Sometimes an economic situation gets so bad that it threatens to - as the team behind Domestos would put it - kill weak brands dead. Just look at what’s happened to Comet, Jessops, HMV and Blockbuster. But they are not the only household names that have been caught out. Some of the brands in the household category itself are also in trouble.
Although the brands still dominate the market with an 81.7% value share, own-label has been wiping the floor with them in terms of growth over the past year. Value sales of own-label products have surged 10.2% on volumes up 4.5%, according to the latest Kantar Worldpanel data [52 w/e 28 October 2012]. Branded sales, on the other hand, have risen just 1% and volume sales have actually fallen by 3.3% - the key factor behind the overall category’s 1.1% volume fall (total value sales grew 2.6%).
Most surprising is Olympic sponsor Procter & Gamble’s performance. In 2011, the giant’s UK and Eire boss Irwin Lee predicted its huge Olympic Thank You Mum campaign would eventually deliver a three-to-one ROI in terms of global sales.
In household, at least, Lee’s prediction looks way off the mark. Despite a strong performance by Ariel, combined volumes of P&G’s three other big detergents (Bold, Fairy and Daz) plunged 14% as value sales declined 4.4% combined. Daz was the biggest casualty with sales down 19.7% on volumes down 30.6%. In household cleaning, Flash has slumped 3.6% in value on volumes down 6% [SymphonyIRI 52 w/e 24 November 2012]. And Nielsen data [52 w/e 13 October 2012] shows that Fairy Liquid sales have inched up just 0.5% as volumes slid 8.4%.
So have the likes of P&G simply lost out to cheaper own-label products or have rival brands also managed to clean up at their expense? And why is the reverse happening in paper products, where brands are outperforming own label?
“The quality and look of the products offered by own label are so much more competitive” Brian Matson, Purity
P&G makes no bones of the fact that some consumers have switched to own-label products to save money. “People are facing tough decisions and looking for ways to cope and this has led to a small element of trade-down and private-label growth,” says Ian Morley, fabric and homecare commercial director for the UK and Eire at P&G. He claims that “this isn’t universal by any means” and that in some categories - such as fabric softeners and air care - brands are still outgrowing their own-label rivals.
But that will be small comfort to household cleaner brands that have watched value sales inch up just 0.6% on volumes down 5.3%, while own-label sales have surged 17.1% in value and 14.3% in volume [Kantar]. Own-label washing-up liquid stirred up an even greater lather, climbing 19.4% in value and 15% in volume, while branded sales rose 4.5% and volumes slumped 8.9%.
Competing on quality
The problem for the brands is that while own label is often cheaper than branded, it’s no longer necessarily nastier - or indeed obviously own label. “We’re seeing a migration from some people who were very brand loyal and who had never tried own label until they were skint,” says Brian Matson, director of own label supplier Purity, which makes budget own-label products for the likes of Tesco, many at a £1 price point. “But these people are realising they don’t have to sacrifice quality because the quality and look of the products offered by own label are so much more competitive.”
The likes of Aldi, which has increased its household sales 30.2% [Kantar], are undoubtedly playing an important role in changing people’s perceptions. “Advertising campaigns such as Aldi’s well-received taste and quality price comparison have gone a long way towards informing consumers that lower price doesn’t mean lower quality anymore,” says Richard Shon, MD of branded and own-label supplier 151 Products. “We’re entering a new phase in the own-label market, with the majority of British shoppers now having tried and liked own-label alternatives. This has increased their level of trust in own label. They know the results - cleanliness, scent, format and so on - can be just as good as the branded market leaders.”
“Overcapacity in tissue is entering the market as heavily discounted brand promotions” Frank Millward, Accrol
Among the big four, Tesco and Sainsbury’s have been at the vanguard of this own-label revolution. Both relaunched their household ranges in 2012, which helped boost their respective household sales by 3.3% and 2.7% [Kantar].
Such ranges are thriving because while own label is not immune to inflationary pressure, it is better equipped to cope with it than the brands, believes Kantar Worldpanel analyst Alex Hare. “Despite price increases, it remains a notably cheaper offer than branded alternatives,” he says.
The story couldn’t be more different in the paper products arena. In toilet tissue, own-label sales slumped 27.6% on volumes down 5.5%, while all of the top five brands delivered value and volume growth, led by market leader Andrex, which grew 10.7% on volumes up 2.9% [Nielsen 52 w/e 13 October 2012]. It’s a similar situation in the kitchen towels sub-category, with own label suffering double-digit value and volume declines as all but one of the top five brands grew share.
One reason own-label is losing out to the brands in paper products may be that the price differential is not as great as in household. There’s certainly been a lot of branded promotional activity, note the experts.
“Value is the key driver,” says Frank Millward, marketing director at branded and own label player Accrol Papers. “There’s significant over-capacity in the tissue industry and some of this is finding its way into the market as heavily discounted promotional offers from the branded houses. Retailers are looking for deep-cut branded offers as they fight to remain competitive against their historical competition and the rapidly growing discount sector.”
Indeed, across household as a whole there’s been a 57.3% surge in featured space promotions by the category’s 10 most promoted brands, according to the latest Assosia data (see p51). Half-price and money-off deals were the most commonly used promotional tactics in 2012, resulting in the average depth of deal increasing 2.3%.
