buying major branded products? In short, they are criticising consumers for doing what they are themselves doing: managing their spending.
Evolution of the distributor’s brand
Academic studies have until recently failed to pay sufficient attention to distributors’
brands. With the producer’s brand being considered as the only point of reference, distributors’ brands were thought of as ‘non- brands’, attracting price-sensitive customers.
Moreover, the distributor’s brand has been even less extensive in the United States than in Europe. In fact, in the United States, with the exception of Wal-Mart, no distributor dominates: distribution is regional, and the national brands still have power in the distri- bution channel. This is why distributors’
brands have long been perceived in the United States as low-cost, low-quality alterna- tives, an assessment that failed to take the full measure of the phenomenon.
It is revealing that the latest book published in the United States about distributors’ brands (Kumar and Steenkamp, 2007) chose ‘private label’ and not ‘trade brands’ as its title: the notion of ‘private label’ categorises the distributor’s brand as a thing apart, and not using the word ‘brand’ therefore fails to account for the true reach of distributor’s brands. They are indeed brands in the eyes of consumers, who are now loyal to them, even if, as will appear, they are not brands like the others. However, this situation has recently changed, as can be seen from a recent interview with Russ Klein, the executive director of 7-eleven, the store that invented the convenience store concept some 79 years ago, He attests, ‘Private label has changed to the point where retailers are using it as the premium brand in some cases’ (quoted in Marketing Management, July–August 2006).
Tesco is an example of this.
At Tesco, the number one distributor in Britain, a survey of the fruit juice aisle is revealing: far from being a product, the distributor’s brand is in reality a segmented range, from the lowest possible price (Tesco Value), priced at s0.33 per litre, to s1.84 for the top of the range, under the label ‘Tesco Finest’. Tropicana’s product, by the way, is sold at s1.62 per litre.
In fact, distributors are well schooled in distributors’ brands. They:
I allocate the majority of their shelf space to them, eliminating all weaker brands;
I have segmented their portfolio of distrib- utors’ brands in order to meet the different expectations of their clients (a far cry from the ‘Soviet’ own brand, signalling the absence of choice) without forcing them to identify with the shop name (Wal-Mart named its men’s clothing range George);
I segment their range in order to cover not only different price levels, from the cheapest to the highest price on the entire shelf, but also the emerging needs known as ‘trends’ (such as Tesco Fair Trade, Tesco Organic and Tesco Healthy Eating).
The distributor’s brand, managed with strength and ambition, in this way contributes to the store’s reputation. However, as we shall discover below, the brand issue for the distrib- utors has shifted: the question now is to turn the store itself into the brand.
Throughout the world, the distributor’s brand is often becoming the only true competitor to the producer’s brand, when it is not the shelf leader in volume. Too many brand managers have not yet accepted this reality: their brands are in a minority. Their enemy is not the other ‘big’ brand, but the distributor’s much cheaper products, with an increasingly comparable quality level. To make things worse, on hypermarket and supermarket shelves we find the producer’s brand, the distributor’s brand and now the lowest-price products, 60 per cent cheaper.
This further heightens the urgency to act (Quelch and Harding, 1996) and position the major producer’s brand firmly and squarely on its pillars of differentiation: innovation and quality on the one side, and emotional added value on the other.
Distributors’ brands occur in all countries, from the richest and most developed to devel- oping countries. In Eastern countries, low- cost products and hard discount are growing rapidly. However, the hard discounters were also a bolt from the blue for mass distribution in the highly developed countries of Western Europe: their growth in France stabilised only this year. And yet these are rich countries.
The distributor’s brand is thus not a phenomenon linked to low income. In Switzerland – which has one of the highest per capita incomes in the world – the leading food brand is Migros, well ahead of Nestlé. This is hardly surprising, as Migros is a dominant
distributor: every village has its own Migros store. Migros – without exception – sells only Migros products. The citizens of Germany, Europe’s most powerful country, enjoy their luxury cars, but they buy most of their food from the Aldi and Lidl hard discounters, which also – almost without exception – sell only exclusive private-label products. It is hard to imagine that the Germans would buy poor-quality goods. Loblaw’s, a Canadian chain, has built its reputation on its President’s Choice brand. The story is the same at Carrefour, Albert Heijn in Holland and Ika in Scandinavia.
Distributors now manage their brand port- folios as part of an overall vision for the category and for the store. They have to choose their ‘brand mix’ for each category segment, and make a decision with regard to the type of brand to offer: producer’s or distributor’s brand? The latter may offer either ranges of economical products, a value-for- money line (often in the distributor’s own name) or own brands (private labels) offering more flexibility in terms of positioning – perhaps even genuinely premium posi- tioning.
