Insights on vertical integration

BACK TO ALL NEWS

Insights on vertical integration

28 Jun 2023

Annie Hollon

Annie Hollon is a journalist, copywriter and social media strategist from the Dallas, Texas area. She found a love for magazine writing during her time at the University of Alabama where she graduated with a Bachelor of Arts, double majoring in public relations and English. Beyond writing, you can find her expanding her library, attempting to teach herself the guitar and trying new hobbies.

BLUFFTON, SC — The final event on the first day of programming at BEMA Convention 2023, held June 20-24 in Bluffton, SC, centered on vertical integration in grocery stores and c-stores.

The business session was led by Audrey St. Onge, president and CEO of North American baking business at Lallemand, and featured insights from panelists Brad Clarkin, VP of production operations at Kwik Trip; Ron Scott, director of manufacturing for bakery and snacks operations at H-E-B; and Richard Ybarra, senior engineering manager of Publix.

For each of the companies the panelists represented, vertical integration had its own definition designed to fit each business model.

While Ybarra noted that Publix’s model stemmed from its founder’s vision of bringing a range of fresh products to consumers through the stores, Scott shared that H-E-B focuses on providing support for consumers and the business through manufactured goods and services.

“We have 13 manufacturing plants in our system, three of which are commercial bakeries,” Scott said. “Our advantage is being there first with innovation with items that are new and some traditional things that our consumers like.”

From Kwik Trip’s purview as a c-store, its vertical integration model stemmed from its founder’s history in grocery wholesale. It’s designed to support more than 850 locations through two commercial bakeries.

With vertical integration, all three companies have the opportunity to advance on consumer trends in a number of ways.

“It all starts with consumer insights,” Scott shared, noting the work of the company’s Own Brands team to turn product ideation into finished goods. “We have different ways to get products on shelves, from promotional items, which are normally shorter-term projects, to product innovations, which could include capital equipment investments and things that will bring new and different kinds of items to the shelf.”

In the c-store space, Kwik Trip is pulling point-of-sale consumer data through its loyalty program, which accounts for more than 50% of all transactions. This information provides key insights on products and allows the company to evaluate feasibility from a manufacturing standpoint … including if there’s enough line time and other key factors.

“We can pull that data to see where we should respectively be trending and that gives us respective insights,” Clarkin said. “Feasibility to me is two-prong. One, can we physically do it? … And then I think line capacity is another really big aspect of the conversation.”

Vertical integration goes hand-in-hand with speed to market and the R&D process that gets a product from concept to consumer-ready.

With private labels seeing an uptick as a result of inflation, brand loyalty from consumers keeps the private label operations of these companies afloat.

“It goes back to developing quality products and being able to keep them on the shelves during the COVID pandemic,” Ybarra said. “We did, like everyone else, run a shortage on some of our shelves with some large name brands that we typically carry. We were able to keep our supply chains, produce the products and keep them on the shelves.”

Finally, as workforce challenges persist, vertically integrated operations, even those with small teams, have been able to rely on suppliers to get through design phases and create a competitive, quality product.

“We want to compete with the top brands out there in the industry, and due to limited resources, we reach out to a lot of suppliers and ask for help for a lot of different things,” Ybarra said, noting the impact of getting the right information will ultimately help manufacturers make informed decisions.

Advertisement

BACK TO ALL NEWS