brands vs private label

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Brands versus Private Labels: Fighting to Win Group 2| Section A Ekta(PGP30134)|Jay (PGP30080)|Udit (PGP30114)|Shahbaz(PGP30379)|Mit (PGP30207)

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Brands versus Private Labels: Fighting to Win

Group 2| Section AEkta(PGP30134)|Jay (PGP30080)|Udit (PGP30114)|Shahbaz(PGP30379)|Mit (PGP30207)

Why do retailers prefer Private Labels ?

Should Brands Manufacture Private Labels ?

Is this the end of the national brand ?

Growing Threat !!!

Recommendations !!!

Why Retailers prefer Private Labels ?

1. Higher Profit Margin

Marketing

Activity

Customer Mind

Set

Market Performance

Shareholder Value

Supply Chain

Efficiency

Reduced cost of delivery

Eliminates middle men

Marketplace Conditions Multiplier

2. Differentiates the Retailer

3. Set their own pricing

Save yourself when

economy fails

Select the optimum price

Nielsen: Price primary driver for purchase

intent

INDIAPrice Conscious

Market + InflationPRIVATE LABELS

PRICE acts as a Point of Difference (POD) to compete versus the established brands

Growing Threat for the National Brands!

1. Improved product quality in Private Labels

Spencers Launched Smart Choice

CookiesQuality+ Low Price

Bharti Walmart’s Great Value tops

floor cleaning segment with 50%

share

High standards

Advent of foreign brands

Quality Private Label

POP

2. Development of Premium Private Label brands

Tesco Finest chocolates sell at a price index of 150 versus

Cadburys

Reliance Mart’s 3 TierEconomy | Standard |

Premium

3. European supermarkets’ success with Private Labels

36%Private label share of total

CPG sales

70Avg price index of private label

vs Brands

4%Increase in the

average number of private label

lines

4. Emergence of new channels & Entry in new categories

Is this the end of National Brands ?

1. Brands positively influence the purchase decision

Marketing Activity

Customer Mind Set

Market Performance

Shareholder Value

2. Brands have an advantage & solid foundation

3. Stronger economy strengthens the Brand Equity

Strength of private label varies with the economic conditions

4. National Brands have value for Retailers

Should Brands manufacture Private Labels ?

Advantages

Utilization of Excess Manufacturing Capacity

Better Market Control

Competitive Advantage

Disadvantages

Cannibalization

Increased mfg. & distribution complexities

Strained manufacturer-retailer relationship

Recommendations

1. Evaluate the private label business

DO A PRIVATE LABEL AUDIT

CALCULATE PROFITABILITY ON FULL COSTS

EXAMINE POSSIBILITY OF CANNIBALIZATION

SHUTDOWN THE EXCESS CAPACITY

DO A PRIVATE LABEL AUDIT

CALCULATE PROFITABILITY ON FULL COSTS

EXAMINE POSSIBILITY OF CANNIBALIZATION

SHUTDOWN THE EXCESS CAPACITY

1. Evaluate the private label business

DO A PRIVATE LABEL AUDIT

CALCULATE PROFITABILITY ON FULL COSTS

EXAMINE POSSIBILITY OF CANNIBALIZATION

SHUTDOWN THE EXCESS CAPACITY

1. Evaluate the private label business

DO A PRIVATE LABEL AUDIT

CALCULATE PROFITABILITY ON FULL COSTS

EXAMINE POSSIBILITY OF CANNIBALIZATION

SHUTDOWN THE EXCESS CAPACITY

1. Evaluate the private label business

2. Invest in strengthening the brand equity

• CONSISTENT INVESTMENT IN PRODUCT IMPROVEMENTS

3. Innovate wisely

THINKING ABOUT BRAND EXTENSION, THINK AGAIN?

4. Use fighting brands sparingly

THE PURPOSE IS TO GIVE THE COST SENSITIVE CUSTOMER A LOW COST ALTERNATIVE

5. Build trade relationships: Know your Customers

Teach your Retailers and subsidize in-store experiments

6. Exploit promotion tactics to capture Shelf-space

7. Take the Private Label competition seriously

Future prospects of Private Label in India

There is a huge opportunity for Private Label manufacturers/retailers because of uncertain economic conditions, high inflation rates, consumer behavior is towards quality and high price sensitivity.