a carbon perspective.

WASTE NOT WANT NOT

Photo by Globelet Reusable on Unsplash

A recently quoted figure garnered quite a bit of press attention: by 2050 the weight of plastic in the ocean will exceed the weight of fish. Whether this is accurate or not, the environmental fallout from single-use plastic is utmost in consumers’ minds. Beverage brands that mitigate, reduce or eliminate plastic waste resulting from consumption will lead the industry’s response, and have opportunities to capitalize on positive sentiment from consumers and policymakers alike.

With speed and agility smaller beverage players can steal a march on the old firm. Ideas around closed-loop recycling and other zero-waste initiatives can and will help the most environmentally savvy brands to cut through meaningfully.

HYGIENE INNOVATION

Photo by Thomas Kolnowski on Unsplash

Odds-on, consumers are going to be concerned about cleanliness and sanitation for some time to come. Upstream strategists will be busy wondering to what extent enhanced hygiene should be worked into development pathways. Will we see beverage cans featuring antimicrobial finishes for example? It is hard to predict what might materialise in 12 months’ time, but it is certain that FMCG pipelines will respond to the pandemic with hygiene innovation, in one way or another.

Smaller beverage brands might be best placed to keep a watching brief, staying prepared to fast-follow relevant innovations not ring-fenced with proprietary technology.

D2C CHANNEL GROWTH

Photo by Bruno Kelzer on Unsplash

The vast majority of beverages (across all categories) are purchased through physical channels. During lock-down, producers have seen their on-trade routes-to-market shut down, literally overnight. Asahi has responded by launching an on-line, next-day home delivery service for its brands. On the other hand, off-trade sales have boomed. But in the round, mainstream retail is focussed on simplifying supply chains, and keeping shelves stocked with essentials. Familiar national and legacy brands are growing while premium, niche products have been de-prioritised. Traditional listings might be the goal for up and coming brands, but the buyers’ attention may well be elsewhere-in the short term at least.

Facing prolonged route to market disruption smaller beverage setups targeting premium consumption opportunities need to double-down on efforts to manifest digital sales channels,  while maintaining the focus on finding D2C audiences on-line.

ACCELERATING WELLNESS

Photo by Daily Nouri on Unsplash

We know from history that shocks tend to accelerate the uptake of previously underlying trends. Changes solidifying over years can gather critical mass quickly. If this is true, then consumer interest in wellbeing will only grow in response to the Pandemic. Themes centred around nature, minimalism, simplicity, spirituality, and conscious consumption will increase in prominence.

In respect to beverages, we think that substantial trends in cleaner drinking and moderation will further crystallise. We also believe that the focus on natural immunity will accelerate. Consumers have long turned to natural remedies and nutraceuticals purported to support physical immunity, and the relevance of these products will be amplified, particularly amongst ‘at risk’ groups.

For beverage producers there are opportunities to articulate new wellness benefits linked to no and low alcohol propositions (especially in everyday categories like beer and wine). Alternative ideas around state change, supported by CBD and ‘adaptogens’, will also grow in relevance.

As people increasingly focus on pursuing health and wellness in a home setting (especially with increased home-working) smaller beverage brands can level the field by offering well thought out packages and subscriptions, fulfilled via convenient, flexible home delivery services.

HOME ENTERTAINMENT HUB

Photo by Adam Jaime on Unsplash

People have been exclusively drinking at home during lockdown. In response many craft breweries have proved themselves able to quickly adapt, switching to responsive on-line delivery services with varied product and packaging mixes-effectively filling in when supermarket shelves were sparse. Support for local craft breweries and beer brands has long been underpinned by significant trends. So, even as things slowly open-up in the on-trade, some groups of consumers will likely continue to focus on more social drinking occasions at home. If that holds true, then craft beer brands and local craft breweries are perfectly placed to cater for these occasions.

Agile beverage setups can offer on-line socially focussed product, packaging and dispense propositions that supermarkets cannot realistically match.

Another factor at play here is the predicted softening of ‘premiumisation’ in the immediate Post Pandemic era. If trips to fancy cocktail bars are eschewed in favour of casual get-togethers at home, then there are attendant opportunities for brands that can help consumers to recreate the quality and experience of the on-trade. Brands that can offer convenient ways to get ‘Bar Quality’ cocktail experiences at home will be well placed to flourish.

