Surprise, Surprise! Retailers Are Holding Most Of The Cards!

This guest post comes from Guy Douglass the Managing Director of the UK based branding agency BOS:Design Ltd in the UK.

In the UK there’s been a lot of hand wringing in the last few days about brands finding it difficult to compete with private label rivals. In particular the demise of the Huggies diapers brand, which is being withdrawn from the UK and Covent Garden Soup Company (CGSC), the brand that created the fresh packaged soup category, being delisted by Tesco a year after the retailer launched its own fresh soup brand.

Surprise, surprise. Retailers are starting to get to the point where they hold most of the cards. Here is hard evidence of that development. Brands cannot produce fit-for-purpose products – even if they are the market leader like Covent Garden Soups – and rest on their laurels.  They have to build strong relationships with their consumers. Tesco’s venture brand, “New York Soup Co.” doesn’t have the sales of CGSC yet, but will Tesco customers stop buying fresh soup or will they just switch from Covent Garden to New York? I suspect the latter.

The nappies (diaper) market is more complicated. It could be argued that soup is less emotive than caring for your baby. Mothers (particularly first time mothers) are very brand conscious and will tend to buy big brands for their little first-born. Retailer brands come into their own when the second child comes along and motherhood is no longer quite so scary. So the ultimate winner coming out of the Huggies demise is likely to be Pampers; mothers wishing to stick with a “proper” brand on the one hand and retailers having less of an opportunity to play one brand off against another strategically and commercially.

Little Angels is Asda’s (Walmart’s UK subsidiary) baby Private Brand. It is becoming a huge baby brand in its own right. It covers all areas of the baby market from nappies to feeding, from maternity to baby food. It is building loyalty and trust amongst Asda mothers and is very credible. It is a demonstration of the possibilities open to retailers. They have a ready-made route to market, they can take ownership of a whole aisle and they can work hard with their suppliers to up product quality to the extent that repeat purchase becomes a no-brainer. The significant difference between Little Angels and the Tesco ‘Venture Brands’ is that the Asda logo sits in pride of place on the front face, so it is clearly ASDA that is bringing you these great products. The customers’ trust is therefore built not just in Little Angels, but in Asda the brand as well, and (conversely) Asda’s above the line marketing activity trickles down to support Little Angels.

There is an argument that consumers will continue to demand the choice of big brands in store alongside the retailer brands. This was certainly the case in the early 90s when Sainsbury’s suffered by putting too much emphasis on private label at the expense of offering consumer choice. However, retailer private label has moved on leaps and bounds since then and Aldi has demonstrated that UK consumers are willing to forgo the big brands; retailers are more trusted to deliver fit-for-purpose products than they were in the past.

I have no doubt that the manufacturer brands will fight back. It has been reported that Covent Garden Soups are launching a £2m TV push, direct marketing and outdoor advertising campaign this autumn. Hopefully this will build demand and trust amongst consumers, and demand amongst retailers as well. But doesn’t that type of campaign all sound a bit “old hat”?

It has become clear that Retailers are trusted brands just like manufacturer brands. The latter will have to become much more pro-active and creative in all elements of their marketing mix if they are to continue to retain a place in the consumers’ hearts.

Guy Douglass is Managing Director of BOS:Design Ltd in the UK. BOS: Design specializes in designing branded packaging for both manufacturer brands and retailers, with one of their biggest clients being Asda, the UK branch of Walmart. Guy previously worked on the client side with both Colgate and Kraft.

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Christopher Durham is the president of My Private Brand and the co-founder of The Vertex Awards. He is a strategist, author, consultant and retailer who built brands at Delhaize-owned Food Lion, and lead strategy and brand development for Lowe’s Home Improvement. He has consulted with retailers around the world on their private brand portfolios including: Family Dollar, Petco, Staples, Office Depot, Best Buy, Metro (Canada), TLW (Taiwan) and Hola (Taiwan). Durham has published five definitive books on private brands, including his first book, Fifty2: The My Private Brand Project. In 2017, he will debut his newest book, Vanguard: Vintage Originals, a visual tour of innovation and disruption in private brand going back to the mid-1800’s. Dynamic in his presentation while down to earth and frank in his opinions, he has presented at numerous conferences, including FUSE, The Dieline Conference, Packaging that Sells, Omnishopper and PLMA’a annual trade show in Chicago. Durham lives in Charlotte, NC with his wife, Laraine, and two daughters, Olivia and Sarah.