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