| Branding
isn’t everything; it’s the only thing. This take off on the popular
football quote is quite appropriate in today’s overcrowded market.
Similarly, the statement can be made: your brand is your business.
If you and your company are unclear about your brand and the positioning
of your brand, how are customers and potential customers to figure
it out?
The term brand has become so commonplace in our language that many
have forgotten where the term originated. In the Wild Wild American
West of the 1800’s, cattle would often graze onto neighboring rancher’s
land.
Cattleman, in order to differentiate their animals, would place
decorated metal implements into the blacksmith’s fire. The metal
would heat to red-hot and the rancher would “brand” his animal on
its flank to differentiate his commodity from his neighbor’s. In
the “Wild Wild West” of the marketplace, little has changed. One
producer’s commodity is hard to tell from another’s.
The decision to brand or not to brand drives the question, “What
business are you in?” As a branded manufacturer, the challenge is
to differentiate your offering in the marketplace. You must create
a brand position and a brand statement that drives all of your other
strategies. Your brand is your business. Creating and leveraging
a successful brand will drive higher customer loyalty and profit
margins.
The decision to pursue a private label strategy places a company
in a production driven mode. The challenges are cost containment
and plant capacity utilization. The marketplace dictates price and
profit margins to a much greater extent. The rising economic power
of consolidated industry giants is forcing greater pressure on pricing
and profit margins. The risk of private label is also rising, as
mega-buyers become an ever-increasing percentage of a company’s
output.
Both branded and private label strategies have risks and rewards.
In the canned tomato-processing segment, the market has rewarded
the branded canner at a relatively high rate. These companies have
created new products at a higher rate and have therefore gained
additional profits. The majority of private label canners have either
been driven out of business or are currently in serious financial
straits. The largest best-funded customers have demanded product
at below market pricing for so long that they have destroyed their
sources of supply.
The lesson for cheese manufacturers pursuing the private label strategy
is that this scenario will likely continue.
As an observer of the cheese producing industry, I have always been
amazed at the difference between the Italian cheese makers and the
Cheddar producers. Production of Italian cheeses are dominated by
branded positions while Cheddar makers more often tend to be private
label.
Isn’t there an opportunity for a differentiated Cheddar to become
branded? Witness the success of Cabot or Tillamook as a benchmark.
In terms of new product development, flavored Jack cheese have proliferated.
Where is the Cheddar equivalent? The research has been done; Americans
want higher flavor profiles. The market testing on flavored Jacks,
Cream cheeses and Havartis is conclusive. Here is an opportunity
for a savvy Cheddar maker to create and dominate the market. How
many other new opportunities for Cheddar exist? Enough that branding,
branding, branding in the boardrooms should be a mantra.
In the retail store, milk is the largest private label item ringing
up sales of $6.4 billion annually. Second in line are private label
cheeses at $2.3 billion. The Private Label Marketing Association
says that one in five items sold in supermarkets is private label.
Further, 75 percent of consumers think store brands are real brands
and 83 percent have purchased store brands. If retailers can be
successful marketers of brands, surely cheese producers can be.
Strategy is everything. Positioning and planning are the two overarching
principles to marketing success. Positioning statements define a
brand and the company. Positioning happens with or without a company’s
efforts. If you fail to position yourself, your competition will
do it for you.
Surely a company that is deeply entrenched in private label production
can’t switch gears overnight. This would be inadvisable. Going back
to the tomato example, 20 years ago, a private label tomato canner
named Stanislaus Food Products decided to change their strategy.
The new owner wanted to build a brand from a company that was 90
percent private label.
Today that company is the largest (and quite likely the most profitable)
fresh packed tomato company in the world. It enjoys a tremendous
brand loyalty from pizza makers. Well over 90 percent of their sales
today are branded versus private label.
For those cheese producers who have a long-term vision and are tiring
of chasing private label business, the field is open. The steps
to creating a brand are tricky but if done correctly and methodically
will produce rewards.
Some will say that creating a brand will compete with current customer’s
private label business. This could be an issue. Therefore, in the
strategy and brand creation, a company must look at different products,
new channels, different price points or even new geographies.
For producers who are already following a branded approach, is your
brand performing according to plan? Your brand is your business.
If your brand statement is not clear, you lose. If the promotions
you have tied to that brand statement are inconsistent, customers
become confused.
Customers will not pay a premium for a product unless they are devoted
to it. Intelligent branding creates that devotion. Promotions of
cents off to the “World’s Best Cheese” seems out of step. Why does
the world’s best product need a discount?
Our entire industry is under great pressure. The economy is softening
and corporate profits are disappointing. Companies that don’t maintain
the health and strength of their brand risk falling behind. Now
is the time to take advantage of weaker competitors. A brand
is a relationship to a customer, a bond and a promise.
Letting relationships dwindle in economic downturns can spell reduced
market share when circumstances recover.
Ed
Zimmerman |