Doing my usually Saturday morning rounds: First Costco for the necessities, then the grocery store for the few luxurious items that are better or have a better selection from Stop & Shop; bananas, red bliss potatoes, cereal.
I buy some cereal at Costco, but one of my little luxuries is Stop & Shop "Nutty Nuggets." They are a generic version of Grapenuts.
I adore Grapenuts, but at $3.49 per box, there's no way, especially when Nutty Nuggets is $2.00 per box.
Today Nutty Nuggets wasn't there. Neither was the store-brand All-Bran, Total, or other generics. There was a store-brand Cheerios (Oaty-Os), Store-brand Frosty Flakes, but that was about it for generics in the cereal aisle.
I can just see the conversation in General Mills' corporate boardroom. The conversation begins with your typical Asshole MBA.
AMBA: Times are tough. People are trying to cut costs wherever they can. The result? We're losing market share to store brands.
Asshole CEO: Can't we buy out these store brands?
AMBA: We manufacture the store brands. It's the same exact cereal that rolls off our production lines. We sell it to the store chains in bulk, put it in boxes with their label, and ship it along with our regular product lines.
ACEO: Why the hell do we do that?
AMBA: It gives a chance for poor folks to acquire a taste for our product. When they're more affluent, they "move up" to our branded product. They're paying an extra dollar or two for our packaging as opposed to the store packaging. But they win in prestige.
ACEO: But why are we losing market share now? Are there more poor people?
AMBA: Because of rising gas prices, even the middle and upper-middle income groups are starting to feel a budget pinch. So they cut corners where they can, and one place is buying store brands.
ACEO: So how can we encourage buyers they need the prestige of our branding?
AMBA: We can make it less economically feasible for stores to offer store brands, and instead offer the store chains incentives for cutting generics. In short, raise prices on bulk purchases by chains so that they won't offer store brands and consumers will have no choice to but to buy branded products.
ACEO: Genius! Have an extra million in bonus. We're not paying you enough.