Contract Packaging & The Private Label Gap. Weather the Storm by Diversifying with a New Opportunity

Transcription

1 Contract Packaging & The Private Label Gap Weather the Storm by Diversifying with a New Opportunity

2 Executive Breakdown 1. The 2010 Private Label Dynamic 2. Why Private Labels Need Partners 3. Prerequisites for Success 4. Identifying an Opportunity (Gap) 5. Start with a Beachhead Strategy 6. Three Companies that Made it Work 7. Summary and Post Success Strategy

3 Who Am I? (Ron McPhee)

4 Private Label share in processed foods alone will reach $60-70B of $350B US market. The 2010 Dynamic

5 The Private Label Dynamic in 2010 Private Label will reach over 25% Market Share, driven by: Brand Equivalent Quality with up to 50% less Big Brand Sales & Marketing Overhead Manufacturing Entrepreneurial Product Development and Process Innovation to meet/exceed Retail Profit & Consumer Value Appeal New Manufacturing Opportunities to First Server Competitive Advantage Capability Private Label market share has grown over 150% in 20 years. Growth will continue in OTC medication, Health & Beauty Care, Electronics, Tools and more

6 Who has the resources to develop this growing industry? Why Private Labels Need Contract Packaging Partners

7 Why Private Labels Need Contract Packaging Partners EXPERTISE RESOURCES FLEXIBILITY COSTING Knowledge in packaging alternatives and best practices Machinery, Labor, Vendor connections Production efficiency & capacity Ability to produce short runs & modify product to find what the market responds to Wealth of data and experience in costing product and alternatives As the Private Label market grows, new and expanding companies will increasingly require the kind of services contract packagers can provide.

8 How do you get a piece? Prerequisites for Private Label Manufacturing Success

9 1) Define your Proven Business Capabilities: Where do you excel? 2) Assess Matching Retail Categories: Prerequisites for Private Label Manufacturing Success Quality, low cost, surplus capacity Food, Pharma Pharmaceutical, Health/Beauty, Dry Goods Liquid or Dry product formulating & blending Blister, Rigid Container, Display Product/Package development capability List/Digitalize all SKU s by size, Price and Unit Price Calculate rough cost/profit feasibility on Items you could match, improve at lower cost Select & Develop Prototypes Identify/Seek a Prospective Beachhead Customer for feedback and/or possible trial, or even authorization

10 Find the Best Entry Point Identifying the New Opportunity Gap

11 Identifying the New Opportunity Gap SEARCH SHORTLIST RESEARCH EVALUATE DEVELOP Use online searches to identify compatible new Food, OTC, Products ( Build a Short List of Operationally compatible possibilities Perform deeper investigation through Contacts, Market Data to determine Acceptance & Growth Trend, edit list Assess feasibility of your operations to produce a Private Label Facsimile of emerging growth Brand Item Develop Fascimile, Calculate Cost & Selling Price, work up a Retail Price scenario based on 40% Margin on Sales. Does it show at least 30% saving over Brand Target? Another option: Develop a Premium Option (e.g. PC)

12 Get on the Market, Then Storm it Use a Beachhead Strategy

13 Use a Beachhead Strategy to Introduce The New Product FIND A PROSPECT MAKE A PITCH GET SELLING MEASURE SUCCESS EXPAND Identify a prospective Medium Size retailer or Wal-Mart to authorize the Item Present your High Quality/Low Cost Item to the Prospect If a positive response to Pitch, give exclusivity to Retailer for a year and see what happens Capture the metrics to measure the Item s success Using the quantitative data, expand to non-competing, additional retailers

14 Double Digit Profit Growth Three Success Stories

15 Success Story: Chocolate Products Ltd (CPL) COMPANY GAP BEACHHEAD OUTCOME Circa 1970: $6M Industrial Chocolate & Fruit Flavoring Business, Dairy & Food Service Industry, division of George Weston Ltd. Identified General Food s Tang as duplicable Success Authorized by Western Canada Supermarket, subsequently by about another 10 Supermarkets Initial First Concept success became full line of Hot & Cold Drink Mixes, Dessert & Entrée Sauce Mixes, sold as both Consumer Packages in Retail and Industrial in Food Service Industry with over 80% distribution CPL grew from $6M to $35M in 15 years. It sold for $25M in early 1990s.