ABOUT ROOT & BRANCH

Root & Branch is a highly focused beverage strategy, innovation and design consultancy with a track record in launching successful innovations for clients of all shapes and sizes. Based in the UK, the company conducts beverage new product development and brand development projects globally.

Original article was published in Beverage Industry Blog.

Smart and proactive supply chain management is particularly important in the beverage industry as companies contend with volatile commodity pricing, inventory quality and safety requirements, complex manufacturing constraints, and product perishability.

While it’s unlikely that any business will remain unaffected by the impact and aftermath of the 2020 pandemic, some companies will fare better than others due to their supply chain perspectives and practices. The principles below will help you foster beverage supply chain resiliency in good times and bad.

1. Create A Clear and Comprehensive Picture of Your Supply Chain

The first step to gaining and keeping control of all the elements of your supply chain is knowing what they are. Mapping out your supply chain means having all of the data from every supplier and partner you rely on to create, package, store, and distribute your beverage. Only when you have the complete picture, can you start to see areas of potential disruption and create an effective plan to respond. External factors like the geographic location of suppliers as well as metrics like inventory levels and lead times, and even the details of contracts and agreements, need to be organized and visible so that you can analyze risks and opportunities quickly and efficiently.

2. Plan for “What Ifs”

The beverage companies who make disruption and scenario planning a regular business practice are more empowered and prepared to make critical decisions during times of crisis. The threat of the Y2K bug, a computer coding problem that was projected to take computers and networks down at the beginning of the year 2000, forced many businesses to think through scenarios they had not considered before. The most well-prepared companies regularly work through the exact steps they would take to address everything from natural disasters and pandemics, to product recalls, transportation failures, and significant price inflation.

The advantage of imagining the worst-case scenario for your beverage brand will help you to work through your options while you have the time and space to strategize and collaborate. When an actual disaster hits, you usually don’t have that luxury.

I worked with a brand that walked through a mock product recall just months before it received notice of an E. coli contamination. Within just a few short days, they were able to get their hands on every product because of their planning during the practice recall.

According to an Institute for Supply Chain Management survey, more than 44% of companies who responded do not have a plan in place to address supply disruptions from China. Of those, 23% reported current disruptions.

With the increasingly global and complex risk environment surrounding beverage supply chains, beverage businesses must examine as many “what-if” scenarios as possible to be adequately prepared to keep their operations stable now and in the future.

3. Keep A Close Eye on Inventory

During a crisis, having a clear picture of your inventory is essential. With potential material shortages and shipping delays, you need to be able to quickly and easily know what you’ve ordered, and when it will be delivered. You need to stay in contact with suppliers to track which materials you can replenish and which items you might not be able to purchase so you can place orders strategically. Tracking your inventory closely and consistently helps you optimize your orders, plan production more strategically, and avoid tying up valuable resources unnecessarily.

4. Identify Backups

Relying solely on one supplier for a crucial part of your beverage can enhance your risk of supply chain disruption during a disaster. For every critical component of your product, you should have a current list of what supply options are available, including an understanding of how the cost and lead times of switching to a different supplier would impact your business. It’s also important to qualify any backup suppliers. Ensure that a transaction has taken place, and that you’ve formed relationships across the organization. You should be able to easily verify that the right material has been used and meets specifications, delivery has been completed, and any issues have been noted and resolved.

If you identify an area where there are not viable options for switching suppliers, it may be prudent to invest in holding emergency stock or having a secondary formula approved and ready to go in case the need arises.

5. Communicate Openly and Often

The more information you and your suppliers share, the better you can operate together to overcome obstacles and keep your beverage business moving forward. Stay in close and frequent contact with suppliers about things like inventories, timelines, and the actions you are both taking to prepare. Outline your plans and expectations as clearly as possible and keep your partners informed as things change on your end, so they are ready to offer solutions and ideas.

6. Set Clear Standards for Quality

No matter the external conditions, product quality remains a central focus for beverage industry leaders. An extensive Neilson study on premiumization found that 49% of consumers were willing to pay a premium for products with high-quality assurances and verifiable safety standards. Having a robust and integrated plan for quality ensures you don’t layer quality issues on top of the other concerns your brand may face during a crisis.

