Private Brands.pdf

Creating and managing brand valueTM

Private brandsA global guide to the rise ofprivate label brands


My first private label experience

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Page 1 Private brands: a global guide to the rise of private label brands

Introduction

United States of AmericaDyfed Fred RichardsCincinnati

I distinctly remember 1981-82, for a number of reasons: I was living in Britain, and it was the year of the Falklands War and the start of the bitter miners strike that came to full effect in 1984. It also was the year I first encountered private label packaging. Maybe, subconsciously, even then I knew bad design when I encountered it?

I was sent by my mother to the local supermarket, Liptons, to purchase some sliced bread and my favorite tin of baked beans beans on toast being somewhat of a delicacy in the UK! At the shelf I was amazed to see what can only be described as packaging that looked like army rations. It was a plain white can with stencil-style lettering that simply said baked beans. Knowing that money was tight and I was on marching orders from my mother to not overspend, I still could not bring myself to purchase the private label can of baked beans: Heinz baked beans was the winner then, and it remains so today.

Later that same month, I was horrified to discover Liptons private label packaging in my home. Was my family also being affected by the miners strike and the financial squeeze gripping the country? Was the terrible poverty and hardship we were watching on TV every night invading our home in the form of this shocking-looking packaging?

In the early days, many consumers believed that private label goods were the same as branded goods in less-fancy packaging.

This prompted brands to go on the offensive and publicly state that they did not engage in producing private label brands. The war for shelf space and consumer loyalty had begun!

After an initial trend of looking cheap, private label brands tried to copy the designs of their branded competitors as closely as possible in an effort to gain some of the brands aesthetic cache. The strategy behind this approach is still unclear to me: was the idea to confuse the consumer or, even worse, trick them into buying private label instead of the brand they had trusted for so long?

New and exciting timesLittle did I know or understand way back in 1981 that what appeared to be a terrible design crime would turn into a global phenomenon and an industry in which I would be actively involved. (In fact, when I worked as a package designer in London with Safeway and Sainsburys, their commitment to raising the design standards for their respective private brands was very clear.)

Thankfully, package design for private label products has advanced by quantum leaps since those early days of emulating army rations and copying brands as closely as possible (while avoiding legal action). Today private label packaging frequently sets the standard and tone for high-end design and consumer expectations for product delivery.

British and Swiss private label brands, for example, have capitalized on the

opportunity to create white space on shelf and distance themselves

from the perception that private label goods are inferior to the brands they once tried to emulate. Better yet, some private label brands have become destination brands in their own right. No longer need consumers feel shame in the checkout line when placing private label products on the conveyor. Private label brands are creating new and exciting design languages, consistently winning design awards, driving business and delighting consumers.

Private label is a growth industry, and one that we can learn from as designers and brand developers. It is becoming abundantly clear that consumers are far more open to new creative ideas than we ever dared imagine. While once branded products led the way, today private label market share is growing year on year. 1981 seems so long ago that I hardly dare wonder what my weekly grocery shopping experience will be like 26 years from now. Certainly, the future appears bright and oh-so-very private.

Dyfed Fred RichardsExecutive Creative DirectorNorth [email protected]

Private label brands now have the power to become destination brands in their own right. Tesco, Harvey Nichols, and Waitrose are great examples of this principle.


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Page 2

Contents

Private brands

What is the strategy behind copying the master brand? Is it to confuse, cheat, or question the consumers ability to choose?

IntroductionDyfed Fred RichardsExecutive Creative Director / North [email protected]

No complexMarina PapendieckExecutive Director / Buenos [email protected]

A view from JapanYuji OhbaCreative Director / [email protected]

One of these things (is not like the others)Rick MarianiSenior Creative Director / [email protected]

Private label to retailer brandsBorja BorreroExecutive Creative Director / [email protected]

A very private New ZealandDebbie Hyde Creative DirectorJames Bickford Director, Head of StrategyNew [email protected]@interbrand.co.nz

Swiss Magic: From copycats to natural born winnerAndreas Rotzler Chief Creative Officer Dr. Thomas Deigendesch Senior [email protected]@interbrand.ch

Distinction is next for EuropeRonald BartikowskiCreative Director / [email protected]

Opportunity and leverageDyfed Fred RichardsExecutive Creative Director / North [email protected]

The importance of private label in creating valueDaniela Nunzi-MihranianCreative Director / [email protected]

The threat!Leigh BachmanExecutive Director, Strategy & Research / [email protected]


Consumers believe that they are choosing a cheap, low-quality product compared to leader brands, instead of confirming their good value for money.

Page 3 Private Brands: a global guide to the rise of private label brands

No complex

ArgentinaMarina PapendieckBuenos Aires

Argentina witnessed the emergence of outlet brands some time before the notion of private brands invaded the market. For consumers, outlet brands meant choosing a lower-quality or defective product. Contrary to that view, the advantage of private brands is that they have the same quality as other renowned brands because, although supermarkets and retail chains distribute and promote them, products are manufactured by the top companies in each sector.

In Argentina, private brands emerged with the repeated economic crises that plagued the economy since the 1980s, when top food companies and supermarkets launched hundreds of good quality products at a lower price. However, with economic recovery, consumers have gone back to leader brands.

On the verge of a new economic crisis in the Argentine economy, private brands have a new chance to consolidate themselves as a real option when consumers choose a product and increase their participation in the market.

