Private Labels are Winning the Battle

Below is an excerpt from a really good Ad Age article. After that, I've drafted a couple of interesting key-take-aways....

Let me know your thoughts...
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Private Label Winning Battle of Brands
Marketers Face Moment of Truth As Retailers' Lines Soar to Historic Sales High
By Jack Neff

The unthinkable
At the same time, volume is shrinking in staple categories where that once seemed impossible, with unit sales of shampoo, for example, down 7.7% last year in all channels, including Walmart.
"Portion control is in," said Thom Blischok, president-consulting and innovation at IRI.

"There is no previous period that exactly parallels where we are today," said Mr. Blischok, who believes consumer spending could remain weak for four to eight years and lead to a "downturn generation" that learns to scrimp and save permanently, including buying more private label.
But the threat to brands goes beyond that.

"Retailers have been talking about destocking, taking out the No. 3 or No. 4 brands, for more than a decade," said Clorox Co. Chairman-CEO Don Knauss at CAGNY. "We're finally starting to see that happen." Walmart, particularly, is aggressively looking to winnow brand assortments and category footprints in some cases, he said.

Executives of Kraft, Kellogg, General Mills, Con Agra and Sara Lee all said that advertising will be a key component of keeping their brands top of mind, and Mr. Lafley noted that P&G brands have pumped out a combined 100 separate "value messages" in advertising to argue for their superiority over private label in recent months. But the response to the downturn also has become increasingly promotional. In one case in December, a mommy blogger bragged of how she combined P&G coupons, rebates and drug-store promotions to buy two bottles of Olay Regenerist facial cleanser for free and get $8.66 in cash back. "We're starting to train consumers that the deal price is the only price," Mr. Blischok said. "We're pumping out the morphine of deal, deal, deal. And we need to be talking value."
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Anyway, here are some key take aways to consider when drafting new brand strategies during this recession.

1. There is no safe brand or category during this economic downturn. Used to be that only over-the-counter meds were the ones affected, but now its also feminine products and skincare.
2. The competition has broaden. Our brands, are not only competing against PL but also against Value brands. (Difference between the two is quantity).
3. Portion control. It used to be that I use as much as I want, now its, I use what I need. Even shampoo sales are declining... no, its not that people are showering less, its that people are being cautious of how much they use.
4. Brands need to advertise more during this time. Now is the times to create/differentiate your brand from that of PL.
5. It costs much more to gain a new consumer than to keep existing ones. HH over $100K are also buying PLs
6. Increasing promotions definitely help, but in the short term... they move sales, but doesn't create value for the brand. We need to be very careful about this... careful about brand dilution.
7. WM / HEB manage their brands like General Mills and Nestle etc.... which we know, but know that we are competing against other marketers, not only retailers and space.
8. If the economy keeps going like its going thus far, brands need to become leaner in production (more than they already are, can you imagine this?) which will eliminate the number 3 and 4 brands in the marketplace.

Which brings me to my next question.... If PL brands are increasing in strength, maximizing resources, competing in prices and value... were do we stand? My answer is... In the mind of the consumer... which can bring us problems in the future, for our consumers are getting much smarter. If nothing or few things differentiate us from PL, we are in big trouble, for we have created 'brand inflation.'

Lowering prices is great, but we need to be careful that we don't dilute the brand... we need to position it as, during hard times, we take a bullet for you consumer, because we know you want to cook (drive, drink, wear) the brand you identify with.

Last but not least, I will close with the line they used... "we are pumping out the morphine of deal, deal, deal. And we need to be talking value."

Thoughts?!