Tension between own brands and A-brands on RetailDetail's Brand Debate

In the current crisis situation, consumers are starting to behave differently. They adapt to the difficult circumstances (government cuts, redundancies, …) and they do that faster than most brands do. The gap between supply and demand is here to stay, as professor Jean-Noël Kapferer of the Parisian business school HEC said on RetailDetail's Brand Debate on 9 September.

 

According to Kapferer, consumers in saturated markets are going through an unprecedented process of social and economic change. Gone are the classic economic principles of balance and self-regulation: in this society consumers make their own deliberate choices based on their own preferences: for example for cheap products, biological products or products of their favourite brand.

Retailers are quicker to respond to consumers, but only A-brands innovate

Price is still a paramount consideration, as most of the retailers' own brands have understood. Still, this is not the only reason why ever more people prefer private labels. “Retailers are much closer to their customers than the slower A-brand manufacturers. They are constantly in touch with their customers and if they decide rapidly, cut the testing phase and quickly get along with it, they can deliver really fast. The volume would be rather limited, but the effect on goodwill would be immense”, says Kapferer.

 

Still, A-brands have their own distinct strength: they decide the future of food and other consumer goods. Only the A-brand producers conduct research and development, only they innovate and create the consumers' needs. This is a huge advantage, but they do not make it count (enough), according to Kapferer.

In practice: not enough dialogue

That is the theory, but how do the retailers and producers themselves experience these changes? RetailDetail organised a debate with key people from both the distribution and the manufacturing and the one conclusion emerging from the beginning already was the lack of dialogue. Pepsico BeLux's general manager Wim Destoop misses “the dialogue about the future: the achievements made by the different categories should be valued much more on their merits by the trade and the industry.”

 

Dominique Leroy, country manager for Unilever Belgium, can subscribe to that point of view: “Why is trade making it so difficult for us to innovate? We invest huge amounts of money to deliver innovating things and our costs are continuously increasing. Just give us some time and space to make our new products successful.”

Fight for your right... to be in a store

Destoop even suggested that private labels are over-represented in the stores – a suggestion that Dirk Depoorter, director of Spar Retail, rejected immediately: “We only have 45% private label”, he said. Moreover, he claims that this is often not a result of choice: “most of our private labels are in the fresh department, as almost all the A-brands have vanished from there. In other categories, the A-brands make sure we grow, something that private labels can not manage.”

 

Pascal Léglise, director private label at Carrefour, claimed that A-brands will never lose their place in the stores: “We can not simply drop the A-brands. Of course, we are eager to develop our own brands, but we can not make the A-brands pay the price.”

A tale of crocodile and sheep

Kapferer ended with the reconciling words that producers and retailers are “like a sheep that crosses the river on the back of a crocodile: they can not constantly fight, because they need each other. Retailers do need A-brands as locomotives of innovation and progress; without A-brands we would have a boring world”, as the brand professor concluded an interesting debate.

In the current crisis situation, consumers are starting to behave differently. They adapt to the difficult circumstances (government cuts, redundancies, …) and they do that faster than most brands do. The gap between supply and demand is here to stay, as professor Jean-Noël Kapferer of the Parisian business school HEC said on RetailDetail's Brand Debate on 9 September.

 

According to Kapferer, consumers in saturated markets are going through an unprecedented process of social and economic change. Gone are the classic economic principles of balance and self-regulation: in this society consumers make their own deliberate choices based on their own preferences: for example for cheap products, biological products or products of their favourite brand.

Retailers are quicker to respond to consumers, but only A-brands innovate

Price is still a paramount consideration, as most of the retailers' own brands have understood. Still, this is not the only reason why ever more people prefer private labels. “Retailers are much closer to their customers than the slower A-brand manufacturers. They are constantly in touch with their customers and if they decide rapidly, cut the testing phase and quickly get along with it, they can deliver really fast. The volume would be rather limited, but the effect on goodwill would be immense”, says Kapferer.

 

Still, A-brands have their own distinct strength: they decide the future of food and other consumer goods. Only the A-brand producers conduct research and development, only they innovate and create the consumers' needs. This is a huge advantage, but they do not make it count (enough), according to Kapferer.

In practice: not enough dialogue

That is the theory, but how do the retailers and producers themselves experience these changes? RetailDetail organised a debate with key people from both the distribution and the manufacturing and the one conclusion emerging from the beginning already was the lack of dialogue. Pepsico BeLux's general manager Wim Destoop misses “the dialogue about the future: the achievements made by the different categories should be valued much more on their merits by the trade and the industry.”

 

Dominique Leroy, country manager for Unilever Belgium, can subscribe to that point of view: “Why is trade making it so difficult for us to innovate? We invest huge amounts of money to deliver innovating things and our costs are continuously increasing. Just give us some time and space to make our new products successful.”

Fight for your right... to be in a store

Destoop even suggested that private labels are over-represented in the stores – a suggestion that Dirk Depoorter, director of Spar Retail, rejected immediately: “We only have 45% private label”, he said. Moreover, he claims that this is often not a result of choice: “most of our private labels are in the fresh department, as almost all the A-brands have vanished from there. In other categories, the A-brands make sure we grow, something that private labels can not manage.”

 

Pascal Léglise, director private label at Carrefour, claimed that A-brands will never lose their place in the stores: “We can not simply drop the A-brands. Of course, we are eager to develop our own brands, but we can not make the A-brands pay the price.”

A tale of crocodile and sheep

Kapferer ended with the reconciling words that producers and retailers are “like a sheep that crosses the river on the back of a crocodile: they can not constantly fight, because they need each other. Retailers do need A-brands as locomotives of innovation and progress; without A-brands we would have a boring world”, as the brand professor concluded an interesting debate.

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