retail news in context, analysis with attitude

Planet Retail is out with a new report suggesting that CPG manufacturers need to be careful as they address what they perceive as the growing threat of private brands.

“In the recession, many brand manufacturers responded to the private label threat by launching their own value sub-brands. While these brands may have helped to retain shoppers from defecting to private label, they could do damage to the brand in the long-run,” said co-author Matthias Queck, who also serves as the company’s research director.

At the same time, the report says that CPG companies should be careful about their new direct-to-consumer models, such as the one announced by Procter & Gamble last week.

According to Natalie Berg, another co-author of the report, “Retailers have been stripping out the middleman for years by pushing their private labels. Brand manufacturers are now recognising an opportunity to do the same by going direct-to-consumer through brand stores, services and online channels.” Berg says that these tactics are beneficial in terms of driving brand awareness but are unlikely to be profit centres in their own right. The more successful and sustainable strategy is for retailers and manufacturers to work together in the form of joint planning, promotions and co-branding in certain cases.
KC's View:
I have dual reactions to this.

I agree that CPG companies have to be careful about diluting their brands when responding to private brands. They represent something different, and it seems to me that people and brands succeed when they play their own game, not the other guy’s.

As for direct-to-consumer efforts...I’m not entirely sure that they won’t be profit centers, mostly because I don’t think we know what shape these programs will take. It’s a new model...and there no doubt will be various iterations. I would not be so quick to discount them.