Well, maybe almost anyone. At first blush, private-label superpremium ice cream sounds like an oxymoron, something along the lines of cut-rate caviar or no-name champagne. As with any quality product, part of the allure of gourmet ice cream is its snob appeal. The names of Häagen-Dazs and Frusen Glädjé, both made in the United States, were fabricated with just that in mind. How much appeal is something called Acme's superpremium ice cream going to have?
Probably not much, says Roberts. But, he adds, nobody ever said you have to use the store's name. "There are some places -- like Marks & Spencer, in London -- where everything in the store is private label. There the expectation is since the product carries the store's name, it's the best there is. In supermarkets that are known for having excellent private-label products, we will use the store's name. In places where the store's name is not as good, we'll make one up."
And Roberts has a third option. He's willing to give the store the exclusive use of the Great Midwestern logo within its selling area. In addition to capitalizing on whatever equity the name has, that will allow Great Midwestern to use up all those pint containers it has sitting in the backroom.
If you look at the numbers, the idea of selling private-label superpremium ice cream makes sense for both Great Midwestern and the supermarkets. Let's deal with the company first.
Despite the wonderful reviews, Great Midwestern, founded in 1979, hasn't been profitable since it expanded beyond Iowa. In 1987, its best year -- in terms of revenues, anyway -- the company had sales of $2.7 million and lost $1.2 million. Last year, Great Midwestern lost $400,000 on about $2 million in sales. By going private label, the company should be profitable, because almost all marketing costs will be eliminated. And without those costs, the company can offer the supermarkets a better price.
Supermarkets like the fact that they can buy cheaper and that there is no middleman to deal with. Those savings should allow stores to make 10% to 15% more on their private-label line, even though it will be sold at a slight discount (see "The Private-Label Route," page 3). And as Roberts points out, falling into his sales pitch, the supermarkets can use Great Midwestern's ice cream as the cornerstone for upgrading the image of the rest of their store brands. So far three supermarket chains have signed contracts, although none will talk about its deal.
Will the idea work? Well, there is precedent. Recently department stores have taken to aggressively promoting expensive private-label brands in an effort to increase margins and customer loyalty. But it's one thing to outline the economics of the arrangement; it's another to convince consumers to buy a luxury item with a name no one has heard of.
Still, people keep flying out to Fairfield to talk, and as of this writing Great Midwestern seems confident of signing at least three more contracts by year's end. If that happens, the company expects to show a $20,000 profit on $2 million in sales in 1989. While a 1% margin is not something that causes you to send up fireworks, it sure beats losing money.
But what of the loss of ego involved? After all, the initial dream was to make the name Great Midwestern as famous as Coca-Cola. Under the new plan, the name is guaranteed to remain only in Iowa, where the company expects to continue selling ice cream on its own.
"I never lost a minute of sleep over it," Roberts says. "I want to build a successful company. Selling under our own name, we couldn't do it. This way, we think we can."
THE PRIVATE-LABEL ROUTE
Five rules for creating a competitive private-label product
I scream
You scream
We all scream for ice cream.
So goes the childhood nursery rhyme. But when the folks at The Great Midwestern Ice Cream Co. found no one was screaming for a superpremium ice cream with their name on it, they got to wondering whether their fortunes might improve if they prepared their confections for someone else.
Here are the five things they keep in mind as they go about private labeling:
* Packaging. The package is the first thing consumers notice, and the trick here is to make yours look similar in quality to the competition's. If you are selling an expensive product, as Great Midwestern is, the package should be classy. These days, black packages with gold lettering usually contain a quality product. So, too, boxes with subtle shadings and delicate artwork. If you are making a less expensive product, look at the competition's package. Don't copy it. But approach it in style and color.
* Ingredients/components. They should be identical. If Häagen-Dazs vanilla is made with nothing but "fresh cream, skim milk, cane sugar, yolk of egg, [and] natural vanilla flavor," those are the only things you'll find in the private-label vanilla produced by Great Midwestern. If the market leader in metal fences uses only galvanized steel, that's what your private-label fence should be made of.
* Pricing. If you're going to use identical components, you won't be able to charge a lot less than the competitor -- nor should you. A consumer who holds up a pint of Häagen-Dazs and a private-label pint and reads the same list of ingredients but notices the private-label brand sells for one-third less, is going to get nervous. "What are they leaving out?" he will ask himself. Nervous consumers don't buy. You probably have to charge only 10% less than the market leader.
* Quality. Roberts and Vollmer are adamant on this point. Your private-label product must be as good, or better than, the competition's. Otherwise, consumers won't feel they are getting a bargain.
* Name. If the store or company for which you are making your product has a wonderful name, by all means use it. If not, invent one of your own, but have it reflect the kind of product you're selling. Bentley's superpremium ice cream makes sense. Cheapo superpremium doesn't.
