supermarket own-label brands
Introduction
The days when supermarket own-label brands were the cheap, "me-too" alternatives to
established brands seem to be over.
The leading UK supermarkets have expanded their own-label product ranges and now
offer a high quality and diverse range of own-label sub-brands from premium food to
clothing.
For example, Tesco recently announced plans to extend its
“Finest” own-label to include a range of homeware including
crockery, cutlery, bed linen, towels and glassware.
Size of the Own-Label Market
Sales of own-label products are significant in the UK. According to Mintel, own-label
products represented almost 20 per cent - worth £10.2bn - of total UK food sales in
2000.
This has not always been the case. A few years ago, customers were complaining that
supermarkets were showing preference to their own labels over branded goods and
that as a result there was not enough choice on supermarket shelves
Research from IGD, which shows a slight decline in the percentage of own-label
products bought by consumers since 1997, would appear to back this up. But IGD says
this is unlikely to be a long-term trend and forecasts further growth for supermarket
own-labels, especially in the fresh foods categories, which it believes is a particularly
strong area for own label. That's good news for the supermarkets, which earn a higher
margin on own-label products.
Developments in own-label branding
Own-label branding has become much more sophisticated.
Supermarkets have moved on from creating imitation brands to developing own-label
sub-brands that stand as brands in their own right. These brands have become an
everyday feature of consumers' lives and, as a result, have earned loyalty.
In the food market, the one category that own-label sub-brands dominate is chilled
foods. In 2001, own label accounted for 98 per cent of the UK chilled foods market
(source: Mintel).
But the food sector is becoming saturated; so that many supermarkets have explored
non-food markets as an area in which they can develop own labels. Tesco's plan to
extend its Finest range into homeware is part of that shift in direction.
Tesco's other sub-brands include Healthy Eating, Organic and Kids, but Finest is its
most successful, growing rapidly at a rate of 30 per cent a year. Next year, Tesco
expects to generate £600m in sales from the Finest sub-brand alone.
Sainsbury's has approached the own-label market
through segmentation. Its brands include Free From,
Way To Live and Blue Parrot Café (Healthy and
aimed at parents with children) as well as its value and premium
ranges. Like Tesco, it is also moving deeper into non-food markets with
sub-brands Perform + Protect and active: naturals.
Own-label sales generate 38 per cent of Sainsbury's total revenue, with its Taste The
Difference premium range estimated to contribute between £200m and £300m.
One of the most famous own-label brands to have emerged from the UK
supermarket chains is Asda’s “George” clothing range. This is estimated
to be worth around £1bn in sales – making Asda one of the leading
clothing retailers in the UK.
The way forward for own-label
How far can the use of own-label brands go? Which products are less suitable for
supermarkets to apply the own-label formula?
It is not easy for supermarkets to break every market they enter.
For example, luxury segments such as up-market clothing and cosmetics – where there
are many well-established, premium brands – are one area in which own-label brands
are rare. Other product areas that could prove restrictive for own label include those
that require a lot of innovation and development, such as an anti-wrinkle skin care or
functional foods.
But such hurdles are unlikely to stop supermarkets in their development of own-label
brands. With increasingly sophisticated marketing methods and room for further
expansion into non-food categories, own-label branding is likely to increase. Whether
they succeed or not, is largely dependent on how far they can persuade consumers of
their credentials.
case study: managing brands in slo w-growth or declining markets
As many consumer markets reach the maturity or decline stage, is product
and brand innovation the way to revive growth?
Introduction
Many consumer markets are now labeled “mature”. Take some examples:
• Tea and biscuits
• Beer
 Fast food
 Ice cream
What do we mean by mature?
Mature markets are generally classified as those that experience sales growth of about
two per cent a year – somewhere near the rate of price inflation. The implication of this
growth rate is that there is unlikely to be significant volume growth in the market. And
if there is, it implies that average selling prices are falling.
What are the implications for brands in mature markets?
Firstly – and most importantly – the market may offer very few new or promising
opportunities for rapid growth. Brands in such markets may be nearing the end of their
life cycles. Or not! Just look at the above examples.
