Followup – What’s in a (Brand) Name?

A couple weeks ago, I was called a fool and attacked for some basic advice I thought was uncontroversial – namely, buying generic items in your grocery store saves you money for what are often identical products.

One comment at the end of 7 Things You Should Always Buy Generic insisted I was “badly misinformed.” One even wrote, “Wouldn’t it be nice if know it all journalists really did know the facts about things, before they went off and jotted down their informative articles?”

Thing is, I did research the facts. I went to the grocery store, I bought store-brand items, and I used them. But I understand the strong feelings – if you spend more money on brand names for the same quality items that you could get for less, you might think I’m calling you a spendthrift. It’s also possible that you can spot differences in some generics that I can’t.

But this week, it turns out I have a powerful ally in my opinion: a consulting firm for brand-name manufacturers.

In a new report from professional services company Deloitte titled The Battle for Brands in a World of Private Labels – private labels are in the same category as generics and store brands – the big news was this…

Store brands (generics) are gaining market share at the expense of national brands. Between 2006 and 2009, market share rose across 74 percent of products in the personal care, household goods and food and beverage categories in the United States.

Interestingly, this report isn’t intended for consumers, but for the makers of those brand-name products for sale in our grocery stores. And here’s a startling admission that many of my critics just refuse to acknowledge…

All too often, retailers are able to take national brand products to third party manufacturers, or even the branded company, and develop a private label version with similar packaging.

That’s just one reason why brand names are suffering, the report says. It then issues this panicky call to arms…

In the battle for the customer, store brands are winning. Unless manufacturers can create a clear reason in the consumer’s mind that the brand is more important than the store when making their choices, the manufacturers are bound to lose margin to the store.

And the advice for those name-brand manufacturers? Stop discounting their products…

National brands should pull back price-related promotions that can decrease consumers’ reference price points. When developing a promotions strategy, consumer product companies should more actively consider non-price-related promotions.

In other words, if you’re a name-brand manufacturer, the message is to avoid competing on price, because you’ll lose. Instead focus on “non-price-related promotions” and otherwise try to “create a clear reason in the consumer’s mind that the brand is more important.” And how do they do this? Advertising. How else can band-name goods perpetrate the myth that they’re somehow worth the extra money, even when the generic versions are often made with the same process in the same manufacturing facility?

The moral of the story: At least try alternatives to the brand-name goods you usually buy. As some Money Talks News readers have commented, they don’t like the taste of generic foods, or bottled water, or cleaning products. That’s fine – at least they tried them. But if you haven’t yet, this is as good a time as any. As the Deloitte report concludes, “Store brands are here to stay.”

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Comments & discussion

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  • Anonymous

    You are right in saying that “store brands” are every bit as good and the brand names. The company I work for (a grocery chain) makes none of its store brand. They contract with manufacturers and provide the packaging. Such as with coffee….they give the packaging to Maxwell House. Ketchup to Hunts, Even the bread is not made by our company.
    So when you buy brand names, sometimes that is all you are paying a higher price for is the name.

    • http://www.moneytalksnews.com/ Dan Schointuch

      Ok. Yay!

  • Anonymous

    The grocery store chain that I work for doesn’t make any of their own products. They provide packaging to companies that make the big brand names and they make it for us. Such as Maxwell House makes the coffee and use our packaging. Hunts makes the ketchup. And the list goes on. So I can say that you are correct in saying that the quality is the same and you are paying for the name when it comes to brand name items. The only time I don’t buy generic is if I have a coupon or the sale price makes the brand name less expensive than the generic.

  • Anonymous

    A hidden risk in using store brands involves product liability. Recently I chipped a tooth on a store brand breakfast product that included a sausage with a piece of bone in it. The store referred me to their supplier who, in turn, referred me to another supplier. I had not saved the piece of bone but had a witness to the incident, a co-worker. The supplier’s supplier denied the claim despite very recent x-rays of my teeth and the dentist’s recommendation for a crown. I never was able to find the address of the supplier’s supplier.