The Drivers Of Main Manufacturers
Years ago I worked for Hills Bros Coffee. We were number 3 for the brand that had a hard time competing with the market leaders (Folgers and Maxwell House) and struggling in many markets to keep our product sold. But we had a market, Chicago, where we were market leaders at four times the share of everyone else. In this market nothing that Folgers or Maxwell House tried could drive us away.
Hills Bros is nowhere near the only example. Heinz has always had a better stake in his hometown of Pittsburgh, and many other brands have significant regional variations that are often long-lasting. In the case of Hills Bros, the dominance of the Chicago market can be traced back to a spectacularly successful launch in 1928 when Hills Bros’ uniformed “red coats” roamed the neighborhoods delivering free 1/2 pound cans of coffee to everyone.
This long-term brand loyalty is all the more surprising as it often applies to products in which the objective differences to the alternatives hardly differ. The Chicagoans may have loved our coffee, but they couldn’t pick it up in a blind taste test. So how is this phenomenon to be explained? You need to examine the drivers that help a brand hold a leadership position.
Consumer based drivers
1. Mother knows best / habit: Past experiences are the most important factor. Buying certain brands is a tradition that is passed on from generation to generation in the family. Buying products with this heritage is both comforting and familiar, and gives you one less thing to think about while in business.
2. Conditioning: After a while you get used to certain aspects of products that can be technically very similar. The taste of Heinz, the smell of Tide, the thickness, the packaging, the color. Research has shown that this type of brand loyalty is more pronounced in products that are consumed straight out of the packaging.
The long-term dominance of brands in some markets also speaks to the power and advantage that a market leader enjoys and can use in a market that is not entirely competitive:
1. Sales Benefits: Market leaders become captains of retail stores, influencing what goes on the shelf, and benefiting from justifying more items than anyone else. That tends to crowd out everyone else when buying.
2. Fixed Costs: Many of the costs of doing business in consumables are fixed costs. Trade ads, for example. These can be absorbed by market leaders with much less impact on the income statement than by the smaller players, giving the market leaders a sustained margin advantage.
3. Marketing: One place to spend those extra dollars is in demand-driven marketing that connects the brand with the major category drivers. Years of spending on marketing build a strong brand foundation that is difficult to undermine.
If you’re number 1 in a CPG category locally or nationally, congratulations! You are in a very competitive position and you will be difficult to beat as long as you keep playing to win instead of playing so as not to lose.
If your job is to gain market share with a leading brand, you have a much tougher job. Instead of spending a huge amount of money on the supply side on lower prices and promotions, which will likely still be fruitless if you take the lead, you can better spend your time and money innovating. Are there ways to address changing consumer needs? Can the product be completely rethought? What really hurt Hills Bros in Chicago in the end wasn’t Folgers price promotions, but Starbucks and Keurig Green Mountain reinventing the coffee experience. This proves once again that every brand has a weakness.
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