7. Monitor Your Financial Models

Having a thorough grasp of your beverage’s financial picture will help you stay proactive in managing your cash flow and liquidity. During a crisis, access to cash and credit give you flexibility and options for taking action. Understanding your cost of goods sold, and short-term and long-term financial needs and commitments prepares you to make quick and informed decisions to manage both your supply chain and the financial health of your beverage company.

8. Seek Out Support

Optimizing your beverage’s supply chain is a hefty challenge. As you wade through options to make the decisions that will significantly impact the success of your beverage, it is helpful to have a sounding board of individuals who understand the industry and have your best interests at heart. Whether it’s a peer group, advisor, or consultants, engaging a team with different perspectives and backgrounds can help you avoid blind spots and make more informed and strategic supply chain decisions.

An optimized and resilient supply chain can serve as a source of stability during a crisis, becoming a source of competitive advantage that will strengthen your beverage business in the long run.

Original article was published in Beverage Industry Blog.

One growing trend amongst retailers is the use of private labels to build brand loyalty and increase profitability. To compete at retail now and in the future, it’s vital to understand what’s behind the private label approach, how retailers are leveraging it, and how it might impact new and existing brands.

What is a Private Label?

A private label product is manufactured by a contract or third-party manufacturer and sold under a retailer’s brand name, or through a licensing agreement. Often, the retailer specifies everything about the private label product including what goes in it, how it’s packaged and what the label looks like. The retailer also pays to have the product produced and delivered to the store. This strategy is in contrast to buying products from other companies with those companies’ brand names on them.

Some examples of retailers who utilize private labels are Walmart, Costco, Aldi, and Trader Joes. According to a report by the Private Label Manufacturers Association (PLMA), in 2018, private label made up just under 20% of the market share for consumables in the channels that Nielsen tracks.

Private-label goods are available in a wide range of industries from food to cosmetics. They are often positioned as lower-cost, high-quality alternatives to regional, national or international brands. Recently, some private label brands have been positioned as “premium” brands to compete with existing “name” brands. Earlier this year, Aldi rolled out a private label line of vegan food products under their Earth Grown brand.

Private Label Manufacturing

A private label or store brand can be the chain’s own name, or a brand name created by the retailer for their stores. The retailer will design the manufacturing, packaging and marketing of the goods in order to build on the relationship between the products and the store’s customer base. Store-brand goods are generally less expensive than national-brand goods, because the retailer can optimize the production to suit consumer demand and reduce advertising costs.

There are generally four types of store-brand product manufacturers:

• Large national brand manufacturers that utilize excess capacity to supply store brands.
• Small manufacturers that specialize in particular product lines.
• Major retailers and wholesalers that provide store brand products for themselves.
• Regional manufacturers that produce private label products for specific markets.

What Makes A Private Label Successful?

1. It supports the retail brand.

Consumers are becoming more trusting of retailers as the organizations that deliver their customer experience. As such, they expect the store brands to represent the same level of quality and similar attributes to the store itself. For example, Trader Joes keeps all its private brands free from high fructose corn syrup, GMO ingredients, hydrogenated oils, MSG, artificial colors and flavors, and preservatives.

2. It brings differentiation and adds value.

Private labels should bring differentiation to an existing category. As with national brands, private label brands perform best when they add something to the marketplace or address an unmet need. Private label brands provide an opportunity to fill a gap between existing brands or to bring new innovation to the market. In 2018, Target launched a subscription box service for its children’s private label clothing line, Cat & Jack, providing convenience for busy parents.

3. It has boundaries.

A successful private label, just as a national brand, needs boundaries in order to remain salient in the customer’s mind. Retailers can use private labels in many ways, but they must be clear and organized in their approach. Brand strategy principles apply to private brands as well, and companies must understand the different segments their products appeal to, the associations between brands, and how each brand aligns with the core brand. Macy’s is one example of a retailer with a well-defined private label strategy. In 2018, the company generated about 29% of its revenue in private label merchandise. In an article by CNBC, a Macy’s representative stated, “Some of our most loyal customers (and biggest spenders) are most loyal to us because of our private brands.”

