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Author: DrtThrwingMonkey Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 214645  
Subject: Re: Private Labels assaulting branded "moat Date: 11/28/2012 2:30 PM
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At the end of the day you have to make a good product and a brand is a way to differentiate. If you have the best product you want to make sure people can identify it and pay you the premium you deserve.


This is true, and I think you have summarized nicely the essence of a brand.

However, the threat to traditional brands remains. I don't think generic labelled products will do well, for the reasons, you mentioned, but a private label brand from a trusted provider, like Trader Joe or Costco, is another way of providing that guarantee that the product you are purchasing is of the same high quality you have come to expect from Trader Joe or from Costco. You could say the same thing about an Apple charging cord - you know that Apple doesn't make them, but you figure that they have chosen them carefully, because they have a reputation for caring about quality that they probably don't want to squander by having you upset about a cheap $29 accessory. Craftsman would be another variant on the same strategy. It is essentially a house brand, but one that has an ok reputation, and you are probably more likely to buy a Craftsman drill than XYZ drill (unknown brand) at the same price.


At the high end (Rolex, Burberry, Chanel, whatever) there is not much threat, since the brand is more of a label for an image than a real guarantee of quality. I would put Coca-Cola in the same category, where you probably suspect you couldn't tell the difference between Kirkland Cola and Coca-Cola, but you might still buy the Coke. But at the low end, say for Hanes or Gillette or Kraft, I think the house brands may spell trouble. So I am glad to see Berkshire's holdings of these low-end brands decline.

DTM
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