Branding a Commodity for Increased Profits
As collectives like Painted Hills Natural Beef have learned, a strong brand can help insulate you from fluctuations in prices and command higher prices by imbuing the product with premium qualities.
Twenty years ago, seven ranching families in Wheeler County, home to the picturesque Painted Hills of Oregon, came together behind the idea that that beef could be better. They were competing against big, industrialized farming in an industry known for thin, often nonexistent margins—one in which the lowest-priced product often wins.
“We were selling calves—500-pound calves—for 80 cents [a pound], and you couldn’t make a living at that,” Painted Hills Natural Beef Chairman Mehrten Homer told OPB recently. “We couldn’t compete just doing a generic [beef]. You’d be competing with the world’s biggest beef companies, and they weren’t doing natural beef at that time.”
The ranchers formed the first board of directors of Painted Hills Natural Beef to market brand-name beef pasture-raised without antibiotics or added hormones—“beef that’s as striking as the natural wonders it’s named after.” Today, the beef is sold at a premium price in supermarkets and upscale restaurants across the Northwest. Those stores and restaurants, in turn, charge a premium to customers who are willing to pay for quality beef with the Painted Hills name. At Market of Choice, for example, shoppers can find Painted Hills 93% lean ground beef in the butcher section for $6.99 a pound, compared to $5.49 a pound for Kroger brand 93% lean ground beef at a nearby Fred Meyer. Discount stores often sell beef for as low as $1.98 a pound.¹
It’s a tactic that has proven advantageous for Oregon’s wine industry, California’s avocado growers and many others. In a commodity market, a brand can help insulate you from fluctuations in prices by positioning the product as premium—for example, a higher-quality product or one that’s produced or processed in a more sustainable way (e.g., Copper River salmon) or in a specific geography (Burgundy wine). The brand serves as a flag, symbolizing those unique attributes, and a vessel in which the brand’s equity is stored.
And people are willing to pay more for a strong brand. Women consistently value branded products higher than men, according to research by BDRC Continental. Women give toothpaste an average brand (profit) margin of 26% and washing powder a brand margin of 12%, for example, compared to 20% and 5% percent, respectively, for men.
“When commodity buyers pay a premium for value, it can’t be skin deep. The value has to be real and tangible, because they will constantly measure and reevaluate it.”
A few key considerations can help you establish a strong brand for a commodity:
- Identify the premium aspects of the commodity.
Branding a commodity requires understanding and communicating the unique attributes of that commodity, whether it be superior quality (e.g., the deep color, silken texture and extra fat of Copper River salmon), how the product is reared or harvested (e.g., sustainable practices by Copper River’s community of independent fishing families), or another aspect, and how that differs from the generic commodity. With Painted Hills beef, for example, it’s the all-natural farming techniques and flavor profile, while with Burgundy wine, it’s the provenance of the wine itself; to the lesser-informed, understanding that a wine is from Burgundy connotes an inherent quality, even if that consumer has no familiarity with the vineyard or maker. And with Kobe beef, it’s the highly marbled, exceedingly tender beef valued for its flavor and fattiness—and the word-of-mouth-inciting beer-fed, sake-massaged, classical music-listening aspects that serve as a marketing vehicle unto themselves. “When commodity buyers pay a premium for value, it can’t be skin deep,” Sam I. Hill, Jack McGrath and Sandeep Dayal wrote in Branding Sand. “The value has to be real and tangible, because they will constantly measure and reevaluate it.”
- Create a market for the branded product.
This requires education—in the case of Painted Hills, education about the non-natural, hormone-laden practices of traditional commodity beef. By shining a light on the darkness of the commodity, Painted Hills is able to offer an alternative to these practices, one that consumers are willing to pay a premium for. “When we first started, people didn’t know about natural beef—so we had to do promotions in the stores to sell our beef and get a following,” Homer told the Angus Beef Bulletin. “We were actually building a natural beef program in stores that didn’t have natural.
- Communicate your brand consistently.
Willamette Valley winemakers, for example, communicate the high quality of the region’s Pinot Noir wines through the Willamette Valley AVA. It’s more than high quality: The climate and soil of the region are well-suited to growing a delicate, difficult-to-grow grape—which happens to be that same grape that is grown and makes up (red) Burgundy wine. In that sense, the Willamette Valley is borrowing on the brand equity that Burgundy has imbued in the Pinot grape.
For Homer and his wife, Glenda, whose ranch is part of the Painted Hills collective, the brand has transformed a ranch that was losing money consistently into a thriving family operation that employs their sons and daughters-in-law in addition to local workers.
“It’s brought more prosperity to [our] ranchers,” Glenda Homer said. “We try to give some of that prosperity to the ranchers that we buy product from.”
At Homer’s ranch, weekly production has gone from 10 heads of cattle at its inception to 600, and live, naturally raised cattle now brings 10 cents a pound more than generic beef—growth and a price premium attributable solely to the Painted Hills Natural Beef® brand, and the marketing of that brand. And that’s a strong testament to the power of branding a commodity.