Mass brands are showing cracks

Last weekend an interesting article appeared in Belgian newspaper De Tijd: “When mass brands start to show cracks”. The reason was Kraft Heinz’ announcement that over 15 billion dollars of value would have to be written off the brand portfolio resulting in an historic drop in the stock price. Also, the new (Belgian) CEO of Beiersdorf, Stefan De Loecker, mentioned a historic disruption to explain the 10% drop in shareholders’ value at the end of February. So digital disruption is also affecting FMCG. There is no doubt this is true and the traditional industry was too late to see the consumer is changing and technology is enabling more dynamic and transparant markets. But is that all?

Shareholder or consumer?

Traditionally not the consumers but the shareholders hold center stage at listed companies. Volumes and market shares have to rise year after year. Nobody cares about the channels through which brands are sold. Efforts to raise volumes or realize record market share where not questioned at all. Only the marketers questioned the fact that resources where being shifted from brand building to promotions. By deploying global brands, large companies were able to win efficiencies and save costs year after year, while company results increased ever more. Clear sky for management because the shareholders are happy. What everyone forgot was to keep ownership of the brands in their own hands.

Things become especially poignant when looking at some figures delivered by retail data specialist Daltix. Nivea for example, the leading brand of the complaining Beiersdorf CEO, stands out as an example of many global brands’ challenges; extreme promotional pressure to reach volume target. Another poignant example is Aquafresh.

The standard price is no more.

In times where all information is available online, who will buy the above brands at standard price? What a contrast to Lotus where the family shareholders have a long term vision and the brand has on average ‘only’ a 17% discount at Colruyt, 19% at Delhaize and 13% at Carrefour.

In order to fill factories and ensure market shares, manufacturers do not only have to reach deep into their pockets. They weren’t unhappy when their products where listed at retailers like Action, Kruidvat, Lidl and Aldi. Although consequences were again large price differences between chains. Here too, Nivea is an example: the standard price for Nivea Sensitive & Pure roll-on (50ml) at Action is 1.99€ while at AH you pay 3.99€. Another example is Persil Duo Caps Color 19d, on the same day you pay 10.86€ at Match, 8.95€ at Carrefour and €4.15 at Colruyt. Not a single consumer who understands and don’t even try to explain a purchasers…

A long way back.

The way back will be long, very long. The consumers does,’t feel the real value of these brands anymore and is no longer willing to pay the normal price. But management doesn’t want to risk a decrease in volumes and turnover. Now the times of cost reductions are over, the large brand manufacturers will have to reinvent themselves by coming up with relevant innovations.

The winner is definitely not the shareholder, but the consumer who will never buy big brands at ‘standard’ price again.

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