It’s such a great time to be involved in grocery, don’t you think? There’s so much going on. To quote IGD chief executive Joanne Denney-Finch: “What excites me the most is every type of company, new and old, large and small, has the chance to win from their current positions.” I couldn’t agree more. However, she also said, on bolder innovations from brands: “The pressure keeps mounting on the manufacturers of branded food and drink.” And she quotes latest research that “seven in 10 shoppers feel the quality of supermarket own brands has been improving, while six in 10 feel the benefits of famous brands stand out less today than they used to.”
Well if she can’t see a connection between these facts then that’s where I will start. The re-emerging trend for own label to copy the brands has been highlighted by the discounters, who are making a living from it. Of course, it’s harder to stand out when you are being copied and of course you can improve quality when you are not burdened by the need to innovate. Innovation in grocery means research costs, development costs and marketing costs. Where is the mounting pressure on private-label manufacturers to innovate? This is not just brands’ job, own label ought to play a unique role to the shopper - not just be a cheaper option.
So the Denney-Finch OBE insight was that branded manufacturers would fight back by taking a bolder approach to innovation: “Tomorrow’s manufacturers will use technology to reward repeat purchases by, for example, offering a better price the more times shoppers buy their products.” Really! So just make your brands cheaper to loyal users then. But unless you are able to select the people who are about to switch, you’re just breaking a fundamental rule of promotions: avoid paying somebody for something they were going to do anyway. That is a very expensive way to defend your investment.
Here is the ‘chance to win’ for the branded businesses. After you have researched, developed and created your demand, don’t wait for someone else to rip you off: rip yourself off. It’s easy, just hack the quality down, bastardise the packaging and make it available as a cheap competitor. At least you will get both margins.