MANUTAILING.

A Brand Point
Management
Perspective:
THE NEW MANUFACTURER/
RETAILER PARADIGM
EXECUTIVE SUMMARY.
The time is right for the marriage of CPGs’ new product development expertise and retailers’
access to shoppers and ability to execute. Today there are constant questions about traditional
media’s effectiveness, a segmented customer base, and a vast majority of purchase decisions
being made at the store shelf. In this light, who can justify the traditional brand or new
product development cycle? Something more insightful, more collaborative and – above all –
more agile is called for. This is manutailing.

The traditional retail model has
evolved notably in the past 30
years, and so has the relationship
between consumer packaged
goods manufacturers (CPGs)
and the businesses who sell their
goods. As today’s retailers continue
to improve the quality of their own
brands and gain a greater share
of the market, this not only affects
the role of manufacturers: this
shifting dynamic paves the way
for new opportunities for CPGs
and retailers to combine their
best practices, forging stronger,
mutually lucrative affinities.
MANUTAILING: A Brand Point Management Perspective
The History of Private Label
For over a century, consumer packaged goods manufacturers
have dominated brand innovation, formulating products and
driving consumer motivation for purchase, while retailers
have served as the real estate managers governing where
these new products are sold. Essentially, CPGs invented
and retailers stocked the shelf. This approach became so
integrated that through the concept of category champions,
CPGs took control of retailers’ merchandising strategies – and
in some cases drove store layout. But as this model evolved,
the more progressive retailers began packing products under
their own brands and the industry of “private label” was born.
Private label was initially successful due to the simple
proposition of value alternative. For individuals shopping on
a budget or for higher income shoppers in low involvement
categories, private label provided an attractive price point.
This concept flourished, as it not only provided incremental
revenue for the retailer via better margins, but it also
positioned the competing CPG offerings as more innovative
and of higher quality, thereby substantiating the price
premium at which they still operate today.
Private label has grown more sophisticated over the years.
Noticing the margin opportunity in converting CPG sales
to PL sales, retailers began creating dedicated teams to
help manage and build their private-label business. This
business now comprises two distinct but simultaneous
strategies. The first involves a three-tiered approach to
value alternatives: opening price point (value), mid-tier
(national brand equivalent/NBE, e.g. Oreos) and premium-
tier (also NBE, e.g. Pepperidge Farm). The second strategy
introduces “opportunistic category brands,” which are
created and launched into specific categories where the
tiered strategy either has a limited potential for success or
just doesn’t get permission from the consumer.
This is essentially how the private label industry has
worked over the last three decades. Once CPG products
(or in some cases, new categories) have proved successful,
retailers have launched value alternatives. To be fair,
in some instances retailers have innovated unique line
extensions, flavor options and interesting licensing
arrangements. But for the most part, CPGs drove true
product innovation. As a rule, the grocery retailer industry
norm was to have specific CPG “targets” for their product
development teams to work against.
Once relegated to replicating CPGs’ offerings with a
lower-price and lesser-performing “value” alternative,
[retailers] are now creating brands based on distinct
consumer need states.
The Landscape Is Changing
Today, retailers – specifically grocery and mass
merchandisers – are rethinking conventional business
models. Once relegated to replicating CPGs’ offerings with
a lower price and lesser-performing “value” alternative,
they are now creating brands based on distinct consumer
need states. And this, given the recent history of PL success
stories – including Kroger’s Disney wellness line as well
as Safeway’s Eating Right and “O” Organics – is just the
beginning of larger changes to come. There are three key
elements driving this belief:
1. Consumer Behavior: Comprehensive analytics of loyalty
card data are providing deep behavioral insights into
retailers’ customers. By understanding the combinations
of purchases in shopping trips and analyzing switching
behavior over time, retailers are gleaning insights and
perspective that surpass those available to CPG’s.
2. Retail Formats: Some of the most successful retailers
are exclusive brand retailers. IKEA, H&M, Apple – all
derive the majority, if not all, of their revenue from their (often costing $20 million or more) were once justified by
