“Branded products provide orientation and promise quality“

“Brand management in view of demographic changes is a very vital topic.”

Interview with Johannes Ippach, Director of Public Relations, German Brands Association, Berlin

Branded products are innovation drivers and their quality promise is the benchmark that retail also has to be measured up against with its store brands. Johannes Ippach from the German Brands Association holds this view. The association that was founded in 1903 in Berlin is the umbrella organization for the German branded goods industry. Among others, members include Beiersdorf, Coca-Cola, Nestlé, Procter & Gamble, Dr. Oetker, Miele, Hugo Boss, Deutsche Bank, Deutsche Post and Volkswagen.

Branded products have been around for about 100 years. How did the market share of brands develop?

Globally as well as nationwide, the appreciation of brands is advancing. This even pertains to those areas where – due to the growth of particular distribution systems – the overall market share was under pressure. The ”Allensbach Market and media analysis 2012” shows that since 2004 the percentage of those who believe that “buying branded products pays off“ is continuously increasing again. Fans of branded products mention the quality promise, a good guideline as well as the aura of brands as significant criteria. More than half of branded product fans are fixed on specific brands – and even a quarter of brand skeptics indicate being set on specific brands.

What turns a product into a brand? Is a logo and a decent advertising budget enough for a membership at the Brands Association?

Aside from a distinctive identification mark – you called it a logo – a brand makes a service promise to the market, which lasts and continues to satisfy consumers. A clear brand policy by the manufacturer, response and establishment with the consumer, ubiquity and national brand establishment are required criteria to become a member of the Brands Association.

Are private brands the natural enemy of classic brands?

Branded and private label products can live well together as long as the trade organizations also promote the significance of brand products accordingly. The trend towards limiting the decision power of consumers and competition through distribution monopolies is alarming. Brands live on competition, and in an environment, that does not shift the economic risks to just one side onto the branded product, brands can deal very well with competition.

Most private label products live from copying and orientation towards the original brand. If retail in the future also bears the cost of brand management, development and funding of innovations and the associated risks, this ”me too” strategy can change a little. Only then will retail learn how difficult it is to establish and manage brands well.

Why do brand manufacturers get involved in producing private brands?

Even if perhaps 10 or 15 years ago some of the manufacturers used this path for short-term capacity utilization, today this happens less frequently. That is because you need two entirely different directions for the branded product and the private label products: on the one hand, you require the best possible quality at justifiable cost and on the other hand, the cheapest offer with still acceptable quality. Both philosophies do not really get along in the same company.

Do you fear consumer journalists who investigate which brand manufacturers also produce cheaper items?

The Brands Association views every one of these inquiries as a chance to explain the mechanisms behind the private label products. After all, there are no “private label products” that are identical to brand products. The differences in favor of the brand products usually start with the development effort, are in the different product specifications or compositions, sophisticated types of packaging, other manufacturing processes and extend to sustainable company management and extensive customer service. Therefore, there are enormous qualitative differences between brand products and private labels. When it comes to investments in innovations, brand products are also always trailblazers. Imitations by private brands take place with correspondingly small risk after the brand product has proven successful.

Many familiar brands are already decades old. Nivea has been around since 1911.

You criticize the buyer power of retailers. Don’t consumers benefit from big competitive pressure?

Consumer, retailer and manufacturer benefit from competition in equal measure. An imbalance in the value added chain is critical for competition. As the last link, consumers always lose. Currently the situation in retail is that four marketing intermediaries decide on over 80 percent of the market. This concentration is higher than in the gas station sector. In the interest of the other involved parties – consumers, small retailers and manufacturers – such an oligopoly must not wield its market power unregulated.

Aldi adds more brand products into its product line up. Does this start a new round of price dumping?

The joint path of a retailer with the manufacturer is a business relationship and generally not a sign of ‘price dumping‘. Only when the price no longer reflects the real value of a product due to the market power of the retailer and loss is factored in, can we talk about dumping or selling at a loss.

How does brand communication need to change in the future – keyword Web 2.0?

The success of brand names is based on credibility and trust. That is why a company should be guided by consumer expectations as well as its own skills in using Social Media. If customers expect or demand this type of mutual dialog, a company needs to develop the corresponding skills. Because of the increasing number of communication channels however, the consumer receives a significantly larger variation of opinions and comments about each brand. In this case, it is essential for companies to act extremely goal-oriented when they convey their own messages to respond to the many opinions. This way, the principle of self-determined communication is preserved.

Having said that, our society is getting older and older. Can older people still be dissuaded from a brand preference?

Brand management in view of demographic changes is a very hot topic. Brand preferences that were taught early are a facet in this. Another one are the needs during different lifecycle stages. From the company’s point of view, the challenge is to respond to the changing customer needs with a successful brand strategy. Communication –and especially advertising –plays a very important role in this.

Brand manufacturers manage to gain a permanent foothold on retail shelves with only a fraction of their new products. Why is that?

This statement is not quite correct: product innovations have always been developed by branded companies and have always permanently made their way onto retail shelves. Think for instance about MP3 players, liquid laundry detergent or the shortbread biscuit. If you mean further developments, variations or model lines when you say new products, then the classic mechanisms of supply and demand take effect.

How big is the willingness of brand manufacturers to open up their own brand stores? Which products are suited for this?

Brand stores are an excellent platform to put your own brand values in conjunction with a shopping experience center stage. The scope here ranges from strategically furnished flagship stores all the way to only distributing your own products via brand stores. If until now premium brands have been associated with brand stores, now there is a trend to where consumer brands also increasingly present themselves with their own brand identities. This can also be a reaction to the concentrated demand-driven market power.

Interview by René Schellbach, EuroShop.de

01.08.2012

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