Gordon Ramsay and Delia Smith may be able to wax lyrical on the finer points of potato varieties, but does the issue hold the same resonance for consumers? Premier Foods business unit MBM Produce certainly thinks so. Earlier this year, it announced it was to launch Potato Lovers, claiming it will be the UK's first fresh-potato brand; a decision that caused a few eyebrows to be raised at the risk associated with the strategy.
MBM, one of the three biggest suppliers of potatoes to UK supermarkets, has invested heavily in developing varieties and building the brand from scratch. Whether it can persuade consumers to pay more for a product traditionally regarded as a largely undifferentiated commodity remains to be seen.
'Potato Lovers is about delivering the right potato for the right purpose at the right time of year,' says Eddie Stableford, managing director of brand design and marketing consultancy Bryt, which created the brand for MBM following research revealing consumer ignorance about potato varieties.
'At one focus group we had a woman in tears over the variable quality of her roast potatoes,' he adds. 'It was not her culinary skills that were at fault, but the fact that most potatoes are marketed as "general purpose".'
Potato Lovers' potatoes are sold by variety, but the key difference is that they are marketed by function; its winter range offers potatoes for baking, chipping, mashing and roasting. While acknowledging the demand from some consumers for more niche products, Stableford says the purpose of Potato Lovers is 'to deliver fantastic-tasting potatoes for common use, not to introduce rare varieties'.
Most commodity suppliers are working to develop brands to escape the rising pressure on margins from the big supermarkets. 'Suppliers in every commodity sector have to do something to get their margins up or they will disappear,' says John Wringe, chief executive of branding network Star Chamber. 'Once the retailers have squeezed as much margin as they can out of their UK suppliers, they will shift their sourcing abroad.' Developing brand propositions is the easy part, he explains, but getting the right distribution, margin and communications in place, to get consumers to buy the product, is a lot more difficult.
Outgrowing the market
There are some successful precedents in the branding of commodities.
Florette, the UK's top-selling prepared salad brand, is one example. 'We are the only known brand in our sector and the only packed salad that advertises the product,' says Florette managing director Mark Newton.
Florette has used advertising regularly since its launch in the UK 15 years ago, and last year became launched a TV advertising campaign. As a result, its sales grew 17% last year, compared with 3% across the sector as a whole.
Cravendale milk is another example. Launched eight years ago by Arla Foods into a commodity-driven, own-label market, the brand's point of difference was its fresher, cleaner taste, and the longer life imparted by a filtration process that removes the bacteria that cause milk to go sour. Unopened, it lasts 20 days, compared with 14 for standard milk.
Marketed as 'the freshest-tasting milk you can buy', Cravendale's core market is women with children. Despite a typical retail price that is 18p higher for two litres than standard milk, the brand has posted double-digit sales growth since launch and is now worth about £63m. In October it expanded the range with Cravendale Hint Of, which offers additive- and preservative-free strawberry and vanilla variants, priced £1.09 a litre.
Arla plans to continue to invest heavily in the brand, not only to promote its benefits and justify its price, but also to counter the challenge from the supermarkets, which are developing own-label versions. Tesco Pure, which launched in June, for example, uses a similar filtration process, and according to Cravendale senior brand manager Thryth Jarvis, is a threat.
Although commodity producers are being forced to think about creating their own brands, consumer trends are working in their favour. 'Consumers' primary concerns are convenience, provenance and health, and any brand that can tap into those three areas stands a good chance of succeeding,' says Pete Hollingsworth, head of product branding at Enterprise IG.
Allied to this is growing affluence and a greater propensity to trade up to products that offer functional benefits. But Hollingsworth warns: 'New brands have to offer real added value, rather than just slapping a logo on-pack, which will be seen for what it is - a cosmetic exercise.'
Jayne Barrett, managing director of branding and design company Elmwood, argues that if people will pay a premium for bottled water - the ultimate commodity - there ought to be scope to brand almost anything. But consumers are savvy, and while they will pay for perceived benefits, they remain mindful of value, a trait exemplified by the fact that 64% of Tesco customers buy products from both its Value and Finest lines.
Some commodity markets are already densely populated by brands. Own-label accounts for only 34% of the bread market and 21% of the butter, spreads and margarines market, according to TNS Superpanel data. By contrast, it accounts for 66% and 62% of the milk and cheese markets respectively.
The discrepancy is caused by the fact that many commodity brands pre-date supermarkets. Hovis has been around for more than 100 years and Lurpak since the Second World War, for example, creating long-standing allegiances that give the multiples less scope to develop own-label ranges that will steal share.
