11/10/2013

1 TABLE OF CONTENTS

2 Introduction...................................................................................................................................................... 2

3 Pick n Pay’s Housebrand Policy.............................................................................................................2

4 Expanding the Housebrand......................................................................................................................3

5 MOORCROFT’S APPROACH AND PROPOSAL..................................................................................4

5.1 The methodology.................................................................................................................................4

5.2 Competition and choice of brand tier....................................................................................4

5.3 Consumer group and target market.......................................................................................5

6 Recommendations.........................................................................................................................................6

7 Bibliography..................................................................................................................................................... 7

8 Appendix............................................................................................................................................................. 8

8.1 Pictures....................................................................................................................................................... 8

8.2 Tables........................................................................................................................................................ 10

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2 INTRODUCTION

The recent financial statements from the Pick n Pay Group have shown that the retailer is

not doing well profit wise. With the current merchandise mix at 23% housebrands, Pick n

Pay (PnP) is aiming to rise steadily from the ashes of the global financial recession and the

decreasing popularity of their brand. Figure 1 in the appendix indicates that house brand

merchandising in South Africa is currently lower at 11 %, as compared to other countries

such as Switzerland 47%, UK 41%, France 29%, and India 13% (A.T. Kearney, 2012).

Below is a discussion that centre’s around PnP’s house brand policy. Fred Moorcroft’s

proposal to extend the house brand merchandise range into toothpaste is also critically

reviewed with due regard to PnP’s target market and the brand merchandising policy.

Recommendations will be made based on the discussion in this paper.

3 PICK N PAY’S HOUSEBRAND POLICY

PnP’s housebrand policy has been applied as the business’ overall marketing strategy that

can be used to increase profits. The company’s original strategy was aimed at competing

with national brands such as Unilever, Tiger Brands and Pioneer Foods; by competitively

pricing their housebrand below the national brands. The strategy was to be achieved by

choosing a variety of fast moving products with low consumer-decision involvement and

packaging them in basic and cost effective packaging to offer lower prices to customers.

The housebrand at PnP currently consists of three tiers; the No Name brand (labeled good)

which offers lowest prices without much packaging and branding focus, the PnP brand

(labeled better) which is strategically placed to compete with national brands by both

pricing and product branding appeal, and lastly the Finest brand (labeled best) which has

been positioned to break above national brands and compete with more premium brands

by focusing on the finest quality, exquisite packaging and premium pricing.

Within a retailer’s merchandise there are options of merchandise variety (breadth) and

merchandise assortment (depth) (Beneke, 2010). Under PnP’s housebrand, the proposed

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strategy was to expand merchandise variety of the No Name brand. Fred Moorcroft’s (PnP

Executive) proposal was to expand the share of housebrands by adding toothpaste to the

No Name brand, with reasoning that “everyone needs it”, therefore it will sell.

This No Name product range expansion is consistent with PnP’s merchandise expansion

whereby they have consistently increased the amount of products under their housebrand.

In addition, all toothpaste brands in South Africa are currently being produced by national

brands only. Therefore PnP will be tapping into a new niche with this product.

4 EXPANDING THE HOUSEBRAND

The decision to expand PnP’s housebrand is a very good business move, especially if it is

aligned with the business’ current requirements of market share expansion and exceeding

customer value. Moorcroft’s decision to expand the No Name brand is excellent because

that is currently the biggest selling tier of the housebrands and a major contributor to the

profit, which aligns with the business requirements.

The No Name brand is sold at lower prices as compared to other brands. This is mainly due

to its basic packaging and standard quality, figure 2 in the appendix indicates an example of

the No Name packaging. For this reason it is important to consider how packaging of

housebrands is perceived by customers. Beneke (2010, p.210-211) states that customer’s

perception of private label1 brands are generally negative as supported by figure 3 in the

appendix.

An important conclusion can be asserted from this finding; toothpaste packaging in South

Africa is exquisitely packaged, normally in bright colours with many details and graphics

on the packaging. Therefore it appears that the No Name Toothpaste will be very hard to

notice and trust by customers, especially when it is placed amongst so many successful

brands that enjoy ample advertising and promotions. Moreover, part of the suggestions

brought forward was to not place the tooth in a box, therefore presenting in a tube only.

This has never been done before and might confuse customers about the quality.

1 Same as housebrand

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As a result, the following recommendations are suggested, with more in-depth analysis

based on consumer behaviour analysis in the sections to follow. The new housebrand

toothpaste must not be placed under the No Name tier. Secondly, more structured and in-

depth market research must be conducted to gain further consumer insight. Lastly,

packaging and pricing must be given special attention, with due concern to whom the new

product will be targeted at.

5 MOORCROFT’S APPROACH AND PROPOSAL

5.1 THE METHODOLOGY

Moorcroft’s proposal is good; however his approach is flawed due to the methods which

were applied before arriving at major decisions. According to the case study, Moorcroft

based his decision on quick market research. The methodology outlined does not form a

structured market research plan that can be used to plan a marketing strategy for a market

penetration plan, because both the product and market exit.

One question was asked, and it was not an in-depth query; the answer to the question will

always be the same because toothpaste is used to clean one’s teeth. The sample size of 100

respondents was inadequate for a project of this size. In addition, the research was

conducted during mid-week working hours, where most respondents would be on their

way to work or educational institutions. Moreover, the research has a high level of bias due

to the lack of random sampling for the size chosen.

