Own-Label Closes in on the Big Brand Names

By Grover, Jim | Marketing, March 19, 1992 | Go to article overview

Own-Label Closes in on the Big Brand Names


Grover, Jim, Marketing


Own-label increased its share of packaged grocery sales steadily during the 80s, reaching 33.4% in 1990. And last year packaged groceries sold under retailer labels increased sales by 15%-around three times the growth rate achieved by manufacturer brands. As real food spending growth slows, that rise is at the expense of manufacturer brands - shrinking in real terms the size of the market for branded suppliers.

Own-label represents the single biggest competitive threat to most branded UK manufacturers - far more so than, say, a re-structure of the European food industry.

But most branded companies are still not thinking fundamentally enough about the challenge - and instead are spending too much time and money thinking about how to out-maoeuvre rival branded manufaturers.

Such retailer success is under-pinned by firm foundations; continuing investment in product quality and innovation, control of the supply chain, superior value for money and, more recently, heavy consumer goods advertising investment to strengthen their consumer brand franchises. Thus in the nine months ending September 1991 Sainbury, Tesco, Asda and Safeway spent 21m pounds sterling on advertising their retail brands-compared to less than 5m pounds sterling five years ago.

Statistics like market share can give false comfort. Almost by definition, brand market share is higher than each of the retailer's individual brands. But combined, owned-label outstrips even the brand leader's market share. What's more, in each store the retailer's brand may be outselling this "brand leader".

The acid test of brand strength occurs at point-of-sale and many "brand leaders" are failing this test.

Real strength of brands in doubt

The only accurate measure of a brand's real franchise is its in-store rate of sale versus its own-label counterpart. Against this measure even the leading manufacturer brands with strong market shares emerge much weaker than their owners recognise.

We have recently analysed the rate of sale of ten major UK food brands against their retailer brand counterparts in Sainsbury or Tesco-the store groups with the most developed own-laberl interests. Each of the ten brands is the leader in its category and has a substantial category brand share. So by traditional measures it would be regarded as a strong brand with a genuine consumer franchise.

However, the real strength of many is in doubt. Five of the leading brands are being outsold in-store by their retailer brand counterpart and only three have a very strong consumer base.

In thinking about how respond to the growing threats, by far the most important requirement for branded manufacturers is to rethink their overall investment in the marketing mix - and re-allocate a higher proportion of total expenditure to the product itself as opposed to advertising and promotion. …

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