Around the Net

Premium Brands Face Dilemma As Generics Gain Ground

Beware the "ghost of Marlboro Friday," warns UBS analyst Alan Erskine. In a note to clients, he recalls when Philip Morris slashed the price of Marlboro cigarettes in a bid to fight back against generic cigarettes. The April 1993 decision backfired big time. Consumers questioned the premium value of the historic brand; PM's shares took a beating.

The dilemma PM faced is similar to the one facing the big brand owners now, Elizabeth Rigby reports. Shoppers have been happy to spend more on recognizable products such as Unilever's Dove shampoo and Procter & Gamble's Gillette razors when times were flush, but they are turning to generic brands as the economy turns south. Things will get worse before they get better, UBS' Erskine feels.

"Consumers down-trade in food, not through choice but through economic necessity," he writes. "And, as a consequence down-trading occurs much later in the economic cycle -- when unemployment peaks -- than with other consumables." Unfortunately, most analysts predict higher unemployment figures in the months ahead.

advertisement

advertisement

Read the whole story at Financial Times »

Next story loading loading..