Increased spending on advertising will be vital for branded FMCG companies who want to compete effectively with unbranded private labels, according to the heads of two of Australia’s biggest FMCG companies.
Speaking at the Australian Advertising and Marketing Summit in Sydney this week, the managing director of Heinz Australia, Peter Widdows, and the president of Campbell’s International, John Doumani, both said combating private labels is one of the crucial challenges facing branded FMCG companies.
“It’s absolutely at the top of the agenda for any supplier to Coles and Woolworths at the moment,” Widdows said.
The central issue, they said, is competing with private labels while also dealing with tightening margins caused by that competition.
And Widdows and Doumani both agreed the answer was increased spending on advertising.
“We have to innovate and then we have to advertise, advertise, advertise,” Widdows said.
“Even though we know our margins are coming down, we have to advertise more.
“We have to grow brand preference, there’s just no way around it.
“And boards are just going to have to accept, and investors are going to have to accept, that margins are going to be squeezed in the short to medium-term but in order to protect the long-term health of the brand, you’re going to have to accept [more advertising],” he said.
Doumani agreed and said FMCG companies need to treat private labels as just another competitor.
This means convincing the consumer of the value of the brand on the balance of price against perceived value, he said.
And as it is so difficult for branded FMCGs to compete with private labels on price, he said, it is important that they advertise effectively to present the strongest possible brand and the best possible value product to the consumer.