A walk around the shelves reveals that mass consumers give close consideration to product design codes according to category, both in general brands and private brands. It is not just that the latter copy leader brands; it is quite rare to find really innovative, distinctive proposals in the segment. Only a few dare to do so.

Thus, private brands seek to look like or copy other brands to succeed in making it to the category and becoming a real option for consumers.

Consumers purchasing private label products benefit from a reasonable option in terms of quality (which many times is even higher than the credit these products are given, if we take into account that suppliers are the same as the leader brands) and a very good option in terms of price.

Price is key: it is the fundamental reason why consumers buy and choose a private brand. Otherwise, they would probably go with their usual, favorite brand. Originally, private brands packaging designs were poor, which rather than reflecting lower prices actually made consumers suspicious about product quality. Thus, they associated them mostly with outlet brands.

It is quite understandable that in the midst of economic crisis, inflation and a generalized increase in prices, consumers should restrict their shopping options and

(many times) quit buying their favorite brands in favor of private brands. But this should not make consumers feel like they are buying a bad product. Actually, private brands succeed in offering a good quality/price ratio, which is the reason why their package designs should confirm this perception and not contribute to consumers suspicions of private brands being low-quality products.

Low investment in package design results in having consumers believe that they are choosing a cheap, low-quality product compared to leader brands, instead of confirming their good value for the money. A consistent message for a private brands packaging design should highlight that it is a good staple, basic, albeit good-quality product. Product design should strive to make consumers feel they made a smart choice rather than feel ashamed of the products they are buying.

As stated above, the main reason why todays Argentine consumers choose a private brand is price; otherwise, they go promptly back to their favorite brand. But if private brands also offered a good choice in terms of packaging, they would increase ten-fold their opportunities vis--vis competitors and ensure consumer loyalty, even in the event of economic crisis.

Today the Jumbo chain is a leader in achieving this with its private brands. Package design has improved considerably, and Jumbos consumers see the chains products as a valid alternative and a smart buy. They would rather not pay more for more traditional or renowned brands, particularly for similar quality.

A good design could be a key contributor to a more appealing, value-for-the-money proposal. It also could result in happier consumers who are proud of their smart buys and not just resigned buyers. Private brands should be a good choice for consumers due to their many benefits. They also should entice consumers to try them and demonstrate why choosing leader brands is not the only way of guaranteeing satisfaction.

Marina PapendieckExecutive DirectorBuenos [email protected]


A view fromJapanJapanYuji OhbaOsaka

The continuous increase in raw material costs has pushed up the prices of all kinds of consumer products. This has made consumers quick to switch to Private Brand products (PB products).

PB products are defined as those that are planned by a distributor (seller), produced by a manufacturer, and sold solely by that same distributor. In contrast, National Brand products (NB products) are planned and produced by a manufacturer and are basically open to all markets (and distributors) to sell. For example, a leading Japanese PB brand, Top Value, is sold at only Aeon, Jusco, and Daiei, which are major Japanese distributors.

The profit margin for PB products is roughly estimated to be about 40 to 50 percent, while the margin for NB products is about 20 percent. The direct deal between manufacturer and distributor enables PB products much larger margin. However, unless the scale of merit for the product is similar in consumers eyes, it is unrealistic to expect to maintain this large of a profit margin.

Top Value originated in 1974, the year of oil shock, and the Top Value brand name was established in 1994. Company sales have increased dramatically over the years they were up 120 percent in 2007 and 130 -140 percent in 2008. Similarly, the entire PB category has also expanded its market share, generating fierce competition among various PB products. Today, health and safety features are important value-adds, and package designs are more refined.

To address the issue of improving PB product safety a source of controversy in recent years former Wal-Mart CEO Lee Scott recently announced that the company will require all of its PB product manufacturers, including the largest manufacturer in China, to disclose their products histories. However, acquiring certificates for safety and environmental issues from third parties in order to comply

with Wal-Marts new requirement will mean additional costs to the manufacturers, and thus some opposition to the plan is to be expected. Scott also

mentioned that the current worldwide economic crisis has made PB products indispensable to consumers and that Wal-Mart is planning to expand its business into Brazil, India, China, and Russia.

The main difference between the Japanese PB product market and the European and US markets is that in Europe and the US, PB-only manufacturers co-exist with top brand manufacturers. In Japan, only top brand manufacturers produce PB products; there are no PB-only manufacturers. That situation will probably remain unchanged. Meanwhile, the sales of PB products are expected to increase, and their packaging will become even more refined and categorized.

Yuji OhbaCreative [email protected]

Resource: Nikkei News Oct. 23, 2008 / Spa Business Oct.08Photo by Takahide Nakamura, Japan



One of these things (is not like the others)

United States of AmericaRick MarianiCincinnati

Do you remember the game One of These Things (Is Not Like the Others)? Perhaps youve played this with your children or recall watching the singsong version from Sesame Street when you were younger. The games purpose was to teach you how to observe and analyze different objects.

As a kid, I loved this game and was always making comparisons. I can remember trying to find the differences between national brand packaging and the grocery store knock-offs. My mother would insist that the only difference was in the price. Its the same thing; it just costs a little less, she would tell me. Since the packaging looked almost the same, I believed the food would taste almost the same. And since I would eat anything when it came to snacks, it didnt seem to really matter.

Today, however, the shopping experience has become a little more challenging. There are more and more products screaming for your attention, and the copycat store brands complicate things further.

