Opinions

Brands And The Recession

Posted by Jim Nichols on February 23rd, 2009 at 12:00 am

Remember the Brandiest?

As personal incomes fall and unemployment rises, brands are generally taking it on the chin. There's an article here from Ad Age that talks about the rise of private label in these tough economic times.

That happens in every recession, and while there is good news from General Mills (GMI) and its brand growth driven by continued investment in brand building, for most companies this is tough times.

What does it really mean? Well, what does a brand mean? From an economic perspective, the value of the brand is measured in large part by the price gap between brand and private label that consumers are willing to pay. And that has surely declined for a variety of reasons.

One is that with a decline in personal income, we all need to make choices as to what is important to us. Do we need the best detergent out there, or are the problems we face in the laundry room sufficiently minor that a value brand or store brand good enough to solve them?

But there are bigger issues for brands. Private label has come a very long way from the old Pathmark No Frills aisle, which had a visual appearance to the grocery store in Repo Man. There is far less of a quality gap -- indeed there is perhaps no gap at all in many categories. Given that many branded manufacturers also make the private label versions of their products, many people have become savvy enough to know that the differences just aren't there.

Then there has been the tendency for brands to take big price advances year after year. When I worked in the cereal business, we found the growth in PL and bagged cereals roughly corresponded to that price advance line. And for good reason. Over the years, cereal went from a genuine bargain to a fairly expensive way to buy grain and sugar.

I think it also points to an urgent need for our industry to find ways to use digital to offer real brand connections and interactions so we can restore the price differentials that consumers are willing to pay. We can offer reach, or depth, but rarely both. We need to quickly figure out a way to offer reach and depth in digital experiences. Or we may find ourselves with a lot fewer accounts in a few years.

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