Brian Sharoff talks PLMA and retail brands
Sharoff's long tenure as President at the Private Label Manufacturers Association is a true American success story. Under his dynamic and entertaining leadership since 1981, membership has steadily grown from 200 companies to more than 3,500 today. Annual PLMA trade shows in Amsterdam (May) and Chicago (November) have long become a must for the retail & fmcg industry.
In the run-up to this year's fair in Amsterdam on May 19 & 20, our newspaper wanted to know how this man built the PLMA into the force it is today and why, at a very indefatigable 68, he now sees the future in video streaming services?
According to market research company Nielsen, the average own label share of retailer annual revenues in 15 European countries has now reached around 30 per cent – the highest it has ever been. Posterity will probably judge that a lot of this advance was attributable to a certain native of Gotham.
Therefore, someone someday is surely going to film 'The Brian Sharoff Story'. This would be fitting as, among his many facets, the man is a film buff and now seems intent on putting the PLMA, if not yet on the big screen, at least onto our smartphone displays. Who knows, maybe this blog will serve as inspiration for the movie script?
Finally, Sharoff fans will doubtless forgive that we have tacked on a short interview about "lead-times" held at this year's Roundtable Conference in Nice.
"I wouldn't want to stop"
Neither one, I'm afraid. Under U.S. tax law, the PLMA is incorporated in a not-for-profit corporation. We have many such entities in America: business organization, universities, foundations, and charities, to name a few.
There is no stock to own, no shareholders, and no profit to divide up. Whatever funds are left over at the end of the year are generally reinvested in the association and its programs.
For the PLMA, it means that we can put on trade shows where manufacturers display their products to retail buyers, but we do not have any commercial interest in those products or the companies that make them.
Some also think of you as the founder of PLMA…
Sorry, but not true again. The PLMA was founded in 1979 by 50-odd member companies who were faced by a number of similar problems at the time. Most of them made some private label and black-and-white generics as well as minor brands that no one had ever heard of. They were therefore looking for a way to tell retailers where to find them.
Were there then no trade shows in the late 1970's?
Yes, but they were almost 100-per-cent dominated by brand exhibitors such as Budweiser or Kraft Foods. Private label was completely under the radar.
They were often more like huge social events than business shows. Companies would come, say, to a famous hotel in Florida and jostle with each other for an opportunity to talk with a retailer. Unfortunately, the presidents of the retail companies were usually boating around on yachts owned by the big brand corporations.
So the founding companies were looking for a way to create a more satisfactory venue. What was the situation for US retailers at that time?
A handful of retailers such as Kroger were trying to expand their private label and especially to improve its quality. They had introduced private label up to 40 or 50 years before. But interest in private label suddenly exploded in the 1970's as a result of generics, and most retailers couldn't find enough suppliers.
So, in fine, you had both buyers and sellers desperately looking for a venue.
How did these guys find you?
After starting the association, they soon found that they didn't have any knowledge of association management and that a lack of expertise led to bad decisions, so they headhunted me in 1981.
I had been working for the previous five years as the head of a trade association in New York City that represented department stores such as Macy's, so I understood retailing.
Weren't you happy in your former role?
Yes, but working with famous department stores wasn't as much of a challenge as helping to direct the coming battle between A-brands and retailers. The only two things the department stores wanted was their annual golf/tennis tournament and to be kept out of the newspapers!
You don't need a five-day week to do that, so I got most of the work done quickly, and for the rest of the time tried to create things that might expand the business.
You seem to have been given a very free hand from day one as President of PLMA?
The founding companies were run by people who had a lot of other things to do and therefore no time to devote to a trade association. So they were more than happy to hire me and say: "Do a good job, and we'll see you in a couple of months!"
This was probably one of the best things that ever happened because members were willing to support the proposals that PLMA staff created and we could move ahead expeditiously.
Why did the PLMA decide to run its annual trade shows every November from Chicago?
Chicago was chosen as the location because it is central for the airlines, and because many of the largest US retailers such as Walgreens were and are based in the Midwest. It was a matter of convenience for the exhibitors and attendees.
Why do you think that your show was such an immediate success?
