Threat of private labels to national
brands
vsVS
What are private labels?
Why do retailers prefer private-labels?
1. Higher profit margin
Reduce costs of delivery
Eliminates the middle
man
Increases supply chain efficiencies
2. Makes the retailer “different”
3. Set your own pricing
4. Saveguard against economic downturns
Trent
Reliance Retail
Pantaloons
Nilgiris
Piramyd
Food world
% of Private Label sales
0 22.5 45 67.5 90
Major private label retailers in India
The growing threat?
The reasons….
1. Improved product quality in private labels
2. Development of premium private labels
3. The European success
4. Entry in newer categories
Then,is this the end of national
brands?
People love brands!
Brands have a head start!
Stronger economy=Stronger brand!
Brands are crowd pullers for retailers!
Should brands then manufacture for private-
labels?
The pros
Use that excess
manufacturing capacity!
The pros
Better market control
The pros
Competitive advantage!
The cons
Strained manufacturer-retailer relations
The cons
Increased manufacturing and distribution
complexities
The cons
Can hurt your own brand!
The best advice?
“If you don’t, don’t start!”
If you already
do,well….
Evaluate private-label business:
• Do a private-label audit
• Evaluate business on full costs rather than
incremental costs
• Examine the effect on your brand
• Close that excess capacity
How to defend against private-labels?
Make your brand strong: Invest in brand equity!
Innovate: With caution
Using fighting brands
Build relationships
Know your customer Teach your retailer
Manage each category: Know your
product
Exploit sales-promotion tactic: Capture that retail space!
Lastly.. Do not underestimate the
private-label threat!
Reference
HBR:Brands Versus Private Labels: Fighting to Win Version inJan-Feb 1996
Marketing Management: A South Asian Perspective; Philip Kotler,Kevin Keller,Abraham Koshy, Mithileshwar Jha
Under the guidance of : Prof Sameer Mathur,IIM
Lucknow