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Is own-label really Miles better? Or Becht simply best?

October 27, 2009

Who’s right, Miles Roberts, ceo of McBride – own-label purveyor to the likes of Tesco and Carrefour – or Bart Becht, ceo of Reckitt Benckiser and arch-high-priest of the cult of the brand? Both claim to be winning the battle for the hearts and minds of consumers. Both can produce ample evidence to support their conviction.

Miles RobertsRoberts is sitting atop a sparkling set of first quarter financial results. He’s had an altogether good year, with McBride earnings well above trend as consumers look more critically at their shopping list in the midst of recession. This particular Q1 set were so good that there will be no need of Tesco own-label teeth-whitener to bring a gleam to Roberts’ smile. McBride’s share price shot up 10% as City analysts jostled to upgrade their underpowered year-end forecasts.

But Becht has been no slouch either. Profits for the maker of Cillit Bang, Vanish, Dettol and Finish were up 40% last year, and the City was just as eagerly awaiting his news and views as Q3 announcement time hoved into view.

And he has not  disappointed. RB has just released its own set of stunning quarterly results: profits were up 25%. A tribute, says Becht, to “our 17 Powerbrands, …. significant investment in media and marketing, and successful new product initiatives.”

“We see no let-up in the demand from retailers for great value and great performing products,” says Roberts. “The only way we you can do that is with own-brand.”

Bart BechtNot so contends Becht: “We are typically market leaders in higher growth categories. We clean dishes not shoes. I don’t have to tell you why. Penetration of dishwashers is going up but shoe polish is not growing because there are fewer people using these products.”

The impression we are left with is that own-label is growing, but RB is taking a larger slice of the high-margin branded sector that remains. It can do this because RB’s powers of innovation in engineering higher-margin products is second to none. Only, it’s not that simple. Part of McBride’s success has stemmed from greater product specialisation and innovation. It would appear that Roberts is no more interested in “shoe polish” than Becht. Instead McBride has been doing exactly the same as RB: engineering higher-margin products such as a five-in-one dishwasher tablet.

So in answer to the question: who’s right?  – it’s neither and both. A case of Frank Sinatra marketing: “I did it my way.”

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Supermarkets face ‘greenwash’ crisis over disappearance of Amazonian rainforest

August 5, 2009

DeforestationProblems with the Brazilian Leather Supply Chain sounds a riveting subject for some obscure PhD thesis. You know the sort of thing: A Reassessment of 8th-Century Scandinavian Boat-Building Techniques.

In fact, far from being academic, it’s a subject of passionate interest to some of the world’s leading shoe brands: Nike, Adidas, Timberland and Clarks among them. That’s because they fear a catastrophic boycott of their products if they’re not more vigilant about the leather supply chain.

Their unease stems from an undercover investigation by Greenpeace which has all-too-credibly revealed that leading Brazilian suppliers of leather and beef for products sold in Britain are sourcing their cattle from ranches involved in the clearance of the Amazonian rainforest.

Clearing tropical forests for agriculture produces an estimated 17% of world carbon emissions. According to Brazil’s environment minister, Carlos Minc, up to 75% of deforestation is caused by ranching.

The footwear companies have been a lot more alert to the ramifications of this problem than UK supermarkets. They are asking for an immediate moratorium on rainforest destruction, whereas the supermarkets are still complacent about their alleged involvement.

The real issue is this.  Brand-owners may cleanse their own supply lines, demanding assurance from suppliers that no ‘dirty’ cattle are involved. But it’s a bit like analysing securitised sub-prime mortgage debt. The good gets mixed in with the bad, and no one’s any the wiser because rigorous scrutiny is almost impossible. Even if the brand-owner’s supply line is ‘clean’, that’s no guarantee the same supplier will not provide third parties with ‘dirty’ goods. Which means guilt by association. Wal-Mart and Carrefour have shown the way forward by threatening to fire any suppliers who continue to do business with ranches involved in rainforest clearance.


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