Brandless: Why Bother?
Credit: The Brand Gym
I drank my first can of Coca-Cola when I was two years old. Apparently I asked for it, and my father handed it to me. (My mother, not surprisingly, is still pissed he did that.) My father drinks Coca-Cola, and his father drinks Coca-Cola. It’s a family thing, sort of. We are devoted fans of the brand
Coca-cola, for me, is like Porsche for Joel Goodson, in Risky Business: “there is no substitute.” I simply refuse to drink Pepsi (and try to do so politely). I want to believe it’s the taste. I want to believe that my palate can detect the trace of coca leaf extract in Coke, and that the smallest bit of citric acid in Pepsi turns me off. I want to continue to believe such things, so I’m not about to sit down for a blind taste test. I like my cola of choice, and I’m not the only one.
Strong brands consistently outperform the market. “The world's 40 strongest brands yielded almost twice the total return to shareholders of an investment in a Morgan Stanley Capital International (MSCI) World index certificate over the course of the 20-year period ending in 2019," according to a recent McKinsey Report. McKinsey people usually know their stuff.. So who would go against their advice?
The people at Brandless, that’s who. Brandless launched initially in 2017. The concept? Sell a collection of items at low prices without branding. Think white-label products (or generics) for the web. In 2019, Brandless folded, and now it’s back under new ownership. This won't make a difference. Goods that solely compete on price lose in the long run.
Ok, so what about competing on price? Brandless founder Ido Leffler says, "Why were we spending $15 or $20 on things that cost maybe $2 or $3 to make?"
Brand names can command a premium. Brandless, the brand without a brand, will fail again.
Human brains love brands. In fact, a study on Coke suggests that "brands are imprinted on our brains." Researchers scanned 50 participant’s brains while they drank cola products. They were told they would be drinking coke, pepsi, generic coke, and a new type of cola. Instead, they were just given a combination of the first three drinks. The study found that consumers "got more pleasure from tasting colas labeled "Coke" and "Pepsi" compared to generic ones" Furthermore when drinking “Coke” or “Pepsi” there was “more activity in the left ventral striatum,” while generic brands “triggered more activity in the medial orbitofrontal cortex” In other words, our brain will evaluate generic products while bypassing that judgment for named brands. In short, marketing overrides logical judgment and surpasses it with emotional judgment.
Research suggests that people will pay a premium for a brand name over a generic. "When it comes to products like over-the-counter drugs like aspirin, or pantry staples like sugar or baking soda, which are virtually identical to their generic competitors,” the researchers noted. “Consumers are indeed more likely to pay up for a brand name if they're poorly educated about what they're buying ... shoppers also appear more likely to spend on a famous label if they have the income not to worry about it."
Like many consumers, I buy private-label products such as AmazonBasics (Amazon) or Market Pantry (Target). I trust the company manufacturing them — based on the strength of their brand.
If Brandless wants to succeed this time, it has no choice but to choose: brand or generic. For me, when it comes to cola, it’s always going to be Coke: there is no substitute.
Thanks to Randal Doane for coaching me through this essay.