The growth of private labels poses a threat to national brands (aka A-brands) around the world, but especially in Western markets. And with consumer budgets continuing to be tight they are looking for ways to save money. Yet, paradoxically, that may also create opportunities for the national brands.

1. © Prof. J-B.E.M. Steenkamp
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Jan-Benedict E.M. Steenkamp
C. Knox Massey Distinguished Professor of Marketing
& Chairman of Marketing
National Brands in 2015 and
Beyond: Sisyphean Task or A
New Hope?
Annual GfK Shopper Congress
September 13, 2012

2. © Prof. J-B.E.M. Steenkamp
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The Threats to National Brands –
The Growth of Private Labels
Source: GfK ConsumerScan

3. © Prof. J-B.E.M. Steenkamp
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The Threats to National Brands –
State of the Economy
Source: CPB, GfK ConsumerScan

4. © Prof. J-B.E.M. Steenkamp
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National Brand Response
Source: GfK ConsumerScan

5. Brand buyer
Promotion buyer
Store brand
buyer
ALDI-buyer
6.4 %**
3.7 %
2.9 %
5.5 %
2.5 %
2.0 %
(28%  27.1%)*
(37 %  36.7%)
(17 %  17.3%)
(18 %  18.9%)
Source: GfK
* To be read as: 28% of households in 2000 and 27.1% in 2003 were brand buyers
** to be read as: 6.4% of the market moved from brand buyers to promotion buyers between 2001-2003
Beware of the Price Promotions Trap!
Cascading Toward Store Brands and Hard Discounters
Laundry Detergent in Germany

6. Channels?
CONSUMER
Crisis
insensitive
Consumer Strategies to Save Money –
Opportunities for National Brands
Opportunities for A-brands
• Developing premium
products
• Selling brands through with
discounters
© Prof. J-B.E.M. Steenkamp
Not to be used or reproduced without permission
Crisis
sensitive
Source: adapted from GfK ConsumerScan

7. • As grocers benefit from continued
footfall despite a weak economy,
Planet Retail foresees a greater
move towards a new ‘super premium’
in the near future.
• Unlike traditional premium lines,
these new super premium lines trade
from very high price points (i.e. Tesco
Restaurant Collection meal for
GBP10), enabling retailers to regain
some margin lost as a result of price
investments in other areas of the
store.
Premium Products
“People will eat more meals at home…. They do not eat dinner out, but they’ll still
buy Ben & Jerry’s for dessert” (Jeff Auxier in Fortune, July 2012).
© Prof. J-B.E.M. Steenkamp
Not to be used or reproduced without permission
Source: adapted from Planet Retail

8. © Prof. J-B.E.M. Steenkamp
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Sleeping with the Enemy
Laundry Detergent Shares in Germany
4.5% 5.0% 4.3% 4.3%
3.3%
6.3%
9.6% 10.6%
2005 2006 2007 2008 2005 2006 2007 2008
Source:
GfK
(2009)
14.3% 14.1%
12.0% 11.7%
7.8%
11.3%
13.9%
14.9%
NBs
SBs

9. The Crucial Role of Shelf-Ready Outercases
Designed & Claim Brand Name (Claim) Plain Brown American
0   
9
© Prof. J-B.E.M. Steenkamp
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10. Assortment
Channels?
CONSUMER
Consumer Strategies to Save Money –
Opportunities for National Brands
Opportunities for A-brands
• Developing basic/cheaper
versions of A-brands
• Extend brand to related
categories
© Prof. J-B.E.M. Steenkamp
Not to be used or reproduced without permission
Crisis
sensitive
Source: adapted from GfK ConsumerScan
Crisis
insensitive

11. Basic Lines of National Brands Can Help Shoppers Staying
with Your Brand
These cheaper branded alternatives are positioned to close the price gap
between SBs and NBs on the one hand, and to fight price aggressive discount
retailers on the other.
Following successful launches of Ariel Básico and Pampers Simply Dry, Procter
& Gamble’s declared goal is to have such basic versions in 75% of all its
categories by mid-2011.
However, serious concerns relate to the brand equity which could be eroded.
 P&G introduced
Tide Basic in 2009
but discontinued it ,
after one year
apparently because
of cannibalization of
the regular range
and brand equity
concerns
 Pampers Simply
Dry has
successfully
extended the
leading position of
P&G in the price-
orientated,
discount-driven
German market.
© Prof. J-B.E.M. Steenkamp
Not to be used or reproduced without permission

