Brands ditch price promotions as defence against own-label lines

Unilever: reviews price promotion strategy
Unilever: reviews price promotion strategy

Coca-Cola and Unilever are among major brand-owners shifting their strategies to better differentiate themselves from own-label competition.

Faced with mounting pressure for shelf-space and furious discounting by supermarket own-labels, many branded goods producers have resorted to price promotions to attract recession-weary consumers.

However, brand marketers are worried that the tactic is damaging their brand equity, leading several of the UK's biggest names to reappraise their strategy. A source close to Unilever said the FMCG company is preparing a complete U-turn away from discounting.

"Consumers are starting to question why they would pay full price in the first place. [Unilever] is now looking at how best to show brand equity in its brands," said the source.

Unilever chief executive Paul Polman has previously told Marketing that he views discounting as a "zero-sum game" (Marketing, 9 May).

Coca-Cola is understood to have put the brakes on price promotion within the past six months, with mixed results.

However, marketing experts believe it will be an uphill struggle for brands that have sacrificed their brand equity to drive short-term sales.

David Bird, senior consumer analyst at Datamonitor, said: "Brands need volume drivers but they also need consumers to trade up to their more profitable products.

"It's easier said than done. It is not unheard-of for retailers to delist household names if they won't run the same discounts as in the past."

Neil Saunders, managing director of retail analyst Conlumino, agreed that brands must help consumers to trade  both 'up and down' to avoid price promotions.

Thierry Billot, managing director of brands at Pernod Ricard, which has maintained a "premiumisation" strategy despite the downturn, said: "We believe premium is a long-term strategy and we should not mortgage the value of our brands by reducing the price."

According to Mintel, in 2011, the proportion of own-label NPD overtook branded NPD in the UK, with 54% in the own-label segment. It is growing faster than the branded-goods market.

Discussion

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus
Brand Republic Jobs

subscribe now

Latest

Oasis #springasmile digital campaign gets people doing good deeds
Coca-Cola: 'Don't approach bloggers with a fait accompli'
Tesco CMO Matt Atkinson: 'It is so important not to stereotype mothers'
McDonald's gives Ronald a new look ahead of global 'Fun times' social media push
In pictures: BrewDog opens first craft beer shop BottleDog for 'beer aficionados'
Facebook ad revenue leaps $1bn as it invests in targeting
Malteser or Maltesers? Mars takes Hershey trademark dispute to court
Apple Q2 profits top $10bn as iPhone sales soar
Lynx tells men not to leave love to fate
HBO captures awkwardness of watching sex scenes with parents
Primark to open first US stores with Boston chosen as flagship location
Marketing spend on the up but a reality check is needed before celebrating
Top 10 ads of the week: Jackpotjoy and BT Broadband fend off Kevin Bacon
Lidl beats Tesco to 10m Facebook fans
Center Parcs ad banned for encouraging parents to take kids out of school
Coca-Cola, Cadbury and Amazon named top brands for targeting youth market
Leaked document shows Nokia to be rebranded as Microsoft Mobile
Nike lays-off hardware staff in move that casts doubt on future of FuelBand
Greenpeace says save the bees or humans will die
What brands need to know about changes to VAT and online downloads in 2015
Jimmy Savile victims urged to claim compensation in new ad campaign
UKIP launches biggest  ad campaign and stirs up 'racist' accusations
Apple boss Tim Cook provides voiceover on ad touting firm's renewed green commitments
John Lewis walks consumers through its history to celebrate 150 years of business
Waitrose boosts content strategy with 'Weekend Kitchen with Waitrose' C4 tie-up
Hottest virals: Cute puppies star in Pedigree ad, plus Idris Elba and Fruyo
Amnesty International burns candles to illuminate new hope
Tom of Finland's 'homoerotic' drawings made into stamps
Toyota achieves the impossible by calming angry Roman drivers
YouTube reveals user habits to appeal to 'older' marketers