Why copy?Consumers play One of These Things (Is Not Like the Others) every day in the grocery store. They see private label packaging that is similar to the name brand in color and architecture. Why does the private label brand copy? Does it really want to fool the consumer? Or is there a lack of confidence that the private label brand will not be able to compete with the national brand? Retailers such as Kroger, Safeway and CVS adopted the copycat strategy a long time ago. Why? Because

its easy. By piggybacking on the success of national brands, retailers can elevate products that might have been viewed by consumers as generic. For a small investment, retailers can reverse-engineer the national brands and leverage what is already working. Little research is necessary, and manufacturers are often willing to create the product at a lower price.

Following the look of the national brand opens the door to parity. The concern is that the retailer often instructs its agency to simply create a package very similar to the national brand, which limits any design exploration. Sure, its a safe way to get a product to shelf, but is it the best way to win the consumers trust?

Missed opportunitiesPrivate label is the biggest missed opportunity in the US retail market today. However, transformation of private label brands into store brands is on the horizon. Retailers such as Target and Wal-Mart have begun to elevate their store brands into something bigger and better. (Targets Archer Farms brand is an example of how copycat package design is no longer the norm.) These retailers have discovered new insights into what consumers will buy, and these insights have allowed them to build connections with those consumers. The retailers also have advance notice about the marketing plans of national brands, and they control the everyday shopping environment. By capitalizing on these advantages, the retailer can identify consumers product needs and, importantly, which needs currently are not being met to build better shopper experiences.

The retailer has an advantage over national brands. They own the canvas where consumers shop. If they listen, they can lead the shoppers to a better experience and lay the foundation to build a true store brand!

Target recently introduced a new cereal box under its store brand, Archer Farms, that has brought a new innovation to the category. Bag in box, a resealable cereal box, was developed to help keep the product fresh. Target fulfilled an unmet need and delivered a better consumer experience.

Innovation may be as simple as challenging the consumer to think differently about a packaging structure or product use. Little surprises can delight the consumer and build loyalty for the masterbrand, which puts the retailer in a leadership role.

Look beyond our bordersIn the United Kingdom, retailers such as Tesco, Marks & Spencer, and Waitrose have elevated the shoppers experience through their store brands. However, evolving private label brands into store brands does not happen overnight. The UK market was the first to invest in this strategy, which has matured over time. Tesco launched its first private label brand in 1924. According to the book Private Label: Turning the Retail Brand Threat Into Your Biggest Opportunity, ten years ago Tescos private label products accounted for only a quarter of its revenue. Today it accounts for more than half of its revenue. Tesco expanded its private label into a three-tier approach: Tescos value brand, Tescos premium brand and Tescos Finest. Tescos Finest is a great example of a retailer elevating a store brand to a higher standard. Consumers view it as the best product and do not mind paying

a little more for it because they trust its quality. Listening to consumers has helped Tesco identify ways to expand its product line, which, in turn, has created new shopper experiences and keeps consumers coming back for more.

Facing the challengeThe UK has shown the rest of the world how powerful store brands have become. In the US, consumers are savvier about private label than many companies believe. Target and Wal-Mart have recognized this and have put solid store brand strategies in place. Other retailers also need to invest in their own brands and begin to build a foundation of trust with consumers. Are Kroger, Safeway, and CVS ready and willing to adjust their strategies to build their store brands? The consumer is ready! If we are to copy anything, lets copy the UKs success and breathe new life into the shoppers experience. Stop copying and start leading! Building store brands that mean something to the shopper will increase your share of total consumer purchases.

Rick MarianiSenior Creative [email protected]


Private label toretailer brands

SpainBorja BorreroMadrid

When private label brands were born,

they first positioned themselves as being

the cheapest product alternative in the

market. They werent very attractive and

offered almost no guarantee of quality.

It was hard to imagine back then that

they would reach the level of brands

delivered by manufacturers or evolve

into premium products.

Private label brands have developed

incredibly fast. In just a few decades they

have revolutionized the market and gained

important market share against brand

name brands. Such incredible development

has forced private label brands to change

their names accordingly. No longer are they

no ones brands. They are now endorsed

by retailers, contributing added value to a

retailers brand and boosting

customer loyalty.

A trend that reflects the evolution and

consolidation of private label brands

is retailers increasing investment in

packaging, which they are recognizing as an

important customer touch point. Retailers

growing interest and pride in their store

brands demonstrate their concern about

developing a personality that differentiates

them and their offerings. For years this

situation has affected the store; now it

affects the product and its design.

The development of store brands has

reached the point where retailers today

not only offer basic products but also those

associated with emotional benefits. We also

see that they provide additional services

such as Braille, customer service, nutritional

information, and even stories to enrich the

packaging and the brand.

Yet, aside from these developments,

important weaknesses continue to be

detected in the retailers brands. The most

important one is the lack of transparency

about the products manufacturers. Most

consumers are unaware of the origins of

these products, and it makes them

feel distrustful.

For many, retailer brands prices, which

typically are lower than the rest of the

category, are usually interpreted as signaling

an absence of quality. This fact can make

consumers feel guilty about not buying the

best products for their families. The look

and feel of the store also influences the

way consumers perceive a retailers brands.

The objective is to make the purchaser see

the retailer brand as an intelligent buy,

combining low price and high personal

satisfaction. This way, the retailers brands

become valued, safe options that, through

the confidence they inspire, deliver

personal satisfaction.

Going back to packaging, there is an

important cultural issue we discovered in

our research for the supermarket chain

DIA. In Spain, the most effective packaging

designs show the product in a natural way,

with a healthy, understated appearance.

