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Brand Names

April 17, 2016

Recently, I listened to a fellow on the radio who was complaining about corporate concentration in the travel industry.  He owns a local travel company.  I can certainly understand why he would be concerned about that, although I didn’t know that it was a problem.  I see now that’s its a problem almost everywhere.  He used the example of the breakfast cereal isle in a grocery store.  You find yourself surrounded by boxes of cereal, with dozens of brands to choose from.  You might think that these come from dozens of companies, all competing with each other, to provide you with the best possible cereal at the lowest possible price.  You would be wrong!  There are three large companies, Kellogg’s, General Mills, and Nestle, who have most of the market, and own most of the brands.  Brands owned by the same company do not compete against each other.  He told us that the same thing was happening in the travel industry.

What about the latest thing in coffee makers, the machines that use those single-serving coffee capsules?  There are just three well-known brands of capsules: Keurig, Nespresso, and Tassimo.  Do they sound European, or maybe German or Italian?  Well, Nespresso does come from Nestle, a Swiss company.  However, the other two come from American companies, Green Mountain and Kraft.  They’re not European after all.

Here’s another example, this time for ice cream.  Doesn’t Haagen Daz sound like a Danish Brand?  That name was carefully chosen to sound that way, but it’s owned by another American company, General Mills.

How about something completely different: power tools?  The company Black and Decker sells them under three brands: Black and Decker, DeWalt, and Porter-Cable.  DeWalt was a small company that specialized in one type of tool.  Porter-Cable was another, that specialized in a different tool.  Both of these were acquired by Black and Decker.  Now they sell their low end line of power tools under the Black and Decker brand.  They sell their high-end and professional tools under the DeWalt brand.  Another line of low end tools they sell under the Porter-Cable brand.  Of course, these three brands do not compete with each other.

I recently bought a new toaster.  I’m quite pleased with it.  The store, however, had three brands of toaster, all with well-known American names, and with different prices.  All of them were made in China.  I picked the middle-priced one, although I didn’t know if it was any better than the others.  The brand names meant nothing to me.

Every grocery store chain seems to have its own brand.  As far as I can tell, these brands are of no use whatever.  You may like the store brand of chocolate chip cookies, but what does this tell you about the store brand of frozen ground beef?  Nothing at all.  They are made in separate factories.  In fact, one factory may make and package a product with store brands from many different stores.  We only find about it when the government announces a recall of products from that factory.  Then we hear that it’s sold under all these different brand names.  The store chains try to sell products with their own brands at the lowest possible prices.  However, I doubt that they exercise any control over quality of these products.  They leave that aspect up to the factories that make them.

We use a brand name as a shortcut to information about a product, particularly for the quality of that product.  We say “that’s a good name”.  If we can’t trust the brand name, what’s left?  Price may be an indication, but are you sure that you are getting something better when you pay more?  Companies, of course, are free to charge whatever they think the consumer will pay.

The key term in product marketing these days is “brand recognition”.  It’s a way that companies use to differentiate their product from similar products of other companies.  To some extent, they are manipulating our minds.  We may assume that the brand name was recommended by someone we know, when we actually saw that name frequently in advertizing.  If one product is good, is another product with the same brand name also good?  It depends on the company’s quality control, and how they use their brand names.

These days, one company will own many subsidiary companies, and those companies in turn will own many brands.  The subsidiaries or the divisions managing specific brands may be sold to other companies.  The trend does seem to be towards corporate concentration, with large companies buying up smaller ones.  The result is that a few large companies dominate many industries, a situation that stifles competition and increases profits for the companies.  It’s the consumer that suffers in these situations, by having to pay higher prices.  Often, they won’t even know they are doing this.  Some brand names are carefully chosen to mislead consumers.  Some won’t know about this, either.

What should we do?  First of all, forget all the old information that you have about brands.  Just because it was a good name in the past doesn’t mean that it’s still a good name.  The marketing world has changed.  Manufacturing has moved.  Products are different now.  Instead, treat brands as just arbitrary and meaningless names.  There are so many of them now that it’s easier to do this.  Without brand names as guidance, you have to do some research before you buy a product.  Don’t look at advertizing; it always claims that their product is the best of all of them.  Find out for yourself.  As well, advocate for the government competition bureau to investigate any industry that’s dominated by a few large companies.  The only remidies are more companies or government regulation.  Of course, the companies will complain loudly;  it’s their profits that are at risk.

 

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