It’s NPD but not as we know it…

Research has revealed that launches of own-label products overtook those of branded goods for the first time last year. The economic imperative, renewed promotion behind own brand value and prestige ranges coupled with a consumer shift away from the perception that own brand products are inferior to their branded counterparts are among the reasons why. But what are the implications of this for brands and how can they compete against own brand products? What makes us favour a branded product versus an own brand product and are we moving to a stage of own-brand only categories or even supermarkets? The first point to make, of course, is that own label npd is not always new product development in the sense that brand owners might mean - own label innovation is often (and unashamedly) as much about copying than creating new products. Although this is not completely true as in some categories, e.g. fresh food, own label drives some innovation; but generally speaking much supermarket own label is a copy of a branded product. In fact we’re even moving into an area of 'phantom brands', own label products that don’t carry the retailer’s name. Retailers might counter that they invest a lot in creating their (cheaper) copies of branded products and the consumer benefits from this. And they would also say that their innovation is not just skin deep. When ASDA relaunched its standard own label range as "Chosen by You" they made a play on the fact that each product had been tested and rated highly by its consumer panel, thus implying an active product development process. And Tesco recently claimed that the launch of its new Everyday Essentials range was much more than a rebranding exercise – their fish fingers are fishier! So brands need to make sure they remain relevant to their buyers and offer something that justifies the price premium. Many brands remain successful in convincing consumers they are better than own-label, so it can still be done. For whatever reason, the ketchup, salad cream and baked bean markets continue to be dominated by Heinz, whilst for many consumers Coca-Cola is and will remain the real thing. In addition, some brands are perceived as offering better value despite a higher price point. Many consumers are willing to pay a premium for Fairy Liquid in the expectation that they will get more washes from each bottle. But other factors are also at play. Cash strapped mums might buy branded products for other members of the family, including their pets, but will buy own-brand products for themselves; whilst some consumers are influenced by ethical sourcing or charity links to particular brands. There’s plenty of evidence to suggest that on laundry products consumers retain their belief in performance and claims about the ability of a product to clean whiter than its own brand competitors. So yes, we are happy to buy more and more own brands but we still somehow see them as second best. If, as had been suggested, consumers now have greater faith in own label products as a result of a significant improvement in quality, that’s surely not a bad thing? But it does throw down the gauntlet to brands to find new points of differentiation and new ways of making themselves an indispensible part of our shop, now that our loyalty to branded products seems to be growing looser all the time.

If the going gets tough, how will the brands get going?

Votes against austerity packages in France and Greece last week renewed speculation that the euro may soon collapse. Moreover, the bookies tend to agree. Ladbrokes suspended accepting any bets last week on Greece leaving the euro and have reported "plenty of support" at 33/1 on the euro being scrapped this year. But what might this mean for brands in Britain and their consumers? At the start of the recession, the strength of the euro against the pound made the UK a very attractive destination for European shoppers. A reversal this year with a strong pound and a weak euro would mean that British exporters would be less competitive in Europe, which in turn wouldn’t bode well for the growth outlook of the UK economy. This could mean a deepening recession and with UK banks having a high level of exposure to Europe, the consequences of another banking crisis could be dire indeed. If that nightmare scenario were to come to fruition, how might brands adjust their activities to deal with it? The true answer, of course, is this is uncharted territory so nobody truly knows. However, many should already be considering how they might react. Everything would depend, of course, on the depth and severity of any new downturn. However, we can expect there to be an accentuation of the squeezed middle. Household incomes will come under even more severe pressure, only this time, there will be no slack in salaries to provide any fat on the family bones. Housing repossessions have steadied out and are now significantly lower than in 2007 and politically pressure will be applied to keep as many people in their homes as is possible. But, 13 million people already live below the poverty line in the UK and, according to charity The Trussell Trust, food banks fed 128,687 people in the UK last year, 100% more than the previous year. If the cost of food and fuel stays high whilst incomes remain static or fall and unemployment increases, they could be in even more demand. This is both a challenge and an opportunity for brands. Politically, if we reach a stage where significantly more people are struggling to feed themselves, there could be downward pressure applied to brands and retailers, which have made major profits in the good times, to revise down their ambitions in order to help the population through. This would be in direct conflict with their commitment to shareholders to make profit and might be unpalatable for some. There will likely be an increase in demand for ‘value’ products in categories for every day usage; household cleaning products etc, and more so than at present across all other categories. Only the most established brands in the most established ranges are likely to be largely unaffected. Pressure could be applied on retailers and the brands for genuine money saving offers; promotional offers which provide genuine savings rather than ones that require you to spend more. The population’s drift away from loyalty cards is likely to continue as they seek cash savings rather than rewards. Aside from at the highest end, a deep downturn could spell the end of our flirtation with higher priced organic produce, at least for a while, though there is likely to be continue demand for reasonably priced fresh produce. Ironically, elsewhere, there could be positive news for charities, which have suffered from dwindling donations. Economy clothes retailers like Primark and Matalan may find that they are facing stiff competition from charity shops as a new generation of ethical shoppers seek higher quality products, albeit second hand, from which others similarly benefit. This is a dark and unwelcome prospect, but with the economic situation in such a state of flux, it should be one which brands and retailers consider now rather than waiting to arrive. We talk often about the need for brands to become more personal with their consumers. Those that appreciate the importance of this may find a way of incorporating their brand into targeted CSR activity, for example sponsoring or supplying foodbanks nationwide or clothes banks (in the way M&S are doing for Oxfam at present), which would not only create positive brand exposure for themselves and their products but could redefine their brand for a generation.

Tesco ditches the value stripes it earned

There's a new war brewing among the retail multiples. The battleground is 'value shopping' and the cause seems to be who can make their value range look as little like a value range as possible. Few product ranges have become as distinctive and instantly recognisable as the Tesco value range, products marked out from a distance by the bold blue and white stripes of their packaging. Sainsbury's tried it with a white and orange range of their own but somehow it wasn't as distinctive and, perhaps best for them, is didn't become as synonymous as the Tesco range with our collective struggle to get through the recession. However, when Waitrose introduced its sleekly packed Essentials range, I sensed it would be a game changer. There was nothing in the Essentials' packaging that marked it out so obviously as a value product. Perhaps the consumer has begun to feel self-conscious, even stigmatised, by pushing a trolley packed full of blue and white striped packages. Maybe there is a sense in which they feel it marks them out to their fellow shoppers as struggling a bit more, not being able to afford the branded goods. Even in recession it can still be a "Keep up with the Joneses" world. Hence Tesco's decision to ditch the stripes with the launch of its new Everyday Value range, with new colourful and more subtle packaging, is an interesting move. Although Tesco points out it’s not a straight like-for-like swap, the addition of the word "everyday" implies routine as opposed to "cheap as chips" whilst the new packaging creates less negative stand-out in the trolley. Value has been good for Tesco and has been good for the industry. It provided the platform for Tesco's dominance of the supermarket sector which, together with its Finest range, enabled it to pitch against Lidl, Aldi and ASDA at one end whilst Finest pitched it against Sainsbury's, Waitrose and Marks & Spencer at the other. It has enabled the multiples to compete across branded products across the complete category mix. But one consequence of the recession seems to be consumers being polarised across a number of sectors. There appears to be life at the economy end of the market and life at the higher end, but like so much of the country, the middle is being squeezed. It’s always been difficult for retailers to operate convincingly in both sectors. This latest move by Tesco may be the first step towards positioning it at the middle-higher end of the market in time for the recovery if – and when – it finally materialises.