own brands. Many leading retailers are now discontinuing
third- and fourth-place CPG brands to create focused choice trial campaigns and repeat programs. Retailers, in turn,
and cleaner stores. And the much-heralded success of
Trader Joe’s has proven that own-brand penetration of 70
percent doesn’t have to come at the expense of consumer
satisfaction with selection. In most food categories, Trader with their consumers’ needs and have such responsive
Joe’s offers only its house-branded products, one-upping
the other highly praised format, club stores, where product
selection is normally limited to one national brand and one
very well-received private label alternative. All of these
formats justify, if not prove, that consumers are comfortable
MANUTAILING: A Brand Point Management Perspective
with significantly less choice. And an inspired – and
inspiring – PL offering can be that choice the majority of the
time. But narrower choices means CPGs need to make the
right choice. Card data is a crucial tool here.
3. Consumer Expectations: What we’ve learned is that
consumers get this. They understand the private label
concept – that retailers source similar (if not the same)
products and present them under the retailers’ own
names or a unique brand, and sell them for less. But now
consumers expect a strong private label offering. Because of
great experiences with the exclusive retailers and the history
of strong PL programs as with Loblaw’s, Safeway, Kroger,
Target, Costco and others, consumers expect, or actually
demand, strong private label alternatives.
By combining this level of understanding with an ever-
evolving and more sophisticated supplier base, retailers
are able to act on new consumer trends far more quickly.
The net for manufacturers is that new product introductions
the fact that there was time to “build a brand” through
would wait for the brand to develop and then launch their
own branded version once the business hit certain pre-
determined dollar thresholds. Now retailers are so in tune
manufacturing networks that they are able to identify and
mimic new products in a much shorter period of time – in
essence “chopping the tail” off the CPG’s investment-
recovery curve.
 What Does This Mean?
Today there is far more cost-recovery risk for CPGs
launching new brands. They no longer have the consumer
attention and limited-competition landscape to build their
brands. Therefore, there will be a reduction of those big
media spends for new brand launches; half as many new
brands were launched in Q1 2009 as the year before1, and
fewer brands will succeed. CPG manufacturers can wait for
the market to produce new brands – e.g., SOBE or Burt’s
Bee’s – but amid the competition, they’ll have to overpay
for the limited number that prove successful. In October
2007, The Clorox Company signed a deal for $925 MM for
Burt’s Bees, paying a premium of over five times the brand’s
annual sales of $170 MM.2
And retailers are showing no signs of slowing their
production. On the contrary, in some cases, they have been
criticized for simply “chasing targets” in the number of new
products they are generating, without apparent concern for
how overall sales will be impacted. This observation was
brought to light in a recent issue of the Australian Financial
Review, citing retailer Coles’ rapid launch of house-branded
products (including a “You’ll Love Coles” energy drink)
that cropped up on shelf long before time would allow for
standard market research.3
What about taking the best practices of
manufacturing brands and blending them with the best
practices of retailing brands? This is manutailing.
MANUTAILING: A Brand Point Management Perspective
A New Approach: CPG/Retailer Partnerships
CPGs need retailers – the top ten retailers now generate
an average of 30 to 45 percent of a given manufacturer’s
global sales.4 And retailers need CPGs, not only to allow
for well-known national brands among their selection but
also for their ability to keep incumbent product categories
relevant through innovation and line extensions.
Quite simply, this calls for the marriage of CPGs’ new
product development expertise and retailers’ access to
customers and ability to execute. In an era marked by
constant questions about traditional media’s effectiveness,
a distracted customer base, and a vast majority of purchase
decisions being made at the store shelf, who can justify the
traditional brand development cycle?
What about new ways of combining specific attitudinal
learnings from research with the behavioral trends of
real shopping activity? What about creating brands that
consumers truly need and want – and having the ability
to modify learnings in a fraction of the time based on real
consumer behavior? What about taking the best practices
of manufacturing brands and blending them with best
practices of retailing brands? This is manutailing.

