Own brands2014

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Text of Own brands2014

  • 1. Retailer Own Brands

2. Contents Definitions The Own Brand Journey Own Brands in 2012 Types of Own Brands Advantages of Own Brands to retailers Consumer factors influencing Own Brand purchasing Current issues Challenges going forward 3. Defining Own Brands Many different definitions provided Early definitions reflected the limited use and development of own brands. They focused on products, labelling and availability but not on their ability to offer differentiation Originally cheap low priced alternatives to manufacturers brands 4. Own Brands are on a Journey 5. Charting the Journey Historically, balance of power - wholesaler 1881 - Ivory soap commercial - P&G 1885 - Sunlight soap launched (Unilever) Strong brand name & USP eroded wholesalers power & established manufacturers as dominant force Mid 60s and early 70s - new shift in balance of power in retailers favour 6. Some Key Milestones The First Crisis Early 1970s LTA, hello money and other forms of discount led to a weakening in manufacturers brand franchise. 1988 - The Year of the Brand 1988 Nestle takeover of Rowntree Mackintosh The Second Crisis 1993 - The Death of the Brand 2nd April 1993 - Marlboro Friday Proctor and Gamble introduced everyday lower prices `Sainsbury introduced Novum Washing Powder 7. What were the reasons behind the change in fortunes? 1. Growing power of retailers and growing sophistication of retailer brands 2. Increased marketing literacy among consumers 3. Weaknesses in marketing depts.. 8. 1 Growing power of retailers and retailer brands Price gap between manufacturer and own label brands became too wide (20- 25%) Retailers began to match the quality of manufacturers brands Retailers expanded their range of own brands Increasing manufacturer collaboration with retailers 9. 2 Increased marketing literacy among consumers Materialistic 80s to the sharing caring 90s Increasing consumer scepticism about brands Increasingly literate consumer 10. 3 Weaknesses in marketing departments Brand managers becoming divorced from their consumers Increasing bureaucraticism 80:20 Marginalised 11. Own Brands are on a Journey Positioning of own brands has changed significantly Currently witnessing premium brands that reflect a stores personality Increasing quality levels Increasing market penetration across categories Retailers own brands now ranked as top brands in many categories 12. Own Brands in 2013 Retailer own brands now account for 35 to 41% of grocery sales in Ireland? 47% of grocery sales in UK 42% in Spain 53% in Switzerland 41% in Germany 44% in Slovakia 17% in Italy 13. Market Value Own label sales in Ireland accounted for an estimated 4.16 billion euros in 2012 Own labels sales increased by 60% in Ireland between 2004 and 09. Growth within the own label market slowed between 2009 and 2011 as a result of the impact of the recession on consumer spending. But they have continued to increase in a declining grocery market. 14. Sales by Outlet Type Own labels account for Majority of sales in Discounters 20% in convenience stores 40% in Supermarkets 15. Sales by Category Fresh fruit and vegetables are the most popular own- label product over 63% of Irish consumers have purchased in last 12 months Less than 50% have purchased own label meat/fish and poultry highlighting importance of traceability and food safety. Foods that are seen as price driven rather than quality driven are more popular own brand categories 16. Types of Own Brands An evolutionary sequence (Burt, 2000) Laaksonen and Reynolds (1994) 4 tiers of own brands Low-quality no-name generics Medium quality quasi brands Comparable quality me-too products Premium quality, high value-added own-brands Wileman and Jary (1997) 5 stages ranging from generics to high quality leadership brands 17. Huang and Huddleston refer to 3 types Generics Mimic Brands Premium Own-brands 18. Generics Retailer controlled items which are packed in such a way that the prime concern with the packaging is product protection, with minimal concern for aesthetic appeal and displaying only the legal minimum of information DeChernatony 1988 19. Quinnsworth Yellow Packs 20. Generics Introduced by UK grocery retailers in 1977 Market positioning is to provide lowest possible price by cutting expenses on advertising, packaging and marketing. Basic functional products No real investment in product design or product development Commodity type packaging with stencil lettering Brand free or no-brand (deChernatony, 1988) Do not compete with national brands Provide product alternatives Typically have lower quality and inferior image than national brands 21. Mimic Brands Largest group Compete directly with manufacturers by mimicking leading national brands. Market positioning usually a value for money approach. Low-priced products