All change in the battle of the brands
Sunday 30 April 1995
Richard Branson's soft-drink product is only five months old, but it has won the exclusive right to be sold in the 40 kiosks in the park, alongside other soft drinks from the Ben Shaw range, which has a tie- up with Virgin.
The irony is that Mr Branson is doing very much the same thing Coca-Cola did during the liberation of Europe: by sending millions of bottles of Coke to the American troops, it associated the liberation with the drink. Coca-Cola became a symbol of freedom. Of course, Virgin was not around at the time: indeed Mr Branson himself was not born until 1950. But Virgin was chosen instead of its rivals because of its "new, refreshing image".
Consider the implications of this. Coca-Cola is the most widely recognised brand name in the world. So with one bound, Mr Branson has managed to create a new brand which is self-evidently a credible challenger to the world's number one. If this says something about Mr Branson's genius for publicity, what on earth is the message for brands in general?
Until a few years ago it was always thought that brands carried considerable intrinsic value, but that it was hard to be specific as to what that value might be. Then a series of takeovers in the 1980s - like the bids for Distillers and Rowntree, where the portfolio of brands was the principal target - led to a series of attempts to acknowledge the real value of long-standing brands. Most recently there has been a reassessment, with think-tanks asking such questions as, "Do major brands have a future?"
The history of brands is quite remarkable. Johnny Walker Red Label has been our best-selling scotch since the mid-1960s and in fact received its Royal Warrant from King George V in 1933. New perfumes are launched every week but Chanel Number 5, launched in 1921, continues to be one of the world's best-sellers. Some brands are even older: Kit-Kat and Mars Bars are more than 60 years old; Cadbury's Dairy Milk nearer 100.
This is why the Virgin Cola conquest is so stunning. Virgin is not only a new brand name; it is evidently one which can be transferred between completely different products. There is no generic link between pop music, where the brand originated, airlines, where it matured, and the two new applications of financial services (with Personal Equity Plans) and soft drinks. Indeed if you had to try and find four completely different categories of human endeavour, it would be hard to beat that bunch.
This experience raises two grand questions. Are brands becoming less important? And what can the established brands do to fight off newcomers?
Viewed historically, brands were developed in the last part of the last century to try to provide a guarantee of consistent standards. Remember that the consumer product industries were very fragmented; that there were considerable problems of quality and, worse, adulteration; that there were no national retailer chains; and that advertising was in its infancy and accordingly was hunting for ways to tell people that they would get guaranteed quality. Brands achieved a premium price for their products because they gave that guarantee.
We do not really need the guarantee of consistency to the same extent in established products. We certainly want consistency, and the emergence of branded hotel chains is a recent example of an old solution being applied to another area of business. But because our retailers are so strong, they can supply an alternative guarantee - in effect becoming an alternative brand name themselves. (The other new recent British entrant into personal financial services aside from Virgin is Marks & Spencer.)
Cola drinks are a good example of this trend. We no longer place so much emphasis on Coke or Pepsi, because Sainsbury's Classic seems to convey an equally strong guarantee of quality. These guarantees clearly do pass across product ranges: M&S is as famous for its Chicken Kiev as for its underwear.
The conclusion that emerges is surely not that brands no longer matter much. Rather it is that it is probably easier to create new brands (like this newspaper) to challenge old ones than it was 30 years ago; and that it is probably at least as easy for a distributor to create a new brand as for a manufacturer. In the case of retailers, the distributor is the brand.
This still leaves a problem for the manufacturer-owned brands. What can they do to fight back?
This was the topic of a recent paper by Professor Kamran Kashani at the Lausanne-based International Institute for Management Development. Professor Kashani pointed out that there were two main forces hitting the brands: market change (which included better educated consumers, faster competition and better retailers), and poor brand management. Brand-owners can do little about the first, but they can tackle the second.
Professor Kashani had a five-point plan. This started by slimming the cost base so that brands did not have to be sold at a large premium to generic products, and not loading the costs of weak brands onto strong ones. Second, it meant innovating, so that established brands really did retain some quality advantage over new ones. Third, it meant listening to market signals (something, incidentally, that the supermarkets are good at doing) for signs of changes in taste.
Fourth, he argued that brand owners should be bold, and he cited the creation of the Swatch brand of cheap watches which, in effect, saved the Swiss watch industry. And last, brand-owners should think globally, by taking products that showed innovation in one area and selling these to the world. The best example there was the Vidal Sassoon combination of shampoo and conditioner in the same pack: Wash & Go. This was a European product given a world marketing push by owners Proctor & Gamble. (By the way, did you know P&G owned that name?)
Is this enough? I suspect not. Or, rather, I suspect that the speed at which brands rise and fall will continue to increase as consumers become better informed, but also become more price-conscious.
Given the increasingly adverse age structure of all developed countries, it is going to be quite hard to continue to advance living standards over the next generation. People whose living standards are hardly rising are going to be less inclined to buy principally on the strength of the label. You can even argue that this drive for value for money is consistent with the success of two of those Virgin ventures: the airline which gave something close to first- class service for a business-class ticket; and the new cola. A blind test in the London Evening Standard last Thursday ranked it above all others, including Coca-Cola.
The good news for all consumers is that the brand war is making all producers - manufacturers, retailers, franchisers - work harder. In a way, what is happening here is merely one example of the drive for better performance, which is affecting everything from car manufacturers to schools.
The idea of the brand, to guarantee quality, was nearly corrupted in that the ownership of a good brand name almost became an excuse for laziness: an excuse not to innovate or improve. That brand names no longer give so much protection to the mediocre should not obscure the fact that it is possible to build a new brand name far faster than ever before, even if a five-month-old product, celebrating a 50-year-old victory, must constitute some sort of record.
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