It is generally believed that rapid improvements in technology and the push towards
globalisation mean that the life-cycles of brands are getting shorter.
It took the motor car market almost a century to reach the current level of maturity.
Yet customers who wanted a mobile phone got one within two years of the market
taking off.
Part of the problem is that brands can be communicated much more effectively and
wider than ever before. The growth stage of a new product or brand can be much
steeper – but shorter.
Sales of many successful brands soar immediately after they launch, but often flatten
out as they attract all the potential customers they can and face competition from
copycats (otherwise known as “me-too” brands!. After the initial growth spurt, brands
are forced into taking a range of measures, such as price cuts, introducing sales
promotions and special offers, and diverging into sub-branded products and off-shoots
to keep interest and sales momentum up.
Re-launch or reposition
One strategy is the re-launch and re-position mature
brands. Lucozade and Ribena are excellent examples of
mature brands which have been successfully re-packaged
and re-targeted – in both cases at the youth market.
Product innovation
Product innovation is another strategy. i.e. Coming up with new and different products.
A good example is New Covent Garden Soups. This business focused on
providing packaged fresh soups for sale by the major grocery
supermarkets – who previously had only sold tinned or dried soups. In doing
so, New Covent Garden Soups grew rapidly by adding value to what was one
of the most mature segments of the food market.
Marketers can also reverse the decline of brands and markets through what is known as
"discontinuous innovation" - a development that fundamentally alters the state and
perceptions of a sector.
Haagen-Dazs heralded the rebirth of ice cream as a
premium product and paved the way for brands such
as Ben & Jerry's to cash in on this enlivening of a once very stagnated
market.
In a sector where loose tea ruled, tea bags revolutionised the way the drink was
perceived - ending the ritual of pouring tea from a pot and reinventing it as a fast
turnover convenience drink. Round tea bags brought further innovation to this market.
Growth in emerging markets
Another area of opportunity for mature brands and products is in emerging markets.
For example, US-based Kentucky Fried Chicken has recently announced
that it is considering opening several hundred new restaurants in the UK
to sell the products of other brands owned by its US parent company
(including Taco bell). UK consumer trends towards more eating out
more, the lack of alternative restaurants and an unusual willingness to
eat fast food - has made the UK a key market for US-owned fast food chains,
which face stagnation at home.
In another example, Dell - the direct sales computer manufacturer –
has announced it is responding to lower growth in the personal
computer market by launching a range of own-brand printers, rather
than re-selling models from the likes of Epson.
The more technologically advanced the product, the shorter it’s period of rapid growth,
and the longer its era of flat sales and eventual stagnation. There is little growth in
sales of televisions, though innovation during the Eighties kept the market buoyant.
There is a replacement cycle, rather than growth in penetration, so people generally
buy the latest wide-screen TVs when they are looking for a new set. The experience of
the computer market over the past year is a convincing example of how quickly markets
rise and fall.
case study: managing product portfolios- nappies
Falling birth rates are putting pressure on nappy brands - how can brand
manufacturers respond?
Introduction
Pampers and Huggies - the two biggest brands in the UK
nappy market - are trying to increase sales at a time when
the UK's birth rate is declining.
The demand for nappies is a "derived demand" - it derives
from the needs of parents with children aged from birth up
to three. A change in the number of children requiring nappies is, therefore,
potentially significant.
Pampers (owned by Proctor and Gamble “P&G”) and Huggies (owned by KimberleyClark) dominate the UK nappy market.
According to Mintel, Pampers and Huggies together accounted for 90 per cent of the UK
market by value in 2001.
Falling birth rates
The number of children aged four and under in the UK fell by 5.1 per cent between
1997 and 2001. Over the same period, sales of disposable nappy sales fell by 19 per
cent, from £457m to £370m.
The UK birth rate is predicted to fall by a further 3.5 per cent in 2002, meaning that
23,000 fewer babies are expected to be born in 2002 than in 2001. What effect does
this have on the product strategy for these two market leaders?
