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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.