SHOP TALK ZEENAT MOORAD

At fast-moving consumer goods companies, recipes and formulas are cloaked in secrecy and nondisclosures. Amid fierce competition, stealth is the order of the day — every day. Coca-Cola regards its syrup formula as the most closely held trade secret in 129 years. Asa Candler, an early president of Coca-Cola who bought the formula in 1887 from the inventor, Dr John S Pemberton, insisted that the recipe never be written down. He feared rivals would copy it.

The story goes that labels were removed from containers of ingredients and staff had to rely on their senses to identify them.

In 1919, when the company needed a loan, its then owner, Ernest Woodruff, had to commit the recipe to paper as collateral.

It was placed in a vault in the Guaranty Bank in New York until the loan was repaid in 1925, after which Woodruff moved it to the Trust Company Bank in Atlanta, which later became SunTrust.

In 2011, after 86 years, the recipe was moved by Coca-Cola to a custom-built, metal-encased vault with motion sensors at The World of CocaCola Museum in Atlanta.

Mythology and intrigue aside, brand equity is inextricably linked to customer loyalty and, by extension, a company’s bottom line.

It’s usually this stickiness that patches companies up in tough cycles.

For SA’s big food producers, which have over the years each amassed a pantry full of heritage brands, there is one recipe they now all seem to share.

Weak consumer demand + drought + inflation from a volatile rand = rising input prices and costs.

Both Pioneer Foods and Tiger Brands sounded an ominous gong last week, saying the balance of the year would remain challenging.

They’re walking a tightrope of maintaining margins and keeping prices affordable for cash-strapped consumers — while trying to maintain volume momentum.

The price of maize, a key raw commodity in the production of staple foods, is over 60% higher than it was a year ago. The country is expected to reap the smallest maize harvest in nearly a decade because of the drought, and we may even have a milk shortage by the end of winter.

Apart from watching their costs across the value chain, both Pioneer and Tiger (and smaller competitors like Rhodes) are relying on the quality and strength of their brands to steer them through the current storm.

It’s a clever strategy because in SA, there is an increasing tendency to rely on the reputational strength and goodwill of a branded product.

Private label or no-name brands, as they’re known in SA, tend to inspire less trust among frugal consumers, who often perceive them as being of inferior quality to national brands.

This is the opposite to, say, the UK, where store- or own-brand groceries already account for more than half of the region’s grocery sales.

They’re ahead of us on two fronts: cost and variety. Their private-label offerings are often far cheaper than established national brands; and we just don’t have as many no-frill options as they do.

Retailers love their house brands because they generate higher average price margins as they require lower research and development costs and reduced packaging costs.

But now more than ever, there is a fairly limited local supplier base able and willing to produce private-label products. They would far rather promote their own brands, leaving retailers to import sometimes.

Speaking of top-secret recipes, Whispers maker Cadbury is a private-label producer for various local companies. Hint: Chuckles by any other name . . . In SA, there is a tendency to rely on the reputation of a branded product