Private Label

PRIVATE LABEL

INTRODUCTION OF PRIVATE LABEL 

Manufactured or provided by one company for offer under another company's brand.

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Available in a wide range of industries.

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Positioned as lower cost alternatives to regional, national or international brands.

DEFINITION OF PRIVATE LABEL 

Brand owned not by a manufacturer or producer but by a retailer or supplier who gets its goods made by a contract manufacturer under its own label.

TYPES OF PRIVATE LABEL Store brands - The retailer's name is very evident on the packaging.  Store sub-brands - Products where the retailer's name is low-key on the packaging.  Umbrella branding - A generic brand, independent from the name of the retailer. 

ADVANTAGES OF PRIVATE LABEL 

Lower Prices

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Better Margins

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Offer consumer greater value

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Bargaining power to the retailer

DISADVANTAGES OF PRIVATE LABEL

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Conflict with other brands in the category.

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Higher R&D expense

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Higher marketing expense

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If product fails, will create negative image

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Inventory risk

CONSUMER PERCEPTION 

People buy more private label.

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They don not need the brands.

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People has accepted Private Label.

STORY WHEN PRIVATE LABEL CAME INTO PICTURE 1)In 19th century ,consumer moved from no name brand to branded product. 2)The manufacturers uses the media 3) The branded message to consumer was one of the smart shopping 4)In 20th century, retailer were small ,leads the brand manufacturer to establish their power over distribution channels.

CONTI……… 5)In 1970’s retailer started to develop their national chains like metro, expanded internationally & consolidated to global player. 6)The retail started to sell non-CPG product,e.g walmart sales were $150 billion on non-CPG. 7)Private label refer as own label,store brands,distributed-owned brands 8)Global private label now approach one trillion dollars. 9)Traditionally, the image of private label was cheap and nasty substitute because of its packaging, but now changed…….. 10)some of private label were high quality but less than the manufacturer brand because of discounting factor.

compan Total y sales($ billion)

Private label %

Private label sales($ billion)

Sales($ billion)

compan y

1)Wal-Mart 316

40

126

75

1.nestle

2)Metro

73

35

26

57

2.P & G

3)Tesco

71

50

36

51

3.Johnson & Johnson

4)Kroger

61

24

15

50

4.Unilever

4)royal Ahoid

56

48

27

33

5.Pepsico.

IS PL ARE BRANDS! 1)Any product is not brand have limited market appeal. 2)Because of more investing in pl was successful and they position the pl in their own rights. 3)Pl share increases from 33 % to 50 %in dozen years, increase in emotion and imagery then a functional logic. 4) Gives more importance to aware the customer. 5)Two types of store brands: i)premium lite:”better and cheaper "sold at discount. ii)premium price: high in price, superior in quality. but cheaper then…….

BENEFIT OF PREMIUM LITE PRODUCT 

Margin is high

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Not much spending on ads….as manufacture brand do…..

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Helps to raise the image .

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Rated in the top ten brand in many category.

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Upgrading the pl products.

PL STRATEGIES 

Managing the price gap in the pl by varying the price

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Recognize that consumers are quality sensitive then price sensitive.

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Highly competitive- same or better quality at…

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Higher gross margin(i.e. 58 %- 68%)

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Biggest threat to national brand.

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Brand loyalty because of the differentiation,

BETTER PROFIT MARGIN ON PL 

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important reason for carrying pl by retailer. Generate high margin because: i)supplier have no market power. ii)product differentiation is absent. iii)sell to professional retailer buyers who are well informed about the quality and availability. Gross margin on pl is 25-30%,high in health and cosmetic category,then…….. Retailer put more emphasis on pl. Customer in particular category divide into 4 groups… brand buyers,pl buyers, random buyers, tossups.

