Doingshopping,whilewe roamarounda brandedretail store,we alwayscome acrosssome new low-
pricedbrandof productswhichwe have neverheardoff.Andtheyare the productswhichyou will not
findinotherretail shops.Whyisthat? Its veryinterestingtoknow the factthat these productsare the
brand of that particularretail,whichare calledas‘Private Labels’. Manycorporationswanttoput their
ownlogoson productsthat theygive awayto reinforce theirbrands,while thereare some corporations
whodon’tdisclose abouttheirprivate brandinthe store. Store brandproductsnow accountfor 25% of
salesat US supermarketsand40% of salesatWal-Mart.
Brand ownednotbya manufacturerorproducerbut by a retailerorsupplierwhogetsits goods made
by a contract manufacturerunderitsown label.Theyare alsocalledasprivatebrand.Theyare typically
those manufacturedorprovidedbyone companyforofferunderanothercompany'sbrand. Thatbrand
can be the retailer'sownname ora name createdexclusivelybythatretailer.Insome cases,aretailer
may belongtoa wholesalegroupthatownsthe brandsthat are available toonlythe membersof the
group.Theyare oftendesignedtocompete againstbrandedproducts,offeringcustomersacheaper
alternative tonational brands. Theyare all merchandisesoldunderaretailer'sbrand. Private label
acknowledge the birth,historyandexistence of genericandstore brands.Itis oftenthe lowerpriced
alternative tothe “real”thing,
The reason behindwhybrandretailersoptforprivate label isthatthey have a greaterControl over
productor service pricing andalsothere isneedtobe marketingdependence. Promotioncostforthe
store brandsis zerooutside the stores.
Retailerscontinuedtopushmore andmore private label productsintodifferentcategoriesof the
marketplace because theyrepresentedhighmarginsandthe promise of profitabilitywithlittletono
marketingeffort. Thiscanbe far more profitable thansellingnationallyadvertisedbrands.A Food
MarketingInstitute studyinthe UnitedStatesfound thatRetailgrossmarginsare higheron store-
branded products(35%) compared to nationally advertised brands(25.9%).
Private-Labelproductsare pre-manufactured,pre-testedproducts.Privatelabel servicescansave your
time,moneyandeffortascomparedto productdevelopmentfromscratch.There are alsolow start-up
costs andyour private label manufacturer’sexperience limitsyourrisk.Youalsoenjoyhigherprofit
marginsand bettercontrol overinventory. Moreover, itprovide muchlowercostof production than
brandedproducts,especiallysinceall brandedcompaniesalreadycoverR&Dand marketingexpenses
provide consumerswithanalternative tootherbrandsat low price. These advantagesprovide anedge
overthe otherbrand, whichhelpcreate apersonalizedanduniquebrandforretailers.Retailerswith
prettygoodprivate-label brands cancreate bettersalesopportunitiesforthemselves.Theycanbuild
value andrecognitionfromthe customers.If consumers seriouslyconsiderprivate labelsasacceptable
qualityprivate label products.This canfostera feelingof brandloyalty&buyerswill also be encouraged
to come back to the store againand again.
Difference between Private Label Manufacturing & Contract manufacturing
In a contract manufacturing business model, a contract manufacturer is approached with
company’s own product or formula and ask them to make it for them. For the agreed-upon price,
the contract manufacturer acts as your factory, producing and shipping units of the product on
your behalf. A private label manufacturing company, on the other hand, has a stock of formulas
ready to be bottled and sold under your brand name. A company just needs to tell them about the
product and quantity to be manufactured with the brand name. ConAgra is one of the biggest
private label manufacturer company.
Private Label Manufacturer Association
The private label businessisunique andtofulfill theirneedsandobjectives, thereisatrade association
that servesthe industryexclusively.Foundedin1979, the ‘Private Label ManufacturersAssociation’is
the international trade organisationdedicatedtothe promotionof private label brands. Theyhave their
officesinAmsterdamandNewYork. PLMA representsmore than3,500 manufacturersandsuppliers
worldwide, rangingfromcompaniesthatspecialise inprivate label tothose thatproduce private label
productsin additiontotheirownmanufacturerbrands.PLMA offerstrade shows,programmes,and
servicesthatare specificallydesignedforthe industry
Withthe helpof theirownbrand,theytry to
change the customers’preferences. Today'sretail marketersare managingtheirproprietarybrandswith
the same combinationof care and innovationasmanufacturersof national brands.
WHO MANUFACTURE PRIVATE LABEL?
