The WSJ ran a front page article recently about the reduction in product/ brand variety taking place in retail stores: http://online.wsj.com/article/SB124597382334357329.html. Seems like this has been a long time coming, but was inevitable as brands like Special K and Colgate pushed out new flavors and brand extensions to increase their brand presence on shelves and to keep revenues increasing incrementally. While nothing is inherently wrong with new flavors and brand extensions, physical shelf space is limited, so unless CPG(Consumer Packed Goods) brands can figure out how to sell products without these physical constraints, this growth ceiling was inevitable. (BTW, the Long Tail is a great read on this subject).
Anyway, nothing like a recession to speed up the pace of change. So now how do these brands ensure profitability? Some may resort to pulling back on marketing spend to manage short term profits. Obviously this is something that larger public companies may be more tempted to do as private companies have a little less pressure to manage to quarterly numbers.
I wonder how these two items – the reduction in opportunities for brand extensions and the pressure of quarterly profits affect the retail landscape. Will the big, more-recognizable brands, which retailers are most likely to continue stocking, benefit from reduced competition and more volume? Or will smaller brands seize the opportunity to create innovation and spend on promotions to attack the larger brands if they decide to favor harvest profits vs. re-investing in marketing and sales?
Interestingly, thus far this year, smaller brands have been noticeably more aggressive in the promotional space based on what I have seen. Will it mean that some of these smaller brands use the cover of the recession to take market share? That remains to be seen…