In the US, however, wild colors,

spectacular type styles and a lot of visual

effects sell better.

The fast growth of

retail chains and the

maximization of their

resources, combined with

a culturally connected

world, enable us to think

in universal graphic codes

that make it possible to communicate with

many different targets. We should not forget

that brands need to adapt to the specific

characteristics of each market, but there

are some packaging elements and concepts

that we can consider globally. Relating to

the signature system, the most common

options are:

Product focus: The product uses a discreet signature system with low brand visibility

that works as a warranty for the product. It

somewhat camouflages the brand, giving

more importance to the product.

Brand focus: The brand is very visible and leads the product. It communicates power

and pride in belonging, betting on this

transparency. One caution: this option can

have twice the negative impact

if the product fails.

Product and brand focus: This very common graphic approach places the brand

in a lower position. Graphically it is very

dynamic; it has a high visibility and doesnt

need to saturate the brand use. Its versatility

becomes clear when it makes the most

of some other elements that accompany

it. This system usually works with many

different product categories (perfume,

children, and pets).

Traditionally, the design objectives for

retailers brands followed the trends of

market leaders. Now, however, retailers

brands are starting to innovate and even

move faster than some brand name

manufacturers in bringing new products

to life. Sometimes a retailers relationship-

building and customer-satisfaction efforts

are so effective even after imitating

a market leaders strategy that when

a branded manufacturer has to remove

a product reference because of bad

performance, the retailer is still rewarded

for it and keeps it.

Another important component of retailers

brands is communication. Supporting the

packaging with consistent information,

both in and outside the purchase space,

is important to gain client confidence

and satisfaction. It is also a great

opportunity to establish an ownable style of

communication.

Increasing consumer concerns about

healthy living, product safety, and quality

make it mandatory to provide

organized and tidy product information on

a package, such as the main and secondary

propositions, simple and effective usage

guidelines, convenience information,

nutritional facts, and other important facts.

Another issue we should take into account

is the brands verbal identity. It should

always reflect the brand DNA and can help

make retailer products more attractive

to the target markets. The development

of this identity can be conventional or

more poetic. The second option is more

creative and can better differentiate the

brand, but sometimes it can be difficult to

adapt a product name to other cultures

and languages. (The word chocolate, for

example, is one word that works in different

languages.)

The use of an ownable type style/font across

a large quantity of references can help

retailers to create a consistent identity and

can facilitate the management and control

of the design. Use of a versatile and widely

available font also can solve many of the

problems of a multi-language strategy. The

counterpoint to the type simplicity would

be the logotipacion of all the product

references imitating the market trends.

Another area in which retailer brands

should invest a big part of their efforts is in

choosing photography that not only helps

to identify the product but also suggests,

evokes and enriches its content.

Retailer brands have grown in Spain 30

percent in the last year. To maintain this

rate of growth they will need to emphasize

authenticity, think always about the

consumer and invest consistently in R&D.

Issues such as universal design, Braille,

products for diabetics, flavors adapted to

different cultures and eco-sustainability

will be more important each day in an

environment where the emotional aspects

of product selection eclipse material ones.

Borja Borrero

Executive Creative Director

Madrid

[email protected]

Retailer brands compete directly with manufacturer brands in creating value for their own brands and, as the retailers do, they also offer a wide array of products and varieties.

We are seeing a lot of creating and managing of new sub-brands and categories, from personal care articles to bio products, across a wide economic range.



A very privateNew Zealand

New ZealandDebbie HydeJames BickfordNew Zealand

Page 8

Private label junkies

New Zealand consumers are private label junkies when walking the aisles of the supermarket. For the supermarkets, the hard yards creating private label loyalty is being further rewarded as consumers tighten their belts. In a recession own label brands are placed to reap the rewards as acceptance, quality of product and trust has been earned.

The New Zealand private label market is

an intensely managed and competitive

environment. Retailers recognize the

fact that the private label brand is a big

puller and, once hooked, the consumer is

extremely difficult to prize away.

Private label in New Zealand has become

more sophisticated and, in some quarters,

has become a stand-alone brand on the

shelf. Private label was once seen as a

contributor; now it is a brand weapon.

In fact the whole notion of private label

is something of a misnomer and risks

trivializing the scale of the business.

New Zealand supermarket operators

have tremendous influence in a very

monopolistic market. Currently New

Zealand has two main players. Foodstuffs

is New Zealand owned and operates

PAKnSAVE and New World supermarkets.

Australian-owned Progressive Enterprises

operates Countdown, Foodtown and

Woolworths. These two entities dominate

the landscape. New Zealanders purchase

approximately 75 percent of their food from

supermarkets, so the private label space is

extremely powerful to both operators.

Currently, both supermarket operators

are engaging healthier eating as a brand

value for their respective private label

offerings. Foodstuffs is undertaking work

on a healthy options range that will appear

on retail shelves under its private label

brand Pams, and is working with suppliers

to reduce the fat, sugar and salt in other

The future is bright for private label in New Zealand. Consumers trust the private label offering and, in some cases, private label has become a stand-alone brand.

private label products where practical. A

reduction in the use of trans-fats has also

been set as an objective.

Pams, owned by Foodstuffs, is the real

winner in New Zealand. As a brand, Pams is a

genuine competitor to branded products on

shelf. It is a private label that has grown up

to become a brand in its own right.