16 Success Story: Chocolate Products Ltd (CPL)

17 Success Story: Interbake Foods, Richmond VA COMPANY GAP BEACHHEAD OUTCOME Circa 1990: $100M, unprofitable regional Branded Segment, marginal contract business, profitable other. Had to Fix or Close the Regional Brand. Division of George Weston Ltd. Opportunity analysis revealed a big gap in PL Chocolate Covered Cookies, Chocolate #1 overall flavor Aldi (more details) $4M in first year with only 400 stores stores morphing over 10 years to a profitable, growing annual $75 million sustainable, with Franchise Profile Business achieving 80% Distribution in USA, Mexico and Canada.

18 Success Story: Interbake Foods, Richmond VA

19 Success Story: Interbake Foods, Richmond VA

20 Success Story: Interbake Foods, Richmond VA

21 Success Story: Interbake Foods, Richmond VA

22 Success Story: Interbake Foods, Richmond VA

23 Success Story: Interbake Foods, Richmond VA

24 Success Story: NutFarms, Australia COMPANY GAP BEACHHEAD OUTCOME Circa 2006: Unprofitable, Family-owned domestic processor & distributor of nuts, etc. to Supermarkets. Had to fix it, or shutter it. Feasibility Study of $1B N. American Cashew Category, to bypass big, heavily capitalized USA/CA Nut Processors Shanghai Wal-Mart s Global Procurement Team enthusiastically authorizes NutFarms with $5M contract Production and packaging of special 10oz. pull tab lidded round can organized with Chinese compatible Peanut Processing partner

25 TRADITIONAL SUPPLY CHAIN Success Story: NutFarms, Australia Tree Processing & Grading Storage Agent Storage Agent Storage Shipping Roasting & Packing Storage Agent Retailer

26 Success Story: NutFarms, Australia ADVANTAGE OF NUTFARMS SUPPLY CHAIN Tree Processing & Grading Roasting & Packing Shipping Retailer Advantages of NutFarms Supply Chain Fresher Product Better Taste Reduced Costs Greater Flexibility Profit Sharing with farming communities

27 Success Story: NutFarms, Australia GROWTH LEADS TO MORE PACKAGING OPPORTUNITIES 2007: Standard 10 oz. can 2008: New Holiday Season Spectacular 2009: 18 Item 20+ Ft. Front End Blockbuster

28 Family Dollar Stores here is looking to increase its private-label penetration the company sees an opportunity to increase consumable private-label sales from current levels of 10% of sales to 15% to 20%. Storewide, Smith said Family Dollar plans to increase private brand penetration from its current 19% level to 25% penetration. 2010) - Supermarket News (Feb. 10, Summary

29 Summary Private Label is underdeveloped in the USA. There are gaps for a supply of Existing or New product concepts. This is an opportunity for Contract Packagers to diversify and expand their core business into a new growth segment. There is a growing Opportunity for Contract Packagers to partner & provide expertise to Private Label Companies.

30 Sustain success by seeking Continuous Operational Improvements Post Success Strategy for Contract Packagers and Private Labels

31 Post Success Strategy for Contract Packagers & Private Labels Once established in the market, fine-tune the business by finding efficiencies: 1) Cut costs by eliminating Waste, reducing variability 2) Optimize resource utilization, including working capital Use tools such as: Statistical Process Control and Lean Manufacturing Specialized systems that give visibility required by Private Label firms lacking their own meaningful information system (e.g. Nulogy s PackManager Software)