4 ms·

Isn’t it pretty common for food manufacturers to white label their product for generic brands? IIRC this is hardly specific to Costco/Kirkland.

by luhn 6y ago

mark-r 6y ago
The difference is that other white label brands aren't expected to maintain or increase the quality from the name brand. It isn't unusual for white brands to be absolute trash in comparison. I have a friend who refuses to buy the Target store brands because he's been burned so often.
- deleted 6y ago
  [deleted]
- Azurin 6y ago
  Target brand is trash, Safeway brand is trash, and WholeFood's 365 is trash (also other wholefoods brands but I haven't verified those)
skwb 6y ago
Yeah, I thought Trader Joe's did this a lot also? I recall they're super secretive of what items they buy directly from name branded stores, and people have spent serious time trying to reverse engineer their supply chain. https://www.eater.com/2017/8/9/16099028/trader-joes-products https://www.eater.com/2017/8/9/16099028/trader-joes-products
- blaser-waffle 6y ago
  Yeah but Trader Joe's are often 1) higher end food (e.g. lobster bisque), or 2) quality basic foods. Same basic value proposition as Kirkland -- not name brand but consistently good quality.
cosmie 6y ago
Yes and no. Manufacturing can take many forms: 1. Manufacturers that only produce private label products for others, and have no consumer brands of their own. 2. Manufacturers that only produce branded products, and (for either operational or strategic concerns) does not produce private label products. 3. Manufacturers that, either intentionally or incidentally, have spare capacity and are wiling to use it for private label production. Mars Petcare is a good case study of all three[1]. They used to call into the third category and had several plants dedicated entirely to private label production. But for strategic reasons sold off their private label division and now fall into the second category, while the investment firm that bought those assets created a new company from them that falls into the first category. There's also a variant of #2: private label brands that do their own manufacturing. Krogers is an example of this - they outsource a number of their SKUs to other manufacturers, but they also operate at least 38 manufacturing plants themselves (figure from 2018)[2]. For manufacturers that do both branded and private label production, the situation isn't as clear cut as relabeling the same product: - Private label is an optimization, not a goal. For sufficiently large or mature manufacturers, this can mean your brand production runs happen on your state of the art production line or at your brand new facility, while your private label runs get the old stuff. This can create distinct differences in both the quality and capabilities of your branded vs. private label production. It can also mean you strategically reserve certain capabilities or innovations for your branded products, and don't make them available for private label clients. - Private label buyers rely on your product expertise and production capabilities, but not the opinions of your brand management team, which may ultimately result in a wildly different set of product requirements and eventual bill of materials. For example, just think about the different optimization goals between a private labeled product for Whole Foods vs. Dollar General. The same manufacturer may produce both, but they may look roughly similar, but the bill of material (and price point) may be wildly different as Dollar General consumers expect their prices to be low above all else while Whole Foods consumers are willing to stomach higher prices but also have higher expectations around the ingredients/materials that go into the product. And the same manufacturer making both of those may have a branded product of their own, which has to fit the image/expectations of their brand while being suitable for consumers at all of the retailers that stock their product. What's notable about Costco/Kirkland is that their set of requirements pretty much dictate that you have to treat the Kirkland product as a first-class citizen along with your own branded products. You can't hold back production capabilities solely for your own branded products, nor under-invest in the equipment/facilities that produce it. The "15-20% cheaper and 1% better in some metric of their choosing" aspect that's referenced in the article is less unique to Costco. That's likely the typical type of optimizations private label buyers request, a specific price point they know their consumers expect it to be and a product change that optimizes it by a metric valued by their particular consumer base. [1] https://www.foodbusinessnews.net/articles/12512-mars-petcare-exiting-private-label-business-in-the-us https://www.foodbusinessnews.net/articles/12512-mars-petcare... [2] https://storebrands.com/kroger-manufacturing-it-takes-village https://storebrands.com/kroger-manufacturing-it-takes-villag...

