LONDON -- Britain's top brands are under pressure.
While nine of the United Kingdom's largest grocery brands managed to post volume gains last year, according to a Nielsen survey, new pressure on margins created by private labels and lower-cost alternatives is turning the battle of the brands into an occasionally nasty contest.
In recent months, several of these major labels have faced direct challenges from store brands or branded competitors. Changing consumer behavior has troubled others.
The current round started with the relaunch of J. Sainsbury's private-label cola in a new formulation produced by Cott Corp. of Canada. In the four-weeks following its introduction in late May, Sainsbury's Classic zoomed to a 73.4% share by volume of Sainsbury's cola sales, compared with a 26.6% share held by the previous store-label product in January.
Coke's share dropped to 14.8% from 45.3% in January and Pepsi's to 8.2% from 17.8%, according to Nielsen. Coke fought back, blasting Sainsbury for mimicking some of Coke's typographic design, and forced the U.K. retailer to change its packaging.
Now other British food retailers, including Tesco, are launching their own Cott-produced private-label colas, which are expected to further eat into the market shares of Coke and Pepsi.
The controversy over Sainsbury's Classic caused brand producers in the United Kingdom to call on the government to tighten copyright laws to ban "me-too" products. The government so far has resisted the proposal, but major brands are talking about forming a permanent lobbying group to protect their interests in the United Kingdom, where store brands generally account for 30% to 35% of their sales.
The Sainsbury's Classic brouhaha was quickly followed by the war of words between Procter & Gamble and Lever Bros. over Lever's new Persil Power detergent. Procter & Gamble claims its research shows that an additive in the Lever detergent rots clothes, which Lever denies. Lever in turn claims Persil Power has overtaken P&G's Ariel in sales terms since its launch.
According to Nielsen figures released by Lever, Persil's share of the U.K. concentrated detergent market rose to 10.7% in early June, a month after Power was introduced. This compares with a 6.4% share in mid-April. Ariel's share of the market fell to 10.3% from 11.8%. Lever now plans to add the manganese catalyst in Persil Power to its other detergents, Radion and Surf.
Brands aren't being hit only by consumers' increasing emphasis on value, however. Sales of Bell's whiskey, for example, fell 2.3% last year because of changing consumer tastes. However, the brand, which was renamed Bell's Extra Special in May, remained the United Kingdom's No. 1 whiskey brand, with volume sales of 1.8 million bottles in 1993.
Extra Special is an 8-year-old whiskey, compared with the previous 3-year-old product. United Distillers, Bell's parent, plans to spent 15 million pounds ($23.25 million) this year and again in 1995 supporting the brand and trying to attract a younger customer.
Nor is all doom and gloom for brands in some sectors. Nescafe is unlikely to be hit severely, despite the possible 25% to 30% increase in coffee prices this year following the severe frosts in Brazil. Nielsen contends that leading coffee brands will realize substantial sales increases this year because consumers will continue to drink as much coffee as usual, despite the price increases.
Walkers Crisps, meanwhile, is one of the United Kingdom's fastest-growing brands because it has just gone into nationwide distribution and is spending heavily, both above and below the line, to boost its profile. Sales last year rose 23%. Nielsen says sales are likely to rise further this year.