5.2 COMPETITION AND CHOICE OF BRAND TIER

Although PnP will be the first retailer in South Africa to offer housebrand toothpaste –

the market is already highly saturated by brands from leading national brands such as

Colgate-Palmolive, GlaxoSmithKline (GSK) and Unilever. It will be very difficult for the

brand to break into the market with such strong and trusted competition. The bottom

spot in the market, which is where Moorcroft’s proposal places the No Name

Toothpaste, is already filled by Mentadent P, Close-Up and McLeans brands.

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Although these brands are neither the top selling nor the premium, they are still the brands

which serve part of the market targeted by the No Name brand. The No Name brand is also

not branded well and has mundane packaging; this will further result in problems

regarding customers recognizing the No Name Toothpaste as a trusted brand.

The PnP Group as a company has decided to target the lower end of the market by

introducing the Boxer stores which do not carry any of the house brands. Although location

is important in this regard, because Boxer stores are mostly positioned for the people in

townships and rural areas; it is still vital to consider that toothpaste is a product which

induces a high level of decision process. It is not like sugar, which is almost similar for all

brands. Certain needs ought to be satisfied by toothpaste; these can be good oral hygiene,

tooth sensitivity, cavity protection and longer lasting fresh breath.

5.3 CONSUMER GROUP AND TARGET MARKET

This is by far the most interesting part of this review because of the consumer

psychographic analysis involvement. The general PnP strategy targets the mass market,

even though it reaches the consumers in the higher LSM ranges. The No Name brand is

generally aimed at consumers which are in the lower income range. These consumers are

generally the ones with the highest brand loyalty. This view has been supported in the

work of Beneke (2010, p.11-12), see table 1 for actual findings.

These consumers are grouped as belonging to the survivor and skilled strugglers market.

They mostly buy national brand which they trust in terms of quality because they cannot

afford to make more than one purchase of the same item in one month, should quality not

live up to their expectations. According to Beneke’s (2010, p.11-12) study, the purchase

decision process is driven by ‘perceived quality’ and ‘trust in the brand’, table 2 in the

appendix shows the results from this study’s respondents. Motivation is a major driving

factor in the consumer’s mind, experience with a product is very important for low income

consumers.

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Fred Moorcroft’s proposal will not be successful because; the customers who typically shop

at PnP (LSMs 6 and above), classified as middle class and top enders, will not see the appeal

and benefit of buying a product that looks cheaper. There are many other choices they

have. Also, because of the high level of market saturation, the consumers below middle

class are also not likely to buy the No Name Toothpaste due to trust and financial risk.

6 RECOMMENDATIONS

The findings have revealed interesting insight about the customers of PnP and the

projected target market of the new product. Conclusions drawn suggested that Moorcroft’s

proposal will not work as he has suggested. The following strategic recommendations will

help launch Moorcroft’s proposal into a more successful start and hopefully, future.

The new housebrand toothpaste must be launched under either the PnP tier or the Finest

tier. However, Finest will be best because of the following reasons.

The PnP tier competes with national brands which are already established in the

market; therefore it would be very difficult for market penetration.

Premium quality, packaging and pricing will successfully launch the Finest

Toothpaste. Quality can focus on functional aspects such as tooth sensitivity

protection, fresh breath, teeth whitening and cleaning as opposed to just cleaning

the teeth.

The target markets are the middle class and top ender’s market, which are typical

PnP customers.

The Finest Toothpaste will be price at a premium price comparable to Sensodyme

by GSK.

Therefore marketing will focus on price, place and promotion. The best shelf space

available for the cosmetics section can be used. Promotions can be run through the

PnP’s Smart Shopper to launch the Finest Toothpaste.

Beneke’s (2010, p.11-13) findings about house brand quality perceptions support

these recommendations – most respondents thought that house brands were of high

quality, figure 4 in the appendix shows these results.

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7 BIBLIOGRAPHY

A.T. Kearney, 2012. Private Label: How both retailers and brand manufacturers can seize

the opportunity. In van Dijk, B., ed. Consumer Goods Council of South Africa. Johannesburg,

2012. A.T. Kearney.

Beneke, J., 2010. Consumer perceptions of private label brands within the retail grocery

sector of South Africa. African Journal of Business Management, 4(2), pp.203-20.

Beneke, J., 2010. Consumers’ Buying Behaviour in an Emerging Market Setting: The Case of

the Entry-Level Private Label Brand. Research Study. Cape Town: University of Cape Town

University of Cape Town.

Beneke, J., 2010. Retailing and wholesaling. In Kotler, P. & Armstrong, G. Principles of

marketing: Global and Southern African perspectives. 12th ed. Cape Town: Pearson

Education, Inc. pp.396-98.

Pepe, M.S., Abratt, R. & Dion, P., 2011. The impact of private label brands on customer

loyalty and product category profitability. Journal of Product and Brand Management,

20(1), pp.27-36.

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8 APPENDIX

8.1 PICTURES

Figure 1 Private label share of market share by value (2012 estimate), (A.T. Kearney, 2012).

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Figure 2 PnP No Name brand product packaging, (Beneke, 2010).

Figure 3 Packaging perceptions of private label brands, (Beneke, 2010).

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Figure 4 Quality perceptions of private label brands

8.2 TABLES

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Table 1 Levels of brand loyalty with respect to income, (Beneke, 2010).

Table 2 Key factors in the private label brand decision process, (Beneke, 2010).

Table 3 Levels of brand loyalty with respect to ethnicity, (Beneke, 2010).

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