Revenge of the brands?

Coles and Woolies must have thought they were on a winner when they planned to roll out big discounts on beer and wine products from the Foster’s Group stable.

After all, who doesn’t love bargain booze?

But some simple – if very aggressive – discounting has led to a big stoush with Foster’s which has tried to take a stand against discounting by refusing supply to product and, in one particularly humorous strategy, sending its staff to Coles to buy up discounted wine.

Plenty of entrepreneurs will be able to see where Foster’s is coming from. Allowing your goods to be discounted to very low prices can quickly erode the brand value you’ve created over decades.

But fighting back is not easy – food and beverage companies in Australia must maintain good relationships with their two biggest routes to market. In the end, most suppliers simply accept that Coles and Woolies have the whip hand and get on with life.

Which is why Foster’s stance is so amazing. This direct action shows that not all companies are willing to be dictated to by companies with incredible market power.

Foster’s message to Coles and Woolies is clear – we are willing to bet that consumers love our products so much that they will go elsewhere and buy it. And if you want to replace our brand with home-brand products, go ahead and see how far that gets you.

But Foster’s is also sending a message to consumers. In withholding supply and restricting consumer access to discounts, Foster’s could be considered to be asking consumers to choose between their love for the brand and their love for a bargain.

For example, Foster’s is effectively saying to beer drinkers that VB costs a certain amount, and while it will be on special from time to time, there is a limit to how low we allow the price to go.

This could be a turning point in the current fight between the grocery giants and their suppliers, which started in staple products like milk, butter and eggs, and now seems to be spreading much further.

In the home brands sector of the grocery market, suppliers have little ability to fight back.

But in the branded product space – where consumers may indeed love their brands more than they love chasing discounts – the grocery giants may well have a fight on their hands.