The organisation was so clearly needed that it wasn't a question of going out and finding new member companies. Frankly, it was more a matter of beating everybody off with a stick!
We were also lucky in our choice of venue, i.e., the Rosemont Convention Center, near the airport. Unlike more mature facilities, where you might be located in one of many buildings, it was still more or less in its infancy, so we were the big show.
The growth of your organisation is also attributable to an explosion of interest in private label business in the late 1970's. Why do you think this was?
Retailers in the Midwest part of America began to feel competition from a strange foreign retailer who had entered the States in 1976. Aldi was an unknown quantity in that it only operated limited-assortment, small-box stores with no national brands.
This didn't make a lot of sense to retailers in the US at the time. In order to drive customer traffic, it was deemed necessary to build bigger and bigger stores, with more and more categories, and ten, twelve national brands in each category all battling each other with TV ads.
But, this period also coincided with the rise of generics and the white, simple, no-name products in France, which slowly began to influence US retailers.
But France is a long way from the Midwest...
The produits libres, initiated by Carrefour Marketing Director Etienne Thil, impressed executives at Finast, an American supermarket chain, when they saw the new marketing idea for the first time at the SIAL food exhibition in Paris.
Finast had only recently been acquired by Pick-N-Pay from Ohio where Aldi was exerting pressure. They and other Midwest retailers began to see generics as a weapon against the discounters at home. In short order, they duly started to offer consumers black-and-white, black-and-yellow, black-and-white-blue products etc.
So why did the PLMA feel the need to re-market private label as 'store brands' rather than as 'generics'?
PLMA faced the strategic dilemma that American consumers and the mass media saw 'generics' as blank, empty, poor-quality commodity products. It was difficult to convey the notion of quality for products that were just called 'rice', 'macaroni' etc., which were often made by small, largely unknown manufacturers, and which were sold at the cheapest price.
On the other hand, 'private label' related to a worn-out concept dating back almost a hundred years. So we decided to rename this segment 'store brands'.
Isn't this just playing with semantics?
Yes, but advertising and promotion is all about semantics. Firstly, there would be no reference to low-cost generics. Secondly, if you use the word private label, consumers and the media would continue to ask, who makes it? But the term "store brands" shifted the focus away from the often small manufacturer to the retailer.
So instead of something obscure like Smith & Ben from Battle Creek we have a big name like Kroger! "Store brands" gave us a narrative that we and the industry can be proud of, and the name has allowed us to move forward.
As a result, we found that many retailers and some of the better known manufacturers, who made private label but didn't want anybody to know about it, soon wanted to be exhibitors at our show.
Why did you extend your activities to Europe in 1983/84?
We had already organised small study missions to Europe because England, for example, with a private label market share of 25 to 30 per cent, was already far ahead of us in the States where we had only 10 or 11 per cent. We all returned very impressed by the way European retailers marketed and merchandised their house brands.
But when we visited executives at Monoprix in France, we were astonished to find that French retailers were having a problem finding suppliers. They told us that local manufacturers were so afraid of compromising their A-brands that they only supplied own label to foreign retailers.
Later on, we heard the same narrative wherever we went in Europe, which is why we decided to offer a "neutral" European forum for the growth of private label.
Why did you choose Amsterdam as your annual May venue?
We started our first trade show in Paris because nearly all Europeans and Americans said that it was their favourite city. I won't speculate here as to the possible reasons!
But none of the locations in Paris, as well as later in Brussels, really worked for us. Either they were too big or too small, or lacked air conditioning, or simply lacked the right vibes, i.e., what the Chinese call feng shui.
Finally, as from 1985 we found a perfect home at the RAI Center in Amsterdam. It was modern, looked good, and was near to Schiphol airport. Also, we had plenty of room for expansion and no competition from other pan-European shows. When we circulated the idea of being in Amsterdam, the buyers said they liked it, so it all made perfect sense.
This didn't stop you briefly experimenting with Frankfurt in 1994, however. Why didn't you decide to continue there?
Tengelmann originally encouraged us to try, and we were happy to get closer to German retailers. We were also delighted that the Marriott Hotel was just over the road.
