Multiplicity Of Brands
( Originally Published 1939 )
Today the consumer is offered a multitude of products unknown to his grandparents. He must choose among a bewildering array of labels; a host of different brands of cigarettes, toothpaste, shaving cream, cosmetics and breakfast foods are on sale in every retail store. The late George K. Burgess, former director of the Bureau of Standards, estimated that there are as many as 10,000 brands of wheat flour, 4,500 brands of canned corn, 1,000 brands of canned peaches, 1,000 brands of canned salmon, 1,000 brands of canned peas, 500 brands of mustard and 300 brands of pineapple. But only a few brands of each kind of product are carried by any single store. Furthermore, the major part of the consumer's budget is still spent for a multitude of products-ranging from household furniture and hardware to clothing and many staple foodstuffs such as meat and vegetables-which are sold to him in bulk or simply on the retailer's recommendation.
Four major charges of high costs due to the multiplicity of brands have been made: (1) they confuse rather than enlighten the consumer and make his purchasing less efficient than if the number of brands were greatly reduced and each brand were identified with recognized specifications or standards of quality; (2) the large number of brands reduces manufacturing efficiency by permitting inefficient plants to survive and by preventing a concentration of production in large plants which enjoy the economies of mass production; (3) distributors, particularly retail stores, are required to tie up large amounts of capital in carrying a needed supply of each type of branded goods; (4) competitive national advertising and the promotion of almost identical products under different brands is a large and unnecessary expense which needlessly increases costs and prices.
The Effects of Multiplicity
Mere wonderment as to which of so many brands are best suited to particular needs may not trouble consumers very much. The retail buyer may pay no attention to labels, trusting to the dealer to understand that he wants good merchandise. If there is a great difference in price between one brand and another, buyers may assume from lack of information that there is a corresponding difference in quality. Sometimes-but not always-this is true. But the consumer who values quality above everything may choose the highest-priced product, quite unaware that some distributors understand this trait of human nature and price inferior goods accordingly.
Ordinarily, however, the consumer has to consider prices. Privately-branded goods are commonly sold on a highly competitive basis with price the primary consideration. Goods sold under private brands, however, can be distributed as economically as if they were not branded at all, and consumers would have to pay the same price in either case. Goods must be labeled and their contents must be identified in some way, and the additional cost of adding the dealer's name to the label is inconsequential. What is important to buyers is whether content and quality are as represented and whether the description is one which can be readily understood.
The existence of a multitude of private brands probably has little effect on the efficiency of manufacturing. Each of the 10,000 brands of wheat flour is not produced in a separate mill or according to a separate formula. Production costs for flour are little if any greater than if fewer brands existed. As a matter of fact, only 4,022 establishments in all are listed by the Census as producing flour or any other kind of grain-mill products, and 70 per cent of such products is milled by the 232 plants doing a business of more than $1 million annually?
Hundreds of wholesalers and chain store organizations buy identical products from a single mill, each one having his merchandise labeled with his own brand name. This practice is also common in the canning industry, in the apparel trades and in many other commodity lines and is often followed even by producers who distribute part of their output under their own nationally advertised brands. Clearly, if no advertising is involved, it costs little more for a manufacturer to produce and package the same product under a hundred brands than under a single brand or no brand at all.
Furthermore, carrying a modest assortment of private brands may add little to inventory expense. Since consumers often (but not always) attach no special value to any particular private brand the dealer's only concern is to be able to offer his buyers a sufficient assortment of sizes, styles, and qualities of the product, whether this necessitates stocking several private brands or only one. On the whole it is doubtful whether the apparent multiplicity of brands is responsible either for excessive costs in manufacture and distribution or for consumer ignorance or inefficiency in buying. The latter undoubtedly exists; but it is due chiefly to the fact that consumer goods are not available under standards and specifications, rather than to the variety of names under which they appear.