Message from Henry

Store brands are raising the stakes for national brands as they grow share in many categories. The key is to not overreact and make price a more important variable than it truly is. Marketers of national brands need to understand the facts behind the changes occurring in their brands' categories before acting. This is a critical point. A common scenario we see goes something like this: a national brand declines while store brands grow. The national brand manufacturer assumes, usually incorrectly, that consumer switching based on price is driving the share change. The national brand manufacturer then unnecessarily spends millions of dollars on price-based actions. The millions spent on reducing price preclude the national brand manufacturer from making the more strategic, equity building moves that will truly drive profitable volume growth.

We are devoting this edition of the Rak Report to the hard work of competing against store brands. It starts with a complete understanding of the market you compete in. Develop a precise behavior-based understanding of the market, how it is organized, and which brands you really compete with. With this foundation in place, you will understand the extent to which your brands compete with store brands. You should then use planning and analytic tools to determine the volume, share and profit outcomes resulting from changes to your strategies and tactics.

In many categories, store brands have created market partitions, indicating they are providing a differentiated benefit to consumers. Vinit Doshi explains how brands can fight back and win in today's challenging marketplace with actions such as sharpening brand positions, optimizing spending on equity-building vehicles and launching product innovations.

Greg Orth correctly states that the impact of store brands can be over stated and is often misunderstood. Needless to say, you have to understand the true impact store brands are having on your business. Do your homework before plunging ahead with elaborate, reactive programs.

The recession will eventually end and so will this latest threat from store brands, right? Wrong. Brand marketers need a sustained, concerted effort to create a value bundle that provides real benefits to consumers and a meaningful difference vs. store brands.