The Economics of Brands

by Daniel Thor, Bellissimo Foods

Foodservice distribution is an industry of brands.  Most distributor’s warehouses are filled with different brands from manufacturers, importers, and their own private distributor brand. While it is traditional for distributors to carry a broad variety of brands hoping to capture the spectrum of quality tiers, the truth is that the quality difference between some brands might be less than you might think. So, what do you really know about your preferred brand?

Sales in the pizza industry are up overall (both independents and the big chain stores), while traffic is trending down. That tells us that the average check size is up. Issue 3 of IFDA’s ‘State of the Street Monitor’ states that check sizes are up as much as 5%. While the increase may be in part due to upselling and cross-selling, we believe that most of the increase is simply higher menu pricing. IFDA’s report states that, “operating costs, which were at +7.4% in the third quarter vs. +6% in the second quarter.” Food costs as well as labor and living costs contribute significantly to the increase. Having a higher operating cost leads to less margins. To combat this, operators need to start thinking about cost saving opportunities – which might include switching brands.

The industry is a big moving target with ever changing manufacturers, brands, and items. Having a brand that you can trust is important, but not at the cost of your own business or brand. Distributors have come a long way in the quality of products that they carry under their own brands. These brands, which are often priced as middle-ground items often perform with the same quality and consistency of their premium priced competitors.

When you look at the cost of an item, what do you think is included in that price? The cost to manufacture the item, the cost to move it from place to place, the cost to store it, sell it, and delivery it, but also the cost of the brand. While private, middle ground, brands perform just as well as the higher priced alternatives, they don’t include the brand premium that could be reduced by switching. If you can get a product that performs to the same quality and consistency that you expect, but at a discount, why not consider it? Customers don’t know what brand of cheese or pepperoni you are buying, and frankly, they don’t care. If it performs for you, it works!

Private label brands should no longer be looked at as second tier, but as a cost-effective alternative. A product that performs to the same quality and consistency as the leading competitor, but at a discounted price.

If you are looking to switch brands, Delco Sales Representative will have the product knowledge to help.

They can do cuttings, provide samples, and help keep your product in the same class that it was before while saving you on food cost. As always, if you need any help, please contact Delco Foods.

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