National Brand and Private Brands

A different strategy is followed by the Nestle Company, which has a stable of global and country specific national brands in its product line. The Nestle name itself is promote globally, but its global brand expansion strategy is two pronged. In some markets it acquires well established nation brands when it can and builds on their strengths – there are 7,000 local brands in its family of brands. In other markets where there are no strong brands it can acquire, it uses global names. The company is described as preferring brands to be local, people to be regional, and technology to be global. It does, however, own some of the world’s largest global brands; Nestle is but one.

Unilever is another company that follows a similar strategy of a mix of national and global brands. In Poland, Unilever introduced is Omo brand detergent (sold in many other countries) but it also purchased a local brand, Pollena 2000. Despite a strong introduction of two competing brands, Omo by Unilever and Ariel by Procter & Gamble a refurbished Pollena 2000 had the largest market share a year later. Unilever’s explanation was that eastern European consumers are leery of new brands, they want brands that are affordable and in keeping with their own tastes and values Pollena 2000 is successful not just because it is cheaper but because it chimes with local values.

Multinationals must also consider rises in nationalistic pride that occur in some countries and their impact on brands. In India for example Unilever considers it critical that its brands, such as Surf detergent and Lux and Lifebuoy soaps are viewed as Indian brands. Just as is the case with products the answer to the question of hen to go global with a brand is It depends – the market dictates. Use global brands here possible and national brands where necessary.

Private brands owned by retailers are growing as challenges to manufactures brands whether global whether global of country specific. Store brands are particularly important in Europe compared to the United States. In the food retiling sector in Britain and many European countries, private labels owned by national retailers increasingly confront manufacturers’ brands. From blackberry jam and vacuum cleaner bags to smoked salmon and sun dried tomatoes, private label products dominate grocery in Britain and in many of the hypermarket of Europe. Private brands have captured nearly 30 percent of the British and Swiss markets and more than 20 percent of the French and German markets. In some European markets, private label market hare has doubled in just the past five years.

Sainsbury, one of Britain’s largest grocery retailers with 420 stores reserves the best shelf space for its own brands. A typical Sainsbury store has about 16,000 products of which 8,000 are Sainsbury labels.
These labels account for two thirds of store sales. The company avidly develops new products launching 1,400 to 1,500 new private label items each year, and weeds out hundreds of others no longest popular. It launched its own Novon brand laundry detergent in the first year, its sales climbed past Procter & Gamble’s and Unilever’s top brands to make it the top selling detergent in Sainsbury tiers and he second best seller nationally, with a 30 percent market share. The 15 percent margin on private labels claimed by chains such as Sainsbury helps to explain why their operating profit margins are as high as 8 percent or eight times the profit margins of their US counterparts.

Private labels are formidable competitors. They provide the retailer with high margins; they receive preferential shelf space and strong in-store promotion and perhaps most important for consumer appeal, they are quality products a low prices. Contrast this with manufacturers’ brands which traditionally are premium priced and offer the retailer lower margins than they get from private labels.

To maintain market share, global brands will have to be priced competitively and provide real consumer value. Global marketers must examine the adequacy of their brand strategies in light of such competition. This may make the cost and efficiency benefits of global brands even more appealing.