There is no room for complacency, and rapid innovation in both the bread and butter sectors are testament to suppliers' recognition that supermarkets are trusted brands. These suppliers work hard to add value both to their own and supermarkets' ranges through strong category management. 'When your market becomes mature, you have to add value by understanding real consumer needs, or you end up cutting prices and slip toward the commodity end,' says Richard Tolley, marketing director of Dairy Crest's food division, which produces brands such as Cathedral City cheese and Country Life butter, as well as being a big supplier of own-label.
A spokesman for Florette, which will spend £2m on promotion and advertising this year, puts it more bluntly. 'The supermarkets see bagged salad as an own-label market, so we have to go to town on marketing to drive the category forward and keep the supermarkets interested.'
Dairy Crest launched Cathedral City more than 10 years ago. The brand is now worth £95m, with a growth rate of 16% and a 10% share of the cheddar market, which is growing at just 4%. The company has invested £50m in its creamery in Davidstow, Cornwall, introduced resealable packaging, and is running a £3m TV campaign. Recent additions to the core range include sliced and grated variants and adult-oriented snack products, such as Dip and Go (cheddar fingers and Branston pickle). 'The brand offers a wide profile with consistent quality,' says Tolley. 'What has happened in cheese is much like what has happened in the wine market, in that artisan history got in the way of knowing and delivering what customers really wanted.'
The wine market offers some encouraging parallels for commodity producers keen to establish brands. The supermarkets, led by Sainsbury's, removed the mystique associated with the French appellation d'origine controlee system by launching its own ranges.
Australian wines now dominate the UK market, having combined strong brands with sophisticated blending to create consistent quality. But there are signs that more educated and confident British consumers are beginning to tire of what they see as a bland and homogeneous Australian offer, and are exploring and experimenting with more complex and sophisticated French wines.
What Potato Lovers, Cravendale and Cathedral City have in common is accessible family brand values - the equivalent, in a sense, of the Australian wine offer.
However, brand experts believe branded commodity producers stand more chance of creating a differentiated offering for which consumers will pay a premium if they focus on education, provenance and the introduction of niche brands, rather than aiming for wide appeal.
Deans Foods, the leading UK supplier of eggs, is pursuing this tactic.
It produces a range of brands for which it offers a plethora of information on its website. Its brands include Corngold free-range eggs, which come from hens fed on a maize-rich diet, enhancing the product's colour and flavour, as well as Woodlands, a joint initiative with the Woodland Trust, which donates 1p from every pack of eggs sold to the charity. Its Columbus egg, meanwhile, contains up to 75% of the daily recommended intake of Omega-3, which helps maintain a healthy heart and circulation.
Star Chamber's Wringe believes Deans Foods has a great opportunity to add value to the egg market, but is adamant that the market dynamics are stacked against commodity brands playing anything other than a niche role. 'To be sustainable, a commodity brand needs to innovate, communicate and make a decent margin, but very few can do all three. Most commodity producers lack the margin to be able to invest in innovation and communication,' he says.
Even commodity brands backed by companies with deep pockets and marketing muscle struggle to gain share. Cravendale, for example, has only a 3% volume share of the £2bn milk market. 'Some of the biggest commodity producers have grown aggressively by acquisition over the past five years, but even they struggle to create viable brands,' says Wringe. 'One might think their size would put them on a more equal footing with the supermarkets - allowing them to reap more benefits from a stronger category management approach which builds value for all parties - but that rarely happens.'
As the trend toward a rationalisation of brands continues, gaining and sustaining a supermarket listing will be a struggle for entrants, despite the allure of branded commodity goods. Unless the retailers relax their stranglehold on suppliers, the outlook for commodity brands is bleak.
As Wringe concludes: 'The commodity marketplace will be dominated by own-label for the foreseeable future.'
- Suppliers can raise margins.
- Offers the chance of greater negotiating power with the supermarkets.
- Emerging consumer trends afford more opportunities for branding.
- Adds interest to the category as a whole.
- Difficult and expensive.
- As retailers rationalise the brands they stock, it may be difficult to get shelf space.
- Supermarkets are quick to emulate new brands.
- Consumers may resent paying more for something they view as a staple.
TOP 5 WATER
2. Perfectly Clear
3. Highland Spring
4. Volvic Touch Of Fruit
5. Buxton Spring
Total market sales: £279m
Source: TNS Superpanel (year to Sep 05)
TOP 5 CHEESE
1. Cathedral City
3. Pilgrims Choice
4. Seriously Strong Cheddar
5. Golden Vale Cheestrings
Total market sales: £1.86bn