The crisis worsens the eternal battle between manufacturers and distributors
The current economic crisis has unleashed an open battle between manufacturing brands and those of distributors (popularly known has “private label”) which until now had been limited strictly to the professional field of business. Now, with pressure originating from the economic crisis, the battle has worsened to the extent of being the subject of television advertising.
Economic crisis and brands
There appears to be a certain consensus in that the current economic crisis began in the second half of 2007, but most certainly by then the sales of many companies had already began to suffer.
Brands are en extremely important part of business activity and thus are immediately affected by economic fluctuations, although it's not easy to specify exactly how the economic crisis affects the value of each brand.
While it's difficult to place a value on brands, taking into account annual reports prepared by large global consulting companies (Interbrand and Millward Brown), we get an understanding of the impact the crisis has had on the value of the top 100 most valuable brands according to these two consultancies. According to Interbrand, in 2009 the total value of the top 100 brands has fallen by 4% compared to the year before. According to Millward Brown, there has not been a decrease, but rather a slight increase of 0.83%, compared to previous double digit growth.
It could be presumed, then, that the leading global brands are not as affected as lesser known brands.
Distribution and distributor brands in Spain
When it comes to Spanish commercial distribution, there are two trends that have been maintained over the past 20 years: on one side, the increased participation of Hypermarkets and Supermarkets in terms of total sales, and on the other, increased market share of distributor brands.
Such is the case that in the Economic Bulletin on Spanish Sales Information from July 2009, dedicated monographically to Spanish commercial distribution in Spain in 2008, demonstrates sustained growth in the sales of food products at Hypermarkets and Supermarkets. The evolution of distributor brands follows a parallel growth to that of supermarket and hypermarket sales, which increased in 2008 as a consequence of the economic crisis.
According to a study by TNS Worldpanel, a company specializing in consumption, in 2008 Spanish families spent 12% more on distributor brands than in the previous year (some 658 euros).
The sales war of 2009
The first reactions when faced with decreased sales began at the end of 2008. That year Mercadona, in accordance with its philosophy of “everyday low prices,” announced that it was going to reduce the number of references at its establishments, including 800 products of the top brands from various manufacturers, and try to substitute them with its own brands (Hacendado, Bosque Verde and Deliplus).
On October 13, 2008 the first Danone ads appeared on television, attacking private label brands: “Activia is unique, and the reason why Danone doesn't produce it for other brands.” It's a policy that was followed in 2009 by Leche Pascual, Fontaneda (Digestive biscuits) and other leading manufacturing brands.
Without any relation to it, but undoubtedly tied to the economic situation in general, on October 15 daily newspapers published news on the creation of new brand by El Corte Inglés: Aliada. The giant Spanish distributor already had private label brands (El Corte Inglés, Hipercor, etc.). Aliada was launched onto the market as an independent brand cheaper than the others.
At the beginning of 2009, two tactical events took place: manufacturers of top brands regrouped with the slogan: “The leading brands have always been with you,” under the banner PROMARCA, and launched a joint campaign in defense of the main brands.
Conversely, the growth of distributor brands affects another group of companies: mass media and advertising agencies, because advertising investment of these brands tends to be much lower than that of leading brands. Consequently, the mass media, mainly television networks, reacted when faced with the threat of increased distributor brands. We were witness to this unusual show of advertisements on Telecinco (A world without brands, Telecinco support brands), Antena 3 (Antena 3 and Onda Cero support brands) and La Cuatro (We are Cuatro and we we believe in brands) as they defended leading brands instead of their programming.
