Is Private Label Still Relevant?

“We’re talking about the development of private-label products and the new challenges that this will present for brands and manufacturers across the globe, as retailers develop and market their own products rather than rely on multinational name brands to meet changing consumer needs.” National-brand manufacturers cannot prevent retailers from displaying copycat private-label products alongside their brands with compare and save” signs heralding the price gaps. Even if many of Amazon’s brands flame out, its private-label approach has the potential to be disruptive because of how much data it can easily analyze about competitor brands that sell on its site — which products and price points are selling, and why — after mining customer reviews. In addition, national-brand manufacturers should bring more legal actions against copycat private labelers who use the same packaging shapes and colors as the national brands, and they should tighten arrangements with contract suppliers to prevent them from using new proprietary technologies in the manufacture of private-label products.

They also may omit their warehousing and distribution costs for private-label products when comparing private-label retail margins with those of national brands that manufacturers deliver direct to stores and stock on the shelves. As Amazon looks to grow in grocery, Nielsen has also estimated that nearly 1 in every 5 items sold in U.S. supermarkets in 2016 was from a private-label brand, with store brands accounting for more than $150 billion in retail sales by themselves last year. A separate study from retail and brands analytics firm 1010data found that Amazon’s private-label products merely accounted for about 2 percent of total units sold on , excluding the retailer’s third-party marketplace and subscription services, in the first half of 2017.

We develop and supply products for sale under retailers’ own brands, these are often referred to as private labels, store brands, own labels, distributor brands and discount brands. In the grocery segment, retailers with private-label products are attracting many customers who require better-quality products at affordable prices. Most supermarket private brand or store brand products are provided by companies that sell to multiple supermarkets, changing only the labels.

Private label products are on average about 30 percent lower in price than national brands, according to Packaging Digest. American Italian Pasta Company (acquired by Ralcorp Holdings last year), whose brands include Heartland and Mueller’s, manufactures private-label products for most major US grocers and club stores as a major source of growth in the dry pasta category. Sometimes the manufacturer produces solely for the PL market, distributing the same product with unique labels for different retailers; sometimes the manufacturer has a well-known brand of its own but sells a portion of its production under private label.

Private-label products, often referred to as “store brands,” are made by manufacturers for stores but carry the store’s rather than the producer’s label. When consumers consider quality, many view private-label products as good as multinational brands and getting better. Categories differ widely in private-label penetration, the price-quality gap between private labels and national brands, and the relative profitability and potential cannibalization cost of any private label or value brand.

National-brand manufacturers must monitor the price gap both to the distributor and to the end consumer between each national brand and the other brands, including private labels, in every market. Many retailers emphasize private-label products because they often deliver a higher percentage of profit margins than national brands. We recommend that national-brand manufacturers take the following nine actions—whether they currently make private-label products or not—to stem any further share gains by private labels.

 

In Europe and Canada, however, where greater trade concentration results in higher retail prices for both national brands and private-label alternatives, the company found that its private-label business was mostly profitable. And most retailers employ different buyers for national brands and private labels, so manufacturers must maintain two sales relationships with each retailer. The more quality private-label products on the market, the more readily will consumers choose a private label over a higher-priced name brand.

In the depth of the 1981-1982 recession, it peaked at 17% of sales; in 1994, when private labels received great media attention, it was more than two percentage points lower at 14.8%. Second, manufacturers of brand-name products can temper the challenge posed by private-label goods. Considerable work has been done on well-defined areas of private-label research such as private-label brand strategy, market performance of private-label products, competition with national brands, market structure, and buyer behavior. Private-label products or services , also known as “phantom brands”, are typically those manufactured or provided by one company for offer under another company’s brand Private-label goods and services are available in a wide range of industries from food to cosmetics to web hosting They are often positioned as lower-cost alternatives to regional, national or international brands, although recently some private label brands have been positioned as “premium” brands to compete with existing “name” brands.

 

In comparable markets, like the UK, the proportion of private label sales is almost at parity with national branded products and across Europe, countries like Switzerland and Spain have already reached more than 50% Today’s supermarket private label products, offer quality on par with national branded alternatives, with some, so closely resembling the market leader, one would be forgiven for grabbing the wrong box. In monitoring reviews on Amazon’s private-label products online, Smith said he hasn’t seen too many negative reviews, a sign the quality isn’t terribly unsatisfactory.

In August, Amazon announced that it would make Whole Foods’ private labels, including its 365 Everyday Value and eponymous Whole Foods Market labels, available for purchase on By late September, many Whole Foods private-label products were offered to those shoppers able to purchase from the AmazonFresh service or through Amazon Prime. Private label has reached a new stage in evolution as consumers expect these products to be on a par with, or even surpass, the quality of national brands,”​ Mintel analyst Katya Witham said. This has greatly reduced the difference in quality with name brands hence improving the popularity of private label products as shown by the increasing market share especially across Europe.

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