4. It has a distinct visual identity.

Private label brands must utilize appealing packaging design with a clear focus on their target audience. Winning products will grab attention and engage consumers. Well-designed private labels differentiate products and deliver a clear brand proposition. Whether they are visually tied to the retailer brand or not, the packaging and visual identity of private label products need to compete with national brands. According to Kasper Ulf Nielsen, “People’s willingness to buy, recommend, work for, and invest in a company is driven 60% by their perceptions of the company and only 40% by their perceptions of their products.”

Opportunity or Threat?

What the growth of private label will mean for suppliers and national brands is yet to be determined. As with every area of uncertainty, the opportunity will go to those who understand the customer best and can deliver superior products and experience at the right price and profit margin. The game is constantly changing and knowing the motivation and moves of each of the players remains your best strategy for success.

Original article was published in Beverage Industry Blog.

Source: depositphotos.com

There is absolutely no need to make any kind of preamble to this statement: the retail industry is undergoing a massive shift, as consumers are modifying their shopping patterns and behaviors.

Companies are still reeling from the initial shock of the pandemic and diligently working to rearrange their supply chains and alter the way they distribute their products. As a result, we’re still not at a stage where we can predict which trends are here to stay and which will die down once the pandemic is over.

Let’s look at the four most prevalent ones you need to be mindful of in the beverage industry.

Stocking up as the new way to shop

We’ve all seen images of empty isles in what were once well-stocked supermarkets. We’ve all been privy to news coverage of supply chain disruptions and impaired production. And most importantly, we all feel the same anxiety over an uncertain future, and want to ensure we have what we need should the pandemic take a turn for the worse.

Products that are in the highest demand include toilet paper, disinfectants, and non-perishables. However, bottled water and other beverages also find themselves on most household’s shopping lists, as 47% of consumers claim they have been stocking up on essentials.

This heightened demand naturally translates into a higher need to increase production and streamline supply as much as is possible in the current climate. Beverage brands are advised to allocate most of their production to their most popular products – and to avoid launching new products for the time being.

Source: depositphotos.com

Whenever possible, it’s also essential to leverage home delivery options. Consumers would prefer to take delivery of a carton or packet of their favorite beverage, as opposed to going out to the shops and lugging it back home.

Shopping online

While we are on the subject of delivery, let’s touch upon that most obvious of shifts – online shopping.

The growing health and safety concerns of shoppers all across the world have resulted in an increase in e-commerce spending, with consumers ordering anything from groceries to toiletries and gym equipment to their homes.

A survey by Gordon Haskett has revealed that a third of shoppers have made an online food shop in the week prior to the survey, and 41% of them had done so for the first time. This is a clear sign that even customers who prefer to shop in person are now turning to e-commerce as a way to stay safe and source everything they need.

Despite issues such as delivery delays and limited availability, 97% of shoppers will continue to do food shops online even after the pandemic is over. That’s why beverage businesses need to step up and offer the option as soon as possible.

Source: depositphotos.com

This is also a chance for smaller companies to get noticed by customers when their usual beverage of choice is out of stock, as most consumers claim they will make a purchase from a brand previously unknown to them rather than forgo the order altogether.

Establishing an online presence – either on your own website, via social media, or by becoming a part of a larger shopping network’s offer – is currently a must. Even if e-commerce was not previously on your radar, now is the time to add it, and high time at that.

Focus on health and immunity

As there is still no medication that can effectively and widely combat a Covid-19 infection, and as the body’s own immune system remains the most important defensive mechanism, people have started focusing on nutrition and immune-boosting like never before.

We are expecting to see a 25% increase in the sale of immunity supplements during the course of the year, as shoppers continue to reach for products that might help them battle the disease.

This will also elicit a rise in those who are choosing to make their own capsules from specifically tailored, quality ingredients.

As a beverage brand, you can focus on marketing products that can benefit the immune system. These might be products high in Vitamin C, electrolytes, minerals, and other ingredients that are considered beneficial to combating diseases.

How much you care will come under scrutiny

Never have consumers been as interested and as influenced by a brand’s values and behaviors as they are today when social media lets us scrutinize just about anyone and anything.

They expect the brands they love and who have previously shown their engagement with social issues to step up and raise awareness, help where they can, and treat their employees well, keeping their safety a priority in these dangerous times.

Brands that claim to focus on their customers and staff but are not enabling employees to work in the safest possible conditions are losing trust and customers quickly.

