Trends in Retail Competition: Private Labels, Brands and

Competition Policy

A Symposium on the Role of Private Labels in Competition between Retailers and between Suppliers

The Institute of European and Comparative Law in conjunction with the Centre for Competition Law and Policy

Oxford, 9 June 2005Sponsored by Bristows CCLP (S) 05/05

Private Labels and Branded Goods:

An Economic and Competitive Comparison

by

Professor Paul DobsonLoughborough University

“Trends in Retail Competition: Private Labels, Brands and Competition Policy” Symposium,

IECL, Oxford

9 June 2005

Private Labels and Branded Goods – Oxford 9 June 2005

I. Brands v. Private Labels

“Horrors” and “Heroes” The different sides to brands and private labels

Consumers’ “Real Champions” Desirable brands and private labels

Competition Concerns Power to prevent, restrict and distort

competition

Private Labels and Branded Goods – Oxford 9 June 2005

II. Brand “Horrors” v. “Heroes” Brand “Horrors”

The “Blob” The “Giant Octopus” Consumers’ The “Virus” Nightmares

Brand “Heroes” The “Protector” The “Pioneer” Consumers’ The “Equalizer” Sweet

Dreams

}

}

Private Labels and Branded Goods – Oxford 9 June 2005

III. Brand “Horrors” The “Blob”

Dominates a category, smothering all rivals Stops others entering and innovating

The “Giant Octopus” Tentacles everywhere to use leveraging

power to grow while restricting or killing small brands

The “Virus” Infects and takes over all shelf space in a

category by proliferating spin-off products

Private Labels and Branded Goods – Oxford 9 June 2005

IV. Brand “Heroes” The “Protector”

Provides value for money through its scale Provides consistency and quality assurance

The “Pioneer” Creates new markets through new products First to innovate when consumer tastes change

The “Equalizer” Enters markets to challenge dominant positions Offers standardisation to aid price/value

comparisons

Private Labels and Branded Goods – Oxford 9 June 2005

V. Private Label “Horrors” v. “Heroes”

Private Label “Horrors” The “Blood Sucker” The “Flesh Eater” Brands’

Nightmares The “Body Snatcher”

Private Label “Heroes” The “Underdog” The “Adventurer” Consumers’ The “Revolutionary” Sweet Dreams

}

}

Private Labels and Branded Goods – Oxford 9 June 2005

VI. Private Label “Horrors” The “Blood Sucker”

Feeds off brands’ success in creating markets Free-rides on brand marketing, formulation,

packaging and/or reputation

The “Flesh Eater” Kills brands slowly by poor shelf positioning,

artificial price differentials, value destroying promotions, deliberate stock-outs

The “Body Snatcher” Copies then replaces brands Copycat/clone own-labels and brand de-listing

Private Labels and Branded Goods – Oxford 9 June 2005

VII. Private Label “Heroes” The “Underdog”

David takes on Goliath Real choice where previously there was

little

The “Adventurer” Boldly going where no one has gone before Innovative products and new categories

The “Revolutionary” Provides value products for the masses Budget lines and generics

Private Labels and Branded Goods – Oxford 9 June 2005

VIII. Consumers’ “Real Champions”

Brands offering: Guaranteed quality and reliability Price/value comparability Distinct variants to suit different tastes Regular improvement and innovation

Private Labels offering: Genuine value (avoiding “marketing surcharge”) Genuine choice (offering alternatives) Genuine variety (filling gaps) Genuine innovation (catering for latent demand)

Private Labels and Branded Goods – Oxford 9 June 2005

IX: Retailer Control Over Suppliers

Retailers as “Suppliers”

Control over

Suppliers

Retailers as “Competitor

s”

Retailers as “Customers

”

Private Labels and Branded Goods – Oxford 9 June 2005

X. Consumer Concerns Retailer sovereignty that permits:

Deliberate damage to brand value Deliberate restrictions on choice Deliberate cutting corners on PL quality Deliberate lack of PL price comparability Deliberate manipulation of prices and

distortion to category price architectures