Commodity brands: Make a name for yourself

claiming it will be the UK's first fresh-potato brand; a decision that
caused a few eyebrows to be raised at the risk associated with the
strategy.

MBM, one of the three biggest suppliers of potatoes to UK supermarkets,
has invested heavily in developing varieties and building the brand from
scratch. Whether it can persuade consumers to pay more for a product
traditionally regarded as a largely undifferentiated commodity remains
to be seen.

'Potato Lovers is about delivering the right potato for the right
purpose at the right time of year,' says Eddie Stableford, managing
director of brand design and marketing consultancy Bryt, which created
the brand for MBM following research revealing consumer ignorance about
potato varieties.

'At one focus group we had a woman in tears over the variable quality of
her roast potatoes,' he adds. 'It was not her culinary skills that were
at fault, but the fact that most potatoes are marketed as "general
purpose".'

Potato Lovers' potatoes are sold by variety, but the key difference is
that they are marketed by function; its winter range offers potatoes for
baking, chipping, mashing and roasting. While acknowledging the demand
from some consumers for more niche products, Stableford says the purpose
of Potato Lovers is 'to deliver fantastic-tasting potatoes for common
use, not to introduce rare varieties'.

Most commodity suppliers are working to develop brands to escape the
rising pressure on margins from the big supermarkets. 'Suppliers in
every commodity sector have to do something to get their margins up or
they will disappear,' says John Wringe, chief executive of branding
network Star Chamber. 'Once the retailers have squeezed as much margin
as they can out of their UK suppliers, they will shift their sourcing
abroad.' Developing brand propositions is the easy part, he explains,
but getting the right distribution, margin and communications in place,
to get consumers to buy the product, is a lot more difficult.

Outgrowing the market

There are some successful precedents in the branding of commodities.

Florette, the UK's top-selling prepared salad brand, is one example. 'We
are the only known brand in our sector and the only packed salad that
advertises the product,' says Florette managing director Mark
Newton.

Florette has used advertising regularly since its launch in the UK 15
years ago, and last year became launched a TV advertising campaign. As a
result, its sales grew 17% last year, compared with 3% across the sector
as a whole.

Cravendale milk is another example. Launched eight years ago by Arla
Foods into a commodity-driven, own-label market, the brand's point of
difference was its fresher, cleaner taste, and the longer life imparted
by a filtration process that removes the bacteria that cause milk to go
sour. Unopened, it lasts 20 days, compared with 14 for standard
milk.

Marketed as 'the freshest-tasting milk you can buy', Cravendale's core
market is women with children. Despite a typical retail price that is
18p higher for two litres than standard milk, the brand has posted
double-digit sales growth since launch and is now worth about £63m. In October it expanded the range with Cravendale Hint Of, which
offers additive- and preservative-free strawberry and vanilla variants,
priced £1.09 a litre.

Arla plans to continue to invest heavily in the brand, not only to
promote its benefits and justify its price, but also to counter the
challenge from the supermarkets, which are developing own-label
versions. Tesco Pure, which launched in June, for example, uses a
similar filtration process, and according to Cravendale senior brand
manager Thryth Jarvis, is a threat.

Although commodity producers are being forced to think about creating
their own brands, consumer trends are working in their favour.
'Consumers' primary concerns are convenience, provenance and health, and
any brand that can tap into those three areas stands a good chance of
succeeding,' says Pete Hollingsworth, head of product branding at
Enterprise IG.

Allied to this is growing affluence and a greater propensity to trade up
to products that offer functional benefits. But Hollingsworth warns:
'New brands have to offer real added value, rather than just slapping a
logo on-pack, which will be seen for what it is - a cosmetic
exercise.'

Jayne Barrett, managing director of branding and design company Elmwood,
argues that if people will pay a premium for bottled water - the
ultimate commodity - there ought to be scope to brand almost anything.
But consumers are savvy, and while they will pay for perceived benefits,
they remain mindful of value, a trait exemplified by the fact that 64%
of Tesco customers buy products from both its Value and Finest
lines.

Some commodity markets are already densely populated by brands.
Own-label accounts for only 34% of the bread market and 21% of the
butter, spreads and margarines market, according to TNS Superpanel data.
By contrast, it accounts for 66% and 62% of the milk and cheese markets
respectively.

The discrepancy is caused by the fact that many commodity brands
pre-date supermarkets. Hovis has been around for more than 100 years and
Lurpak since the Second World War, for example, creating long-standing
allegiances that give the multiples less scope to develop own-label
ranges that will steal share.

Adding value

There is no room for complacency, and rapid innovation in both the bread
and butter sectors are testament to suppliers' recognition that
supermarkets are trusted brands. These suppliers work hard to add value
both to their own and supermarkets' ranges through strong category
management. 'When your market becomes mature, you have to add value by
understanding real consumer needs, or you end up cutting prices and slip
toward the commodity end,' says Richard Tolley, marketing director of
Dairy Crest's food division, which produces brands such as Cathedral
City cheese and Country Life butter, as well as being a big supplier of
own-label.

A spokesman for Florette, which will spend £2m on promotion and
advertising this year, puts it more bluntly. 'The supermarkets see
bagged salad as an own-label market, so we have to go to town on
marketing to drive the category forward and keep the supermarkets
interested.'

