1. Position Paper on
Do private labels represent a sustainable Branding strategy?
By
UMA M
11397100
DMS - PU

2. Do private labels represent a sustainable branding strategy?
Introduction
As retailers have become more powerful and global, they have increasingly focused on their own brands
at the expense of manufacturer brands. Rather than simply selling on price, retailers have transformed
private labels into brands. Consequently, manufacturers such as Johnson & Johnson, Nestle, and Procter
& Gamble now compete with their largest customers: major retail chains like Carrefour, CVS, Tesco,
and Wal-Mart. The growth in private labels has huge implications for managers on both sides. Yet,
brand manufacturers still cling to their out-dated assumptions about private labels
The Definition: Private label products or services are typically those manufactured or provided by
one company for offer under another company's brand. Private label goods and services are available in
a wide range of industries from food to cosmetics to web hosting. They are often positioned as lower
cost alternatives to regional, national or international brands, although recently some private label
brands have been positioned as "premium" brands to compete with existing "name" brands. Private
Labelled Brands are also called Store Brands
The Reason for Private Brands – Shift in Paradigm:
A recent survey conducted by Perception Research Services (PRS), shows that the vast majority of
shoppers are purchasing some private-label products on a regular basis (86%, on par with the 84% seen
in November 2010). This is true across income groups and other types of classifications.The latest data
shows that more types of private-label products are being purchased as significantly more shoppers
claim to have bought more private-label products than they did in 2010 (38% vs. 32%), and reported
purchasing 54% more product categories (7.4 vs. 4.8).
High levels of private-label purchases continue for paper products, cereals, cleaning products, and canned and
frozen vegetables. And for the first time, cookies and salty snacks have now moved into the top tier of regularly
purchased private-label products as well.Overall, the largest gains seen for private-label penetration were for:
• Soft drinks (carbonated and noncarbonated)
• Salty snacks
• Frozen meals
• Vitamins/medicine
• Cookies
According to the report, shoppers report feeling good about buying private-label products. Over half (51%) say
they feel smart/savvy when they buy private-label products; and very few (only 11%) say they feel self-conscious,
with almost none (3%) saying they feel embarrassed when doing so. In some cases, shoppers are willing to go out
of their way to buy some private-label products. This is especially true at specialty stores such as Trader Joe’s and

3. Whole Foods—known for high-quality, distinctive offerings. This suggests that with the appropriate level of
product innovation, private-label products can turn a retail chain into a shopping destination.
In many instances, private labels have surpassed a national brand’s capacity to deliver on visibility,
consumer interest, involvement and appeal. Proprietary brand decision makers are often able to
command close to parity or parity pricing for their products, without articulating cost as the
differentiating factor. This represents a point of departure from the past: there is an acknowledgement
that today’s proprietary brands have the ability to transcend the negative baggage and problems of
traditional store brands, creating unique, resonant benefit propositions for consumers.
Retailers are beginning to recognize that they cannot simply rely on national branded products to draw
consumers into their stores and sustain loyalty. This is due to the fact that manufacturers’ product brands
often have the ability to transcend geographic location, distribution channel or retailer (e.g., Bounty
paper towels are available at a wide array of grocery stores, drug stores and mass merchandisers across
the United States.) Due to this pervasive presence of national brands, consumers need not have a strong
relationship with a particular brick-and-mortar store setting to have access to these products. It is only
the proprietary brands, exclusively available at a specific retailer that can be a magnet to draw people
into its store versus others and accrue direct meaning and loyalty to the overarching banner.
A Brief time Travel of Private Brands:
The first age of private label was as a simple, budget purchase for hard-up consumers. In 1919 a
young demobbed soldier called Jack Cohen used his serviceman's gratuity to set up a market stall in
London. It flourished, but Cohen was ambitious and wanted to sell his own products. In 1924 he signed
a deal with tea producer TE Stockwell to sell its tea under his firm's brand. Taking the first three letters
of the tea company's name and the first two of his surname, he gave the Tesco name to Britain's first
private-label product.
The second age of private label was a move upmarket. Marks & Spencer began to sell its own products
under the St Michael brand in 1928. Named after the founder of the company Michael Marks, the brand
came to stand for quality and value to three generations of British shoppers and demonstrated the
potential of private labels to provide more than simply a budget offering.
The third age began in 1992 with the launch of Sainsbury's Novon washing detergent. Rather than
representing a cheap, budget equivalent closely aligned to the store master brand, Novon was a
standalone product. Thanks to in-store promotions, Novon quickly doubled Sainsbury's share of the
detergent category and proved that private labels could stand on their own merits.
The fourth age marked a period when private labels became brazen in their attempts to replicate and
replace manufacturer brands.
The sixth age has seen a shift away from basic store brands toward a brand architecture of private
labels. The big supermarkets have moved from a simple house structure to use private-label sub-brands
to offer distinct organic, budget, healthy and premium lines – a multifaceted offering that surrounds
manufacturer brands on all sides.
In 2007 we saw early evidence of the next step for private labels: category leadership. Asda has
launched tea bags made from nylon mesh under its premium Extra Special label. These tea bags cost
about four times the price of traditional paper ones. What's important here is that there was nothing like
it being sold in Asda by a big-name brand. Until now, for all their advancement, private labels have
been second movers: undercutting and improving on big-brand offerings, but always following. Now,

