ECN CoverE&C Commissary News

Editorial Comment — December 2014

What’s In a Label …?

Coming soon, perhaps, to a commissary shelf near you: Generics, No Frills, Store Brands, Private Labels, and just in case the Pentagon has forgotten, the Defense Commissary Agency’s (DeCA) very own “Commissary Value Brands.”

As far as the statutes affecting commissaries are concerned, something new has been introduced to the equation. The just-passed National Defense Authorization Act (NDAA) will give the Secretary of Defense — and by extension DeCA — the green light to procure any commercial item (including generic items) for resale in, at, or by commissary stores. As with other resale stocks, it gives DeCA the latitude to do this “using procedures other than competitive procedures.”

Putting aside the fact that competition for generic items was given the old heave-ho from the get-go, in the same legislation Congress requires a review from DoD by next September as to whether Private Label, among other things, is a good idea for commissary patrons or not.

We realize that there are distinctions between “generics” and “private label items,” but we are puzzled. In what logic does one authorize what will amount to staffing — and therefore, spending or reallocation of tightly-focused resources — a wild-card scheme that has the potential to undermine the entire commissary pricing and service structure, before figuring out whether it actually makes sense?

Apparently, the thinking — again without much deep consideration of “what does this all mean in the grand scheme of things?” — is that, one, patrons want it, and two, it will save DeCA money — and therefore, go ahead and do it, and don’t even bother to compete it.

Of course, whether or not this is true just isn’t known. The facts are that, on one hand DeCA owes its present-day existence to national and name-brand manufacturers and suppliers who have supported commissaries with “at cost price” savings for longer than anyone can remember, and on the other hand, patrons have shown their desire to shop these “at cost” national brand merchandise stores.

A good part of a manufacturer’s ability to keep doing this relies on volume. If that volume is eroded at the margin by government-sponsored support of a private label program, then you effectively take away the margin from the name-brand suppliers and their shelf space, sales, and ability to provide reasonably priced products and compelling promotions.

Another casualty of shifting business to a Private Label program would be shelf-stocking. Damage the business proposition for national brands and they in turn can no longer provide the service without passing cost onto the customer, not to mention the extra penalty of their loss of economies of scale and shelf space and volume. It’s one of the eight wonders of the world: industry provides name brands in DeCA stores with the understanding that — aside from categories stocked by members of NIB and NISH — industry will provide the personnel to stock the shelves and manage portions of inventory.

The second fact that nobody calling for a DeCA Store Brand/Private Label wants to think about, is that DeCA would have to staff and administer this program, at the very least to make sure that it is carried out properly and effectively. Add another cost in the DeCA expenditures column. That is what we call “headed in the wrong direction.”

A third fact that may have been overlooked is that DeCA has recently reinvigorated — with cooperation from industry — its own surrogate for a Store Brand/Private Label program, the Commissary Value Brands program. Known long ago as the Value Brand Items (VBI) program, it has not had much “hype” in the last decade or so. And retail is a distracting affair where these types of products tend to be the least advertised, least highlighted, least prominently placed — in order to keep the costs as low as possible. Placement is marketing, which has built-in costs, and is an arrangement negotiated between the vendor and DeCA for patron savings. In a price-sensitive area, low cost is often the be-all, end-all; as a result, the old program’s perception was short-changed.

So now, prodded by talk of Private Label perhaps, the program is being merchandised more visibly by DeCA and industry. And the genius of it is that it provides equal to or better than Store Brand/Private Label prices using household name brands.

So why push Store Brands to the detriment of a system that works? Either to torpedo it — which is unthinkable — or, as a means toward provoking improvement in the existing program (it’s interesting that this appears to already have been the result); or, well, as they say, “ignorance is bliss.” But just be careful of the ignorance part — it’s well known that “a fool and his money are soon parted.”

We say to DoD — you have a system that works, at least when it’s not being undermined by furloughs, shutdowns and under-staffing, and you already have a revamped Commissary Value Brand program using national brands to achieve a Private Label effect at the best prices going: don’t spoil a good thing.

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