Food manufacturers face a tough environment. Powerful industry trends like retail consolidation and the growing dominance of giant manufacturers are squeezing growth rates and profit opportunities. Crowded shelves offer little room for me-too products that taste slightly better or sell for 5 cents less.
One example of today’s challenge: Private label manufacturers increasingly find themselves in a “commodity trap.” Bidding for a chain’s private label business through an electronic auction leaves no room to consider supplier strengths other than pricing. And competing on price alone can put unbearable profit pressures on small and mid-size companies.
To escape the commodity trap—whether you are a private label manufacturer or a branded company—you must change the criteria on which your products are judged. You must clearly communicate the unique and distinctive value-added content of your offering. And if necessary, you must develop more profitable and defensible product lines. Both tasks can be difficult, expensive and time-consuming for smaller food companies that lack big-company marketing staffs.