Private label price war

Private label price war

The own-brand uprising is causing a huge headache for major FMCG players. How will it end? asks Richard Taylor

Richard Taylor
Managing Partner
Brandon Consultants

The rise of the discounters has not only shaken up the big 4, it’s made them look within to leverage their own brands like never before. We have witnessed a meteoric rise in many own-label categories, a huge threat to all but those special few megabrands that occupy a monopoly in our mind. The retail rhetoric that we hear time-and-time again is that management are obsessed with own-label growth, reducing complexity, and simplifying their portfolios by culling the brands in the lost middle ground. 

The time for own-label to shine has never been stronger, Aldi and Lidl have made it quicker to shop with a more limited range of great own-label products that we can find at speed, bringing more shopper ease and contentment. Coupled to that we’ve lived in a world of uncertainty for fast approaching a decade. Bedding in a new smart shopper mentality, one that consciously lowers our spend. This is the new norm that isn’t going away. 

Historically own-label was the poor relation to the megabrands, but smart retail strategies mean this is no longer the case:

– Clear tiering and entry points for different shoppers. The long old held 3-tier (good, better, best) own-label strategy is being torn up and the majority are cutting out the middle to replicate the discounters, simplifying categories down to 2-tiers (good and best). 

– Great tasting products and improvements where people now see brand and own-label having reached parity. 

– Improved nutritionals and labelling, often now ahead of their branded competitor. 

– Presence in-store is now much more prominent. Tesco’s has been placed at eye-level in many categories.

– Investment in design. An improvement in packaging format and design has resulted in there being less of a gap for consumers to pay extra.

Shoppers have moved with these improvements. The after effect of this is that a great deal of the brands are fighting huge value and volume challenges. They’ve battened down the hatches and reduced their marcomms spend. The focus now being to renovate the product and packaging to drive efficiencies.  

Should brands just accept defeat? What can they do to look to overcome the challenges? 

1. Even more important than before, its vital that brands have a distinct position that people can relate to on an emotional level. One that is clear and consistent through all communication and not just the shiny tip of the iceberg TVC. How does this position play out at the fixture? 

2. We are bombarded with information and messages at every turn, it’s vital that brands create distinctive iconic assets that people can shortcut quickly. 

3. Developing innovation that cuts through and meets new needs, desires and audiences. Extending brands that we know and love with innovation that fulfils a need makes for a powerful and somewhat safe evolution of a brand. 

4. Don’t cost renovate on the areas of the product and packaging that are really important to people (think Toblerone mountain removal disaster). Be prepared to stick up for your brand and consumers. 

5. Don’t throw the baby out of the bath water. In times of uncertainty we crave all that made us safe in the word, brands are a constant source of comfort and anchor people. Hold on to what people love(d) about you at all costs. 

As for the world of own-label brands, retailers are going to continue to drive them forward and focus on building value for themselves. Strict brand guidelines may be relaxed in favour of brand design that works in category and drives an emotive response. Only time will tell. 

Holly Aston
ADMINISTRATOR
PROFILE