BSLG in the News (Again)

This article about co-branding private label products with national brands got my blood up.

Pundits need to pun in order to justify their existence, but it makes no sense for national brands to help out store brands. They're in a dog fight with them for the soul of the American consumer, with stores like Tesco, Aldi and Trader Joe's looking to reduce or eliminate national brands entirely.

Now, the Private Label Manufacturers Association and stores would have you think:

1.) PL products are just as good as national brands

2.) They're a better value

3.) They're the wave of the future

None of these assertions is true.

Store brand items are only as good as national brands when they're manufactured by the national brand (60% of national brands make PL versions of their products, an insane statistic). Why any company would help its competitor to get a leg up on them is beyond me, but then who outside of Detroit was surprised at what happened to GM and Chrysler?

Store brands used to be a better value, but prices have been rising steadily, thanks in part of greed and the idea that consumers are going to switch permanently to store brands. This hasn't been proven over time, and is like any other assertion that "things will never change." That kind of thinking was what got us into this mess in the first place: no one could imagine things prior to the real estate bubble, and banks, Wall Street and most financial institutions assumed they could go on acting irresponsibly forever.

Finally, there is no indication that consumers will not switch back to national brands IF THE BRANDS CONTINUE TO HOLD VALUE. Brands are a promise to consumers. In the case of food, this has meant greater safety, quality and value for money (not "value," as in "cheap"). When commodity prices ramped up two years ago, the national brands were guilty of passing on these costs indiscriminately to consumers. That gave store brands an edge.

But in the grocery business, where 1-3% margins are commonplace, stores realize that private label products are a better bet for them. When consumers began switching in large numbers to Private Label, the stores themselves got greedy. Prices on PL products have risen dramatically in the past few months, and so store brands are no longer the "value proposition" they were.

It makes me recall something Lenin said: "The Capitalists will sell us the rope with which we will hang them."

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