Brands respond with product innovation and brand extensions
One response to falling demand has been a significant amount of new product
innovation and product re-launches.
The Pampers and Huggies brands are also being extended beyond nappies into all
aspects of baby care.
P&G recently announced a re-launch of its Pampers Baby Dry range. The re-launch was
backed by a £5m advertising and marketing campaign in an effort to put pressure on
Huggies' Freedoms nappy range. This initiative was announced just a month after the
£6.8m re-launch of Huggies' parent and baby club.
In August 2002, P&G launched a Pampers baby wipes range, called Kandoo. This is
marketed as a transitional tool for three-to-five year olds as they progress from nappies
to the toilet.
The Pampers brand has also been extended into:
• Disposable bibs called Bibsters
• Packaged face-and-hand wipes called Wipesters, and
• Sunscreen lotions on a wipe – called Sunnies
P&G has also agreed a licensing deal to make Pampers Clean 'n' Play, a cleaning fluid
that can be sprayed and has licensed the Pampers brand to a clothing company to
make baby pyjamas and blankets.
How successful is this brand extension strategy with customers? Do product re-launches
and extensions mean anything to customers? Are they confused by the proliferation of
products carrying a familiar brand name so strongly associated with one product –
disposable nappies?
One baby product buyer at a leading supermarket chain dismisses the Pampers Baby
Dry re-launch, questioning how adding "new" in front of the brand name will drive sales.
He says:
"With increasing competition, manufacturers are tweaking their existing products to
create some sort of interest, in a market that is falling in both value and volume. Such
revamps mean little to shoppers and only end up confusing them."
Advertising executives feel that nappy brands may expose themselves to ridicule if they
are over-extended:
"The fear is that Pampers and Huggies could soon become commoditised and hence
devalued. Consumers today can see when manufacturers are trying to milk brands, and
they could lose their credibility. There is only so much that you can do with a nappy
brand - you can improve on the absorbency, breathability, feel and fit. I cannot see any
nappy brand being extended into baby food. Even extending it into clothing may not
work, because clothes are all about aspirations."
Brands must also be careful not to extend into products that have the potential to
seriously damage brand value.
One example is the launch in 1999 of Pampers Care Mats. The Care Mats were
disposable mats on which infants could be placed while changing their nappies or to
protect toddlers against bed-wetting.
Less than six months after the launch, P&G was forced to label the mats with a safety
warning after fears were raised that they could suffocate young babies.
Skeptics feel that new product and variant launches in the nappy sector are often
simply a means for companies to gain a temporary edge over rivals.
Whether all the new product development and brand re-launching will help to expand
the sector in the long term is open to question.
buyer
behaviour
-
case
study:
influence
of children on
buyer behaviour
Research suggests that children are exerting more influence over family
buying decisions. What are the implications of this for retailers, brands and
marketers?
Children are an important part of the family buying process. But what roles do they play?
Marketing theory suggests five main roles in a family buying process:
- Initiator
- Influencer
- Decider
- Buyer
- User
Which roles do children play in addition to the obvious one – “the user”
Children certainly influence family buying decisions from cars to holidays.
They are also the buyers of the future. Provide children with Penguin
bars and McVitie's may be able to hold on to the adult due to brand
awareness and brand loyalty formed at such an early age.
But how should businesses market to children? Are there conflicts with being seen to
specifically target the child audience – can it alienate parents?
Products have to appeal to the conflicting agendas of child and parent, while fighting
off increasing competition. A marketer of children’s foods was recently quoted as
follows:
"Ten years ago children wouldn't have given a damn about cheese. It
used to be just Dairylea, but now children's dairy products
encompass everything from cheese to yogurts, and fromage
frais. Our brands also face more intense competition than
ever and it's not just from other chocolate biscuits - it's from
products such as Dairylea Dunkers and Fruit Winders. These things didn't exist before."
Marketers also have to recognise that children are moving into new markets. Children
as young as seven buy DVD's, and no teenage lifestyle is complete without a mobile
phone. This has a knock-on effect. For example, the money children spend on mobile
phone cards reduces the money they spend on snacks.
