Brand leaders often cheaper than their peers
National brands on average manage to charge a substantial price premium compared to private labels. But do market leaders achieve this more easily than smaller brands?
Only 4 out of 10 leading brands sell at a price premium relative to all other national brands. This price difference, however, can be substantial in some cases: 1 in 30 leading brands charges 50% more than other brands.- The remaining 60% sell below the average price level of their peers (see figure) resulting in an average price discount for category leaders of 7%.
- This level varies by region and category: Number 1 brands do relatively better in the Americas (-1%) and in household care (-3%) but are on average least pricey in Europe (-9%) and in personal care (-9%).
- Categories with very low price levels for leading brands include skin cleansing lotions, liquid soaps or toothpaste.
- Categories in which leading brands achieve a substantial premium are, for example, colas, frozen pizzas or washing-up liquids.
While big brands (by definition) dominate the market based on the number of buyers, part of their appeal may be a consequence of charging relatively low prices. One question that leading brands selling at discounts should be asking themselves: Can we increase price (or reduce promotional activities) given our likely higher equity? And how are other brand leaders managing to sustain a high premium?
Analysis includes 2016 data on 1,851 #1 national brands across 86 categories and 31 countries.
