DO BIG BRANDS MATTER?

Greg Dring
08-07-2014
Nielsen
Manufacturers often ask us “do big brands matter?” We would respond, to whom? Retailers or consumers? Given retailer ‘supremacy’ in the Australia and New Zealand grocery market, market structure tends to dictate profitability. So when considering the major determinant of a brand’s size, it often comes down to winning with the retailer, rather than winning with the consumer.
Retailers drive brand ranking variations
A brand’s performance can vary dramatically by retailer. Given that 99 percent of shoppers have shopped in both major retailers in the past 12 months, it boils down to the major retailers’ commercial imperatives and category priorities driving the variation in brand ranking.
Favourable trading terms leads to increased space, more opportunities to trial new product development, better promotional calendars and catalogue opportunities, all of which leverage sales.
The link between brand market share and rank within category
To explore this theory, we looked at a portfolio of big brands – not based on absolute dollar size, but by their relative market share ranking.
Relative market share is a traditional strategic tool for estimating a brand’s competitive positioning within a category. This segmentation approach allows us to study the relationship between brand size and the variation in a brand’s performance across the two major Australian grocery retailers.
We examined 58 brands across 26 categories with a combined retail sales value of around $9.5 billion. Of the 58 brands:
· 18 brands were classified as having clear leadership (average relative market share of 3.2x*)
· 8 brands were classified as having narrow leadership (average relative market share of 1.29x*)
· 9 brands were classified as strong followers (average relative market share of 0.79x*)
· 23 brands were classified as followers (average relative market share of 0.4x*)
Category leaders i.e. those brands with clear leadership and narrow leadership, had the lowest variation in performance across the major retailers. For example, the top 18 brands with ‘clear leadership’ had an average variation in ranking of 15 positions in each of the major retailers. For example, John West was ranked the 23rd largest brand in Coles, compared to 35th in Woolworths.
Brands classified as ‘strong followers’ or ‘followers’ had on average a greater variation in performance between the two large retailers with average ranking variations of 27 places and 31 places respectively.
In fact, we found that while the majority of brands perform differently across stores, our relative market share analysis indicates ‘category leaders’ can drive better outcomes with both retailers, thus showing lower ranking variation and larger aggregate sales value.
One of the key findings of the analysis was that 67 percent of the brands we examined ranked higher in Coles than in Woolworths. We believe this reflects Woolworths’ larger private label offering which is around 15 percent larger than Coles, coupled with the specific category work currently being undertaken by Coles.
The analysis also highlights the limitations of loyalty data (which typically only looks at one retail store brand) as a proxy for market performance.
Big brands are critical in driving topline category performance
Big brands defined as category leaders with high relative market share scores are growing faster on average than lower ranked brands, and they are taking share. With almost two-in-five (38%) products sold on promotion, category leaders are likely to participate to a greater extent than followers, creating leverage in the sales line.
While brands categorised as ‘clear leadership’ and ‘narrow leadership’ are growing faster than average category growth, brands categorised as either ‘strong followers’ or ‘followers’ are growing below average category growth and losing share. Brands in these later two categories tend to be losing share to a dominant market leader and / or a private label offer, growing at multiples of category growth.
Manufacturer concerns around change in market conditions are based around margin pressure and cost of doing business, range rationalisation, private label penetration and the retailer’s price war. Improving a brand’s relative market share by understanding its positioning relative to competitors is likely to yield topline benefits either through consumer pull or retailer push or both.

About the Study
Nielsen’s Homescan Shopper Panel is robust, trusted, credible and one of the biggest shopper panels per capita in the world. It monitors shopper behaviour across a panel of 10,000 households, which is projected to represent the Australian population and retailing landscape.
Shopper data is collected via handheld scanners that transmit data directly to us. This data can be used to identify key shopper behaviour across key grocery outlets. Our point-of-sale technology for our retail measurement services captures sales and price data from virtually every major retail chain.
When integrated with retail sales data, the powerful insights drawn from our Shopper Panel enable you to identify the ‘why’ as well as the ‘what’ behind your brand sales, allowing you to fine-tune your marketing strategies.
Categories examined in this study include: small goods dairy, coffee, soft drinks, juices, confectionery, snack foods, convenience frozen, convenience meals, canned fish, pasta, salad dressing, nappies, dishwashing, pest control, frozen vegetables, sauce, deodorant, men’s toiletries, biscuits and cookies, cereal, meal bases, vitamins, pet food, skincare, spreads, dairy cheese, vegetables, water and sports drinks.
*Rules of thumb per Richard Koch, “The Financial Times guide to Strategy” Prentice Hall, 2000