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 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 $150 billion on non-CPG.
7)Private label refer as own label,store
brands,distributed-owned brands
8)Global private label now approach one trillion
dollars.
9)Traditionally, the image of private label was cheap
and nasty substitute because of its packaging, but
now changed……..
10)some of private label were high quality but less
than the manufacturer brand because of
discounting factor.
compan Total Private Private Sales($ compan
y sales($ label % label billion) y
billion) sales($
billion)
1)Wal-Mart 316 40 126 75 [Link]

2)Metro 73 35 26 57 2.P & G

3)Tesco 71 50 36 51 [Link]
& Johnson

4)Kroger 61 24 15 50 [Link]

4)royal 56 48 27 33 [Link].
Ahoid
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,

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
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 Retail $ National Retail $ Price

Brands Gross Margin Brands Gross Margin Difference
betw. Brands
INC (Macy’s) $79-129.00 BCBG $158-178 37%
Dresses GM 60-69% Dresses GM 48-56%

Alfani (Macy’s) $34.50-42.0 Nautica $45-55 30-39%

Men’s Polo GM 58-68% Men’s Polo GM 50-54%

Faded Glory $10.77-14.42 Levi’s Denim $19.68 37%

(Wal-Mart) GM 38-54% For Wal-Mart GM 45-48%
Denim

Sonoma $ 16-28.00 Dickie’s, $16 – 40.00 20 –25%

(Kohl's) GM 60-62% Shady’s & etc GM 40 – 48%
Menswear

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 PLquality 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) 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