Manufacturersof private label productsfall intothree generalclassifications:
Large manufacturerswhoproduce boththeirownbrandsandprivate label products.
Small andmediumsize manufacturersthatspecialise inparticularproductlinesandconcentrate
on producingprivate label almostexclusively.
Major retailersandwholesalersthatoperate theirownmanufacturingplantsandprovide
private label productsfortheirownstores.
From anyof thisprivate label manufacturer,goodsare orderto be producedandthenare soldon their
retail stores.Theyoptfora verystrategicplacementpatternfortheirprivate brandsinthe store.They
alwaysplace theirproductsjustbesidesthe nationalbrandedproducts,theyalsoattractbuyerbygiving
Some Well-known Private Label Retailers
Retailersin UKwere the innovatorsof Private Label inmanyaspects. Many retail storesinnovated
relentlesslytocreate compellingandinspiringbrandstocompete head-onwithtraditional, national
Marks & Spencer
Perhapsthe strongestsuccessstoryinthisregard wasthat of the Marks & Spencerbrandin the late
1980s and early1990s. It isa UK based clothingretailerknownforgoodbasicsthatcomplementedits
Mainstreamretailerscouldneitheremulate Marks& Spencer’spremiumquality,noritsprice.
Tescois a Britishmultinational retailerandmostof the bigexample for Private Label. The private
labeledproductswere inventedhereonthe basisof whata workingclassfamilyonatight budgetwould
needtobuy,apart from opportunitygivenbyretailer tothemina certainproductcategory.
Tescocreatedan organics line,akid'sline and,perhapsmostimpressively,the Tesco Finestsub-brand.
TescoFinest startedinready mealsandchilledfoods,where the retailerhasa natural advantage (these
productsare difficulttoprepare anddistribute).Integral toitssuccesswasitsveryhighpremium-ness.
The exceptional price andqualitywere well receivedbythe higherendconsumer.Itwasalsoevident
that TescoFinestwasan encompassingpropositionandcouldstretchintoothercategories.Butrather
than tryingto rule the world,Tescoselectivelyventuredintothosespecificareaswhere itcouldadd
About40 percentof productssoldin Walmartare private label store brands.Walmartbeganoffering
private label brandsin1991, withthe launchof ‘Sam'sChoice’,aline of drinksproducedby Cott
Beverages exclusivelyforWalmart.Sam'sChoice quicklybecame popularandby1993, itwas the third
mostpopularbeverage brandinall of the UnitedStates. OtherWalmartbrandsinclude ‘GreatValue’
and ‘Equate’inthe US and Canada and ‘SmartPrice’inBritain. Greatvalue whichisnot onlythe biggest
brand Wal-Martcarries, it's the biggestgrocerybrandin the entire US.
Target’s, the secondlargestdiscountretailercompanyinUS, ArcherFarms (private label brand) has
successfullyestablisheditself asanaffordable luxuryconveniencebrand,offeringgourmetgoatcheese
pizza,KeyLime Cookie Strawsandorganicmilk,all still inkeepingwiththe whole ‘cheapchic”Target
Everymajor grocerhas itsown private label brandlike Krogerstoressell Private Selection,Costcohas
private label wines -Kirkland. Apartfromretail stores,these private label brandsare intrendamongthe
e-commerce retailerstoo. Forsome tope-trailers,in-house brandsaccountforclose to25% of their
sales. UK's largestonline fashionretailerASOSgets50% of the revenue fromitsprivate label brands.
Rocket Internet’s Indianfashione-retail , ‘jabong’ alsolaunched4-5private label brands. Indian’slargest
online retail Myntra have about10 private label brandslike ‘Dressberry’and‘HRX’ .They are the biggest
sellingbrandsontheirsites,overtakingbrandslike Puma,Adidas&Levi’s. Theyare alsoplanningtoadd
six more such brandsinthisyear.
Consumersare definitelygivingretailerspermissiontogrow theirprivate labelbrands.Theycanbe said
as the future leaderof the retail business.It’sprobablysafe toconclude the nextgenerationof super
successful brandswill notcome fromthe name brands,butfrommore private label brand-focused
retailers.Consumersseekingtosave some moneyintoughtimesmaybe fuelingthe currentgrowthin
private label brands. We here atCrossProf.comhelpsyouconnectwiththe mosttrustedprofessionals
whocan guide youwell tobuildyourprivate-labelbrand.Frommanufacturingprivate brand,itsin-
house promotion tothe legal agreementinvolvedinit;advice forall these technical matterswill be