Pams has a warm, friendly and fun

personality on shelf, and, as a brand, has

become a friend the consumer can trust. It

has evolved visually from stark beginnings

to where it sits now full color, food shots

and dynamic branding, while retaining the

equity of its heritage. Pams has set the

benchmark for other private labels to follow.

The future is bright for private label in New

Zealand. Consumers trust the private label

offering and, in some cases, private label has

become a stand-alone brand. Consumers are

becoming wise to the fact that these private

label brands are often being produced by the

brand manufacturers they compete with

and are asking the question: Why should I

pay more for what is essentially the same

product? Historically, private label in New

Zealand was only focused on value, while

quality and brand value was the domain of

branded suppliers. This rule was broken by

Pams, who understands the value of brands

and is leading private label into the future.

Although, in the main, private label in New

Zealand is struggling for individuality, it is

refreshing to see a private label such as Pams

breaking away.

Debbie Hyde Creative Director

James Bickford Director, Head of Strategy

New Zealand

[email protected]

[email protected]

The art of private label

There is support for private label above-

the-line in New Zealand; however, these

brands have to work extra hard on shelf

compared to mainstream brands.

Signature Range was launched as a

revolutionary concept but has evolved as a

hybrid visually. While it uses black as a key

identifier, each categorys individual visual

and verbal language is taken from the

brand leaders. Signature Range was the

first private label brand to gain consumer

trust with a me too strategy. However,

one questions why Signature Range has

not now evolved away from a me too.

The newly introduced

Select range is

endorsed by the

Signature Range

brand. It is unclear

why Signature Range

has developed this

strategy. This could be

for one of two reasons.

One, the Signature

Range endorsement

acts as a brand

extension or two, this

could be the phasing

out of Signature

Range to make way

for Select. The Select

private label is safe

and delivers to a very

simple and predictable

formula. It has

positioned its products

as premium, and within

its SKU formats there

is evidence of being

more adventurous in

approach.


Swiss magicFrom copycats to natural born winner

Andreas RotzlerDr. Thomas Deigendesch Zrich

Swarm Tactic

Migros Budget advertisement:You won't find these products cheaper anywhere else.

Me-too principle

The old Migros Copycat world

The new Migros Natural Born Winner Universe

Gottlieb Duttweiler, a pioneer of the Swiss retail business, had a clear vision when he introduced private labels in 1928 to benefit customers and revolutionize the retail business. Today, private labels are more successful than ever. A recent AC Nielsen study indicates that the worldwide market share of private labels in the FMCG business is 17 percent, 20 percent in Europe and considerably higher at 45 percent in Switzerland.

The original success of store brands was rooted in their attractive price-value offer. To compete against the superiority of name-brand producers, retailers started to produce no-name products by copying name brands and positioning them in the low-price segment. Key to this strategy were lower pro duction costs and savings in development and communication costs, resulting in lower prices. Additionally, these no-name products provide an automatic differentiation in the competitive marketplace and allow retailers to close the gap in their assortment. The recent success of store brands is based on the fact that they have become strong stand-alone brands. As the Nielsen study reveals, the attractive alternatives are per ceived to be as good as name brands. Nearly three-fourths (72 percent) of US households surveyed viewed private label brands as equivalent to name brands, while 62 percent said store brands were just as good as name brands.

Today, store brands are represented in low price as well as in premium segments and deliver the same benefits as name brands. They provide orientation about the product offer, they convey trust in the high quality of the product and, most importantly,

they deliver the critical function of a real brand: prestige and emotional identification. The development from a no-name to a real brand is also a result of a sophisticated positioning strategy and a differentiated package design that all successful store brands have today.

Globalization has spread the same patent for success around the world and Switzerland is no exception. Everyone uses the same recipe for success. This me-too principle has resulted in everything looking quite the same.

Customers around the world reach for crunchy breakfast cereals which display a bowl in the lower right hand corner of the package. Cleaning products for a sparkling home feature high-color contrast packaging with diagonally placed, three-dimensional typeface.

Every square millimeter of the packaging and every neutron in the customer s brain has been programmed so the customer will move his arm to grab the product behind the well-designed message.

It does not matter if its an original or a private brand: the pattern used is featured the world over. And this well-known strategy has been copied by private brands for years.


Cherry Picking Tactic

Migros Selection advertisements for French cheese and the Spanish speciality Pata Negra ham

If we view things from this perspective, packaging that tries to fulfill consumers wishes ends up in nowhere land, a vast emptiness which at best could be considered background noise. No true leader emerges from this massive, undistinguishable block of forms and colors which make up mainstream packaging design. As a result, supermarket shelves the world over tend to look the same.

Recently, something has changed. Copycat brands have become unique at both ends of the product range for both cheap and luxury products. And the design principles follow two simple rules borrowed from Mother Nature:

As in cherry picking, the sweetest things in nature, the nectar of flowers and the sweetness of fruits, are translated into design elements such as compact forms and colorful shapes in contrast to a plain background. These stunning design elements can be spotted quickly. They help relay a message to the world, I am the essence. I am good and sweet. See me, grab me, eat me.

Another example borrowed from nature illustrates the way weaker creatures seek protection. It is known that little fish swim in swarms so that they look bigger and seem to be more powerful as a group.

Migros, the biggest Swiss retailer has followed this direction. Migros has launched both a cheap and an expensive product range. Notably, Migros has broken away from established design patterns to present something else, drawing on examples from nature.

