The Relationship Between Manufactures And Retailers

To understand the role of H-E-B’s Own Brands, we need to understand the role of private labels to a retail store. Retailers manufacture carry private brands since retail gross margins in the private labels are relatively high. Retailers are able to realize cost advantages since they do not have additional advertising and distribution costs associated with private labels. In addition to increasing profits, store brands help to attract and retain customers. Retailers however need the critical procurement revenue from national brands for ad space and displays on stores and hence need to maintain a balance between their Own Brands and national 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.

According to the American Marketing Association (AMA), a brand is a “name, term, sign, symbol, or design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competition”. However, as Keller highlights, a brand is also “something that has actually created a certain amount of awareness, reputation, prominence, and so on in the marketplace”. Therefore, a brand is an identity created to differentiate itself from the competitors and to be remembered in consumer’s mind.

Joe Coulombe started Trader Joe’s in 1967. Traded Joe’s can be characterized as a low cost, high quality grocery store. Eighty percent private label product mix, expanding its target markets, keeping costs down, and extremely effective marketing powers Trader Joe’s increase popularity. Since 2002, the market value of private food label has risen twelve percent (Datamonitor, 2008). This essay

A popular strategy among supermarkets it own brand strategy, which is its own label products produced by, or on behalf of the supermarket and sold under ASDA’s own name or trade mark through ASDA’s stores (Morris 1979). By having its own branded products, they have the potential for greater control over influencing and managing issues such as quality, health and safety and environment, as opposed to a supply chain that stocks other brands within its business and in turn have a better understanding of their own supply chain. Additionally if a retailer has its own brand strategy, then other brands often have greater competitions in obtaining shelf space and also they can use accurate and effective procurement and distribution of their brands

b. Does the issue of branded vs. private label enter into this consideration? Why or why not?

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.

As a manufacture of private label personal care products, Hansson Private Label, Inc. has a considerable amount (28%) of market share in its specific industry. However, private labels as a whole constitute less than 19% in the entire personal care industry. Therefore, growth of HPL depends on the growth of the industry and more importantly the growth of private label component within the industry. In terms of the personal care industry, market growth will not improve significantly in the future. As proven in the past four years, unit volumes in the industry increases less than 1% in each year and the dollar sales growth was only driven by modest price increases. Therefore, the opportunity for private labels

The company was recently presented an opportunity by its largest retail customer to significantly increase its share in their private label manufacturing. The prospect of growth was risky, since it

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.

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.

However, when Franklins unsuccessfully attempted to reconfigure their position in regards to their consumers, they lost their hold on the market (Armstrong et al. 2012). It is also outlined by Armstrong et al (2012) that the inexperience of Franklins in regards to market segmentation resulted in the loss of existing consumers as well as future consumers, and ultimately resulted in an uncontested response to ALDI. 4. ALDI’s Private label strategy Smith (2006, p. 39) implies that due to the nature of the supermarket industry, stores that offer a larger range of products are often more efficient than those that offer fewer items. ALDI however tests this notion, as they stock roughly 700 private label products - which is less than other retailers who stock 25000 to 30000 products (Bonn 2006, p. 1), yet they are still able to secure their market position and contend with rival retailers (Armstrong et al. 2012) 4.1 Perception of Private Label Within the last 20-30 years, private label brands were initially targeted towards the lower classes; therefore people’s adoptions of private label brands were not very common (Kumar & Steenkamp 2007, p. 12). However, in recent decades private label products have become more favorable to Australian consumers. This is evident in 2010 Nielson Global Survey (The Nielsen Company 2010) as the total percentage of sales of private label products have increased

Hansson Private Label (HPL) is a manufacturer of products such as soap, shampoo, mouthwash, shaving cream, sunscreen and other personal care products. Its mission is to be a leading provider of high-quality private label personal care products to America’s leading retailers. The main topic of this paper is to evaluate a new investment of 50 million for a private label manufacturing proposal by a key partner. This will increase debt but bring new customers and new opportunities. However it also brings risks to lose some existing customers on the long run. The project mainly spans in 3 years. So Hansson is evaluating the return on

The recession, which started in 2008, has helped drive the need for private-label products, or as they are more commonly called, store brand products. These private-label products generally cost the consumers about twenty-five percent less than the major national brands that are offered. Throughout the supermarkets and other types of food retailers, the private-label sales grew by more than 9% from 2008 to 2009, and these types of private-label sales accounted for about 35% of Kroger’s overall sales. Most stores do not operate their own processing plants for these private-label items; Kroger does however operate their own plants for the private-label products. [ (Senauer & Seltzer, 2010) ]

Since an increasing number of people focus on brand names instead of product, brands become important elements for customers to choose products (Carroll, 2008). When customers trust the brand, the benefits for the manufactures are generated. In the first place, brands can be used by products as the tool to identify and differentiate themselves from various products. Secondly, brands are helpful for companies to build a competitive advantage (Bick, 2009). Therefore, organisations take more attention to branding.