Saturday, 12 August 2017

Strategy: American consumers have a new attitude that's creating a 'sphere of despair' for Nestle, Unilever, and Procter and Gamble

Brands are facing an uphill battle.

Store brands are creating a tough situation for name brands.

Retailers from Whole Foods to Walmart are making big bets that consumers are more willing to buy goods without a name brand on them.

A new consumer packaged goods start-up, Brandless, has hinged its entire business model on the concept: it sells common household items devoid of brand labeling that always cost less than $3.

Retailers are now "more willing to invest in 'store brands,'" because the stigma of "generic" goods has lifted, according to a note by Barclays.

It recently revealed that Amazon is sitting on a slew of private label brands that its developing in-house to compete with existing offerings. Target also has seen success with its private label brands, which UBS recently called a "bright spot" for the brand.

But if it's good for retailers, it's bad for the storied name brands that stock their shelves and compete directly with the private label product.

Consumers are increasingly apathetic to brands, creating what the Barclays calls a "sphere of despair" for food brands like Mondelez and Nestle, and consumer conglomerates like Unilever and Procter and Gamble.

The rise of store brands has "greatly diminished manufacturers’ pricing power," according to Barclays. More consumers are now choosing the lower-priced brands, and there's more of them, meaning brands can no longer set the bar for the price of goods like they once did.

Other factors creating challenges for the big players are a "greater mistrust of iconic brands," customers who are more likely than ever to choose a "local" brand, and "lower barriers to entry" for companies to create big brands through social media.

The private-label craze — and resulting issues for established brands — is clearly illustrated by what's happening in the battery market.

Amazon holds about 90% of the online battery market with its AmazonBasics battery line. The batteries are cheaper than comparable brands, and in the eyes of regular Amazon customers, they perform just as well. That has spelled trouble for the name brand Energizer, according to UBS.



from pulse.ng - Nigeria's entertainment & lifestyle platform online

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