Magazine article Marketing

Alive and Kicking

Magazine article Marketing

Alive and Kicking

Article excerpt

It looks like the brand is still king - consumers are willing to pay an 87% premium for brands over own-label. But this is not a cue for complacency, warns Simon Marquis

The brand is alive and well. The prognosis: good.

It's exactly a year since "Marlboro Friday" -- the black day when Philip Morris slashed the price of its flagship brand. It was widely seen as an act of marketing suicide. Decades of investment in a look, a personality; the result -- a great, premium-priced world-beater, transformed at a stroke into a discounted hustler. If this could happen to Marlboro, marketers thought, the game was surely up for brands.

In the UK, brand owners have had even more reason to be concerned. The recession forced consumers to adopt a cautious approach to spending their money. And they are more likely than ever to shop in a handful of thriving, nationwide supermarkets that have become reassuring brands in their own right; are launching a stream of attractive sub-brands; and are powerful enough to drive margin-crushing deals with manufacturers.

It is a mark of the strength of the big grocers in the UK that manufacturers have responded -- under the cloak of the British Producers and Brand Owners Group -- to counter what they see as a never-ending flow of supermarket lookalikes. There is no doubt that brands are having to fight, and fight hard.

But we should not consign brands to an early grave.

The media, let's be honest, have done their bit to create this impression. "Superstores stalk the Superbrands" ran the Independent on Sunday. "Do you passionately believe no other brand of tomato ketchup tastes like Heinz? Or are you convinced that it is indistinguishable from the cheaper own-label versions by Sainsbury, Tesco or Safeway?" enquired the Times.

Unfortunately, marketers, who know a lot about their own sector, have not always been able to see the whole picture, because they don't purchase a wide enough sweep of market data.

So says Simon Broadbent, partner in the recently-formed Leo Burnett Brand Consultancy, and much-respected marketing guru for more than 30 years.

"Facts have been rate in this debate," says Broadbent. "A very gloomy view has become the received wisdom about brands."

Broadbent has assembled retail sales data from no fewer than 50 different market categories including instant coffee, canned catfood and toothpaste. The whole database represents more than |pounds~6bn in sales at the checkout, so the average category is worth |pounds~126m. The data comes from Infoscan NMRA, producing an accurate overview of 1992 and 1993.

The most critical indicators are volume share and price. Chart 1 shows that the market share of the number one brand in the average category is a dominant 30%. Together, brands one to three account for more than 50% with own-label at 23% and the cheaper "tertiary" brands at only 4%. There is almost no significant shift year-on-year. "It presents a remarkably stable overall picture," observes Broadbent.

Chart 2 shows the price of branded goods relative to own-label. Again there is almost no change from 1992 to 1993. But the extraordinary fact is that the number one brand still commands, on average, a 45% premium over own-label.

Taking volume share and the price differential together, the average brand leader accounts for over 34% of the retail value of a category. Whatever the fashionability of niche brands, the stark fact remains -- the big money is in brand leadership.

Chart 3 shows the effective distribution enjoyed by the brand leader in the average market category. …

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