Isn’t it pretty common for food manufacturers to white label their product for generic brands? IIRC this is hardly specific to Costco/Kirkland.

by luhn 6y ago

Isn’t it pretty common for food manufacturers to white label their product for generic brands? IIRC this is hardly specific to Costco/Kirkland.

mark-r 6y ago

The difference is that other white label brands aren't expected to maintain or increase the quality from the name brand. It isn't unusual for white brands to be absolute trash in comparison. I have a friend who refuses to buy the Target store brands because he's been burned so often.

deleted 6y ago
[deleted]
Azurin 6y ago
Target brand is trash, Safeway brand is trash, and WholeFood's 365 is trash (also other wholefoods brands but I haven't verified those)

skwb 6y ago

Yeah, I thought Trader Joe's did this a lot also? I recall they're super secretive of what items they buy directly from name branded stores, and people have spent serious time trying to reverse engineer their supply chain. https://www.eater.com/2017/8/9/16099028/trader-joes-products https://www.eater.com/2017/8/9/16099028/trader-joes-products

blaser-waffle 6y ago
Yeah but Trader Joe's are often 1) higher end food (e.g. lobster bisque), or 2) quality basic foods. Same basic value proposition as Kirkland -- not name brand but consistently good quality.

cosmie 6y ago

Yes and no. Manufacturing can take many forms: 1. Manufacturers that only produce private label products for others, and have no consumer brands of their own. 2. Manufacturers that only produce branded products, and (for either operational or strategic concerns) does not produce private label products. 3. Manufacturers that, either intentionally or incidentally, have spare capacity and are wiling to use it for private label production. Mars Petcare is a good case study of all three[1]. They used to call into the third category and had several plants dedicated entirely to private label production. But for strategic reasons sold off their private label division and now fall into the second category, while the investment firm that bought those assets created a new company from them that falls into the first category. There's also a variant of #2: private label brands that do their own manufacturing. Krogers is an example of this - they outsource a number of their SKUs to other manufacturers, but they also operate at least 38 manufacturing plants themselves (figure from 2018)[2]. For manufacturers that do both branded and private label production, the situation isn't as clear cut as relabeling the same product: - Private label is an optimization, not a goal. For sufficiently large or mature manufacturers, this can mean your brand production runs happen on your state of the art production line or at your brand new facility, while your private label runs get the old stuff. This can create distinct differences in both the quality and capabilities of your branded vs. private label production. It can also mean you strategically reserve certain capabilities or innovations for your branded products, and don't make them available for private label clients. - Private label buyers rely on your product expertise and production capabilities, but not the opinions of your brand management team, which may ultimately result in a wildly different set of product requirements and eventual bill of materials. For example, just think about the different optimization goals between a private labeled product for Whole Foods vs. Dollar General. The same manufacturer may produce both, but they may look roughly similar, but the bill of material (and price point) may be wildly different as Dollar General consumers expect their prices to be low above all else while Whole Foods consumers are willing to stomach higher prices but also have higher expectations around the ingredients/materials that go into the product. And the same manufacturer making both of those may have a branded product of their own, which has to fit the image/expectations of their brand while being suitable for consumers at all of the retailers that stock their product. What's notable about Costco/Kirkland is that their set of requirements pretty much dictate that you have to treat the Kirkland product as a first-class citizen along with your own branded products. You can't hold back production capabilities solely for your own branded products, nor under-invest in the equipment/facilities that produce it. The "15-20% cheaper and 1% better in some metric of their choosing" aspect that's referenced in the article is less unique to Costco. That's likely the typical type of optimizations private label buyers request, a specific price point they know their consumers expect it to be and a product change that optimizes it by a metric valued by their particular consumer base. [1] https://www.foodbusinessnews.net/articles/12512-mars-petcare-exiting-private-label-business-in-the-us https://www.foodbusinessnews.net/articles/12512-mars-petcare... [2] https://storebrands.com/kroger-manufacturing-it-takes-village https://storebrands.com/kroger-manufacturing-it-takes-villag...