Academic studies have until recently failed to pay sufficient attention to distributor’s brands. With the producer’s brand being considered as the only point of reference, distributor’s brands were thought of as ‘non brand’s , attracting price-sensitive customers. Moreover, the distributor’s brand has been even less extensive in the United States than in Europe.
In fact, in the United States, with the exception of Wal-Mart, no distributor dominates: distribution is regional, and the national brands still have power in the distribution channel. This is why distributor’s brands have long been perceived in the United States as low-cost, low-quality alternatives, an assessment that failed to take the full measure of the phenomenon.
Distributors are well schooled in distributor’s brands. They:
The distributor’s brand, managed with strength and ambition, in this way contributes to the store’s reputation. However, as we shall discover below, the brand issue for the distributors has shifted: the question now is to turn the store itself into the brand.
Throughout the world, the distributor’s brand is often becoming the only true competitor to the producer’s brand, when it is not the shelf leader in volume. Too many brand managers have not yet accepted this reality: their brands are in a minority. Their enemy is not the other ‘big’ brand, but the distributor’s much cheaper products, with an increasingly comparable quality level. To make things worse, on hypermarket and supermarket shelves we find the producer’brand, the distributor’s brand and now the lowest-price products, 60 per cent cheaper.
Distributor’s brands occur in all countries, from the richest and most developed to developing countries. In Eastern countries, downspouts and hard discount are growing rapidly. However, the hard discounters were also a bolt from the blue for mass distribution in the highly developed countries of Western Europe: their growth in France stabilized only this year. And yet these are rich countries.
The distributor’s brand is thus not phenomenon linked to low income. In Switzerland – which has one of the highest per capita incomes in the world – the leading food brand is Migros, well ahead of Nestlé. This is hardly surprising, as Migros is a dominant distributor: every village has its own Microspore. Migros – without exception – sells onlyMigros products.
The citizens of Germany, Europe’s most powerful country, enjoy their luxury cars, but they buy most of their food from the Aldi and Lidl hard discounters, which also – almost without exception – sell only exclusive private-label products. It is hard to imagine that the Germans would buy poor-quality goods. Lob law’s , a Canadianchain, has built its reputation on its President’s Choice brand. The story is the same at Carrefour, Albert Heijn in Holland and in Scandinavia.
Distributors now manage their brand portfoliosas part of an overall vision for the category and for the store. They have to choose their ‘brand mix’ for each category segment, and make a decision with regard to the type of brand to offer: producer’s or distributor’s brand? The latter may offer either ranges of economical products, a value-formoneyline (often in the distributor’s own name) or own brands (private labels) offering more flexibility in terms of positioning –perhaps even genuinely premium positioning.
It is true that within the meaning of the catch-all term ‘distributor’s brand’ there are distinctions to be made between very different realities. Two axes give structure to all the distributor’s products or brands: the level of value added, and the relation to the store (see Figure below).
In terms of added value, at the bottom of the scale are the low-cost products, hastily designed by mass-distribution multiple retailers to counter the breakthrough of the so-called ‘hard-discount’ German stores (Aldiand Lidl) and their French counterpart (Ed).
These products are the result of a minimalist conception of quality: low-cost sardines have the legal right to be called sardines, but ma keno pretence at anything more. Their low price is obtained through the purchase of the cheapest sardine lots in fish auctions the world over. Low-cost gingerbread contain snot one gram of honey. This should not be confused with the business model of the hard discounters such as Aldi and Lidl, which established precise quality specifications with industrialists, aiming to obtain decent quality despite the rock-bottom prices, via economies of scale pushed to the extreme:
the manufacturer recruited will produce only one reference, in astronomical quantities. At the other extreme of added value, we find products such as Tesco Finest, for example fresh fruit juices made less than three days earlier and with a limited shelf life (without preservatives) and Mono prix Gourmet, which, as its name suggests, offers products with high experiential value. In the United States and Canada, the President’s Choice line from Lob law’s aims high in terms of quality, as its name suggests.
In terms of nominal relationship to the store, a distributor’s brand may either carry the name of the store or its own name: one or the other. Thus, at Careful, there are ‘Careful’, Tex (for textiles) and Blue Sky. Of course, intermediate situations do exist, where the store endorses its own products: allAuchan products aimed at children are signedRiketRok, but the Auchan logo is clearly visible on the front of the packaging.
We thus arrive at the matrix shown in Figure below. The store does not impose its name directly:
Relative positioning of the different distributor’s brands
Other terms are used to denote the forms of distributor’s brands:
Certain stores use their name in all segments:
Figure above shows how the highly respected British company uses its name Tesco both for low-cost products (Tesco Value) and for the top of the range (Finest) and niches and trends (Tesco Healthy Eating). Capitalising Mona single name makes the customer’s job easier, and profits the store, but of course means that high standards must be achieved in all segments, even at low prices. French stores prefer not to run the risk to their reputation, and do not use their name on the cheapest products.
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