Now the big European discounters have reached the point where customers can no longer be lured into stores with loss-leader offers galore, where suppliers cannot be pressured even more and where people seem to come to the conclusion that profits can be achieved in the long run only through a reputable added value. Customers can be pleased.

For many years the cheapest price and the biggest rebate was supposed to boost turnover. For the longest time it seemed to pay off, especially as long as the manufacturers of brands still saw the chance of accommodating retail through tight calculations, without lowering the product quality. Private labels and the entry of more and more new suppliers turned the sales market into a battle field, it was a case of dog eat dog. It was downright absurd how they even acted against the very own corporate maxim, namely to achieve profits that ensure the future of the company. European and national public authorities sat on their hands due to a misinterpretation of the consequences.

A change is about to happen. Aldi and Lidl are introducing new product lines which they advertise decidedly as Premium products. As such they are, following our model of the market, positioning themselves in the PremiumEconomy segment of the market instead of the lowest segment of the market, the Economy segment. “Quality at a fair price” is the new motto. The trading companies proof even with this new marketing process that they know how to make brand policy in a classic sense: They are innovative and they are creating brand concepts on the basis of the seven elements defining a brand. The elements “origin” and “history” play a major role. For instance, they are offering dairy products from the farms of “Bavarian mountain farmers” and coffee beans “from the harvest of Ethiopian family farm suppliers”. The segments we have observed are not so much single products but a comprehensive selection whose components stem from different manufacturers, one can come to the conclusion, that with this new strategy manufacturers of a smaller or medium size are getting a chance. As we know from experience it is often the small and medium sized company that is most reliable in regard to quality and innovation.

At Aldi we have been observing chocolate products for some time now and we can say on the basis of this observational research that food discounters are well on their way to better serve their customers through new performance criteria and are getting away from the image “of being the cheapest”. This ought to be congratulated. This disclosed development should be food for thought for the food conglomerates which are often operating on the verge of market domination.

We recently read in the press that the domestic appliance industry as well as the electronics industry have also been taken in by this development. The Media Markt Group, globally operating by now, and a subsidiary or the Metro Group, is going to introduce independent brand marketing and it will either use developed, established brands or develop own brands. They will no longer offer private labels of the old kind, but rather brands in a classic sense. The awareness seems to prevail in trade that there is only one way out of the misery of the market destroying price and rebate battles. Namely the way of the classic brand.