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S Birwadker Retail Brands 08 March2011 2

S Birwadker Retail Brands 08 March2011 2






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    S Birwadker Retail Brands 08 March2011 2 S Birwadker Retail Brands 08 March2011 2 Document Transcript

    • Store brands vs. national brands:Strategies for successby Samar BirwadkerThe HubMarch 2011
    • This PDF is designed to be printeddouble-sided to help you conserve paper.© 2011 Landor Associates.All rights reserved.Landor Associates is one of the world’sleading strategic brand consulting anddesign firms. Landor is part of WPP, one ofthe largest global communications servicescompanies. Visit us at landor.com.
    • Store brands vs.national brandsStrategies for successAlthough there is no dearth of opinions on how Who is winning the battle? Samar Birwadker is senior insightsthe battle between national brands and retailers’ manager in the San Francisco office ofstore brands will pan out in the United States, During the mid-2000s, store brands were hailed Landor Associates.most analysts agree that it’s shaping up to be as the second coming of retail, providing wonderfulquite a contest. Long seen as beacons of trust new opportunities for growth in previously unchar- This article appeared in slightly differentand credibility, national brands watched their tered territories. With share of sales growing at form in the Hub (March/April 2011).market shares erode as retailers became more an average annual rate of 0.5 percent between 2005 hubmagazine.comsophisticated at developing and selling their own and 2009, store brands became a poster child forstore brands. To be fair, without the right retail practicality and austerity in tough economic times.1partners, national brands couldn’t have created But starting in 2010, the recovering economy createdthe differentiation that has allowed them to a new set of realities. Now, in 2011, retailers arecommand a premium over their store brand forced to rethink their store brand portfoliocounterparts. Retailers have played along for the strategies in order to remain relevant in a worldmost part by relying heavily on leading national where, more than ever, consumers seek brands thatbrands to lure customers through their doors. not only offer value but speak in a unique, identifi- able voice and deliver substance with purpose.In the last decade, the rapid evolution of storebrands has led to converging competencies, and Although store brand sales are still growing nearlynow store and national brands are at war for the twice as fast as sales of national brands, the abatingsame consumer dollars. It may sound like an recession has toned down some of the irrationaloxymoron, but in spite of intensifying competition, exuberance. Ambitious store brands dressed infuture success for both will depend not only on how fancy packaging can no longer masquerade thewell their playing fields and core competencies are aisles pretending to be the real deal. Retailers 1 Information Resources, Inc., Times & Trends (October 2009). symphonyiri.nl/portals/0/articlePdfsdefined, but also on how well they can manage the are quickly learning that prime shelf space and /T_T-SeptOct-2009-Private-Label-US_Europe.pdfstrategic relationships with each other. (accessed 17 January 2011). Landor Associates 1
    • National brands Store brands most likely to be perceived as least likely to be perceived as most likely to be perceived as least likely to be perceived as Best brand Unapproachable Simple Distinctive Worth more Arrogant Good value Dynamic Trustworthy Daring Friendly Social Original Trendy Down to earth Prestigious Down to earth Dynamic Gaining in popularity Authentic High quality Social Obliging Energetic When we compare average perceptions of guaranteed foot traffic can’t make up for puny and Eating Right, that speak to the unique sensibili- 15 store brands to an equal number of marketing budgets and half promises. ties of their customers’ lifestyles and help fulfill diverse leading national brands, it’s clear their unmet needs. It is critically important for that there is plenty of work to be done at The fact that national brands are reclaiming some of retailers to continue to identify and fill in gaps both ends of the spectrum. their lost share in the recovering economy indicates left wide open due to the lack of innovation on that store brands still have a long way to go before the part of national companies. store brands 24.7 (CVS), 365 Everyday they can credibly sing a tune different than value. Value (Whole Foods), America’s Choice It also suggests that a majority of store brands, even Tesco: Over 70 percent of the merchandise that (A&P), Durabrand (Walmart), Eating Right at lower price points, lack the compelling, believable Tesco carries across all categories is part of the (Safeway), Equate (Walmart), Great Value proposition necessary to compete against heritage retailer’s Good, Better or Best store brand portfolio. (Walmart), Kirkland Signature (Costco), national brands that have stayed relevant by An industry-leading 50 percent store brand share Mainstays (Walmart), O Organics (Safeway) working hard to strengthen their unique meaning of the retailer’s total sales allows Tesco to carry Ol’ Roy (Walmart), President’s Choice in customers’ hearts and minds. enormous SKU assortments and reap higher margins. (Loblaw), Sam’s Choice (Walmart), Up & Up (Target) As the recession ends, consumers’ shopping Whole Foods: The retailer offers tiered store brands habits and attitudes toward brand consumption including the more value-priced 365 Everyday Value national brands Breyers, Campbell’s, are changing. And this shift is creating greater and 365 Organic Everyday Value lines, and the Whole Cheerios, Tide, Head & Shoulders, overlap in the competencies of retailers and Foods Market line, which often features artisanal or Horizon Organic, Kellogg’s, Lysol, Olay, national