Big brands struggle to stay on top

Big brands seem to be getting into trouble – again. After all the hype over the past few years surrounding Marlboro Friday and Sainsbury’s humiliation of Coca-Cola with Classic, the pendulum of opinion has swung back in favour of brands – perhaps too far. We are all familiar with the new conventional wisdom. Good brands are the commercial world’s Peter Pans. The brands have discovered the secret of eternal youth, shaking off the deleterious ageing effects of the product lifecycle to ride each new wave of product innovation. And if a big brand does get into trouble, it has the reservoirs of trust and experience to bounce back – look at Coca-Cola or IBM. It’s all very persuasive and large elements of it are true. But it’s no excuse for complacency. Just look at the UK grocery scene. The table shows how the UK’s top ten grocery brands of 1992, as measured by sales through the multiples, have fared over the past five years. While three brands, Coca-Cola, Walkers and Nescafé have delivered absolutely mind-boggling sales results, seven out of 1992’s top ten have failed to keep their sales (which are shown at face value) chugging ahead of RPI. Taking inflation into account, PG Tips and Persil recorded real sales slumps of over a third in five years, with Whiskas sniffing at their heels with a drop of about a quarter. But UK groceries is not the only arena where so-called power brands are stumbling. Across the water, in the US, icon after icon seems to be having trouble. Levi’s recently announced that it was cutting one-third of its US manufacturing jobs as new competitors slice up its markets. On the one hand, new designer labels are grabbing its chic high ground. On the other, aggressive retailers such as JC Penney and Sears have been pushing own label: up from 16 per cent to 25 per cent in six years. Ford and General Motors are not having an easy time either. While they toy with rather dubious notions of “brand management” the commercial rug is being swept from under their feet. In the US today, only those aged 54 and over are choosing the big three’s brands in favour of the Japanese. Among the 33-to-53 age group, Asian brands’ market share is 45.8 per cent, compared with Detroit’s 44 per cent. Among 18 to 32-year-olds, the Asians are nudging 50 per cent, and the big three are down to 41. (In the UK, Ford’s current market share of 18 per cent looks pretty sick compared with the 30 per cent-plus it commanded in the early Eighties.) Meanwhile, Kodak (share price down 40 per cent this year) is slashing its research and development budgets and 10,000 workers as it struggles with low-price competitor Fuji on the one hand (market share up 20 per cent this year), and a shift from a chemicals-based to a digital-based industry on the other. With last week’s decision by the World Trade Organisation exonerating Fuji of rigging the Japanese market against its competitors, Kodak is up against it. The list continues. Apple, once the “in” computer brand, lurches from crisis to crisis; over the past 18 months Kellogg has been forced to cut its prices twice as own-label competitors undercut it; McDonald’s has been on the ropes with failed promotions and new products and threatened revolts from franchisees. Big European brands aren’t proving immune to banana skins either. The now famous “moose test” looks like scuppering the chances of early success for Mercedes’ move into small car production with its A class, while the British Airways labour dispute not only punctured its annual results but also its reputation as a brand really able to change the rules of the airline game. So what’s going on? At first sight there’s not much in common between these various brands’ circumstances; a closer look does reveal some common themes, however. First, from blue jeans to breakfast cereals leading brands are under pressure from new, lower cost competitors which seem to be successfully disrupting brand loyalists’ preconceptions about the trade-off between quality and price. Second, once-clear market boundaries are being redefined in terms of technology, geography or both. Both of these challenges are especially difficult to handle. But what’s striking is how some are handling the pressure so much better than others. Take the UK grocery top ten again. Of course, there are caveats. Charting sales through multiples doesn’t give the whole picture, and Coke and Walkers’ performance is flattered by the ongoing shift of sales from impulse to the big five. Some measurement criteria, such as Nielsen’s definition of “multiple”‘, have also changed. And some categories are riding the crest of a wave while others are sagging. But that doesn’t alter the fact that the contrast between different brands’ performance in the same category is staggering. In the past three years, for example, Walkers’ sales through multiples rocketed 82 per cent – during which Golden Wonder slumped 23 per cent (again, not taking account of inflation). Golden Wonder was a top-50 megabrand just three years ago. The way it’s going it won’t even figure in the top 100 next year. While Whiskas lost nine per cent of its sales between 1992 and 1997, Felix managed to put on 106 per cent. While Persil slumped 21 per cent, Bold rose 66 per cent. Of course, all these troubled brands may bounce back, just as Coca-Cola did. But it’s worthwhile reemphasising a point made two decades ago by Ted Levitt, the great marketing guru: that differentiation takes place not only in what marketers sell, but “how they manage what is sold”. What makes successful branders stand out from the rest is “how well they manage marketing, not just what is visibly marketed,” he said. “It is the process, not just the product, that is uniquely differentiated.” In other words, no matter how powerful brands appear to be, they remain only as powerful as the brand management skills behind them.