private label

PRIVATE LABEL

INTRODUCTION OF PRIVATE LABEL

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

Available in a wide range of industries.

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

Better Margins

Offer consumer greater value

Bargaining power to the retailer

DISADVANTAGES OF PRIVATE LABEL Conflict with other brands in the

category.

Higher R&D expense

Higher marketing expense

If product fails, will create negative image

Inventory risk

CONSUMER PERCEPTION

People buy more private label.

They don not need the brands.

People has accepted Private Label.

STORY WHEN PRIVATE LABEL CAME INTO PICTURE1)In 19th century ,consumer moved from no name brand to branded product.2)The manufacturers uses the media3) The branded message to consumer was one of the smart shopping4)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.

company

Total sales($ billion)

Private label %

Private label sales($ billion)

Sales($ billion)

company

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

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

Helps to raise the image .

Rated in the top ten brand in many category.

Upgrading the pl products.

PL STRATEGIES Managing the price gap in the pl by varying

the price

Recognize that consumers are quality sensitive then price sensitive.

Highly competitive- same or better quality at…

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

Biggest threat to national brand.

Brand loyalty because of the differentiation, end of the season sale

BETTER PROFIT MARGIN ON PL

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, toss-

ups.

PRIVATE LABEL MATURITY CURVE

HIGH MATURITY STAGE

UK introduction of premium product

high quality and high price

transition pl compete with premium brands.

quality improved product quality, in terms of

India ingredients, packaging etc.

of the nascent stage major focus on price,less focus on quality

product price

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

National brand should.

What This Means

Change mind set and realize that Private Labels arecompeting 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 categoriesAverage 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 P’S OF PL1. Product: quality is equal to national brand.2. Partnership: work in extra mile in terms of

support,marketing,mechandising e.t.c.3. Planogram:ensuring every product leads to

sales and profit, delist the slow movers.4. Packaging:reflect quality and

performance of overall brand & from inside as first impression….,as 70% of purchase decision only at pop.

5. Pricing:provides the high perceived value to customer Without leaving profit.

6. 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) Large national brand manufacturers: that utilize their expertise and excess plant capacity to supply store brands

2) Small, quality manufacturers :who specialize in particular product lines.

3) retailers and wholesalers: that own their own manufacturing facilities.

4) 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