Advantages And Disadvantages Of Private Label Brands

During the second half of our trading period we focussed massively on the private label market and found our niche there. We had realized that the minimum cost of the product wins the market share so we started experimenting with S/Q Ratings and percentage of superior materials to come up with the best product with the least cost price. Adding minimum profit margin to the cost price we were able to seize a massive chunk of the private label market. Attached are a few snapshot highlighting our success in that market.

is to target price-conscious consumers in the U.S through either private label products or a new mass-

Stores are also competing in other forms in order to secure loyal customers. Some of the forms are product range and quality by which stores are offering privately-labeled products that are primarily used in the commodity lines at lower prices.(Australian Government, Department of Agriculture) This has caused a significant shift in the industry, thus allowing players like ALDI who started with a private labeled product early on to gain and improve its market share. Another major form is convenience where several non-price factors such as opening hours, strategic locations, parking area, distribution options (delivery or in-store pickup) and online shopping comes into play. (Australian Government, Department of Agriculture)

This left a segment open for new entrants to come with no competition from incumbents.  Private labels also did not do product proliferation and were focused on limited popular brands at low costs. This helped them save costs in R&D of new products and also save costs by not experimenting new products. They did not compete with the Big 3 on all possible niches. Also, from the table below, we see that the total costs of the private label are 40% less than the Big 3 brands, which helped them to target the price sensitive customers. They are several strategies that the private labels applied which resulted in reduced cost structure. First of all, they did not use coupons, which had accounted for 23% of the total costs for Big 3 brands. The private label also offered higher margins to retailers (15%) in comparison to Big 3(12%) in order to get premium shelf space and signage. The private labels reduced packaging costs by supplying cereals in clear plastic bags. They also used less labor intensive manufacturing process and fewer expensive fruits and nuts.

1. Hansson Private Label already has a 28% share of the private label personal care products. So they are a pretty big player in the industry.

Over these 68 years of independence, Indian economy has witnessed a drastic change in the pattern of consumption due to increase in level of income and purchasing power. Post 1991 economic policy reforms, there has been high degree of competition and mass production. There is immense positive change in demand for high end technologically advanced branded goods, stimulated by increased awareness and changing taste and preference spurred by demonstration effect. This would mainly be due to narrow difference in prices of non branded and branded goods. Attractive services and accountability provided by various brands also contribute to this increase in demand for branded goods. Post liberalisation, Indian markets were flooded by foreign goods and there was wide range of choice. Earlier, Indian consumer durable market was dominated by few domestic producers like Godrej, Voltas, Kelvinator etc. The main categories of consumer durables are colour TVs, refrigerators, air conditioners and washing machines. Double income families, rising income level, increasing awareness among consumers are driving growth of this industry and easy financing avenues fueling the market.

To fully understand what this particular term means, it is necessary to first and foremost define the first two words: private label. In the simplest definition, a private label is a brand that is owned neither by a producer nor a manufacturer but rather by an individual or business entity that contracts a manufacturer to make the said branded product for

Twenty plus years ago, the terms “private label” or “own brand” were usually synonymous with “cheap knock offs.” These products were viewed as inferior to the national brands and just a low cost alternative for the extremely price conscious. However, in the last 20 years, the paradigm has changed. As major retailers sought ways to expand their brand and entice customers to become loyal to their stores, private label (“PL”) and own brand (“OB”) products became a more viable and significant component of their marketing and brand strategy. However, this came with the caveat that their PL/OB offerings had to meet or exceed the quality of the national brands but at a price point of 10-20% less.

There is research that shows half of shoppers bypass their closest store, typically for the lower prices. Kroger offers many private label products and keeps the prices low (Hartman group). They are able to sell at relatively low prices and still generate good financial return based on their cost structure. According to this marketing strategy, they attract and retain more customers. Kroger has private products and the customers more and more tend to buy value oriented merchandise. It will increase the demand for private label goods in the U.S. Kroger has three kinds of private label product--Private Selection, Banner Brand, and Kroger value to satisfy different customer’s requirements. Private selection is a premium quality brand, banner brand focus on taste and efficacy, and Kroger value is designed to deliver quality products and sell those at an affordable price (Bell).

The industry within which Hansson Private Label exists is a very competitive and volatile one. It is dominated by two types of firms, namely, Branded and Private Labels. Tucker Hansson operates as a private label firm. Private Label firms are an emerging market which is competitive based on its ability to have a lower price than its rivals. This market has experienced growth primarily because of this affordability. However this growth would be regarded as organic.

Indian consumers have become very brand conscious with the introduction of many stable products in the country.

 Introduction……….  History………  Brand Inventory………  Brand Exploratory………  Gap Analysis………  Recommendations………  Conclusion………  Bibliography……… 

1. There are several advantages to proprietary products over open source products: better quality control issues in creating products; a firmer control over the licensing, either the technology the product is based on or what material (music in this case) can be used with the proprietary device; the potential to build brand loyalty (for example Sony memory cards only work in their products, if you’ve already bought these cards you could be more likely to purchase additional Sony products in the future); pricing – companies could possibly charge a premium price for their proprietary products as there could be few to no competitors in a specific market space; vertical markets (if Sony is providing the device, memory card and music the

The Big 3 had high advertising to sales ratios of 10-14%, also deterring entry, because average first year advertising cost for a new brand was over $20 million. We can conclude that total costs related to producing private label products are lower than new branded products. Private label products can offer greater margins to grocers and still sell at lower prices. They have a considerable competitive cost advantage over the new branded products.

Foreign brands whose outlets are opening up in India as per the norms, where the Government is allowing up to 100% FDI in single-brand retail and 51% FDI in multi-brand retail.