The inexpensive private brand, Migros Budget, has developed one design pattern for the complete array of products in the budget range, from coffee and pasta to cleaning products. The design pattern seems to say, We didnt even spend a penny on design. The message emphasizes quantity, and a never-ending swarm of good, yet inexpensive products. Customers who choose these products will certainly benefit.

At the opposite end of the private brands is Migros Selection, where the product is the star. The packaging used for these high-end products features a window so that the product is visible. Thus, the carefully selected products are beautifully presented. The customer is bound to be convinced from the first moment that what has been selected is exquisite quality. The packaging relays a message which seems to say, This is perfection. This is cherry picking.

These private brands in Switzerland adopt a simple butextreme visual strategy which focuses on a basic, down-to-earth,natural magic to change the world. In Swiss German, we say, Weniger isch meh the design world knows it as "less is more."

Andreas Rotzler Chief Creative Officer Dr. Thomas Deigendesch Senior [email protected]@interbrand.ch

Page 10


BEST Albert Hein, Netherlands

BETTERcoop, Sweden

GOODREWE, Austria

Distinction isnext for Europe

GermanyRonald BartikowskiHamburg


Leading the packEurope continues to lead the pack in private label development. Nine of the top ten countries in the world with the highest-value market share of private label are European.

Because of their unique position to leverage consumer trends, retailers have been able to deliver value-added propositions that resonate with the consumer. This advantage has allowed for retailers continued growth year after year.

Retailers have moved beyond simply creating imitations of manufacturers brands and started developing targeted sub-brand tiers. By adding budget and premium offerings on either side of the existing private label range, most retailers have created a classic good-better-best strategy.

Continuing to use consumer insights to customize the shopping experience, retailers have identified social trends as a way to brand their offerings. Lifestyle, health, and ethnic ranges allow consumers to associate the retailer brand with these important issues in their lives.

Coke is available everywhereIts a small world, and retailers in Europe are quick to learn from the developments around them.

When new ideas and trends are identified in one market, this thinking is adapted and transformed into another, leading to a lack of distinction among major retailers.

Almost every retailer has a range of products addressing the popular topics of our time: obesity, health, organic, and the environment.

This combined with the same selection of manufacturer brands has created a very me too approach to the market, no matter which retailer a consumer chooses.

How does a retailer create a point of difference?

Selection is distinctionConsumers want to know where products come from. Based on this important insight and by looking for a distinctive offer to drive consumer retention, retailers have started to develop their own unique selection of regional product ranges, including one-of-a-kind regional product labels and partnerships with other brands.

Culinary traditions of certain regions and assumed qualities resonate with consumers, as Reflets de France and Kirks fresh cheese have shown. Coop has started a region-for-region concept quite recently. Unser Norden (Our North in English), a Coop offer, is produced and available exclusively in the north of Germany.

All of these concepts are ways to create that point of difference that allows a retailer to stand out from the crowd.

Ronald BartikowskiCreative [email protected]

Selection is distinction. Retailer-exclusive regional concepts is the next level of consumer retention.

Reflets de France, exclusively at Carrefour (France)

Kirks cheese specialities from a small Danish dairy manufacturer available at EDEKA (Germany)


Opportunityand leverage

United States of AmericaDyfed Fred RichardsCincinnati

Page 12

Its all gloom and doom. Run for the hills! Hide your cash under the mattress and start buying private label brands.

If you believed everything you read, then all of the current advice would lead you to think that private brands are about to clean house at the grocery aisle the theory being that in an effort to save cash at home, consumers will automatically turn to private label brands, and in droves. In fact, these brands are there specifically to reassure consumers and understand their needs especially the reduced size of their wallets.

Is it really that simple? Even in uncertain economic times such as these, should private brands really be offering up the value proposition so soon in an effort to gain new and loyal consumers, especially after so many companies have spent so many marketing dollars to elevate private brands perception beyond the entry-level mandate of value? Most economic trends, including the current financial downturn, are cyclical. What happens when the good times roll again? Where will private brands value propositions be then? In the coming months, private brands need to make a concerted effort to not just play the value card. Consumers expect private brands to be cheaper. But in recent years, consumers have also raised expectations about what a private brand needs to do.

While private brands across Europe have managed to successfully breach the value proposition while elevating product delivery, they have also managed to accomplish something that US private

label brands have yet to do: establish themselves in the hearts and minds of the consumer as equals to other brands that happen to save them money.

The best time to fix the roof is when the sun is shining

Are consumers really that fickle? Will they turn away from branded products simply to save a few pennies? I think not. Granted, many grocery carts around the country mine included will, for a period of time, be filled with more than an average amount of private brands in an effort to conserve cash. However, brands will continue to make their mark. Consumers are creatures of habit and are always in need of comfort and familiarity. Tough times require comfort foods and comfort brands. No matter what a private brand offers, it will never be able to match the experience of sitting down with your favorite branded product.

During an economic downturn like this one, private brands in the US should balance their short-term messages about value with longer-term messages about trust, dependability, quality and price. In this way they can secure an indelible place in the hearts and minds of consumers and retain their share of cart even as the economy improves.

Dyfed Fred RichardsExecutive Creative DirectorNorth [email protected]


The importanceof private labelin creating valueBritainDaniela Nunzi-MihranianLondon

In Interbrands recent Top 25 Performing European Retail Brands report, 60 percent of the companies featured offer private label products that contribute between 30 and 100 percent of their revenues. Three of the top five brands sell only private label products.

