If the going gets tough, how will the brands get going?

Votes against austerity packages in France and Greece last week renewed speculation that the euro may soon collapse. Moreover, the bookies tend to agree. Ladbrokes suspended accepting any bets last week on Greece leaving the euro and have reported "plenty of support" at 33/1 on the euro being scrapped this year. But what might this mean for brands in Britain and their consumers? At the start of the recession, the strength of the euro against the pound made the UK a very attractive destination for European shoppers. A reversal this year with a strong pound and a weak euro would mean that British exporters would be less competitive in Europe, which in turn wouldn’t bode well for the growth outlook of the UK economy. This could mean a deepening recession and with UK banks having a high level of exposure to Europe, the consequences of another banking crisis could be dire indeed. If that nightmare scenario were to come to fruition, how might brands adjust their activities to deal with it? The true answer, of course, is this is uncharted territory so nobody truly knows. However, many should already be considering how they might react. Everything would depend, of course, on the depth and severity of any new downturn. However, we can expect there to be an accentuation of the squeezed middle. Household incomes will come under even more severe pressure, only this time, there will be no slack in salaries to provide any fat on the family bones. Housing repossessions have steadied out and are now significantly lower than in 2007 and politically pressure will be applied to keep as many people in their homes as is possible. But, 13 million people already live below the poverty line in the UK and, according to charity The Trussell Trust, food banks fed 128,687 people in the UK last year, 100% more than the previous year. If the cost of food and fuel stays high whilst incomes remain static or fall and unemployment increases, they could be in even more demand. This is both a challenge and an opportunity for brands. Politically, if we reach a stage where significantly more people are struggling to feed themselves, there could be downward pressure applied to brands and retailers, which have made major profits in the good times, to revise down their ambitions in order to help the population through. This would be in direct conflict with their commitment to shareholders to make profit and might be unpalatable for some. There will likely be an increase in demand for ‘value’ products in categories for every day usage; household cleaning products etc, and more so than at present across all other categories. Only the most established brands in the most established ranges are likely to be largely unaffected. Pressure could be applied on retailers and the brands for genuine money saving offers; promotional offers which provide genuine savings rather than ones that require you to spend more. The population’s drift away from loyalty cards is likely to continue as they seek cash savings rather than rewards. Aside from at the highest end, a deep downturn could spell the end of our flirtation with higher priced organic produce, at least for a while, though there is likely to be continue demand for reasonably priced fresh produce. Ironically, elsewhere, there could be positive news for charities, which have suffered from dwindling donations. Economy clothes retailers like Primark and Matalan may find that they are facing stiff competition from charity shops as a new generation of ethical shoppers seek higher quality products, albeit second hand, from which others similarly benefit. This is a dark and unwelcome prospect, but with the economic situation in such a state of flux, it should be one which brands and retailers consider now rather than waiting to arrive. We talk often about the need for brands to become more personal with their consumers. Those that appreciate the importance of this may find a way of incorporating their brand into targeted CSR activity, for example sponsoring or supplying foodbanks nationwide or clothes banks (in the way M&S are doing for Oxfam at present), which would not only create positive brand exposure for themselves and their products but could redefine their brand for a generation.