Brands Fight Back

As Private Label products soar, the national brands are fighting back.

Brands are switching their ad spend from gourmet and luxury items to staples like Kool-Aid and Hamburger Helper as shoppers cut back even at home. Land O’Lakes unveiled the first ad promoting its core butter in 10 years, passing over other products like cheese and eggs, while Hormel’s SPAM and Dinty Moore stew have seen double-digit sales growth following new ads targeting the frugal consumer.

During the last significant downturn in the 1980s, companies simply slashed ad budgets. But with private label products stealing market share, brands are fighting back this time. To drive home that point, Nielson Co. reports sales of store brands overall rose 9.1% to $84.8bn in the 52 weeks ending March 21, while branded products rose a mere 1.7% ($421bn). Kraft has been pushing Kool-Aid year-round now, instead of just during the Summer in an effort to capture dollars from consumers cutting out soft drinks. Not all marketers are ignoring the high end, though: Unilever is pushing its cheap Suave shampoo, but also boosting its spending on Bertolli frozen meals, along with announcing a line of licensed PF Chang's frozen Asia entrees. Hamburger Helper, introduced during a recession in the early 1970s, is seeing a doubling of ads from parent company General Mills as sales of dry meals have risen 9%. The company believes converts in hard times will carry over once the economy recovers because consumers continue to demand convenient meal solutions.

Even companies doing well in the private label wars are arming themselves for things to come: PepsiCo’s Frito-Lay reported sales volumes were strong in the quarter ending March 31 even with higher prices. To combat the incursion of the store brands into its market share the company has stopped “short weighting” product (putting less in while charging the same), adding upwards of 20% more for retail grocery SKUs (as opposed to vending). In addition it has launched value lines Munchos and Santitos at $2 per bag. Groupe Danone is combatting the erosion of its Dannon yogurt brands with a combined response of cutting prices, promoting some products, advertising more and introducing new products. Focus remains on its high-margin Activia line vs. more commoditized yogurt.

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