11 New Strategic Brand Management by Philip Kotler   4th Edition
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11 New Strategic Brand Management by Philip Kotler 4th Edition


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labels. This is
a true branding approach.
The problem for multiple retailers is to get
free from the grip of Coke and Pepsi.
Unfortunately, with some exceptions
(Sainsbury\u2019s Cola in the UK, President\u2019s
Choice Cola in Canada), market shares of own
labels remain very small. This is probably
because compared with the real thing, private
labels look like faked cola. Parents who buy
own-label colas to save money risk being criti-
cised by their children. Private labels have no
image in a category that has been decom-
moditised by brand image. Coke\u2019s identity
encapsulates the American dream, authen-
ticity and pleasure. Pepsi has the same associa-
tions, although to a lesser extent, and also
means youth. Own-labels create no such value
in the eyes of the young heavy consumers.
They create bad will.
The Monarch Beverage Company was
created in Atlanta, USA, by two former Coca-
Cola marketing VPs. With the help of a former
Coca-Cola chemist, it knew how to produce a
good cola syrup. Most important, instead of
focusing on the end-consumer (the mistake of
Virgin) and running the risk of having no
access to mass distribution, it focused on the
customer problem: to increase the share of its
own label with profit. Even if they were given
away free, own-label colas would not be
consumed: they lack authenticity, a reas-
surance on quality and taste, and fail to
deliver the right intangible values. Monarch
has created a portfolio of brands, all looking
American (like \u2018American Cola\u2019), and coming
from a true American company based in the
Mecca of colas, Atlanta, close to Coca-Cola\u2019s
own headquarters. These brands, owned by
Monarch, are granted under licence to
multiple retailers. Each mass multiple retailer
therefore has its own brand, different from its
competitors\u2019, for its operations worldwide.
Carrefour for instance has American Cola. The
syrup is made by Monarch to match each
retailer\u2019s specifications. The company
provides the brand and the product; it leaves
its customers totally free to manage their own
bottlers, prices and promotion. No national
sales force is needed: negotiations are carried
out at the corporate level, with the category
global manager.
This in-depth comparison of alternative
brand and business models has illustrated the
benefits of enlarging the perspective on
competitive strategies, beyond communi-
cation and brand image. Brand leadership is
gained through the synergy of multiple levers
within a viable economic equation. Thus is
the true condition of brand equity.
BRAND AND BUS INESS BUILDING 63
64
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Each day brings fresh news of the expansion
of distributors\u2019 brands. On 28 November
2006, Carrefour launched its mobile phone
range under its own brand, while praising the
capabilities of its Orange network, aiming to
turn it into a tool for creating customer
loyalty that would itself be profitable and a
channel for growth. The offer was carried by
the 218 hypermarkets under the Carrefour
name, visited by one million clients every day.
This is not an isolated phenomenon.
Distributors\u2019 brands are on the rise every-
where, and now dominate the market in
many so-called mass consumption categories.
For example, in France the market for self-
service packaged ham is 400,000 tonnes a
year. The hard-discount circuit alone, without
national brands, sells 100,000 tonnes. In large
and medium-sized stores 300,000 tonnes are
sold, of which two-thirds, or 200,000 tonnes,
are \u2018low-cost products\u2019 under the store brand.
There are only 100,000 tonnes remaining for
the major brands: Fleury Michon, Herta
(Nestlé), Madrange, Sara Lee, etc. In Germany,
45 per cent of organic products are sold under
distributors\u2019 brands (Jonas and Roosen, 2006).
Having been restricted for so long to the
mass consumption sector, distributors\u2019 brands
are now part of the competitive environment
in all sectors: even the mass prestige products
store Sephora has undertaken a voluntary
policy of own-name products over the past
three years. Distributors\u2019 brands are also
found in automobile equipment (the Norauto
tyre is the biggest seller in France), agricultural
cooperatives, pharmacy groups and so on. For
so long merely the cheapest products, they
have now become innovators which are quick
to offer consumers products that keep pace
with the latest trends in society (organic
farming, fair trade, exoticism, gourmet dishes
and so on), following in the footsteps of the
Monoprix and Sainsbury\u2019s brands. In many
cases, these have become inseparable from the
store: thus Picard stores sell only the
distributor\u2019s brand. Clients go to Picard and
buy Picard. The Body Shop, now part of the
l\u2019Oréal family, sells only its own distributor\u2019s
brand. Gap began life as an exclusive retailer
of Levi Strauss, stocking jeans in all sizes, but
changed its strategy when discount arrived in
the United States. Now Gap only sells\u2026 Gap,
an action that seems to have inspired
Decathlon. Other examples include Ikea,
65
4
From private labels to store
brands
66 WHY IS BRANDING SO STRATEGIC?
Habitat, Roche and Bobois, Crate & Barrel and
William Sonoma. Marks & Spencer\u2019s has done
the same since its inception.
In the B2B sector, distributors\u2019 brands and
low-cost products are also present: it is true
that Asian companies are competing to supply
them. Thus a Facom key for a mechanic costs
s10, but only s3 if made in Taiwan.
Bubbendorf, the famous blind maker, now has
the tubular motors for the electric automation
of its blinds manufactured in Asia. Until
recently, it installed automations by Somfy,
the market leader: now it is its main
competitor. In the office furnishings market,
Office Depot and Guilbert have based their
success on distributors\u2019 brands: apart from the
so-called obligatory products (certain Pentel
products, Stabilo Boss, Post-It, Staedtler,
Dymo, Bic) they sell only the products of their
own brand. And is there not something para-
doxical about the way that the same big
companies that complain about the rise of
distributors\u2019 brands, then buy the Niceday
brand from their Guilbert supplier instead of
buying major branded products? In short,
they are criticising consumers for doing what
they are themselves doing: managing their
spending.
Evolution of the distributor\u2019s
brand
Academic studies have until recently failed to
pay sufficient attention to distributors\u2019
brands. With the producer\u2019s brand being
considered as the only point of reference,
distributors\u2019 brands were thought of as \u2018non-
brands\u2019, attracting price-sensitive customers.
Moreover, the distributor\u2019s 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 distri-
bution channel. This is why distributors\u2019
brands have long been perceived in the
United States as low-cost, low-quality alterna-
tives, an assessment that failed to take the full
measure of the phenomenon.
It is revealing that the latest book published
in the United States about distributors\u2019 brands
(Kumar and Steenkamp, 2007) chose \u2018private
label\u2019 and not \u2018trade brands\u2019 as its title: the
notion of \u2018private label\u2019 categorises the
distributor\u2019s brand as a thing apart, and not
using the word \u2018brand\u2019 therefore fails to
account for the true reach of distributor\u2019s
brands. They are indeed brands in the eyes of
consumers, who are now loyal to them, even
if, as will appear, they are not brands like the
others. However, this situation has recently
changed, as can be seen from a recent
interview with Russ Klein, the executive
director of 7-eleven, the store that invented
the convenience store concept some 79 years
ago, He attests, \u2018Private label has changed to
the point where retailers are using it