PRIVATE LABEL MATURITY CURVE HIGH MATURITY STAGE

UK

introduction of premium

product high quality and high price transition

pl compete with premium

brands. quality terms of

improved product quality, in India

ingredients,

packaging etc. of the quality product

nascent stage price

major focus on price,less focus on

WHY THE GROWTH? Consolidation of retailers Brands sell to same retailers and become a commodity Retailers need differentiation and better margin Declining retail prices (women’s apparel prices dropped 2.4% 2007 vs. ‘06) Globalization of Production

NATIONAL BRAND COUNTER STRATEGIES Develop unique products and stay ahead as a trend leader  Create own stores  Develop a compelling marketing strategy  Increase brand loyalty  Combine effort by offering exclusive lines. I.e, Simply Vera, American Living, Liz & Co  Create one shot exclusive deliveries and SKUS  Evaluate sourcing strategy and production cost  Maintain net price (minimal promotions & discounts)  Improve forecasting and turn around time 

What Th is M eans National brand should.  Change mind set and realize that Private Labels are competing brands  Innovate and stay as market leaders to beat PL  Stay focused on target audience  Increase and market brand imagery to gain and maintain customer loyalty  Partner with retailers to produce exclusive brands, SKUS, one-time offers or lines  Price competitively and streamline expenses

FUTURE OF PRIVATE LABELS Becoming national premium lifestyle brands: INC, Alfani, Arizona  Branching out to create specialty chain business: George apparel stores, Wal-Mart, UK  Increasing depth of multi dimensional merchandising product mix (Tony Hawk mens, boys, footwear and etc) 

APPENDIX 1 RETAIL PRICE COMPARISON

Private Label Brands

Retail $ Gross Margin

National Brands

Retail $ Gross Margin

Price Difference betw. Brands

INC (Macy’s) Dresses

$79-129.00 GM 60-69%

BCBG Dresses

$158-178 GM 48-56%

37%

Alfani (Macy’s) Men’s Polo

$34.50-42.0 GM 58-68%

Nautica Men’s Polo

$45-55 GM 50-54%

30-39%

Faded Glory (Wal-Mart) Denim

$10.77-14.42 GM 38-54%

Levi’s Denim For Wal-Mart

$19.68 GM 45-48%

37%

Sonoma (Kohl's) Menswear

$ 16-28.00 GM 60-62%

Dickie’s, Shady’s & etc

$16 – 40.00 GM 40 – 48%

20 –25%

Average price gap 37% based on quality equivalent categories Average price gap 21% based on national brand’s quality is perceived to be less than private label brands.

SOME INDIAN PL Jade Blue  Mochi Ka Juta  Food Bazaar  Pantaloon  Westside  Naturals  Reliance fresh  Patidar  Shree ji  Induben-Khakhrawala 

10 Product: P’S OF PL quality is equal to national brand. Partnership: work in extra mile in terms of support,marketing,mechandising e.t.c. Planogram:ensuring every product leads to sales and profit, delist the slow movers.

Packaging:reflect quality and performance of overall brand & from inside as first impression….,as 70% of purchase decision only at pop. Pricing:provides the high perceived value to customer Without leaving profit. Position:position mark the one that you want to compete directly against …….

7. push: let the branded player spend money to develop category awareness, once customer in store, retailer have major impact. 8. personnel: 9. promotion: by display and through features to gain customer attention. 10. pride: take pride in your brand, treat it and market it with the respect it deserves.

WHAT PRODUCTS ARE SOLD AS STORE BRANDS? Major supermarkets, drug chains and mass merchandisers today offer:

These include full lines of fresh, frozen and refrigerated food.  canned and dry foods  snacks, ethnic specialties  pet foods  health and beauty care  over-the-counter drugs  cosmetics, household and laundry products, lawn and garden chemicals, paints, hardware, auto aftercare, stationery, and housewares. E.t.c. 

WHO MAKES STORE BRANDS? 1)

2)

3)

4)

Large national brand manufacturers: that utilize their expertise and excess plant capacity to supply store brands Small, quality manufacturers :who specialize in particular product lines. retailers and wholesalers: that own their own manufacturing facilities. Regional brand manufacturers that produce private label products for specific markets

STORE BRANDS IN INDIA: 1)As retail is still under unorganized structure. 2) it contributes a turnover of Rs.700 Cr in the organized structure. 3) India is expected to achieve a sizeable volume in the coming 3-5 years. 4) store brands include mainly food and apparel industry.     

RETAIL PLAYERS HAVING STORE BRANDS IN INDIA ARE FOOD AND GROCERY

FASHION

OTHERS

Spencer's Daily

Shoppers' Stop

Vivek's

Adani- Rajiv's

Westside

Planet M

Subhiksha

Lifestyle

Music World

Nilgris

Piramyd

Crossword

Nirma-Radhey

Ebony

Gautier

Globus

Lifespring