Private-Label Pirates And Digital Defenses

12 08 2008

In days of yore, marketers built brands and retailers built shelves.

It was good business. Everybody prospered.

Then, without so much as a raising of the skull and crossbones, private label brands appeared on the horizon to steal market share.

Private label could offer customers cheaper prices, and no wonder. There was no need to invest in building the category.No need to spend a nickel on marketing, which is typically one of the three top expenses on a CPG company’s income statement.

All they had to do was sail in and take their share of the business.

Ol’ Roy, Wal-Mart’s store brand of dog food, bit Purina where it hurts and became the top-selling brand of dog food in the United States.

Recently, Unilever sold its All, Snuggle, Wisk, Surf and Sunlight brands to global private equity firm Vestar Capital Partners for $1.08 billion in cash. Why? They were so squeezed between market leader P&G and private label that they felt they couldn’t compete — even though their laundry care unit resulted in $1 billion in turnover for the company last year.

And Brandweek reports Unilever is not alone:

“ConAgra (… is) selling its Pemmican beef jerky brand to Brazil-based Marfrig Group (…) Kraft (…) relieved itself of lackluster-performing Post cereal line (…) The bigger companies are now looking to shed any brand that isn’t the leader in their category. No. 1: thumbs up. No. 2: ditch,” said Chris Bragas, CEO of Eastwest Marketing Group, New York, which specializes in strategic planning, advertising and partnership marketing.”

And now Ad Age reports that private-label is taking the next step and breaking down the walls between retailers. Safeway is taking its organic house brand, O Organics, and better-for-you brand, Eating Right, into competitive grocery-chains nationwide this fall.

This leaves CPG marketers with two choices. Cry in our rum. Or find ways to fight back.

How To Fight Back Against Private Label

Innovation, Innovation, Innovation. One way to beat the pirates: build faster brands.

According to Advertising Age, product categories in more than 20 countries show a private-label market that is 56% higher where there is low innovation activity compared with categories with many new products

Where are you supposed to find all these new ideas? Go online. Listen to blogs. Build a strong online loyalty program. Create digital panels and get engaged with your consumers.

Yes, the pirates can do these same things. Our job as protectors of our brands is to do it better, faster and smarter. It’s do-or-die.

Go Crazy. And Go More Digital. Let’s face it. There’s no rational reason to buy a name-brand product if the cheaper store-brand product is just as good.

If you can’t be better (for legal or cost-of-goods reasons), forget rational. Go crazy, and go digital.

According to Brandweek, P&G has been able to maintain the upper edge over competitors like Unilever while fighting off private label by continuously seeking innovation in product launches. Earlier this month, for example, P&G announced it was introducing a line of laundry and fabric softeners, called Tide and Downy Total Care, made from beauty care products.

Why not go a step further? P&G can create online fashion and beauty shows to support the launch, enlist celebrities to pitch, and build social communities around these ideas.

Shake things up.

Be More Facebook and Less Faceless. Private-label brands count on brands being boring, rational and predictable. They count on our brands being managed by bankers and not entrepreneurs.

Maybe what you need are a few more loose cannons rolling around on your decks. Challenge your agencies to think crazier. Ask social networks and online ad networks what they could do if there were no rules.

The commanders of the private-label ships are the same execs who used to manage your brands. They know your playbook as well as you do. Burn it, and keep them off guard.

Get Closer To Your Customers. Private-label brands know people like saving money. But since they’re not investing, they can’t learn the kinds of things that you can learn. What are the emotional reasons people need a pasta sauce, or a frozen dinner, or a haircolor?

What do your customers want to do? Who do they want to be? What do they dream? Can you offer them branded online tools that make their lives more interesting, more fun, less dull?

Leave the Parrots to the Pirates. The world doesn’t need more “me-too” products. By the time you copy a successful innovation, the pirates will be there too.

How else can CPG brands do battle against private-label, and win? What do you think?

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2 responses

17 09 2008
Will The Crashes of Lehman Brothers and AIG Take Your Brand With Them? « i C P G

[…] Need to fight off Private-Label pirates? Here are a few ideas. […]

4 03 2009
The General Does Battle Against The Private-Label Pirates, And Wins « i C P G

[…] Private label pirates accounted for more than $81 billion in U.S sales in 2008. That’s a 10.2 percent leap over the previous year. And, it’s no secret that the worsening economy has put significant wind at their backs. […]

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