Building Trading Partner Collaboration with Trust

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June 30, 2009

By Maureen Azzato

Store-brand success for retailer and suppliers typically occurs when both trading partners are focused on building the total category and the total business, and each party is committed to a relationship founded on trust, according to panelists at a recent Food Marketing Institute (FMI) conference.

"We have found that when the intended result is the growth of the category as well as both the product they're selling and our company's overall success, then you have collaboration," said Richard Jurgens, CEO Hy-Vee Inc., during a panel discussion during the recent FMI Private Brands Summit in New York.

"We're trying to grow total business as opposed to just shifting business from one supplier to another whether, it 's major or private. So we look for the great relationships that are collaborations where we are legitimately trying to increase share of market," said Jurgens about his 200-store grocery chain based in West Des Moines, Iowa.

By their very, nature store-brand supplier relationships are more trusting, according to Danny Wegman, CEO of 73-store Wegmans Food Markets, based in Rochester, N.Y.

"What we're looking for in a supplier is someone who wants us to make money and we want them to make money," Wegman said. "We want an environment of trust -- we want to be trusted and we want to trust our supplier. [We want an open relationship] where there aren't too many mysteries because that doesn't help us. If we're doing something that is screwing somebody up we want to know it."

During the workshop titled "Getting the Relationship Right," Kevin Hunt, co-CEO of Ralcorp Holdings Inc., added that his company's most productive relationships are with retailers that are committed to store brand development at all levels of the organization. This makes it "easier to have the strategic discussions we all want to have. It gets us away from a straight transactional relationship," he said.

Private brand suppliers and retailers are highly aligned with satisfying customer needs, and smart suppliers listen closely to their retail partners when it comes to customer insights, said Jack Kelly, president and CEO of American Italian Pasta Co.

"With all the spending and all the smart people at the national brands, they don't get nearly as close to customers as retailers do. And if retailers continue to market to customers in a way that is relevant to those customers, they can develop lifelong relationships," Kelly said. "I'm going to guess that any consumer is more loyal to their retailer than any particular brand."

Prior to this discussion, Carla Cooper, a retired PepsiCo executive, who also participated on this panel, said national branded suppliers will not cede share to store brands without a fierce and competitive fight. She put retailers on notice and said: "Welcome to the war, and you are now the competition." [For more on Cooper's presentation see "National Brands Prepare for War Against Store Brands."] 

Responding to Cooper's comments about national brands, Wegman said his company does not have adversarial relationships with store-brand suppliers.

"It's a very different relationship, and it is naturally a more trusting relationship," he said. "Which way would you bet? Are you going to bet that your going to be more successful with someone you're at war with or someone you're trying to be at peace with? To put it another way . . . we're not looking for a partner to go to war with."

Read These Related Articles:

• FMI Kicks Off Private Brands Summit in New York
• National Brands Prepare for War With Store Brands
• Wegman: Price and Quality Challenge National Brands, Creating Premium Store-Brand Opportunity
• Store Brands Drive Differentiation and Profit
• PLMA Live: Aldi's Strategy for Growth

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