Tim Smith, UK general manager of eco-friendly brand Method, suggests the continuation of such measures could spell even harder times to come for the category’s biggest branded players. “In this environment, consumers are basically looking to factor out inflation and brands and retailers have one of two approaches,” he says. “Either they are reducing their marketing and putting it into promotions or they are continuing to invest rather than getting involved in the promotional death spiral.”
Many brands that fall into the latter category are managing to prosper in this challenging environment through continued investment in innovation allied with canny promotional and marketing spend. Among these players, there is a strong conviction that innovation and added value will trump what many still perceive as the bargain basement offerings of own-label propositions in the long run.
Some of them, at least, have reason to be confident. Unilever boasts two of the standout performances of 2012. Since a 2010 relaunch, Persil’s sales are up 10.1% on volumes up 1.4%, aided by the addition of booster technology last June.
But the brand that’s really cleaning up is Domestos, with 17.7% value growth on volumes up 9.2% [SymphonyIRI], a performance that makes P&G’s declining fortunes with Flash look all the more dismal and even take some of the shine off Reckitt Benckiser’s 7.4% value growth with Dettol, on volumes up 2.6%.
Domestos cleans up
Unilever delights in the figure that one bottle of Domestos is sold every second in the UK and claims innovation is at the heart of the brand’s success. Last year, Unilever launched Domestos Extended Germ Kill and the NPD has continued into the new year with the launch of Domestos-branded toilet wipes.
“Brands cannot succeed by being environmentally friendly alone” Clare Allman, Ecover
Petra Hangweier, brand building director for laundry and household cleaning at Unilever UK, claims the economic situation has also played to the strengths of Domestos. “The economy has meant a number of consumers have reduced their repertoire of cleaning products, moving away from more specialist products and turning to brands they trust,” she claims.
That said, brands are being forced to work harder to win that trust, admits UK marketing director for Reckitt Benckiser Jerome Lemaire, another advocate of investing in NPD rather than promotions. “We believe cutting back investment in NPD or marketing budgets in tough times or an over-reliance on price promotions is not sustainable long term and won’t drive the growth we need,” he says.
Hence RB’s pledge to pour millions into marketing and NPD over the coming 12 months with new ad campaigns for Finish, Vanish, Dettol, Air Wick and Cillit Bang. Lemaire adds that it will continue to work with dishwasher manufacturers too. “Dishwasher penetration in the UK is still a fraction of the US or other European markets,” he says. “We’re investing heavily in working with the machine manufacturers to continue to drive up dishwasher ownership.”
Green message muted
All of the big branded players emphasise the importance of NPD and P&G’s Morley is quick to defend the performance of its Flash brand on this count. “We have enjoyed solid growth in this brand over the past few years behind a stream of innovation including bringing Febreze freshness into our Flash product range,” he maintains.
“This is a unique and desirable benefit in the surface cleaning category and one that shoppers are willing to pay a premium for. Innovation creates value when it makes a difference in someone’s life, and the more we can do this, with more people, the more we will grow.”
More and more brands seem to be trying to make a difference by stepping back from explicitly targeting the environmentally conscious and instead appealing to cash-strapped consumers with messages about better performance and value for money.
The fortunes of Unilever’s Cif hint at some of the reasons for this change of tack. Despite heavy investment in Cif PowerPro Naturals, an extension that put much weight in its green credentials, sales of the brand were up just 2.4% last year against volumes that slipped 2.7% [SymphonyIRI]. While Hangweier insists demand for greener products is “continuing to grow”, Cif’s sales contrast starkly with those of Domestos, which focused on performance in its marketing.
Lemaire believes the writing is on the wall for brands that rely too heavily on green messaging. “Our research shows that ‘green credentials’ are not the most important factor in purchasing choices,” he says. “Performance and value will be the key messages for 2013. We know that while there will always be a small proportion of ‘dark green’ consumers prepared to compromise on performance, most consumers are not. Consumers now expect companies to be ‘green’ in the general sense - it is no longer a platform for marketing advantage.”
Indeed, Clare Allman, UK marketing manager for Ecover, credits a step back from the company’s eco-warrior image for turning around its fortunes in the past year. She initiated a major packaging revamp last year, backed by a £4m marketing blitz, in an effort to reposition the products as more modern and family-oriented and less geared towards “people with beards and sandals”, she says.
“Having a sustainable lifestyle is still incredibly important for people, but brands can’t succeed by being environmentally friendly alone,” she says.
“You have to adapt and be up to date. The figures were looking horrible for last year but we’ve managed to turn it around despite the economic factors.”
“Green used to have more credibility. Now more than ever the battle is about value for money” Laurence Smith, EnviroProducts
Sales figures do indeed suggest the strategy is paying off. In the detergents and treatments market the brand delivered value sales growth of 6.5% [SymphonyIRI], although like the majority of brands its volume sales are still down year-on-year, by 1.6%.
This example underlines the view of Laurence Smith, commercial director at EnviroProducts, maker of the No More Chemicals cleaning products range and E-cloth. “Green used to have more credibility and we used to use it much more,” he says. “Now, more than ever, the battle is about value for money.”
That’s not to say green can’t be a credible message, especially if it’s combined with value for money as Tesco’s own-label range of environmentally friendly laundry and cleaning products, Naturally Powered, can attest. The retailer says the range has made a marked contribution to its growth in household.
The challenge for the brands is that own-label players have raised their game. Now they’re going to have to as well.
Household brands all washed up
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Household brands all washed up