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    Report: Consolidation Seen In Private-Label Food Manufacturers' Future

    CHICAGO - In less then 10 years, America's 1,500 private label food manufacturers could consolidate to a field of no more than 20 as they respond to the demands of large-scale food retailers, according to a new report by Deloitte & Touche Corporate Finance LLC.

    CHICAGO - In less then 10 years, America's 1,500 private label food manufacturers could consolidate to a field of no more than 20 as they respond to the demands of large-scale food retailers who wish to leverage their purchasing power and merchandising programs and reduce costs through streamlined transactions, according to a new report by Deloitte & Touche Corporate Finance LLC.

    "From our observations of food retailing mega-chains like Wal-Mart, the message is clear: Expand through consolidation to keep pace with upsized retail mega-chains or risk perishing," said Dan Ruhl, managing director of Deloitte & Touche Corporate Finance LLC, and co-author of the report entitled "Consolidation is Changing the Face of the PL Industry."

    The report notes that as food retailers become national chains, they want private-label vendors to broaden their reach to provide economies of scale. "National food retailers want vendors that can service their entire geographic region, and provide a greater variety of products. The goal is for more consistent products, packaging, and pricing, as well an efficient way to provide many product categories to each store," said Ruhl.

    Brad Akason, also a managing director at Deloitte & Touche Corporate Finance LLC and a co-author of the report, noted four other factors that are driving the private-label manufacturing consolidation trend:

    -- Private-label brands are a highly effective way for retailers to differentiate their value in markets crowded with "same-as" stores.

    -- Name brand preference among consumers is declining.

    -- Mega-chain retailers want to allot more shelf space for private-label goods because of larger profit margins and growing consumer satisfaction.

    -- Consolidation among private-label manufacturers is already resulting in larger product offerings, increased capacity, greater supply-chain leverage, faster speed to more markets, and more capital to invest in product improvement and innovation.

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