brands vs private label a6
TRANSCRIPT
Brand vs. Private Labels:
Fighting to Win
WALMART LABEL- Great value
What's the biggest fast moving consumer goods (FMCG) brand in America?
Private labels are brands that are not owned by a manufacturer or producer but by a retailer or supplier who gets its goods made by a contract manufacturer under its own label
PRIVATE LABEL
These brands are a win-win solution for retailers and customers in the current retail market structure
PRIVATE LABEL
NATIONAL BRAND PRIVATE BRANDV/S
Differential Advantage
Selling & Promotional Expenses
Traffic Flow
Store Image
Restrictions
Store Loyalty
National PrivateIMPACT ON STORES
Designed, produced, and marketed by a vendor and sold by many retailers
Developed by retailer and only sold in retailer’s outlets
• Currently estimated at Rs 13 billion & constitute around 10-12% of the organized retail product market in India
• Share in the modern retail in India is about 7%, but it is as high as 40% in European countries, and as low as less than 1% in China
• The growth of private labels is likely to continue in the current financial environment as "cash-strapped consumers” perception of the products as a 'cheaper option'
PRIVATE LABEL MARKET
• Higher margins
• Cheaper price
• Better bargaining power for the retailers
PRIVATE LABEL – GROWTH DRIVERS
EVOLUTION OF PRIVATE LABELS
‘60s and ‘70s – cheaper & generic products
1970’s - form of black and white labelled products
Major improvement in packaging – 1st step to Success
Initial focus on low end price point
Multiple price points including a premium line
Popularity of private label - additional challenge to name brand
MAJOR PLAYERS IN INDIADEGREE OF PRIVATE LABEL
PENETRATION
90%
30%22%38%
80%
75%
PRIVATE LABEL THREAT
• Improved Quality of Private Label Product
• Premium private label brands
• Emergence of new channels
• Creation of new categories
PRIVATE LABEL THREAT
PRIVATE LABEL THREAT
• Purchase process favors brand-name products – lack of time etc.
• TATA Tea over a private label tea
• Brand-name goods have a solid foundation on which to build current advantage
• E.g.. - Sony DVD players over Croma DVD players (perception of quality)
BRAND STRENGTH
• Brand Strength parallels the strength of the economy
• National brands have value for retailers• E.g.. Retailer cannot afford absence of
Maggi noodles (before it was banned)
• Excessive emphasis on private labels dilutes their strength
BRAND STRENGTH
• Conduct a private label audit
• Calculate private-label profitability on full-cost and marginal cost basis
• Examine the impact of private labels on market shares of your national brands
• Close excess capacity
EVALUATING PRIVATE LABEL
• Consumers today believe that store brands and national brands are essentially made of the same ingredients
• 80% believe the statement “most store brands are manufactured by the national brands”
HOW PRIVATE LABELS ARE KILLING IT!!
HOW PRIVATE LABELS ARE KILLING IT!!
• Invest in brand equities
• Innovate wisely
• Too many line extensions confuse customers
• Use fighting brands conservatively
• Build trade relationships
WINNING STRATEGIESE.g..: P&G has 70 improvements to
Tide since its 1956 launch
E.g..: P&G phased out white cloud tissue
• Build trade relationships
• Know your brand’s price elasticity
• Exploit sales promotion tactics
• Take private labels seriously
• Manage each category separately based on private label penetration and price-quality gap
WINNING STRATEGIES
E.g..: Cola vs Coca Cola
How Brands are winning??
1. They manage overall broad category covering segments in terms of demographics, usage, occasion, benefits etc.
2. They create brand advantage by investing in genuinely superior product performance- continuous stream of innovation, marketing support and right pricing
3. They create business system advantage over retailer brand by leveraging global supply chain scale to provide SKUs at lower unit cost
WINNING STRATEGIES
• Keep the margins that retailers extract from you
• You get access to mass consumer data in real timeE.g. When P&G bought a stake in online retailer Ocado, it was the opportunity to access this kind of data that motivated the investment
• Direct access to consumers also enables a company to build a stronger brand
• The people, the setting, the atmosphere, the products, the in-store promotions, the experience
HOW BRANDS BENEFIT FROM BEING RETAILERS
• http://www.brandingstrategyinsider.com/private-label• Google images• http://business.time.com/2012/11/01/brand-names-just-dont-mean-
as-much-anymore/• http://www.slideshare.net/ProfessorMathur/kotler-chap-15-4-what-
are-private-label-brands?related=1• https://hbr.org/1996/01/brands-versus-private-labels-fighting-to-win
References
THANK YOU !!
These slides have been created by Fern Sharma, Divya Jaiswal, Gautam Bansal, Anindo Chatterjee and
Mehandi Goel from IIM Lucknow, as part of a MBA course “Brand Management" (www.MBASkills.IN)
taught by Prof. Sameer Mathur.