Dairy Crest launched Cathedral City more than 10 years ago. The brand is
now worth £95m, with a growth rate of 16% and a 10% share of the
cheddar market, which is growing at just 4%. The company has invested
£50m in its creamery in Davidstow, Cornwall, introduced resealable
packaging, and is running a £3m TV campaign. Recent additions to
the core range include sliced and grated variants and adult-oriented
snack products, such as Dip and Go (cheddar fingers and Branston
pickle). 'The brand offers a wide profile with consistent quality,' says
Tolley. 'What has happened in cheese is much like what has happened in
the wine market, in that artisan history got in the way of knowing and
delivering what customers really wanted.'

Expanding markets

The wine market offers some encouraging parallels for commodity
producers keen to establish brands. The supermarkets, led by
Sainsbury's, removed the mystique associated with the French appellation
d'origine controlee system by launching its own ranges.

Australian wines now dominate the UK market, having combined strong
brands with sophisticated blending to create consistent quality. But
there are signs that more educated and confident British consumers are
beginning to tire of what they see as a bland and homogeneous Australian
offer, and are exploring and experimenting with more complex and
sophisticated French wines.

What Potato Lovers, Cravendale and Cathedral City have in common is
accessible family brand values - the equivalent, in a sense, of the
Australian wine offer.

However, brand experts believe branded commodity producers stand more
chance of creating a differentiated offering for which consumers will
pay a premium if they focus on education, provenance and the
introduction of niche brands, rather than aiming for wide appeal.

Deans Foods, the leading UK supplier of eggs, is pursuing this
tactic.

It produces a range of brands for which it offers a plethora of
information on its website. Its brands include Corngold free-range eggs,
which come from hens fed on a maize-rich diet, enhancing the product's
colour and flavour, as well as Woodlands, a joint initiative with the
Woodland Trust, which donates 1p from every pack of eggs sold to the
charity. Its Columbus egg, meanwhile, contains up to 75% of the daily
recommended intake of Omega-3, which helps maintain a healthy heart and
circulation.

Star Chamber's Wringe believes Deans Foods has a great opportunity to
add value to the egg market, but is adamant that the market dynamics are
stacked against commodity brands playing anything other than a niche
role. 'To be sustainable, a commodity brand needs to innovate,
communicate and make a decent margin, but very few can do all three.
Most commodity producers lack the margin to be able to invest in
innovation and communication,' he says.

Even commodity brands backed by companies with deep pockets and
marketing muscle struggle to gain share. Cravendale, for example, has
only a 3% volume share of the £2bn milk market. 'Some of the
biggest commodity producers have grown aggressively by acquisition over
the past five years, but even they struggle to create viable brands,'
says Wringe. 'One might think their size would put them on a more equal
footing with the supermarkets - allowing them to reap more benefits from
a stronger category management approach which builds value for all
parties - but that rarely happens.'

As the trend toward a rationalisation of brands continues, gaining and
sustaining a supermarket listing will be a struggle for entrants,
despite the allure of branded commodity goods. Unless the retailers
relax their stranglehold on suppliers, the outlook for commodity brands
is bleak.

As Wringe concludes: 'The commodity marketplace will be dominated by
own-label for the foreseeable future.'

BRANDED COMMODITIES

PROS

- Suppliers can raise margins.

- Offers the chance of greater negotiating power with the
supermarkets.

- Emerging consumer trends afford more opportunities for branding.

- Adds interest to the category as a whole.

CONS

- Difficult and expensive.

- As retailers rationalise the brands they stock, it may be difficult to
get shelf space.

- Supermarkets are quick to emulate new brands.

- Consumers may resent paying more for something they view as a
staple.

TOP 5 WATER
1. Evian
2. Perfectly Clear
3. Highland Spring
4. Volvic Touch Of Fruit
5. Buxton Spring

Total market sales: £279m

Source: TNS Superpanel (year to Sep 05)



TOP 5 CHEESE
1. Cathedral City
2. Dairylea
3. Pilgrims Choice
4. Seriously Strong Cheddar
5. Golden Vale Cheestrings

Total market sales: £1.86bn
Source: TNS Superpanel (year to Sep 05)



TOP 5 YELLOW FATS
1. Flora
2. Lurpak
3. Anchor
4. Clover
5. Bertolli

Total market sales: £866m

Source: TNS Superpanel (year to Sep 05)



TOP 5 SUGAR
1. Silver Spoon Granulated
2. Tate & Lyle Granulated
3. Whitworths Granulated
4. Silver Spoon Caster Sugar
5. Silver Spoon Icing Sugar

Total market sales: £248m

Source: TNS Superpanel (year to Sep 05)



TOP 5 BREAD
1. Kingsmill Square
2. Hovis Premium Square Cut
3. Warburtons Wrapped
4. Hovis Best of Both
5. Warburtons Toastie

Total market sales: £1.26bn

Source: TNS Superpanel (year to Sep 05)



TOP 5 MILK
1. Cravendale
2. Wiseman
3. Dairygate
4. Provamel
5. Dairy Crest

Total market sales: £2.57bn

Source: TNS Superpanel (year to Sep 05)