Christmas is a great time to catch up with family and friends that you hardly see. This year I ran into a friend of mine who works for a chemical manufacturer. The organisation he works for happens to specialise in anti-bacterial hand washes and sunscreen creams.
After exchanging our greetings I asked how work was and he told me that manufacturing was tough and would only be getting tougher. The weather was hot (it is Christmas and summer in Australia at the moment) and so I took out the sunscreen my wife had purchased from our local supermarket to apply on my children’s skin. He asked why we had purchased that particular brand and my wife explained that she recognised the brand and that the bottle looked easy to open and close. He then began to explain that the difference between the brand offered by the supermarket “Home Brand” and the brand we had purchased was probably perfume only, ie one had a different aroma added to it than the other. In terms of the protection offered, there was no difference. The company he worked for made several brands of sunscreen and they where all pretty much exactly the same, differentiated by packaging and therefore price.
He extended his comparison to the anti-bacterial hand cleanser that his company also makes. Our local supermarket stocks a few brands and we have gotten used to the smell of a particular brand that we now buy regularly. The formula used was very similar if not the same across each of the brands that they packaged on behalf of other companies.
With all of this information at hand it got me thinking. Of late the press had been hammering the big supermarkets about their drive to have customers purchase “home brand” products by essentially giving them priority positioning on shelves as well as undercutting the competition on price.
Can millions of dollars invested in a brand disappear literally over night if you learn that brand A and brand B are essentially the same? Are you likely to switch to a “home branded” product offered by a supermarket simply because it is 30% lower in price than the traditional market leader. Should we as consumers care if big brands are being driven out of the market by cheaper alternatives with the distribution power to undercut them?
The large supermarket chains of Coles and Woolworths dominate grocery shopping in Australia. IGA and a few independents offer some competition but the shear distribution of these large chains means they control what we eat and what brands we buy. Or do they?
The press is telling us that if we don’t want our grocery shelves dominated by “Home Brands” we should be voting with our wallets, driving the dollars back to the big brands. Yet the big brands make us pay 30% more for what is essentially the same product as the “Home Brand” simply because this is how they make lots of money.
Look at your own shopping experience. Would you travel out of your way to buy a particular branded product if the local grocery store didn’t stock or stopped stocking it? Would you continue to go out of your way even after a few months. If you are time poor, you like most others are more likely to pick the easier option, just buy what the store offers.
In Australia the Coles and Woolworths range of “Home Branded” products are taking between 25% and 30% of all grocery sales. This is likely to rise to over 30% as has been seen in other countries like the UK. With a young family, I purchase 9 litres of milk each week. That is three times three litre containers. The difference between buying the “Home Brand” and the market leader is over $1.50 per container, equating $4.50 per week. I personally prefer the taste of the market leader’s milk but until my kids can tell the difference and ask for it, I would rather save the $4.50 per week.
Therefore the market leading retail milk brand in Australia who has spent so much over the years convincing us that their flavour and milk is better is now forced to compete primarily on price. It is a big challenge for them and it will require them to begin to think in a different way so that they can begin to win customers like me back. As I mentioned I prefer their milk but when the economy is facing tough times, we all reign in our spending where we can and make compromises to get by.
A few years ago a similar marketing challenge was presented to Panadol the leading paracetamol brand (head ache relief). A low cost, no frills competitor come into the market saying that it offered the same formula as Panadol without the premium price. Their advertising in fact focused primarily on this point of difference. Same formula, 30% cheaper.
What Panadol did was evolve their product range, developing products that worked quicker “Rapid” and were more focused on specific pain relief (eg kids). They developed marketing campaigns focusing on the tie that many Australians had with the brand and how they used it for specific pain relief. They used some real customers and made their advertisements focus on “testimonial.”
To date it has worked and Panadol is once again selling well. Whilst the other brand is still around, it hasn’t been seen on TV for years.
These are great example that many big brands can take and use as they focus on regaining market share from the cheaper and almost equivalent in flavour “home brands.”
January 17th, 2012 
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