Big Firms Try to Stop Erosion of Brands
Companies see more of their customers defecting to private-label products
LITTLE wonder Elsie has trotted back from retirement! Elsie is needed at work.
Elsie the Cow is the advertising symbol for Borden Inc., the giant United States food company. Twenty years ago Elsie was put out to pasture by Borden's front office, which thought that modern consumers were too sophisticated for commercials based on the opinions of a cow. Well, management was wrong.
"We've given Elsie a more contemporary look; her horns are shorter, her eyes a bit sharper, and we've changed her daisy symbol a little," says Nicholas Iammartino, director of company communications for Borden. The updated Elsie is appearing in new television and print ads.
"Elsie reflects solid family values," Mr. Iammartino says. "She was a working woman before her time."
Elsie also represents the effort by a major US food company to rebuild public loyalty to its brand name products. Anthony D'Amato, Borden's chief executive officer, conceded as much recently when he told a gathering of Wall Street officials that his company's most "crucial challenge" was rebuilding Borden's brand name franchises.
Borden's challenge is far from unique. Consumer companies throughout the US - from food to high-technology firms - are struggling to overcome tough new competition from low-cost producers, particularly private store labels and generic brands. Consumers are turning away from brand name products for lower cost products. In the process, many companies are finding themselves hard hit.
THE shift to private-label products has been under way for a number of years, although the economic slowdown has clearly accelerated the trend. A poll of 2,000 consumers taken in 1991 showed that 72 percent of those surveyed felt that private label products were "equal in value or better in value than the brand name products," says Peter Stisser, a vice president with the Roper Organization. "Consumers know that many private label products are quality products," and, in some cases, are made by the brand name companies, he says.
Last month, Procter & Gamble, the nation's largest consumer products company, announced plans to slash 13,000 jobs out of a worldwide payroll of 102,000 workers. The company said that its huge roster of brand name products, from Crest toothpaste to Tide detergent and Pampers baby diapers, was being undercut by cheaper non-brand-name products.
Apple Computer also recently announced a larger than expected earnings loss. Many computer experts partly attributed Apple's woes to inroads by lower-cost, little known computer companies. Philip Morris, the largest US food and tobacco company, said it would roll back the price of many of its products because of competition from non-brand-name items.
During the past decade, alternative products have captured an increasing share of the consumer market. Private label products now make up about 18 percent of the $325 billion food industry, according to John McMillin, a food analyst with Prudential Securities Inc. He estimates that almost 8 percent of all employees at packaged food companies have been laid off in the past two years, reflecting tougher competition within the industry. Layoffs have occurred at Kraft, General Foods, Borden, Heinz, Campbell Soup, CPC International, Ralston Purina, and others.
The soft drink industry is an exception, where consumers appear to be resisting private labels. Sales of private label drinks make up about 14 percent of the total, but are expected to drop back to a more typical pattern of around 6 to 8 percent as the economy improves, according to Prudential Securities.