Private Label –1

From Private Labels to Store Brands

Chapter

4

• Brand Management System

• On Building A Brand

• Managing Across Brands

Private Label –2

Agenda

• Extent of problem.

• How to combat private label threats.

Private Label –3

Strategies for Combating Private Labels

Quality

1/Price

Provide More for the MoneyInnovate

NATIONAL BRAND

PRIVATE LABEL

Reduce Price Gap

Do Nothing

Make Premium Private Label

Introduce Value Flanker

Source: Stephen Hoch

Private Label –4

Strategies for Combating Private Labels

• Do nothing– Wait for economy to improve– Retailers are sufficiently diffuse, their

power is low– In small categories with little potential

return, retailers not likely to invest in private label

– However, share loss may occur

Private Label –5

Strategies for Combating Private Labels

• Differentiate– More for the money– New and improved– Advertise– Eliminate weak brands and focus on

strong

• Better retail support

Private Label –6

Strategies for Combating Private Labels

• Reduce price gap– Lower costs– It is often not profitable for retailer to close price gap

(mfr brand loses high margin, store brand loses volume)

• Me too strategy– Fighting brands (Kodak Funtime Film)– Protects brand (+)– Cannibalization (-); Revenues do not cover product

introduction costs (e.g., advertising and slotting fees)

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Strategies for Combating Private Labels

• Make a private label – Can test formulations as a P.L.– Can increase price on premium brand w/P.L. entry– Can formulate to target competitor, not self– Can obtain cooperation on shelf positions (P.L. to

right hand side of competitor - as 90% right handed)– Key threat: retailer owns customer, threatens to drop

you without price concessions

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Summary

• Solutions to the private label problem– Do nothing– Better retail support– Differentiate– Reduce price gap– Fighter brands– Can’t beat ‘em, join ‘em (source the private

label)

Private Label –9

Store brandsWhat are store brands?

Store brands are products that stores put their names or brands on.

- Better selection, value and saving (generic brands)

- Items: fresh, frozen food, canned and dry foods, snacks, beauty care, drugs, cosmetics, etc.

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Store BrandsContinues….

- Store brands as good as or better than national brands

- Shoppers no longer can distinguish between national and private label brands---- they don’t care to know the difference.

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Where do store brands come from?

• Store brands become an important ally in how they provide their families with high quality and value.

• They are major retailers and wholesalers that own their own manufacturing facilities and provide store brand products for themselves

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Continue……

• And they are also regional brand manufacturers that produce private label products for specific markets.

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Store brands meet all standards and requirements

• Store brand products are tested and analyzed for quality and safety by independent companies before they reach the shelves just like national brands.

• Packaging and label the product to meet the store’s specification. (Unique identity and packaging)

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Continues….

• Store brands are more innovative. The development of multiple tiers of products targeted to different consumer segments. (Only this kind of products sold in their favorite store.)

• Store brands represent choice and opportunity to purchase relatively to savings

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Continues…….

• Stores have become more actively involved in developing more products to make stronger impression with their customers.

• Overall, store brands are not cheaper they are just LESS expensive to market than national brands are.

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Store brands: The smarter choice

• Food and non-food grocery products: Estimated $32 billion in annual savings for the store brands (U.S.A markets)

• Marketing tax: (tax on advertising and promotional costs (media) in national brand makers lead to higher prices).

Private Label –17

Continues….

• Consumers’ new habits and familiarity are now built to reach loyalty of store brands.

• Overall, with top quality, unique items and solid savings, store brands add up to a smarter choice for consumers.