The Elephant in the Boardroom

fmcg, marketing, advertising,I have a thing about Private Label, we work in an industry that relies on getting a contribution from branded sales. Brands are not just taking a hammering from Retail Trading Negotiators seeking even greater discounts while maintaining net margins, but also by PL; as mentioned earlier it is reckoned that almost 30% of all grocery lines by 2012 will be own-brand. Tesco currently says own label accounts for 40%.

Private Label is invidious, it does not innovate, it imitates. It would appear unjust to Manufacturers who put in the hard yards and need successes to keep doing so. But Multiples are getting better and quicker at getting their versions to shelves alongside the brand leaders. These “cheaper alternatives” mostly inferior, would appear to be the right brand for these difficult times. Why?

Because Own Label is cheaper and consumers are now conditioned to believe they should sacrifice quality for price despite the fact that brands in a scramble to maintain a declining share have been reducing their prices and spending their budgets on promotional footfall for the Retailers and not investing in equity building brand activity.

Because Retailers increasingly view their Customer as being a loyal shopper to the name over the door rather than the brands which invest in R&D, NPD, Category Management, Brand Research & Support etc. and have tried to achieve a higher gross margin by pandering to an own label in their quest to differentiate themselves from their Retail competitors.

Because Manufacturers too have let themselves be dictated to by these Retailers – and in some cases their own Distributors – to join the race to the bottom and capitulate in eroding their margins and thus the contribution to ensuring the consumer remains loyal to their brand.

One notable brand I admire is Red Bull for maintaining – and being able to sustain – a premium pricing across all channels which affords substantial brand support which in turn perpetuates demand which ensures premium pricing and so on.

Another lays down a marker to expectant wannabes. The new campaign for Bird’s Eye “100% Polar Bear” neatly makes space in your freezer for Bird’s Eye Peas, Fish Fingers and Chicken Dippers and also deftly takes a swipe at Private Label.

Focussed, well produced – some say menacing – work featuring the voice of Willem Dafoe, the TV spots justify a premium positioning and pricing strategy as well as communicating the quality of the product offering. I’m quite sure the Polar Bear gives good ole Captain Bird’s Eye the boot, although he’s still on the fish fingers pack, and drags the brand into the new decade. It’s also great confident brand equity building stuff, not tricky at all, which will also drive footfall to the freezer cabinets in Retail and keep the Grocery Trade happy as well as boosting sales. It might just help keep private label advancing in the freezer.

 

My Grocery Shopping Experience.

FMCG, brand awarenessMy wife has been temporarily incapacitated and I’ve been doing the weekly “big shop” for the past couple of months.

 

I looked forward to this, as in the past I’ve enjoyed Grocery store-checks as an information gathering exercise – seeing who’s active, new product launches, what products are on promotion, what offers there were – in the FMCG categories in which I or my clients operated.

 

There is an unwritten adage in business that says you support the clients who support you and remain loyal even if that client may not have the particular advantage, benefit or indeed price, you’re looking for. And for sure, private label was never to be purchased – unless for research purposes – as you were earning your living in and from the branded goods business.  But that’s another day’s rant.

 

That said, it’s been an interesting time seeing how the different retailers are reacting to the crisis on a daily basis and there’s no doubt there is an almighty dogfight for the weekly household budget. According to Checkout, Nielsen recently reported that in 2012 almost 40% of all goods sold will be on promotion or some other kind of offer and more worringly that Private Label will account for almost 30% of all sales.

 

This is obviously extremely frustrating for Manufacturers who invest and bring to market branded products that consumers want, only to see their investment eroded by Retailer’s knocking-off their brands and services quicker than ever before. Some are willing participants and will happily supply an own label offering of their product; others reluctantly do so and a brave few refuse despite the growing concentration of ever increasing buying power. Again, another day’s rant.

 

Anyway, the scorecard after 6 weeks of dedicated grocery shopping:

 

Dunnes Stores, Cornelscourt

On more recent visits Dunnes have upped their offer and have been stuffing the store with Recession Buster offers on floor displays, Gondola ends and on-shelf. Everywhere you look there are deals: bogofs; twin & banded packs; half-prices; value loaders; extra fills.  Heaven for the promiscuous branded shopper. It’s just an impression while they have upped the ante in Freshly Prepared produce,  it seems to me that Dunnes may have pulled back from ambient own label as there doesn’t seem to be as much PL presence on-shelf. A very well stocked, very clean store with lots of choice. Easy to navigate the particular categories, but more than two trollies passing in an aisle coupled with the ubiquitous Pallet blocking the floor results in Jousting with your fellow shoppers. Friendly helpful staff. I haven’t done the math yet, but my perception is that their Value Card is, cent for cent, better value than their competitors.

 

Tesco, Ballybrack.

The occasional foray into Tesco Ballybrack (where my wife’s environmentally expensive shopping bags were once purloined by a fellow shopper from her trolley which she left unattended while at the meat counter) is, I admit, mainly driven by their weekly insert in the Irish Times and I have been dispatched to purchase selected items from same and may as well do the big shop while I’m there. Several times I have had to search out and be directed to the offers which are poorly flagged – twin-packs that aren’t twin-packs – that allegedly are when they’re scanned and the like. Several times the Staff were unable to find the offers we wanted and several times I have gotton a full refund because the epos didn’t scan the offers that were found. So maybe not much communication between branch and head office then. There is not as much choice as I expected and there is a lot of dumbing down on the shelves with sub-value and sub-sub-value lines dominating the facings. Good bread counter and well stocked wine shelves which appear to be drawing the punters. Not completely convinced they’re cheaper than Dunnes but am impressed with the very slick and sophisticated Monthly Club Card Mailer.

 

Superquinn, Blackrock

My expectations were high. I knew they’d be more expensive though I hoped the experience would compensate. You fall into the Bakery, still a great psychological booster for all things natural and fresh. Fruit and veg follows, not as big or as wide a stock but good quality nevertheless. Approachable and well stocked meat and fish counters. Very long aisles, cluttered shelves with not a lot of offers either, though the new “Essentials” range is very much present. It is immediately obviously that it is more expensive than its competitors, I’d reckon at least 5% -10% even on basics like tinned veg and dairy. Petfood too. The wine sale was on so I can’t be sure whether that department is good but it was sure well stocked. Surly counter staff. Does not justify a premium.

 

PS: Both Dunnes and Tesco rate a B on my score card across the board. Superquinn, based on just one visit mind rates a C-, unfortunately in my book the SuperQuinn of Feargal Quinn is no more. Overall, it strikes me that the stores themselves need to do more to drive loyalty to their own particular bricks and mortar brands than rely on deals or offers squeezed from manufacturers and distributors.

 

PPS: An aside: it really irks me out that the stores reduce their staff packers’ overhead on a charity pretext and let young well meaning amateurs throw potatoes on top of soft fruit, pack detergents with fish and throw tin cans on top of bread. Am I alone?