It is true that within the meaning of the catch-all term ‘distributor’s brand’ there are distinctions to be made between very different realities. Two axes give structure to all the distributor’s products or brands: the level of value added, and the relation to the store (see Figure 4.1).
In terms of added value, at the bottom of the scale are the low-cost products, hastily designed by mass-distribution multiple retailers to counter the breakthrough of the so-called ‘hard-discount’ German stores (Aldi and Lidl) and their French counterpart (Ed).
These products are the result of a minimalist conception of quality: low-cost sardines have the legal right to be called sardines, but make no pretence at anything more. Their low price is obtained through the purchase of the cheapest sardine lots in fish auctions the world over. Low-cost gingerbread contains
not one gram of honey. This should not be confused with the business model of the hard discounters such as Aldi and Lidl, which established precise quality specifications with industrialists, aiming to obtain decent quality despite the rock-bottom prices, via economies of scale pushed to the extreme: the manufac- turer recruited will produce only one reference, in astronomical quantities. At the other extreme of added value, we find products such as Tesco Finest, for example fresh fruit juices made less than three days earlier and with a limited shelf life (without preservatives) and Monoprix Gourmet, which, as its name suggests, offers products with high experiential value. In the United States and Canada, the President’s Choice line from Loblaw’s aims high in terms of quality, as its name suggests.
In terms of nominal relationship to the store, a distributor’s brand may either carry the name of the store or its own name: one or the other. Thus, at Carrefour, there are ‘Carrefour products’, Tex (for textiles) and BlueSky. Of course, intermediate situations do exist, where the store endorses its own products: all Auchan products aimed at children are signed Rik et Rok, but the Auchan logo is clearly visible on the front of the packaging.
We thus arrive at the matrix shown in Figure 4.1. The store does not impose its name
directly:
I when its insufficient reputation is a handicap for product sales;
I when the badge function of the consumption does not fit the presence of a generalist distributor (for example wine or textiles);
I when the level of added value of the products is too low and could reflect nega- tively on the store: for example, at Carrefour low-cost products are labelled No. 1 or Eco, without any mention of Carrefour.
Why do Leclerc hypermarkets have no store brand with their name? I organised a seminar on this theme with the managers of this group, and it appears that this has to do with the company’s culture and its historical legacy.
Leclerc was conceived and grew up as a discounter of major brands. Signing its products Leclerc would not fit with this vision of the company’s raison d’être. Nevertheless, customers have clearly realised that Marque Repère (Marker Brand) is Leclerc’s distributor’s brand. In this regard it is interesting to note that this brand is itself named ‘brand’, and uses at its second name the ontological function of any brand: to serve as a reference marker.
Tesco Value
Eco Products No.1
Tesco Leader Price Sephora
George (Wal-Mart) St Michael
(Marks and Spencer)
Aldi Lidl
President’s Choice
Added value 0%
Relationship to the store Fauchon
Tesco Finest Tesco Healthy Choice
None Strong
Figure 4.1 Relative positioning of the different distributors’ brands
Other terms are used to denote the forms of distributors’ brands:
I The own brand or private label is a distributor’s brand that has its own name and does not generally refer to the company’s name (for example Miss Helen for cosmetics at Monoprix, or Jodhpur for textiles at Galeries Lafayette).
I The counter brand: this word designates a distributor’s brand, generally a private label, created to divert clientele from a particular big brand, by slavishly imitating all its distinctive traits in order to play on client confusion and the psychological principle according to which everything that looks very much alike is in fact very similar. Thus each company creates its counter brand to Ricoré – Calicoré, Incoré, etc – with packaging similar in all respects, placed just next to the national brand on the shelf.
I The positioning brand: these are ranges that, far from being content with offering the best quality/price ratio, position them- selves on trends or in the premium segment. Take for example the Monoprix brands, such as Monoprix Bio (organic), Monoprix Equitable (fair trade), Monoprix Gourmet.
Certain stores use their name in all segments:
Figure 4.1 shows how the highly respected British company uses its name Tesco both for low-cost products (Tesco Value) and for the top of the range (Finest) and niches and trends (Tesco Healthy Eating). Capitalising on a single name makes the customer’s job easier, and profits the store, but of course means that high standards must be achieved in all segments, even at low prices. French stores prefer not to run the risk to their reputation, and do not use their name on the cheapest products.