Footnotes:
1. Mintel Global New Products
Database, April 2009.
2. Investors Press Release,
The Clorox Company,
October 31, 2007.
3. “House Brands Fuel
Supermarket Turf War.”
Australian Financial Review,
June 2, 2008.
4. Private Label Strategy: How to
Meet the Store Brand Challenge.
Boston: Harvard University
Business School Press, 2007.
p. 156.
MANUTAILING: A Brand Point Management Perspective
An Argument for Manutailing Our initial recommendation is that manutailing
Under this concept, CPGs would carry out their traditional relationships be structured around mutually agreed-upon
brand development activity, i.e., identify a consumer need “buy horizons.” That is, the CPG and retailer will establish
and then create a solution and brand development platform. a time frame – say three years – under which they will
But instead of spending millions of dollars on advertising partner, exclusively, to develop the brand. At the conclusion
and slotting, and hundreds of thousands of dollars in sales of the three years there will be a “buy” option for both sides,
development, they would take the concept directly to a with the brand being sold to the highest bidder. The benefit
network of strategic retail partners. This partnership would for the retailer will be a successful proprietary brand that
then foster a brand development program that focuses will remain so; or for the CPG, a successful brand that can
on store-level execution and trial of the brand – where so be scaled based on real market performance.
many purchase decisions take place. Brands – the next Summary: It’s Time
generation of great brands – would be built where they are
merchandised and bought. These are times of change and transition. Great brands –
and great companies – are built where others encounter
Media spends could be reduced and be more effective based obstacles and/or get muddled in complexity. Airline
on specific regional insights from the retailer. And truly deregulation hindered the major airlines and gave birth to
comprehensive brand-planning programs could integrate Southwest and JetBlue. Sub-optimal plant configuration and
those spends with circular activity, direct mail, store antiquated thinking took down “old” Detroit and gave birth
associate training, end-caps and other in-store activity. to the Prius. It’s time for concepts like manutailing to allow
It would be an industry blend of discipline expertise – like a new breed of consumer brands to be born.
an architect and a builder; an engineer and a manufacturer;
a playwright and an actor. Just five years ago, the concept
The Issue of Ownership
of allowing retailers to participate in the
A primary obstacle facing manutailing is the issue of fundamental aspects of brand development
ownership. Who truly owns the brand? Or, perhaps more would have seemed reckless, at best.
importantly, how would financial markets value a successful
But the changing consumer landscape
“manutailing brand” relative to the other aspects of that
company’s traditional business? demands new thinking around how to best
This is only really an issue if the companies, especially the
build relationships with those who try, and
CPGs, hold to their traditional business constructs. The repeatedly use, products. And with so many
manutailing concept, by nature, distributes the financial large grocery and mass merchandisers
risk of brand development by reducing CPGs’ capital outlay
and replacing it with retail activity. The retail activity, while bringing in CPG executives to run their
difficult to accurately measure, will almost certainly be corporate brands programs, manutailing is
worth more than what the manufacturer would traditionally
a mutually beneficial approach. More than
spend to launch and initially support a new brand.
just a matter of both sides cooperating, it’s
So who gets more credit for the new brand (assuming it’s
successful)? Once the brand is developed, established and
smart, and a win-win. Manufacturers get
self-sustaining who “gets” it? the retailers’ attention and the exclusivity
they desire without the threat of a private
label offering for a specific period of time,
and retailers get the true product innovation
and CPG collaboration that will deliver
“destination” brands.
 ABOUT THE AUTHOR

Eric Ashworth is Chief Strategy Officer for Anthem Worldwide where he leads large-scale branding initiatives for major
retailers and CPG companies across the globe. Eric has held senior brand and marketing management positions at global
branding agencies and consumer product companies. Eric has served as a guest lecturer on brand strategy at the Haas
School of Business at the University of California, Berkeley.

Anthem Worldwide, a Schawk Strategic Design Company, is an

integrated global network that provides innovative solutions
to articulate, unify and manage brand impact. Anthem creates
compelling brand experiences by aligning its strategic, creative
and executional talent worldwide with the business needs of
companies seeking a competitive advantage. Anthem offers a full
range of branding and design services to our clients including
Campbell’s, Coca-Cola, E-Mart, Foster’s, General Electric, Hbc,
Kimberly-Clark, Microsoft, Nestlé, Procter & Gamble, Revlon,
Safeway and Unilever. With our network of world-class design
professionals in 12 cities, Anthem is presently located in Chicago,
Cincinnati, London, York, Melbourne, New Jersey, New York, San
Francisco, Singapore, Sydney, Toronto, and Hilversum.

For more information on Anthem, please visit

http://www.anthemww.com.

© 2009 Schawk, Inc. All Rights Reserved. No part of this work

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MANUTAILING: A Brand Point Management Perspective