12. Assortment
Brands
Channels?
CONSUMER
Crisis
insensitive
Opportunities for A-brands
• Focus on core brands
• Customer intimacy
• Innovation
• Packaging
• Emphasize the difference – social media
Consumer Strategies to Save Money –
Opportunities for National Brands
© Prof. J-B.E.M. Steenkamp
Not to be used or reproduced without permission
Crisis
sensitive

13. Create Differentiation through Distinctive Packaging
P&G’s Pushes Design in Brand-Building Strategy
• Differentiates the product
• Influences choice at point
of purchase
• Stimulates new product
awareness
• Provides emotional
satisfaction
© Prof. J-B.E.M. Steenkamp
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14. Packaging to Generate Sales
© Prof. J-B.E.M. Steenkamp
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15. © Prof. J-B.E.M. Steenkamp
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So…. Don’t Make Your Packaging to Look Like a Generic!
15

16. Packaging (and brand name!) copycatting
The Real Stuff Aldi’s copycat
© Prof. J-B.E.M. Steenkamp
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17. “I tried this shampoo and conditioner because my mother-in-law recommended it and
said she thought it was just like Pantene repackaged. It did work fine for quite a few
months when I first started buying it but after awhile, I went back to branded shampoo
and conditioner….. I recently went back to try Protane and it has been really horrible on
my hair. I have tried to persevere and use up the bottles (only 1 of each) so I don't waste
them and just today finally used branded stuff again because I had had enough. I am
totally amazed at the difference. My hair instantly feels back to normal and I am never
going to bother buying Protane again. I don't know if they have changed the formula but
I'm not going to waste my money on it again.”
Source: http://www.productreview.com.au/p/protane-aldi-shampoo-conditioner.html;
accessed August 23, 2012
Harness the Power of Social Media
© Prof. J-B.E.M. Steenkamp
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18. © Prof. J-B.E.M. Steenkamp
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MAD - Mutually Assured Destruction
Opportunities for National Brands
Opportunities for A-brands
• Be a knowledge partner
•Offer unique SKUs
• Co-branding
• Provide brand economics
•

19. © Prof. J-B.E.M. Steenkamp
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Overemphasis on Private Labels May Hurt the Retailer:
Store Brand Share vs. Share of Wallet for Albert Heijn
SB share in a
customer’s total
expenditure at AH
% of customers Mean share-of-
wallet
0-20% 21.4% 26.0%
21-30% 32.4% 47.0%
31-40% 26.4% 46.8%
41-60% 15.2% 38.6%
61-100% 3.4% 21.8%
SOW = % of total expenditure on groceries that is spent in Albert Heijn stores
Source: Ailawadi, Pauwels, and Steenkamp,
based on GfK household panel data

20. © Prof. J-B.E.M. Steenkamp
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Private Labels May Not Always Generate More Profits:
Key Drivers of SKU Profitability
% Gross Margin
+
Additional Allowances/
Manufacturer services
-
Selling costs
Sales Price
X
% Net Margin
X
Velocity
(Shelf space
turnover)
$ Profit
Per
Square
Foot

21. © Prof. J-B.E.M. Steenkamp
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Diapers
Brand
A
Store
Brand
Retail sales price
($)
14.40 8.77
Gross margin (%) 3 17
Penny Profit ($) 0.43 1.49
Velocity per square
foot (index)
100 66
Gross margin per
square foot (index)
43 98
Cereal
Brand
A
Store
Brand
Retail sales price
($)
2.79 2.19
Gross margin (%) 11 14
Penny Profit ($) 0.31 0.31
Velocity per square
foot (index)
100 70
Gross margin per
square foot (index)
31 22
Private Label Products Don’t Always Generate More Profit!
Contrasting Diapers versus RTE Cereals
Source: The Boston Consulting Group

22. Offer Unique SKUs
22
© Prof. J-B.E.M. Steenkamp
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23. Co-Branding
Costco and Starbuck’s
M&S and MarmiteWoolworth’s and Vegemite
Costco and Post
© Prof. J-B.E.M. Steenkamp
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24. Joint promotions
© Prof. J-B.E.M. Steenkamp
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25. © Prof. J-B.E.M. Steenkamp
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So, What Is It Gonna Be in 2013?
• If you focus on the short
term
• If you see problems
rather than opportunities
• … if you are Sisyphus
(without his thong)

26. © Prof. J-B.E.M. Steenkamp
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Or…
• If you see opportunities in
consumer strategies to
save money
• If you see opportunities in
MAD
• …. if you are Luke (but
without his hair cut)