Reasonably acceptable quality An alternative to higher priced national brands Similar packaging to national brands Limited investment in product design or product development 22. Surge of mimic brands appeared in 1990s Look-alike or copy cat brands Retailers accused of confusing the consumer and stealing brand equity from manufacturers Have provoked legal action over infringement issues e.g. Coca cola v J. Sainsbury (Classic Cola), Kellogs v. Tesco, and Dunnes and Karen Millen Imitation then gave way to innovation 23. Premium Own-Brands Market Positioning to provide consumers with a high value added product with often higher quality than national brands Priced on par with National brands Compete directly with national brands Offer the opportunity to differentiate the retailer from competitors Provide retailers with a strategic tool for developing retail store image 24. Innovation and quality a key driving force in premium own brand development Originally retailers were passive distributors of national brands Retailers now actively involved in developing and marketing own brands Some retailers have their own in-house NPD and packaging design departments e.g. Zara Build store loyalty and help to reduce store switching Access to both consumers and scanner data facilitates tracking consumer trends and informs product development 25. What are the Advantages of Own Brands for Retailers? 26. Advantages of Own Brands for Retailers Higher profits/better margin advantages This is the single most cited reason for focusing on own brands by retailers Competitive edge/turnover advantages Store image / customer loyalty advantages 27. Higher profits / better margins 1 Margins tends to be 5-20% better - Keller (1993) suggests that gross margins for Own-brands can be 20-50% higher than national brands! 2 Manufacturers promotional expenses are avoided 3 Display space can be manipulated for better returns 4 Sales can be promoted by placing own brands next to major brands 5 Tighter stock control is usually possible 6 There is more control over pricing 7 Favourable buying terms occur where excess supply capacity exists 8 They can help to breakdown manufacturers, hold of certain markets 28. Competitive Edge / Extra Turnover 1 Advantage over competitors with no own brands 2 Offer benefits distinct from competitors 3 More control of product specification and quality 4 Allows more retailer-led product innovation 5 More control over composition of product range 6 Can exploit gaps in the category 7 Imitation styles can be introduced quickly 8 Own-brand products cannot be obtained elsewhere 9 Can be sold at lower prices 10 More scope for differential pricing 11 Offer more price variety for the consumer 12 Inducement to use the store, leading to other purchases 29. Store Image / Customer Loyalty 1 Good value enhances store image 2 Build relationship of trust and credibility 3 Control over relationship with customer 4 Good value builds loyalty to the store and own brand 5 Increase loyalty even if temporary stock out 6 Own brand may be perceived as equal to or better than manufacturers brand 7 Widely assumed that own brands are made by leading manufacturers 8 Own brands can give a distinctive corporate image 9 Own brands carry the retailers name into the consumers home 10 Retailer advertising can benefit the stores and the own brand 11 Better design co-ordination can be achieved between the stores and the products 30. What are the factors influencing own brand purchasing by consumers? 31. Factors influencing own brand purchasing Range of Issues explored Price Quality Packaging Demographics Risk 32. Price Own brands typically 10 to 30% cheaper General consensus that price followed by quality are the 2 main influencing factors for own brand purchasing (Hoch, 1996; Miranda and Joshi, 2003; Mintel, 2012) Own brand proneness positively related to consumer price consciousness Own brand shoppers perceive them as providing greater value for money 33. The Irish Perspective Shopping and spending has been altered by the recession Value for money matters most It is a key driver in the Irish market at present Special offers and low prices are top of consumers minds Own labels are most strongly identified in terms of costs but they are suffering from a personality deficit (Mintel, 2011) 34. Significant cost savings have been highlighted for those switching from branded to own brand products E.g. Milk, Tea and Bread can yield annual saving of 338 Euros pre year (Irish Times, 26th Sept., 2011) 35. Quality Quality has improved immensely while maintaining price competitiveness Divided opinion as to whether they are perceived as inferior in quality Similar objective quality ratings versus different subjective quality readings (Sethuraman and Cole 1999) Range of studies concluded that national brands had higher quality ratings than own brands due to advertising, equity. (Cheng e