Soviet Bread is a Stale Brand

The communists are in and the brands are out. Behind the iron curtain, brands were considered un-marxist and unnecessary, products were stripped of their labels entirely and items such as bread was simply labelled ‘bread’.

The logic was simple, remove the tool of capitalist competition and everybody has access to the same standardised goods. Easy peasy lemon squeasy.

The only issue with lumping all the bread together and commoditising under the state, was that there was no incentive for anyone to make good bread. Customers had no idea who made it and had no threat of sanction if they were unhappy with the product, and no prospect of rewarding producers through repeat custom.

So the bakers stopped trying,

The customers had no say,

And so, the bread was rubbish.

The Economics Behind Bad Bread

This isn’t just a story about communism, It’s a story about information asymmetry, a term coined by George Akerlof in his 1970 paper, The Market for Lemons. The idea being that when buyers have less information about a product’s quality than the sellers, it creates a power imbalance between parties that lead to outcomes that aren’t exactly efficient or fair.

When customers are unable to tell the difference between good and bad products, they’ll only pay an average price. If your consumers are only paying an average, there’s no point making good bread.

So quality deteriorates each time, and eventually the market collapses.

Bring Back the Branding

Akerlof highlighted in his paper the need for things like warranties and certifications to mitigate this issue and branding is crucial in countering information asymmetry because it acts as a symbol of quality and reliability. A brand helps consumers make informed choices and creates a system of accountability: 

• Good brands get rewarded with loyalty and premium pricing

• Bad brands are punished with customer churn

• Everyone in the market has an incentive to improve

You wouldn’t hesitate to pay more for a Siemens fridge than for a nameless one from the back of some warehouse, even if they look similar. The extra cost isn’t just for the logo, it’s for the trust, reliability, and the track record behind it.