But Frankfurt presented us with a logistical problem. The exhibition site is made up of big halls, and we weren't quite big enough for two halls, and it didn't look good to hold the show in a hall and a half. Also the halls available weren't contiguous, so one is both here and there.
What have been the organisational consequences of extending your activities to Europe?
Our head office remains in New York, but we have a European office in Amsterdam for the convenience and efficiency of our international membership. We're known as PLMA in the US and PLMA International Council in the Netherlands.
In New York we have two separate types of administrative staff: One team only works on American issues, such as exhibitor relations for the Chicago show, and the other team, including artwork and finances, works on everything.
You once explored the possibility of an additional venue in Japan. Why didn't this work out?
Somewhere around 1988/89 we received an enquiry from Japan. It was put to us that private label was growing very quickly there and that its large consumer population of more than 125 million was changing fast.
But our study missions to the country quickly found it to be a totally different retail culture with an obsession for quality and that local manufacturers will rarely make private label.
So in the early 1990's we organised what we knew was going to be almost exclusively an export show for European and American manufacturers. But when we talked to the exhibitors later on, we found that they were all still waiting for a response!
Add to this the inevitable involvement of local government ministries, which some would call careful and others obstructionist. The underlying philosophy often seems to be: Don't allow foreigners to gain a beachhead! So we decided after two years of Japan, let's try another venue in Asia! Maybe we will go back one day, but we can't wait for the regulators.
So you then tried Hong Kong…
Yes, it was then still British and is home to a number of important retailers including Watsons and Dairy Farm. There was no thought of mainland China at the time. We did that show for two years, but again it became obvious that it was only possible to put on an export show and therefore was not going to be successful over time.
After this we looked at Singapore and were thinking of rotating around South-East Asia. Then suddenly in 1998 there was a big economic crisis in the region, so we decided to wait until the market picked up again.
By this time, however, we had begun to understand one thing about Asia: It isn't Europe! Most Europeans seem happy to export to each other's market as long as they make money, but Asia is all separate, so the idea of a pan-Asian show was clearly not supported.
So why did you decide on Shanghai as from 2006?
Mainland China started to emerge in a more modern retail form with supermarkets and hypermarkets etc. At first, the main players were big western groups such as Walmart, Carrefour, Tesco, Auchan, Metro etc., so one could build the concept of private label with retailers we knew and who knew us.
We were very lucky in that Carrefour passed on to us a longstanding contact they had with a lady who had worked both for them and the Shanghai International Promotion Center. She therefore knew how to promote Shanghai as a commercial centre and understood private label. This was a godsend because foreigners are lost without a local partner in China.
But our lawyers were very concerned about trademarks etc. in China, where it is difficult trying to enforce relevant laws. So we decided not to use the PLMA logo, but to create a new one called the "Shanghai Private Label Fair".
We are 25 per cent partners in the show that will now be held at the Shanghai New International Expo Center (SNIEC) in the busy Pudong district. Although the show this year will actually be held in November, it is intended that the Fair be held in December annually.
Have you also looked at Latin America and Africa?
We've researched both markets. South America, though, doesn't look like it works. Like Asia, it is also most certainly not one place, and, to make matters worse, local manufacturing capabilities for supplying private label have not really advanced.
Africa is undergoing a strong process of urbanisation, and people are leaving their farms for the cities. Thus, there are several increasingly urbanised areas on the continent such as Cape Town, Johannesburg, Accra, Lagos, and Nairobi. Also, South African retailers can picture opening stores in all such major urban areas.
But the distances between urban centres are quite vast so that it may be hard to decide on a truly central location. This said, we are looking at Africa, and at some point we will do something there.
Why do you also have annual Roundtable Conferences in Europe and Leadership Conferences in the US during the run-up to your trade shows?
In association management you soon find that all your members aren't looking for the same thing. The vast majority of around 80 per cent only wants a trade show and to meet buyers. But the other 20 per cent, or so, feel that an organisation should do more for them and want to interact with others etc.
So you create events especially for them. In the US we put these on in Florida, California or Arizona, and in Europe we go from city to city. Next year, for instance, our Round Table Conference will be in Lisbon. The following year, it will probably be Hamburg.