Marketers also need to be sensitive to the peculiarities of children-related markets. It
may be tempting to use a daring marketing campaign to make a product stand out. But
a poorly thought-through campaign could result in the product and/or brand being
attacked by ethical campaigners, outraged mothers, educationalists, health and safety
organisations and others.
A good example of how things can go wrong is Sunny Delight. Sunny
Delight enjoyed boom sales after its initial launch. However, the
drink's popularity crashed when the media realised that it was sold
from chiller cabinets purely as a marketing ploy to make it seem fresh
and, therefore, healthy. The actual product formulation was far from
healthy.
Retailers face a challenge to display products in a way that attracts children.
Promotional displays have to be able to handle child usage (or abuse) and capture a
child’s imagination and attention.
Disney has a reputation as being particularly good at interactive
promotional marketing. Many children also
prefer Woolworth's to supermarkets because of
features such as pick 'n' mix sweets. The Early
Learning Centre succeeds by creating a playground
which allows children to play with toys rather than
leaving them wrapped in plastic.
marketing strategies - case study: uk snack food market
Changing lifestyles create growth opportunities in the snack food market
Introduction
The decline of formal lunchtime eating is creating new market segments and strong
growth in the snack food market.
Research suggests that more of us eat lunch at our desks and spend all night playing
computer games. The snack market is enjoying strong growth due to a range of new
products that are positioned to exploit these changing lifestyles.
It has been apparent for some years that increasing time pressures on consumers have
been the main force behind a shift away from traditional mealtimes. Meal consumption
is now fragmented into:
• More frequent and smaller "meals" (the term “grazing” is often used to describe this
behaviour)
• Taken in more diverse locations
Datamonitor's new report, “Hand-held Snacks”, examines the UK hand-held savoury
snacks sector. It reveals that "on-the-go" eating and snacking are on the increase.
On-the-go consumption can be split into three key categories:
• On-the-move
• Multitasking (for example, eating while working), and
• Leisure
Hand-held snacks are well suited for consumption in all three situations and there is
high consumer demand. As more consumers take to eating while engaged in other
activities, such as office work, playing computer games or commuting, hand-held
snacks are ideally poised to exploit this trend.
Datamonitor's research finds that consumer choice in the hand-held snack sector has
increased, with a proliferation of flavours and variety, and more substantial snacks.
Segmentation
The report examines product launches across six segments of retail hand-held snacks:
filled bread; pastry-wrapped; unwrapped; pizza snacks; snack kits and others.
The filled bread segment has experienced a very high level of new product
development over the past 18 months, as sandwich-type snacks continue to enjoy high
popularity. The main innovation trends are exotic alternatives and "big eat" options.
Exotic alternatives to traditional sandwiches - wraps, ciabattas, pittas, and fold-overs have become increasingly popular in recent years. Traditional sliced bread is making
way for more "exciting" breads, in order to raise the profile of the sandwich and appeal
to consumers' adventurous tastes. Many of these new breads are stronger, both
structurally and in flavour, than sliced bread and allow for more filling and the
combination of unusual ingredients.
There has been strong innovation in more substantial filled bread products, aimed at
people with heartier appetites. Many of these "big eat" sandwiches are aimed at the
male population, which has a higher level of sandwich consumption than females. Such
products include deep-fill sandwiches and thick-cut sandwiches, such as Sainsbury's
"The Big One", which makes a bold claim to be "the UK's biggest pre-packed
supermarket sandwich". Many big eat innovations contain bacon, egg, sausage or other
meats, and some have specific lunch themes.
Pastry-wrapped snacks witnessed the second highest levels of
innovation, according to the report. Ginsters have
been prominent in developing the pastry slice, and
other manufacturers in the UK have been
attempting to benefit from its success.
Unwrapped snacks, usually meat or cheese sticks such as Peperami, and
"other" snacks, which fit into none of the other sectors and include products
such as scotch eggs and filled potato skins, have also
diversified (it is now possible to buy scotch egg bars among
other things).
