Generic Cola Can - Jewel Supermarket

I read a very interesting post on the Branding Strategy Insider Blog that got me thinking about house brands and how beneficial they are to driving product innovation and in particular a product’s value proposition.  Granted house brands are often a lower cost version of a brand name but there is genuine innovation going on here.  There is no doubt that the manufacturing processes are being optimized, there are lower R&D costs, product components or ingredients are being changed to add to that cost optimization and of course they are being placed in head to head competition on retail shelves.  Nevertheless if the consumer chooses the house brand over the name brand, the price is only one component of that decision.

Twenty five years ago when “generic” brands first hit the marketplace, the “branding” was designed to tell the story that they were a cheap but serviceable alternative to the real “brand name” products.  The stenciled font used clearly identified them as taking very little effort in packaging cost and offered a tremendous value and price savings.  As a young couple my wife and I made ends meet with these un-branded brands.

Today even though our household income is substantially greater, house brands STILL fill our pantry.  Whenever we feel that a house brand is about equivalent to the leading brand we will invariable pick the house brand and typically save a bundle.

I get the fact that a leading brand might deliver some level of comfort and satisfaction to a consumer simply by having the most recognizable name.  However the advance of house brands points to a shift in consumer behavior, expecting a greater tangible value for their loyalty. The closer a brand can effectively target products to the increasingly unique demands of the individual consumer, the more likely they will build a loyal following including garnering a premium price.  Name brands may get the product right but house brands are creating more value for the consumer.

It’s not easy getting it right and so name brands will always lead the way.  An Example.  I wear Adidas ClimaCool running shoes.  In my mind there isn’t a pair of shoes that compares to these on the marketplace.  When I run my feet tend to overheat and that increases the stress of running.  These shoes are super ventilated and breathe like no other and they fit my feet perfectly.  As a result I’ve fallen in love with them and wouldn’t run in anything else.  When a brand can target a product effectively, at a specific need, to a specific market segment, they will hit a home run nearly every time. And if that same targeting spills over to their other products that loyalty will extends to other products they offer as well.  Years and years have passed without a credible alternative to the ClimaCool offering.

It’s no surprise then that house brands are making their stand with product categories like facial tissue, mouthwash, OTC medications, laundry detergents, cereals and many other commodities.  You’ll find all these and many more house brands in my house.  In this world of knock-offs the house brands are swinging for the fences but just as frequently striking out.  I love Kellogg’s Special K with Red Berries.  I’ve tried several house brand alternatives and have failed to find anything that tastes as good.  I will remain loyal to Special K until someone offers me something that clearly beats it.

Inevitably competition will drive the innovation of the value proposition and consumers will reward house brands that raise the bar.  Unfortunately in some cases that often puts the major brands in competition with themselves and undermines their ongoing profitability.  An example of this is found in  Wal-Mart’s Ol’ Roy dog food.  An extremely successful house brand in it’s own right being manufactured by Mars Petcare. You may be aware that Mars is one of the world’s largest manufacturers of pet foods including brands such as Pedigree.  I’m sure Ol’ Roy and Pedigree sit side by side on Wal-Mart shelves.  I wonder if the erosion of profits that occurs when consumers switch from Pedigree to Ol’ Roy worries Mars.

The consumer wins every time someone innovates the overall value proposition so let’s all cheer on the innovators whom ever they may be!