There is constant and ongoing debate in the press and industry forums by retailers and distributors regarding retail own brand, parallel import and direct import of products. Funnily enough, as shoppers we don’t worry about these things we just make decisions every day at shelf and on line about what we will and won’t spend our money on.
I enjoyed a Peroni beer last night at an Italian restaurant. It was a “genuine” import red label Peroni from Italy. It was good too, and cheaper than locally brewed beer. My son and his friends look for “genuine beers” as often as they can, and shop independent liquor stores to find Corona, Heineken, Grolsch and Peroni that is brewed in their home country’s breweries not brewed and bottled in Adelaide. In my son and his friends’ minds, they are buying the genuine article at lower prices than a locally produced copy. These are their words and descriptors, not mine.
It’s an interesting shopper mind set; one that is driving independent retailers and buying groups to look at how they can provide imported products at the same prices that the rest of the world enjoys, not just in beer, but in all items we shop. The important thing to note is that these lower prices are not just being driven by retail own brand.
I was walking liquor stores in Iowa a few weeks ago and came upon a six-pack of Clear Creek 12oz (350ml) cans for US$2.89, sitting alongside a 12-pack (also 350ml bottles) of Busch Light Beer for US$8.99. These two brands are ‘ultra cheap brewer own brands’ for want of a better descriptor. Now, before anybody talks about beer tax differences making price comparisons between countries difficult, your comments are valid, but my observation isn’t about absolute price, but about overall pricing in the sector.
Many years ago in the US, brewers looked at the rise of low-cost, retail own brand in grocery and saw that the ‘floor’ in pricing for each food and drink sector was being set not by the manufacturer’s brand or factory owners in each industry, but by the retail brands. The brewers figured that as they owned the large volume breweries they should jump ahead of the retailers and decide on what the floor pricing would be, what brands would be on sale in this ultra cheap sector, and in which packaging sizes. They effectively attacked themselves before they could be attacked, a valuable lesson I was taught as a very young marketer.
So, they set about brewing high-volume, cheap brands to sell nationally. In doing so, they didn’t remove quality from the product; they just didn’t spend any advertising or promotional funds against them. The brewers shipped the product to shelf and allowed the shopper to decide at shelf whether they wanted the cheap but less well-known beer brand. Meanwhile, the brewers focused on managing their premium and mid-price sector brands with high advertising and promotional costs.
Because of the US brewers’ strategy there is now effectively no retail own brand beer. This situation sits in marked contrast to the UK where over 50% of key wine, beer and spirit categories are retail own brand.
I wonder what’s going to happen in Australia over the coming year as new shareholders in our brewers decide what to do with their breweries, brands and the prices of our beer.
In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands.
CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.