The new branding battleground

If imitation is the sincerest form of flattery, suppliers to Australia’s supermarket sector have plenty to feel flattered about.

The grocery industry has become a prime battleground for an intellectual property feud where brand equity is being quietly transferred from suppliers to retailers through the clever use of design.

Gone are the days where home-brand products wore their plainness on their sleeves. Now the supermarket brands look so much like their branded peers, videos are being made in their honour, including this one from media and marketing website Mumbrella.

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But what do you do when you feel another company’s products look remarkably like your own? And worse still, that company is a major customer, with the potential to knock your product off the shelves as its in-house products gain in popularity?

Tony Di Donato, who runs a boutique branding business in Melbourne, says the world is shifting for many suppliers and SMEs should take notice.

“Once upon a time, the retailer was a partner. Now it’s a partner and a competitor.”

“The house brands have the reach and the ability to copy what brands have known for years,” Di Donato says.

“Consumers haven’t bought into their offerings [so far] because they’re not attached to their brands. But we’re in the middle of a change.”

Backdrop to brand battles

This quiet brand war comes as tensions have flared between supermarket and suppliers, most recently over discounts across milk and bread.

But they were given a fresh look by Australian Competition and Consumer Commission chairman Rod Sims this week, who noted that many smaller suppliers feel they “lack a real ability to negotiate supply arrangements”.

“Supermarkets sell both branded and their own private label products. This vertical integration in the supply chain needs close scrutiny to ensure the supermarkets do not misuse their market power.”

Sims’ comments follow complaints from US food giant HJ Heinz to overseas analysts that Australia has become an “inhospitable environment for grocery manufacturers”.

But it’s not just supermarket suppliers feeling the squeeze: department stores such as Myer have also been pushing the attractive margins and independence of home brands.

Premium products at discount prices

Gary Mortimer, from the School of Advertising, Marketing and Public Relations at the Queensland University of Technology, says we’re starting to see home brands at supermarkets that were once seen as “dodgy” reach critical mass.

Mortimer says home-brand sales now estimated to account for between 30% and 35% of the grocery market could reach the 50% to 55% levels reached in the UK in supermarkets such as Tesco and Sainsbury.

“We’re seeing them positioned as premium products at discount prices,” Mortimer says. “It’s a smart marketing ploy.”

Mortimer says the skyrocketing sales of private-label products can be attributed to the products gaining the trust of consumers at last.

Part of this trust is from the supermarkets advertising about the quality of the product’s suppliers, but another element is the design – the overall appearance of the product.

Di Donato says recent improvements in house-brand offerings “highlight the importance of intellectual property”, because many house products now have a similar appearance to branded competitors – although the retailers have been careful not to break any laws.

Nothing illegal, but plenty clever

IP experts contacted by SmartCompany say Woolworths and Coles would be well-advised on how much inspiration they can draw from market-leading brands. They say the supermarkets are following in the footsteps of Aldi, which has managed to find that delicate line between flattery and imitation.

Mills Oakley Lawyers senior associate Jack Dolphin says the Coles products featured in the Mumbrella video are safe, because the “Coles” label is so prominent, and labels are a key identifier for consumers.

“If the brand is strong, typically the company name will win out,” Dolphin says.

But IP lawyer Trevor Choy says Australian IP laws often result in “celebrity brands” being protected and others missing out.

“Other laws are about, ‘this is the wrong thing’, but here if you are not a celebrity brand, it is ‘what have you done wrong, Mr Brand Owner?” Choy says.

Dolphin concedes that IP is a “complex field” that often produces decisions that surprise the average person. “There’s a subjective element to it, even though the law is there to be used.”

Colour me bad

Colours have been at the heart of some of the higher-profile IP disputes over the past decade.

From Darrell Lea successfully fending off claims by Cadbury that its purple packaging and advertising was misleading and deceptive, to Whiskas successfully registering the Whiskas purple colour as a trademark, another case has emerged: that between hardware chain Mitre 10 and Woolworths.

Mitre 10 earlier this year sought an injunction against the rollout of Woolworths’ new hardware stores, Masters. It argued, unsuccessfully, that colours used for the Masters stores were so similar to its own that customers might mistakenly enter a Masters store thinking it was a Mitre 10 store, or mistakenly believe the two businesses were linked.

Woolworths has already gone ahead with an opening of a store in the Melbourne suburb of Braybrook, but the case is not over, with a full trial expected later in the year.

IP lawyer Jack Dolphin says claims about colour are difficult. Certain products are attached to certain colours (pasta sauce labels are often red and coffee labels often feature brown or gold) so there’s more leeway to use those general colours in similar products.

But where a company has made a concerted effort to link their product with a certain colour, such as stain remover Napisan and its pink lid, their case strengthens.

“It’s hard to claim you’re the first to use a colour or that a colour is associated purely with your product,” Dolphin says.

How SMEs can fight back

Branding expert Tony Di Donato says SMEs must realise they cannot hope to take on retailers who have finally realised that they can create brands, not just sell them.

Indeed, he says Australia is in the third and final stage of a process seen in the UK decades ago when its supermarkets were breaking into home-brand sales.

The first stage is where a retailer offers a cheap product on the shelf with no label or a bland label.

The second is when a retailer starts to copy the market label.

The third is when it understands the need to create a brand. Nowadays, Di Donato says, Sainsbury has similar brand equity as other products.

In response, Di Donato says brand owners need to work hard at telling the story of their company through distinctive branding and tell that story everywhere – from branding on products, to logos, websites, communications and within the company’s culture.

The idea is to create a clearly defined brand with a story the consumers can embrace – and cannot be replaced with some clever use of colours.

“What large organisations do is make sure people understand the power of their story, and encourage an emotional connection,” he says.

“This story that emotionally connects with people is their point of difference.”

Using the example of Richard Branson, Di Donato says the British entrepreneur has understood his story as a modern-day Robin Hood going into an industry with a couple or few major players, and offering a cheaper option.

He says house brands might be cheaper and more attractive these days, but they will struggle to connect with shoppers the way that other brands can.

In that split second when a shopper is weighing up between two products, an emotional connection to a certain brand can make all the difference, he says. “Purchases are made on emotion,” Di Donato says.

But Gary Mortimer of QUT says private labels are already having an impact on how some of the bigger brands are operating. For example, Coles followed chocolate maker Lindt in putting its chocolate block in a carboard box, but it wasn’t until the grocery giant made the change that Cadbury followed suit.

Di Donato says as suppliers buckle down to focus on their core products, resources will be pulled from innovation – leaving the retailers as the greater innovators.

“Innovations will soon be driven by the retailers, because it’s an expensive exercise.”