4. however, supermarkets are using store data, category knowledge and strong supplier relationships to
begin to lead the market.
Advantages of a Private Label:
Establishing a store brand accords businesses the opportunity of establishing trust between the store and
the client. This is because the client can readily identify the group responsible for branding the product.
Additionally, businesses get the chance of making repeat sales through this approach. This is because
clients will always associate the product directly with the specific store. Furthermore, a particular
business can distinguish and differentiate themselves from other competitors in the market place
There are various advantages for the retailers to go for private label brands. The advantages include
Control over pricing of the product/service,
Put forth own ideas on marketing plans,
Create personalized image which in turn leads to higher customer loyalty,
Higher control on production, marketing, distribution and profits,
Give their own inputs, additional materials, logos, tag lines, etc.
Customer's changing preference - drive towards private label products.
These points provide an edge over the other brands. Private label brands are available in a broad range of varieties
from food to cosmetics. These brands help create a personalized and unique brand for retailers. Retailers with
pretty good private label brands will be able to create better sales opportunities for themselves. They can build
value and recognition from the customers. Private brand products allow retailers to differentiate their products
from competitors' products, and provide consumers with an alternative to other brands.
The flip Side:
However, within typical channels, there are some categories in which shoppers are resistant to buying
private-label, as roughly one-third stated they would not buy private-label versions of personal products;
vitamins/medicines; or frozen meals. It would seem these types of products represent a bit more ―risk‖ if
the product quality is sub-par, and in standard venues such as grocery and mass (where most private-
label purchases are made), the perceived quality seems lower in these categories.
The Road ahead:
Every coin has two sides unless it is biased. In the case of Private Label brands there exists fairly a good
chance of success if the following points are considered.
Overall Strategy:Overall chain strategy in terms of commitment to quality, breadth of private label
offerings, use of own name for private label, a premium brand offering, and number of stores
consistently enhance the retailer's store brand performance in all categories. Also, the extent to which
the retailer serves a customer base containing less wealthy and more elderly households and operates in
less competitive markets improves the performance of the store brand.
Pricing Strategy:The everyday low price (EDLP) positioning benefits the store brand but only in lower
quality categories where the value positioning of the store may be better aligned with the price
advantage of the store brand.

