JWT’s AnxietyIndex is designed as a place to discuss how brands and consumers are responding to the global recession. With daily content updates, AnxietyIndex.com includes contributions from around JWT’s network, offering a truly global perspective.
Five months ago, Spain’s largest supermarket operator made the biggest splash in the country’s retailing history by eliminating 900 branded products from its shelves. The chain, Mercadona, owns the most popular private label in Spain, Hacendado.
Currently, the share of market for branded products in primary retail categories is more than 50 percent. The question is whether Spaniards’ bonds with brands are strong enough to avoid a shift toward a private-label-led retail model (as is the case in Germany).
Now Ipsos has issued a qualitative and quantitative study of Mercadona’s customers, finding that 40 percent are against the change and 30 percent are in favor of it. Another 30 percent are unsure. Overall, 55 percent said they are unhappy about having less choice, while 40 percent said they will shop elsewhere if they don’t find their usual branded products on the shelves. Sixty percent said there are some branded products they could not go without.
Meanwhile, a consumer movement, yoquieroelegir.com (“I want to choose”), has been created to defend the presence of brands in retail stores. And Pascual, the leading milk brand, is airing a TV ad explaining that private labels’ cheaper prices are the result of a real quality compromise.
It’s too soon to know if the Ipsos research reveals a solid sign of private label resistance, but it seems clear that in spite of the downturn, brand value is still healthy in Spain.
Counting on a very strong (and very cheap) private label brand, Mercadona, the leading Spanish grocery retailer, announced in January that it would drop underperforming products. Consumers are now the decision maker, and they vote with their purchases. Hundreds of products have disappeared from shelves—Mercadona trimmed the number of product lines it carries by 8 percent in late 2008—causing a shock to many brands’ sales.
As Food Business Review reports, some disgruntled customers feel this move is limiting their choice and forcing them into Mercadona’s private label (which is seeing a strong sales growth). Indeed, many smart shoppers are likely feeling much less smart now that they cannot choose between branded products and PL. Still, they’re benefiting—by lowering its costs, Mercadona has been able to cut prices. Savings aside, shelves certainly look a lot grayer without the colors of myriad brands.
Three key factors—increasingly savvy store brands, an economic environment that’s pushing consumers to reconsider their brand choices, and manufacturer brands decreasing their marketing spend—are combining to form a perfect storm in favor of private labels.
Store brands aren’t new, of course. But in boom times, consumers had fewer compelling reasons to consider alternatives to the brands they’d bonded with over the years, even if they cost significantly more. The current environment, however, is different from anything we’ve seen in our lifetime.
In Japan, a major retailer, Aeon, saw 40 percent growth for its private brand, Top Valu, in February. Across its 2,000 stores, that translated to 371 billion yen (around US$3.8 billion). It’s likely that with better control over production costs and therefore a keener ability to defend its margins, Aeon will add more of its own products into the mix and take up even more shelf space.
Given that private label products can be 30-50 percent cheaper than their branded rivals, it’s more essential than ever for FMCG manufacturer brands to defend the bonds they’ve built with consumers—yet most are slashing their marketing budgets.
JWT’s AnxietyIndex research has shown that the cost of health care is one of the primary drivers of anxiety for Americans today. The generic-drug prescriptions plans offered by Wal-Mart, CVSandStop & Shop—which all charge around $10 for a 90-day drug supply—go a long way toward helping customers without health insurance. Now Stop & Shop is going one step further, offering free 14-day supplies of select generic antibiotics (with prescription, of course) at its nationwide pharmacies.
It’s a nice way for the American supermarket chain to show it can help customers with not only their physical woes but some financial ones, as well. (The tagline is “Save more. Feel good.”) The offer, which runs through July 11, is likely to alert more customers to the retailer’s generics program and instill some loyalty in Stop & Shoppers, who will likely pick up other grocery goods along with their prescription.
Considering that some cash-strapped American have stopped filling their prescriptions altogether, however, it will become imperative to educate consumers about the dangers of skipping medication before alerting them to the availability of cheaper alternatives.
Counting on a very strong (and very cheap) private label brand, Mercadona, the leading Spanish grocery retailer, announced in January that it would drop underperforming products. Consumers are now the decision maker, and they vote with their purchases. Hundreds of products have disappeared from shelves—Mercadona trimmed the number of product lines it carries by 8 percent in late 2008—causing a shock to many brands’ sales.
Three key factors—increasingly savvy store brands, an economic environment that’s pushing consumers to reconsider their brand choices, and manufacturer brands decreasing their marketing spend—are combining to form a perfect storm in favor of private labels.
