The problem with brands

By: Catherine Sleep - 26 January 2006 13:38

New research from Datamonitor offers further proof, were it needed, that it’s not a great time to be a branded food manufacturer. The UK is Europe’s biggest user of private label products, with penetration exceeding 35% of total consumer packaged good spending. I’ve said it before, and in one of my increasingly frequent senior moments, no doubt I’ll say it again: the plethora of private label ranges produced by the major multiples might well help grow new categories, but they will also capture the lion’s share of them.

These days so-called ‘famous brands’ need to take dramatic measures just to secure their share of the market, never mind grow it. They risk being stuck in the middle of the market with private label products snapping at their heels and the premiumisation trend making them look dowdy. This month’s demise of Golden Wonder provides a salient example.

This is not to say that private label and premiumisation are mutually exclusive. Some private label ranges do still target the value market but the days when private label was synonymous with the 7p can of beans are long gone. An increasing number are going for the high end and they’re doing it very well. Cue rather expensive ‘gastro meals’, cue sumptuous on-pack artwork, cue lots and LOTS of silver cardboard.

Famous brands cannot compete with private label on consumer knowledge as retailers have unsurpassed access to customer data. They certainly can’t compete on price and will struggle to outwit retailers when it comes to merchandising. What does this leave? Innovation, and that’s about it. Innovation in product development, in packaging and perhaps most importantly, in marketing. Creating an emotional attachment to a brand is going to be more vital than ever.

UK is Europe’s leading private label market

Comments on this blog post

Innovation may be one part of the response strategy to private label, but the retailer can copy successful innovations and avoid the costs associated with those efforts that don't succeed. The longer term issue is the lack of growth as private label absorbs share. Most CPG businesses are managed with business models that incorporate growth as a key component of business existence. Michael Porter wrote years ago about the issues involved with barriers to exit problems versus barriers to entrance. What are the growth and existence strategies for CPG companies facing market stasis or decline?

David Harvison, United States