companies. Below are some predictions small-batch specialty products. Whole Foods sells Oreo, Pepperidge Farm, Quaker Oats, and best practices for store and national brands store-brand goods across many categories that Smucker’s, Vaseline going forward. include everything from frozen dinners to supple- ments to shampoo and snacks. Store brands take on national, but national battles back Safeway: Safeway’s lifestyle-focused O Organics and Eating Right brands have become some of Acceptance of store brands in the United States the largest selling brands in the category—even has grown, but it’s still nowhere near the levels managing to cross over to non-Safeway retail seen in European markets. In 2011, U.S. retailers channels. This is a great example of how progressive must continue to borrow store brand strategies U.S. retailers can use sophisticated store brand from progressive retailers across the pond. Tesco portfolios to “fill in the gaps” and deliver total and Marks & Spencer have created powerful solutions to customers. hybrid portfolios, taking advantage of “branded house” strategies for massive efficiencies, and The high penetration of store brands in Europe has creating dedicated brands for specialty categories led national companies there to invest heavily in R&D such as skin care and organic food, where they to help feed their innovation pipelines, and American lack credibility and consumer permission for national companies must follow suit to stay ahead. brand stretch. According to a recent study by Deloitte Insights, only four in 10 national companies invested more in2 “Dearth of CPG Innovation Helps Fuel Private Label Progressive retailers such as Target, Whole Foods, product research in 2010 than they did 10 years ago.2 Growth,” Store Brands Decisions (26 October 2010). and Safeway have led the way in the United States storebrandsdecisions.com/news/2010/10/26 /dearth-of-cpg-innovation-helps-fuel-private-label-growth by creating tiered portfolios of cross-category National companies can minimize retailers’ store- (accessed 17 January 2011). brands, such as Archer Farms, 365 Everyday Value, brand opportunities by taking advantage of their2 Samar Birwadker
    • superior R&D abilities to innovate new products, a simple feature, Swanson has discovered that Whole Foods offers tiered store brands,going beyond the line extensions they’ve relied consumers are willing to pay extra for it. from value-priced lines to artisanal andso heavily on. National companies must continue specialty products.to be better than retailers at tapping into consumers’ McCormick: Home cooks can prepare mealsdesires, motivations, and behavior to identify white like gourmet chefs without having to purchasespaces and build compelling brand propositions a separate grinder. The national brand companyto fulfill unmet needs. These innovations need invested in structural design and now includesto be flawless, furious, and done faster than ever a built-in grinder in the bottle tops of certain spicesbefore, making it difficult, if not impossible, for and seasoning mixtures. Retailers find it difficult toretailers to imitate. invest in innovations like this for their store brands because they can’t match the volumes requiredProcter & Gamble: The national brand powerhouse to make it cost-effective.was able to create a unique and ownable propositionand drive higher differentiation for Dawn by using How far can your brand stretch?Olay’s brand equity in the dishwashing soap segment.Although dishwashing brands have touted their While consumers may be receptive to a store-brandability to be “gentle on hands” in the past, borrowed product when it comes to staples or other generalequity from Olay, a cross-category brand, adds merchandise, they may not be as open to a grocerya huge dose of credibility and helps Dawn break chain selling advanced skin care products underaway in a commoditized category that’s crowded its own label.with look-alikes. Walmart: In October 2010, the retailer rolled backSwanson: Packaging its broth in cartons with re- Project Impact, a two-year-long initiative with a goalcloseable lids rather than cans enhances conve- to satisfy shopper assortment expectations bynience for customers, making it easier to save expanding store-brand varieties and scaling backunused broth and reducing the amount that’s SKUs of national brands. In March 2009, greatlythrown out and wasted. Although the carton is underestimating its inherent strength, Walmart Landor Associates 3
    • above In 2009, Walmart replaced popular replaced popular national brands with several revitalization treatments, and more. This has helped national brands with several extensions of extensions of its Great Value store brand in new the retailer go head to head with leading national its Great Value store brand, but this worked packaging and advertised them with better in-store brands such as L’Oreal and Aveeno. In November against its promise to be a destination for signage. This initiative failed to deliver the estimated 2008, CVS debuted Beauty 360, an innovative concept lower-priced national brands. increase in foot traffic and instead compromised store within a store that offers an upscale shopping Walmart’s destination strategy by limiting the destination to time-starved women. Exclusive store below P&G was able to drive higher retailer’s ability to retain its customers. Most brands including 24.7, Skin Effects, Christophe differentiation for Dawn by using Olay’s importantly, it worked against Walmart’s brand Beverly Hills, and Essence of Beauty are spotlighted. brand equity in the dishwashing soap promise of being a destination for lower-priced segment. national brands. National companies must focus on inculcating a culture of true innovation that can create higher Innovating for victory differentiation, help them remain relevant, and most importantly, create deeper, lasting bonds with their To drive higher differentiation, progressive