PUNK

I’m not sure who would be most offended, Johnny Rotten or Nigel Farage. But there’s a surprising similarity between the two. Both punk and Brexit were protest movements. Punk’s explosion 40 years ago was a reaction to the economics and politics of the time. Agree with Farage or not, so was Brexit.

Now the 52%’s voice has been heard, it’s not just the ‘political élite’ that have been shaken up. So have Britain’s Biggest Grocery Brands. They’re near-unanimous in their warnings of looming inflation. Shrinkflation is widely associated with Brexit, but, as Mondelez points out, the cost of cocoa has increased by 50% in the past four years (p6). As the pound weakens, it will only get worse. Only this week Mars president Fiona Daw-son warned of dramatic price rises to its bestselling products, including a 30% tariff on confectionery, 20% on animal products, 15% on cereals and more than 10% on fish and fruit. The return of trade barriers would threaten currently integrated supply chains, she says.

A brand’s job for retailers is simple: to counterbalance the low margins of own label

Of course, Brexit is only half the story here. This ranking is based on sales from last year [52 w/e 31 December 2016], when deflation still ruled, as the sector’s old guard responded to the discounters by slashing prices: 49 of the top 100’s average prices are down; 62 have lost value. Some have failed to do their job for retailers. That is, serve as a counterbalance to own label by convincing shoppers to pay more with compelling NPD, marketing, etc. Princes (44) has lost more than a fifth of its sales due to a slew of delistings and price cuts; so have Velvet (86) and Anchor (76), to name a few. Price might help win volumes from fellow brands, but it’s a fight they won’t win with own-label suppliers.

The big four face a similar fight with the discounters. They need powerful brands in that fight. Brands such as Innocent (24), which, after years of intense price competition in the juice sector, has racked up the year’s fifth greatest gain with canny NPD tapping demand for healthy, functional products with ‘natural’ cues. The same can be said of the year’s fastest and third fastest growers, Arla (21) and Alpro (46). Of course, price is still crucial for these brands, but even more so is what they stand for.

In this environment, prices rising again may actually be welcome. But all of the top 100 will need to work out exactly what it is they stand for. And for those brands whose only answer is low prices, the future is pretty vacant. Rotten, in fact.