The new national free-range egg brand promised by Noble Foods could be on television by the spring, but producers might have to wait a couple of years for the expected price premium to reach down to them, they were told before Christmas.
Noble Foods chief executive Peter Thornton said that he intended to spend in the region of £1-2m on television advertising in March and April to establish the brand.
“But it’s not something that pays back immediately,” he warned. “Developing a brand can take three years to build up the equity and make some good money,” Mr Thornton explained to members of the Midlands Free Range Discussion Group at Hawkstone Park in Shropshire. Producers had turned out in force to the last meeting of the year to hear Noble Food’s plans for the egg sector under its new CEO.
Building a national brand, he said, would avoid the danger of free-range eggs becoming a commodity and enable a premium price to be achieved, possibly around 15%, as reported last month.
The new brand was “one sure way” to ensure there was an appropriate distribution of value down the supply chain: “When we built the Cathedral City cheese brand we had direct milk suppliers who were paid a good premium above the standard rate.” However, it wouldn’t happen overnight.
“Having done work like this previously, I would expect that over the first one or two years we would hope to break even. What we make on the premium we would put back into advertising for the long-term benefit of the business. You have to re-invest the premium to get the brand established in the first place.”
“I don’t think anyone else in the egg trade has the capability to attempt this,” he went on. “The ambition has to be there to build a national egg brand and I’m pretty confident that over time we can do it.
It was an opportunity that had to be grasped: “We’re always going to have the cut and thrust of pricing negotiations with customers, but if we can take a big part of the egg market like that it can only benefit us all.”
In discussions about launching the brand the response from most retailers has been fantastic, he said.
“Some customers have asked if this was the right time to be introducing a brand at a 15% premium, but my response is that eggs are still fantastic value and we will be working hard to get this message across”.
He pointed out that once the brand became strong enough that retailers would want to stock it despite the price premium.