retailers customers. National companies should better use must invest in holistic brand development programs their brand stature and vast network to crowdsource that build their parent brands. Investing in store customers’ opinions and understand their needs. environments, aisle promotions, retail execution, By opening up the innovation process, national couponing, product bundling, and sophisticated companies can identify market trends quicker, research and market intelligence can help retailers leading to better consumer insights, and conse- create even more compelling products and lasting quently, to stronger brands. relationships with their shoppers. Procter & Gamble: In 2011, P&G plans to increase CVS: CVS’ store-brand portfolio of health and beauty its product innovation and marketing spend by brands offers a plethora of premium products such 30 percent by developing new products and honing as antiaging and mineral makeup, advanced skin existing ones through its collaborative, open4 Samar Birwadker
    • National versus store brands Landor tapped into the 2010 U.S. BrandAsset® Valuator (BAV) study to gain an even better understand- ing of how consumers perceive and interact with leading national brands and large store brands. BAV is the world’s largest and most enduring study of brands with 18 years of tracking data on over 50,000 global brands and 700,000+ consumers. BAV provides a quantitative framework of over 70 measures that help drive strategic direction and intangible value of brands.innovation Connect + Develop initiative. The collaborators versus only 22 percent of “non- BAV backed up our assertion thatprogram was started in 2001 and now, after 10 years, winners.” In addition, the winning national store brands need to work harder toover 50 percent of P&G’s innovations come from companies are much more likely to place high gain the trust of American consum-outside collaborators that include consumers, importance on both sales profit and strong ers. Consumers view store brands asentrepreneurs—and competitors. growth outlook.3 approachable and strongly associate them with value, but do not thinkMountain Dew: In 2009 Mountain Dew decided Campbell’s Soup worked with retailer Kroger of them as distinctive, authentic,to begin researching a new flavor. It created to develop its Simple Meals concept that took daring, or innovative. To competea Facebook and Twitter campaign called into consideration Kroger’s merchandising tactics more effectively with nationalDEWmocracy to recruit loyal fans, which created to create solutions for busy, end-of-aisle shoppers brands, store brands need to notbuzz leading up to its very successful product who were looking for grab-and-go meal ideas. only integrate stronger aspirationlaunch. Retailers however lack the loyalty, cred- into brand language, they need toibility, and resources needed to create similar National company Kimberly-Clark (with research also develop stronger products thatimmersive experiences for their store brands. partner Red Dot Square Solutions) developed virtual back up brand promises. reality technology, which it has used with retailersJoining forces such as Walmart and CVS to develop virtual in-store National brands have an edge over environments to create better shopping experiences store brands—at least in terms ofStore and national brands need to offer value plus and develop effective product-bundling strategies. consumer perception—becauseexciting brand promises in order to compete for they are thought of as overallconsumers’ dollars. In the future, success for both With an eye on shoppers, national companies and “better brands” and are seenwill depend on how well they can expand their retailers must together determine which trends as more reliable, trusted, highercompetencies, and on their ability to join forces. drive customers’ choices and what’s needed quality, innovative, and exciting.Strategic partnerships with national companies to create powerful propositions for their unmet However, national brands needcan help retailers focus their resources on core needs. By bundling across categories, retailers to convince consumers of thedestination categories and improve their in-store and national companies can offer complete solutions additional value these productsexperience while delivering total solutions to for consumers that encourage shopping trips that can bring into their lives.shoppers. And national companies can gain reinforce the value of the store and the brands itshopper insights from retail partners, earning carries. For example, health- and wellness-focusedgreater ability to focus on consumers across shoppers looking to buy their favorite national branddepartments and drive product and brand of low-calorie frozen dinner are likely to takedifferentiation in their core categories. advantage of a bundled promotion that offers diet-friendly store-brand drinks and snacks.A recent Nielsen report stated only 20 percent Focusing on comprehensive solutions based on 3 “CPG Companies See Retail Collaboration asof national companies realize the full potential of a shopper’s lifestyle can help national companies Effective,” MC Marketing Charts; and “Winning Practices on Strategic Customer Collaboration,”their collaborations with retailers. Nielsen studied and retailers successfully serve the needs of Nielsen Wire (11 November 2010). marketingchartsactivities of national companies achieving full a lucrative consumer segment together. ■ .com/direct/cpg-companies-see-retail-collaboration- as-effective-14993/ (accessed 17 January 2011).potential (or “winners”) and found they havea tendency to cast a wider net when seeking out blog.nielsen.com/nielsenwire/consumerretail partners: 50 percent of winning companies /winning-practices-on-strategic-customer- collaboration/ (accessed 17 January 2011).approached 10 or more retailers as potential Landor Associates 5
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