Spending on retailers own-label goods is rising: growth has been running at an annual 5.3 percent in the US and 7.4 percent in Europe between 2000 and 2005, and sales have reached more than US$ 350 billion across the two. Private labels share has grown across almost all categories.

Consumers no longer view brand solely as a mark of quality; instead they search for brands that match and enhance their individual lifestyles. They are also more likely than before to deliberately trade-down in certain low-interest categories in order to enjoy a higher standard of consumption in others. Enter the role of private label.

In addition, as luxury and premium goods become more accessible and value brands become increasingly high-quality, the mass A brands are feeling the pinch as they are squeezed in the middle ground. This poses a huge threat to traditional mass market, household-name brands.

To combat this threat, retailers are moving away from mere price competition to more value-added and segmented offers. They are also beginning to explore new markets and sales channels. Consider Boots entering the US market and Marks & Spencers presence through BP petrol forecourts, for example.

There still remain, however, certain advantages that strong manufacturer brands enjoy. They continue to have the innovative edge on private label goods. Also, some consumers continue to perceive private label as inferior to its branded competitors, especially within certain sectors. Manufacturers must capitalize on these advantages if they are to compete against retailers private label offerings.


The UK is widely acknowledged as a pioneer in private label, and the penetration of own-label products is one of the highest in the world.

Within the private label sector in the UK, there are four key categories:

Category 1 Budget alternative: Private label is the stores value brand, e.g., Tescos value range

Category 2 Cheap me-too: Private label imitates the brand leaders in an attempt to generate a rub-off effect by association, e.g., many supermarkets gin products imitate the market leader, Gordons Gin

Category 3 Genuine competitor: Private label becomes a valid branded offer in its own right, often inhabiting a position of strength where manufacturer brands have been weak or the market fragmented. Manufacturers are essentially pitted against private label brands at this point, e.g., Sainsburys Organic range

Category 4 Category partner: Together, the manufacturer and retailer take a holistic category management approach based on deep shopper insights, with total category growth in mind. Increasingly, manufacturers are taking this better the devil you know approach, going as far as manufacturing for these private label offers to ensure product differences are maintained.

Daniela Nunzi-MihranianCreative [email protected]

Page 14


The threat!

United States of AmericaLeigh BachmanCincinnati

The CPG industry

Doesnt it seem like weve been talking about the emerging threat of private labels for years?

Originally, this threat was due simply to private labels offering a lower price that appealed to price-conscious consumers. Then the threat shifted to private labels encroaching on a brands visual equities so that the national brand no longer owned its own color, logo or shape. And, more recently, the private label threat has emanated from consumers no longer being ashamed to buy the private label due to improved perceptions of quality as well as the discount chic image that retailers like Target have made fashionable.

In fact, private label products account for more than US$ 81 billion (16.2 dollar share) in the US, up 10.2 percent over the past year. And with the country experiencing a major economic downturn, private labels seemed to be poised better than their branded counterparts to weather the storm. In September, Walgreens, for example, announced its previous quarter private sales were up 15 percent versus the previous year.

In addition to what can already be seen at the checkout counters, new data revealing Americans perceptions of private labels seem even more threatening to CPG brands. According to a new survey by The Nielsen Company, 72 percent of consumers believe that private labels are good alternatives to branded products. The same survey said that nearly two-thirds (63 percent) of consumers believe that the quality of the private label brand is as good as name brands and one-third (33 percent) of consumers believe some store private labels are higher in quality than the name brands.

Lets face it, private labels are no longer an emerging threat; they are a daily threat to CPG companies. And as the economy teeters on the brink of Depression with a capital D, that threat is no longer something CPGers can afford to look at over their shoulder, or even down their nose it is front and center.

Lets face it, private labels are nolonger an emerging threat, they area daily threat to CPG companies.


Yet despite all this, I think CPGers can count themselves lucky that the damage being done to them at the hands of private labels isnt far worse. For all that private labels have evolved over the years, the private label retailers in the US are still a long way off from having figured it out like their Western European cousins have.

US retailers seem to puzzle endlessly over what their strategy should be every day, with little progress being made. Should we use a masterbrand strategy across the store, or offer a house of brands? Or a hybrid of the two? Should we look like the national brand equivalent in each category, or have a holistic design strategy across all categories? What about when we offer different tiers premium, base and value? Sure, a new and effective private label strategy pops up here and there among the retailers, but for every Publix or Target, there are a dozen retailers that waffle in indecisionthinking they have next year or next quarter to figure it out. But if the train hadnt already left the station before, its clearly long gone now that we are in a full-blown economic recession.

Case in point: everyone has known Tesco was coming to the States for some time, and yet, how many private label retailers have changed their strategy and launched or relaunched their store brands in a revolutionary, game-changing way? Instead, retailers waffling and indecisiveness has led to inertia.

As sales for private labels increase, retailers are patting themselves on the back for a job well done but this has not been because of a well-thought-out private label strategy; rather, in spite of one. Private labels have ridden the wave of natural industry forces and most recently a tanking economy, but imagine the tsunami they could be riding if more retailers get off the fence, pick a strategy and implement it with excellence.

I think whether a retailer chooses to pick the masterbrand strategy or the house-of-brands strategy or some other strategy is immaterial, in some ways. Sure, one may work better than another in different circumstances, depending on the overall retailers strategy, and we each have our own professional opinion on what that should be. But the more important choice to make, regardless of the strategic approach, is one that leads to compelling and consumer-relevant package design.