Emerging trend for healthy eating
A significant emerging trend in the pizza snack market has been the introduction of
"low-fat" and "healthier" versions. These snacks appeal both to parents concerned
about children's health and to weight-conscious adults.
Datamonitor's analysis of new product trends finds that snack kits have changed
comparatively little recently. However, as an emerging sector it is dynamic and the fast
growth of certain brands, such as Kraft's Lunchables, demonstrates its growth potential.
Snack kit trends have focused on two main product types - lunchbox
packs for children and dipping products.
The success of Lunchables can be attributed to the high interactivity of
the product for its mainly young consumers. Such interaction allows
children to be responsible for their own meal, while parents feel satisfied that their
children are eating nutritious food. The fact that packs include games or puzzles
ensures that the concept is a firm favourite with children.
Dipping is the other main trend in the snack kit sector, with a variety of products
available. The element of fun has been central to the popularity of the dipping snacks,
especially among children. The idea of dipping food and mixing flavours is more
interesting than a simple home-made sandwich or a piece of fruit.
Analysis of hand-held snack product development has shown this sector to be very
dynamic and as more food manufacturers enter the market it is no longer simply
enough to launch "convenient savoury snacks". Consumers demand additional benefits
- such as health and interesting tastes and textures - beyond fulfilling basic nutritional
needs. By offering these extra benefits manufacturers will be able to expand the appeal
of hand-held snacks to a broader consumer base.
case studies- changes in promotional mix
Introduction
The following three mini-case studies illustrate recent examples of organisations that
have decided to change their promotional mix (How they combine different
promotional methods to attract ‘customers’. They were picked to show that what
we do can be applied to all sectors, and not just the firms that you are familiar with.
BUPA
Bupa, the provider of private medical and health care services, is rolling
out responsive radio ads for its Care Homes division as it phases out
press advertising.
This follows successful promotional trials for its cancer centres last year.
Radio advertisements on Classic FM will run for five weeks and will target
two audiences:
(1) the “gray market”, which would be considering care homes, and
(2) people thinking about care home residency for someone else
The 60-second radio adverts are designed to:
• Broaden customer awareness and
• Increase up-take
Until now, door-drops, direct mail, press ads and inserts have all been part of the
marketing mix.
Last year, Bupa used responsive radio adverts for the first time in an effort to boost
membership and its customer marketing database of 4.5 million records. It also decided
to increase direct-response tv ("DRTV") ads and scale-down press activity.
Dawson & Sons
Wooden toy mail order specialist Dawson & Son is embarking on its
first national magazine insert programme in a bid to generate more
customers.
Until now, the company has concentrated on responsive adverts in
publications such as Nursery World and Natural Parent.
The company, whose products range from rattles and train-sets to
family games like croquet and boules - wants to diversify its marketing mix.
As part of the test strategy, Dawson's spring catalogue will be placed in The Sunday
Times in an attempt to boost its 55,000-strong customer database.
Dawson's plans to roll out the initiative for its winter catalogue later this year, if the test
proves successful. However, not all ideas work. Dawson & Sons was forced to accept
a takeover bid from Mullbury bush to avoid bankruptcy!
Marie Curie Cancer Care
Marie Curie Cancer Care is reviewing its marketing strategy in an attempt to attract a
wider audience by steering away from traditional direct techniques,
such as mailings.
Direct-response television (“DRTV”) and face-to-face marketing are both being tested in
a bid to supplement the charity's typical over-60s donor base with younger supporters.
If tests prove successful, they will become part of Marie Curie's marketing mix.
"Traditional methods are declining in response because everyone is using them,"
explains Marie Curie head of supporter development Sarah Tite. "We need to look at
other ways of reaching a broader audience."
The DRTV campaign is timed to coincide with Marie Curie's flagship Daffodil day on
March 9.
Responsive billboards and posters are also being rolled out across the country,
encouraging people to call and donate to the charity.
Marie Curie is also addressing the issue of supporter development in an attempt to keep
its 600,000-strong donor base loyal.
A restructure of the charity's strategy will place the donor at the centre of its activities.