From The Econimist World in 2009 - Print edition
By Tamzin Booth, PARIS
No-nonsense brands will prosper in 2009
On September 29th, when the United States Congress rejected the first bail-out plan for Wall Street, the Standard & Poor’s 500 index plunged and all of its constituents fell in value, except one: the Campbell Soup Company. Investors flocked to the iconic brand, which makes some of America’s favourite broths, such as chicken noodle and cream of mushroom, and its shares went up by 0.3%. That is a very good clue to the type of brands that will prosper in 2009: those that represent good quality, no-nonsense and excellent value for money.
To safeguard their own profits, advertising firms always insist that any brand can do well during hard times if owners continue to lavish money on marketing. But the reality is that consumers are likely to change their habits dramatically during a downturn. Fast-moving consumer goods have little to fear, but products priced for status are likely to suffer.
One victim will be organic products. Any brand built around do-gooding notions of organic, corporate social responsibility or caring for the environment may need to rethink, according to Interbrand, a marketing consultancy, as value for money rises up the consumers’ agenda. Two early beneficiaries of consumers’ changing mood, on the other hand, have been Aldi and Lidl, big German hard-discount supermarket chains which are expanding across Europe and eating into the market share of established giants such as Tesco and Carrefour. It used to be shameful for middle-class families to shop at hard-discounters, but now their brands suggest intelligent buying. Aldi and Lidl and their imitators will gain more ground in 2009.
Luxury brands are in trouble.
Luxury brands are in for trouble. The industry has argued that it can resist a downturn: the seriously rich, after all, will still have plenty of cash to throw around. But that underestimates its achievement in selling luxe to the aspiring middle classes as well as to the wealthy. Louis Vuitton bags, after all, are sported by middle-class women as well as by the private-jet class. In Japan, where office workers typically save up for years to buy from Louis Vuitton and other luxury-goods firms, demand is falling. Their best hope will be to find ways to offer cheaper goods without compromising their image. Luxury car brands such as Porsche and Audi, for instance, are revamping their certified “pre-owned”—ie, second-hand—product ranges. Top fashion labels are hoping that fashionistas will buy the season’s hot new sunglasses even if they can no longer afford a $3,000 handbag.
In Interbrand’s 2008 ranking of the world’s top 100 brands, the combined brand value of four financial institutions—Merrill Lynch, AIG, Morgan Stanley and Goldman Sachs—was estimated at some $37 billion. Since then, Merrill has ceased to exist as an independent entity, AIG was bailed out at the taxpayers’ expense and Goldman Sachs and Morgan Stanley have thrown themselves under the protection of federal regulation as deposit-taking institutions. Banks will have a hard time in 2009 rebuilding any kind of confidence, let alone strong brands. On the other hand, they desperately need to compete with each other on this front in order to shore up their balance sheets with new deposits.
Brand new
On the brighter side, 2009 will see the arrival of big emerging-market brands into the developed world. Companies in China, India, Brazil and Russia have built strong brands at home, but they have mostly stayed there. Mahindra, an Indian conglomerate with a strong brand, which sells everything from tractors to insurance, will launch a small, fuel-efficient sport-utility vehicle in America. StrawberryFrog, the advertising agency working on the launch, says that emerging-market brands such as Mahindra can leapfrog rich-world marques by using guerrilla-marketing techniques and new media. If the Indian firm succeeds, more will surely follow.
It certainly helps that Douglas Conant of Campbell's is one of today's marketing superstars. But agree completely with your premise. (I was once bum-rushed for 19 cents. It was, so the indigent man said, to buy a can of Campbell's soup in the middle of winter. I couldn't get the money out of my pocket fast enough.)
Posted by: Steve Poppe | December 07, 2008 at 10:37 AM