You are now 68. Do you plan to ask the Board of Directors to re-appoint you when your current contract expires in 2017?
I enjoy my job and I wouldn't want to stop if I am getting results for our members. Reappointment could take me to 2019 or 2020. But our Board also wants to be realistic, so we have already designated one or two people for the transition as well as one person as an interim manager, should anything unexpected happen to me.
Have you identified any opportunities for the future?
In addition to trade events, I think our next major business area will be video streaming. It obviously doesn't serve the same purpose as a live trade show, but we see it as an equal in terms of getting messages across to manufacturers, retailers, and consumers.
Why not stick with your trade conferences?
You know, you have to remember the lesson learned back in 1895: If you were a big company that made horseshoes and horsewhips etc. One day, you met a guy who introduced himself as Henry Ford, and he told you that the future is in cars and that he can make 2,000 of them a week.
So you have to make a choice: Either Ford is crazy, or you ought to get out of the whips and horseshoes business real quick! Today's world is changing all around us. Trade conferences as we known them may be obsolete in ten years.
So you or your advisers are the Henry Ford of the 21st century?
When I looked around three or five years ago, I asked where the media industry was going, how can I give store brands a place in the media, and get messages out to our members and retailers?
The days of many trade magazines are probably numbered. Publications like Lebensmittel Zeitung are excellent, but they are unique. They are the exceptions, not the rule.
So why not simply offer web conferencing or webinars rather than videos?
To me, web conferencing and webinars are also showing signs of age. It makes no sense in terms of getting a mass message out. I am convinced that the medium people instinctively prefer is video. Online is reading, video is watching and therefore being more involved.
It's the TV experience that people have grown up with, which is why many of the more innovative online companies are trying to compete with TV via their own programming.
So why do you use a website to get the videos out to people?
If I want to reach retailers, I have to have a website which can give them audience-related videos. This is why we created something called PLMA Live! in the US around four years ago. The content can then be viewed on PCs, tablet computers, and, most important of all, smart phones which are a game changer.
What type of message do the videos on your website convey?
For example, we have just done a major demographic survey in the States that identifies not the Millennials or the Baby Boomers, but the 24- to 49-year-olds as the crucial customer group that retailers should be going after. Communicating this message by video streaming works better than sending someone a printed report or doing a webinar.
Isn't that a bit dry as a piece of video entertainment?
Taken out of context, perhaps, but PLMA Live! aspires to be more imaginative. Like on a TV news channel, our programme opens with a musical theme. Then there is our news anchor Jodi Daley and myself. You always try to have a man and a woman.
Then the two of us work our way through the script. You can see the news desk on the site right now by going to PLMA Live!.
But if anyone can use this content free-of-charge, where's your pay model?
PLMA Live! has no revenue, it is part of our service to members. We aren't aiming to commercially promote private label, but to cover the arena in which private label exists.
In fact, I don't mind if someone else uses our content because we aren't selling individual products, but are presenting trade-related news and clickable two- or three-minute cameo stories to a targeted professional audience.
The payback on these specific stories, which we update once a month, is the impact we have as a news giver on the minds of our industry audience.
Could you give an example of the type of feedback you have received so far?
Lidl recently sent us an email saying that they would like to learn how our private label show in the US works and what the trends are etc. They contacted us because seven months before we had broadcast a story on PLMA Live! called 'The Discounters Are Coming'.
In the States, no one had done a story on Lidl coming to America, so journalistically we were way ahead and they noticed.
So you are now one of our B2B competitors?!
No, not at all. We accept no ads and make no money on the content we offer. We aren't taking advertising dollars from the US or international trade press. Moreover, trade publications don't cover the kind of stories we do.
If Kroger announces that they are going to launch a new line of private label organics, that's a typical trade press story. But our demographics reporter would more likely write a story about the growing Hispanic-Latino market showing how there are many different components to this market: Mexicans, Brazilians, Costa Ricans. The news coverage is entirely different.
What other features are included on PLMA Live!?
We also broadcast what is going on at trade shows as they take place. Our production team sets up a studio at the show in Chicago, and then our news anchor, Jodi Daley, and I report live from the floor, interview people and comment on new products. You can see these onsite in our archives.
