The Brand Empire is arming against Retail…
writes Frankfurter Allgemeine Sonntagszeitung on Jan. 30th, 2005

Commentary regarding the Merger of Procter & Gamble and Gillette by F.M. Schmid-Preissler, SchmidPreissler Strategy Consultants

In marketing they like to use military terminology because entrepreneurs often feel like commanders and descendants of the great general and military author Carl von Clausewitz. In the beginning of the 18th century he wrote his benchmark “Vom Kriege” (About War) and many of his definitions of tactics and strategy are valid to this day. However, and this is what marketing experts should consider, that modern practical warfare has little in common with warfare of the 17th and 18th century. Colossal armies and humongous deployments have made room for other techniques of warfare and thus we can also say for marketing that size alone is not the bottom line. Of course, globally seen, retail is a buying power and it would be a grave mistake to underestimate it. However, to break this power in a race for size does not bear good prospects.

As long as manufacturers offer products and brands the consumer demands and as long as these products and brands are not part of the ‘me-too’ category, manufacturers do not have to get nervous about their trade partners being bigger than they are.

The manufacturers have to know that retail has the whip hand. This applies especially the globally operating mercantile corporations whose prestige and goodwill from the consumer make it possible to further expand their private label supply. There are plenty of small, medium-sized and specialized suppliers, right outside their offices to make sure that no shelf remains empty. And one more thing we should keep in mind: There is a limit to everything, even for retail. WalMart, feared by Procter & Gamble and Gillette in the States has not been able to gain a foothold in Germany. Aside from a frequent change in managers and losses in the millions we read relatively little about this company.

To suggest to Oetker, Unilever, Nestle, Danone, Ala and whatever these companies might be called, to merge is pure nonsense. Aside from antitrust legislation and other obstacles, the attempt to emulate Procter & Gamble and Gilette is going to bring not a dime less in sales for WalMart, Aldi, Lidl, Carrefour, Ahold and Rewe and not a point less in margin. Generally, it is absurd to arm against retail in this manner.

Strong brands, mutual trust, an excellent cost/performance ratio and an intelligent and selective distribution are the best requisite for a spot on the shelf. And since there is so much talk about power, I think that the most powerful one is the one who has got the consumer on his side.