Source: depositphotos.com

As a business in this climate, you need to choose the way you want to react to the pandemic – one that is in line with what your brand already stands for – and act accordingly. If you have been vocal about community service and engagement, you need to act on those values now, or risk being dumped by a lot of your customer base.

This can also be your time to shine – not merely as a marketing tactic, but as a way to genuinely establish some sort of relief and help those who could benefit from your actions. Don’t think of it as a way to attract a new market base, but rather as a “what goes around comes around” kind of strategy.

Source: depositphotos.com

Final thoughts

As we try to navigate the shifting currents of the modern market, let’s try to keep one eye on the waves we are being tossed by, and another on the horizon. That’s where some of these trends may crash and sink, while others may swim ashore and remain embedded in customer behaviors for decades to come.

CREDIT: Eaters Collective via Unsplash

The world is in the throes of a health crisis, and its wide-reaching impact is being felt even in the beverage industry. Bigger brands such as Coca-Cola and PepsiCo have weathered the storm so to speak, even as they have scaled down operations due to varying degrees of lockdowns. PepsiCo, in particular, saw a 7.9% increase in first quarter sales, while Coca-Cola has held steady, at least in the first half of 2020. Both, though, are predicting profits to plummet for the rest of the year. Alcoholic drinks manufacturers figure to get hit hard, too, with Heineken, for instance, already cutting its worldwide beer portfolio by as much as 30%. Wine and spirits retailers are suffering as well, with Majestic Wine having to endure 9 weeks of canceled orders.

Lower profits and canceled orders seem to be part of the beverage industry’s new normal — that is, unless companies adjust and adapt. In some cases, that means reinvention, as in the case with San Miguel Corporation, a known beer maker in Asia that began producing alcohol and hand sanitizers to augment the dwindling supply of both in the Philippines. Kirin Beverage Co in Japan, on the other hand, released an immunity-boosting drink, Kirin IMUSE Water, this year that reached its three-month sales target in its very first week.

Other companies are banking on goodwill to drive brand loyalty. It is a tactic put to good use by the New York Distilling Company, which repurposed its undiluted Perry’s Tot Navy Strength Gin to make hand sanitizers. However, the company has not made these sanitizers available for commercial sale. Instead, it distributes its innovative home recipe for free — two parts uncut gin plus one part aloe vera gel — to existing clients as a show of support and solidarity. Pernod Recard USA has adopted the same strategy, making sanitizer in its manufacturing sites and donating them to clients and those in need. Pernod Recard France, on the other hand, is leading an initiative called 1,000 Cafés that aims to support small-town cafés all across the country.

Beverage companies are also adapting their business processes. In particular, more and more beverage companies are shifting their focus from on-premise outlets, like bars, restaurants, and tasting rooms, to off-premise, as in liquor stores and retail establishments. This shift in focus is allowing liquor companies in America to continue flourishing, even as on-site drinking in the country remains largely restricted. In fact, off-premise beer sales have been on the rise in America, even registering a 12.8% increase year-on-year despite an ongoing health crisis. This underscores how vital off-premise sales will be for beverage companies moving forward.

Moreover, e-commerce is becoming the norm in the industry, particularly when it comes to alcoholic drinks. That’s because a recent CNN report on online beer sales found that more people are buying booze online than ever before, and for good reason — it is a much safer, more convenient way to buy beverages. Case in point: European brand Double Dutch now offers its products online via Shopify, as it looks to ease the impact of lockdowns on its on-premise sales.

The rise of e-commerce speaks to the importance of innovative, consumer-first strategies. Consequently, proper foresight and preparation on the part of managers will be critical for beverage companies who want to thrive in this new normal. An article on leadership success by lifestyle writer James Gonzales highlights the importance of curiosity and trusted feedback as key components of great managers, as these will enable them to anticipate purchasing trends and deepen relationships with existing customers. As a result, they will be able to better leverage the e-commerce boom within the industry and keep their beverage companies profitable even in the new normal.

Indeed, the ongoing health crisis is ushering in a new normal, and it is unforgiving to say the least. All is not lost, though, especially if beverage companies can change with the times and adopt new business models and innovative means to connect with clients. A few are doing so already; the others just need to follow suit to survive.

exclusively written for drinkpreneur.com by Raven Jem