If the whole purpose of PLMA Live! is to be trade-specific, what motivated you around a year and a half ago to create a second site called Store Brands USA for consumers?
Well, the consumer market is entirely different. For many years it was simply not cost-effective to advertise store brands in the States. TV is too expensive, and consumers don't even know what the concept means. But when we saw what online can do for streaming, we envisioned a channel entirely aimed at the consumer.
So how do you go about building an audience?
Our PLMA Live! News Director Bob Vosburgh, a young guy with a wonderful radio voice, does the retail news in 90-second or two-minute clips. We'll take a story from the U.S. or elsewhere. It could be something like: "Over in Germany a retailer has just started a concierge service that helps elderly customers home with their products…"
Or we have our own TV chef, Diane Kniss, who offers recipes with clips showing her chopping and cutting etc. So you could have something like: 'Today's recipe for Wiener schnitzel comes from Aldi, a retailer located in…'
Surely there would be business potential here for manufacturers to insert commercials in order to promote their products?
Yes, this is possible, in which case we would probably have to spin off video as a separate entity because video lives on advertising and therefore couldn't function as a non-profit organisation.
Are the rumours true that you are bringing PLMA Live! to Europe soon, and how do you intend to overcome the inevitable language barriers?
Yes, we intend to set it up in five languages. We are recruiting multi-lingual experts like yourself who can do a two- or three-minute story about the retail business on camera.
Let's make a jump to your Round Table Conference in Nice this year. Your trade speakers often spoke about long lead-times. They indicated that four to six months, or more, can elapse between a supplier first approaching the retailer and the appearance of an own label product on the store shelf. Isn't this frustrating for all parties?
From a manufacturer's point of view, they would certainly like to have the contract signed on Tuesday, the product in production by Wednesday, and delivery on Thursday, because that's their vested interest. But in all fairness the product is the retailer's, and, if the retailer needs additional time, the retailer ought to get this.
I'd also bet that if you went to a big A-brand manufacturer with a great idea, it would take two years for them to market it.
But do lead-times really have to take so long?
Obviously, it isn't the case that a manufacturer simply says he's got a product, and boom, you put it on the shelf. However, four to six months' lead-time is not the case for all products. But it is true that there can be long lead-times when a product is first conceptualized or is part of a new range and has to undergo developmental and research analysis.
It's then let out to bid and a manufacturer is chosen. The retailer has to inspect the plant. There could also be government regulations to observe, and obviously the packaging people must have their say. Even when the product is assigned a location within the store, various departments need to be consulted in order to avoid the package design clashing with overall shelf merchandising strategies etc.
Presumably, the growing consumer demand for sustainable products will extend lead-times even further?
I don't necessarily agree. Whether the issue is sustainability or new packaging, they are all part of the process, and it doesn't necessarily take longer. After all, it will not be the first time that a retailer has dealt with sustainability, so there is a lot of material in the binder, so-to-speak.
If the retailer is looking at sustainability across the board, then yes, it could take five years, but it isn't a product-specific issue.
Some of the speakers at your Round Table venue this February seemed to suggest that there is a reliable pipeline for consumers to get their ideas and wants over to the retailer. Do you find this realistic?
I don't think it's always true, I think it is episodic. Obviously, there are times when retailers are thinking about doing something, but realize that they have to do some additional analysis.
For example, in America a retailer might suddenly discover that 20 per cent of his customers are Spanish-speaking and that he needs to address the product needs of that specific market. He might consult a middle-man who specializes in the field, talk with his suppliers and/or hold focus groups.
But I would take issue with the notion that retailers can have regular input from a customer idea box. It takes a lot of research and hard work to know what customers want.
But haven't superior retailers like Mercadona in Spain or Wegmans in the US set up areas in their stores where customers are invited to talk about the products and services they find missing on the shop floor?
Of course, yes. Asda was excellent with the development of 'Chosen By You' and 'Chosen by Kids'. Carrefour did a great job with their panel test concept. But I would suggest that when customers channel back too much information, it can lead to uncertainty on the part of the retailer.
We saw this when retailers began to accumulate data from their loyalty programs. The amount of information became overwhelming.
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