October 16th, 2010
Cut-price promotions could backfire on makers of leading brand household goods such as laundry liquids, mouthwash and toothpaste, says the boss of a specialist own-label producer with an operation in Bradford.
Chris Bull, chief executive of McBride, which manufacturers for major supermarkets including Bradford-based Morrisons, said strong promotional activity by the firm’s branded competitors could boost its own sales in the long run.
McBride, whose UK operations include a factory at Dudley Hill employing more than 300 people, announced a one per cent rise in sales between July 1 and October 24, even though Mr Bull admitted big brands were fighting hard for sales.
He said the promotional spree was not necessarily bad news for McBride as consumers would become accustomed to paying low prices for brands, and when the average price increased again they would buy even more supermarket own-label goods, which would offer better value for money.
“As a former branded player, the last thing you want to do is to continue to promote on an ongoing basis,” said Mr Bull, who joined McBride in May from Unilever. “The longer the promotions go on for, the more it will benefit McBride. Private label is a growing phenomenon and will continue to gain share. I’m extremely optimistic about the future of private label, which historically has grown its share not just in the recession but when there’s more money around too.”
The company, which also has factories in Burnley, Hull, Barrow and Middleton, near Manchester, is in the process of passing on cost increases, but admitted there was a “lag period”, which would temporarily affect margins.
Last month, the Manchester-based supplier announced a 33 per cent rise in pre-tax profits to £29.6 million in the year to June 30.
The company said trading was in line with expectations.
Revenues grew in spite of the effect of pulling out of a low-margin business in Spain earlier in the year and the one-off benefit in the previous year from increased demand for anti-bacterial products in response to the swine flu scare.
McBride’s re-structuring programmes, announced earlier this year, have been completed on schedule.
Chris Bull said: “While our markets remain highly competitive, we continue to see growth in our core categories and the benefit of ongoing cost reduction programmes.”
Source: Telegraph & Argus