5. Support Promotions: Retailer promotional support can significantly enhance private label
performance.
Balancing Act:Retailers often use national brands to draw customers to their stores. Retailers who
pursue this traffic building strategy usually carry more national brands, deeper assortments, and offer
better everyday (lower price gap) and promotional prices on national brands. Each of these actions
works against the retailer's own brands, highlighting the important balancing act the retailer must
perform to profitably manage the sales revenue and margin mix in each of their categories. At the same
time, adding a higher quality premium store brand program may mitigate this trade-off.
On Par Quality:premium store brands offer the retailer an avenue for responding to the national brand's
ability to cater to heterogeneous preferences. This appears more likely in categories where store brands
already offer high quality comparable to the national brands.
Product Innovation:It seems as if creating product innovations is the key to success—for retailers to
achieve additional growth in those categories that have been met with some resistance, and for national
brand manufacturers, who must give shoppers a meaningful reason to pay more for their offerings. In
the long run, increased innovation will be a winning formula for all.
Compelling Brand Voice:In order to have a consistent and compelling brand voice, retailers need to
understand the contribution and role of proprietary or "own" brands within their business and also
within the lives of their consumers. ―Own‖ brand products, branded communication and expressions
should all be developed in accordance with this thinking.
In addition, a clear commitment to superior product, a store environment that furthers the brand
proposition and well defined merchandising strategies round out the strategic direction of this retailer.
A New Approach to Private Label Branding:
In order to be truly successful, retailers must advance from the generic or store brand mindset of the past
to a new private label paradigm. Many retailers have begun to describe their private label brands as
―own‖ brands because there is recognition that these proprietary, exclusive offerings are tools that
represent momentous power and potential for the retail store.
The term ―own‖ brands acknowledges that today’s visionary retail marketers have powerful proprietary
portfolios that they control and manage and there is potential to reap bigger and better rewards by taking
a closer look at the way they orchestrate the role and expression of these brand offerings in the eyes of
consumers in each product category. Those retailers who appreciate the magnitude of this brand
opportunity have created a new industry standard in their realm of influence and activity.
―Own‖ brands are articulated and developed in a way that they not only fit with the brand promise of the
retail store, but if effective, they also give consumer drivers a key point of departure to enhance and
celebrate the overall retail brand proposition to keep consumers coming back for more.

6. Conclusion:
In consumer marketing, brands often provide the primary points of differentiation between competitive
offerings, and as such they can be critical to the success of retailers and manufacturers. Private label
brands have made tremendous inroads over the past two decades. Although the success of private labels
has been limited to certain product categories and segments of consumers, retailers continue to expand
the domain of private label offerings. In this exploratory study, our objective was to assess how PLBs
are perceived in a multicultural context. Findings comprise some main points that are valuable for retail
firms operating in multi-cultural contexts. First, an array of statements is found to be highly associated
with PLBs image including convenience, youth, economy, reason and simplicity. Some of these items
(i.e. convenience and reason) were previously associated with national brands.
The real golden era of private labels is only just beginning and manufacturers are glimpsing the true
challenge that awaits them. Brand managers will have to compete against private labels that are cheaper,
more premium, more profitable, better merchandised, more trusted and easier to market – and face the
prospect of trying to enter categories created, and now led, by private labels.
Retail firm may try to encourage consumers to compare the taste of their brands versus national brands
in their campaigns of communication. In addressing the question whether consumers from different
cultures but living in the same context perceive differently PLBs image, the findings of the study
suggest that there are much more similarities than differences of PLB image perceptions. Only two
attribute statements (related to convenience and youth) on eleven are differently perceived by
consumers. This result is interesting in a strategic level because similar image perceptions in a
multicultural context allow retailers to standardize their retail offer and communications. This means
that they spend much less money on communication.
Category management and brand management must work together to fuel the marketing strategy. One
cannot replace the other. Both product and positioning points of difference set the ―own‖ brand apart in
consumers’ minds. A consumer-centric approach is at the heart of ―own‖ brand development and
elevates above the product-centric thinking of the past.

7. References:
The Mixed Brand and Private Label Strategy –
Retailer’s Perspectiveillustrated by the Rema1000 case - Jesper Kolind
http://www.articlesbase.com/branding-articles/developing-a-private-label-brand-1919702.html
http://www.brandingstrategyinsider.com/2008/05/the-rising-powe.html#.UR3L2x0yZEZ
http://retail.about.com/od/privatelabelbranding/Private_Label_Branding.htm
http://en.wikipedia.org/wiki/Private_label
http://www.packworld.com/private-label
http://www.organicmonitor.com/r0811.htm
http://www.amazon.com/Private-Label-Strategy-Store-Challenge/dp/1422101673
http://retail.about.com/od/privatelabelbranding/Private_Label_Branding.htm
http://www.brandchannel.com/papers_review.asp?sp_id=360