No one debates the statistics that at least 80 percent of purchase decisions are made at shelf in the CPG industry. And estimates have put the time spent making that purchase decision from as much as three seconds to as little as one-fifth of a second (the latter being much more likely). So lets use a little common sense: when you are reacting to something that quickly, are you thinking about all the functional claims the national brand makes, how that brand can really help your life, and how much this lower-priced alternative looks like the national brand and might do just as good a job?

Or, in that fraction of a second, is your brain thinking only, ooh, pretty I want that, much like my five-month-old daughter does when she sees a shiny object just out of reach?

I dont mean to oversimplify what makes for a good, consumer-relevant package design, but I think you get my point. Because of the way the brain reacts on instinct, truly compelling design is what can build a brand and motivate shoppers to actually purchase. This phenomenon of human physiology is going to be true for a national brand or an attractively-priced private label. So why shouldnt the private label brands take a cue from nature and take advantage of design?

Private label retailers need to play by the same rules as the CPGers: Get in the game with package design. Design to delight the consumer, not to try to fake the consumer into believing that because it walks like a duck and talks like a duck, its a duck. The consumer is smarter than that. Use design to allow the product to win on its own merits, as a real brand that supports the retailers consumer proposition, that actually is good quality and that whoopee! has a fantastic price.

In these tough economic times, the bases are loaded for

private label brands. Retailers can choose to rely on price and

continue to walk in the run or they can swing for the fences

with package design.

Leigh BachmanExecutive Director, Strategy and [email protected]

80 percent of purchase decisions are madeat shelf in the CPG industry.

Page 16

Best Global Brands has taught us time and time again that brand remains a far less volatile asset than other business assets tangible or intangible.


www.brandchannel.com

Scott LucasExecutive Director4000 Smith RoadCincinnati Ohio 45209United States of [email protected]

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Bertrand ChovetManaging Director Branding and Packaging28 rue Broca75005 Paris [email protected]

Hiroyuki OkadaExecutive ConsultantOsaka Office2-6-11 Kitahama Chuo-kuOsaka 541-0041 [email protected]

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Roman Perez-MirandaPresident Interbrand Latin America/Iberia130 Fifth AvenueNew York New York 10011United States of [email protected]

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Interbrand started in 1974 when the world still thought of brands as just another word for logo. We have changed the worlds view of branding and brand management by creating and managing brands as valuable business assets.

We now have nearly 40 offices and are the worlds largest brand consultancy. We bring together a diverse range of insightful thinkers, making our business both rigorously analytical and highly creative. Interbrand has the broadest geographical presence offering more people, more disciplines and more knowledge tailored to our clients. Our work goes deeper and further. We create and manage brand value by making the brand central to the businesss strategic aims. Were not interested in simply being the worlds biggest brand consultancy. We want to be the most valued.

The past year has been one of the more dramatic and turbulent that global economies have endured. In some regions of the world, the anticipation of a troubled economy ahead will undoubtedly make it more challenging for marketers to make effective plans. Patience wanes in a results-oriented, nervous economy. Brand management needs to constantly demonstrate value. And in regions with markets opening to the global stage for the very first time, a new and unknown set of challenges awaits.

As the world becomes one global economy, it becomes an increasingly complex place. Will the economic woes of developed markets pollute emerging markets, or will developing markets provide the medicine that the established world needs? Charting the course for successful brand management requires a multifaceted perspective, even if its delivered through one brand. A connected and holistic approach to brand management is a prerequisite.

Packaging is often the first and most regular contact people have with your brand. More than just a face to the brand, packaging is a powerful selling tool. It influences market position and consumer behavior by triggering purchase and creating loyalty.

We ensure packaging solutions work seamlessly with brand strategy. Our packaging work brings brands to life in accessible and engaging ways, from the way they look, feel and function to how the packaging works competitively and complements a wider portfolio.

Our design teams have a deep understanding of shoppers. We work across all sectors to develop packaging design systems that deliver consistent, powerful and enticing messages from the first moment theyre seen on the shelf.

In troubled economies, we know that business doesnt cease. Companies may struggle, but the practice of buying and selling continues no matter what. Leading brands know this and come through difficult times stronger and ready to compete rather than hibernating in the comforts of business as usual.

In developing markets, we know there is a world of possibilities opening to consumers. The idea of buying and selling is not new to them greater choice is the novel concept. Wealth is no longer an exciting idea, but a reality. The marketers challenge is showing people where and how to spend. Many of the Best Global Brands have seen the opportunities emerging and are bullish in establishing themselves. Regardless of your view of the world, in good times and bad, your brand is your companys most valuable asset. Understanding how your brand creates value for you is key to maintaining market leadership or establishing it in the first place. We continue to see an increasingly sophisticated outlook on managing brands and a growing importance on understanding the drivers of brand value.

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2008 retrospective of the collection of Monthly Perspectives produced by Dyfed Fred Richards

Every month Dyfed Fred Richards (Executive Creative Director, North America) shares his observations on the graphic world around us.

These glimpses into the good, the bad and the ugly offer insights and observations about categories that inspire and educate, and are sent via email around the globe.

Brandchannel (brandchannel.com) is a website about

branding launched in 2001. Its goal is to provide a

global perspective on brands.

The website is produced by global branding agency

Interbrand but maintains editorial independence. It

is published weekly and features web reviews, brand

profiles, reader polls, and an international directory

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Documents

Private Brands.pdf