Private Labels | Store Brands

1. PRIVATE LABELS | STORE BRANDSGROUP 10

2. PRIVATE LABELS | STORE BRANDS
Guidelines
Definition and Evolution of Store Brands & Private Labels
Why do stores introduce Store Brands?
Why do manufacturers produce Private Labels?
Consumer Behaviour
What’s Next?
1
2
3
4
5
GROUP 102 1

3. 3
There are millions of
brands
out there...

4. 4
PRIVATE LABELS | STORE BRANDS | What are they?
GROUP 10 3

5. STORE
BRANDS
PRIVATE
LABELS
PRODUCER
RETAILERS
GROUP 10 4
 DESIGN
 DISTRIBUTION
 SELL
 MANUFACTURING
 PACKAGING
Line of products strategically
branded by a retailer, within a
single brand identity.
PRIVATE LABELS | STORE BRANDS | What are they?

6. Store Brands Private Labels National Brands
RETAILERS
RETAILERS
OWNER
RETAILERS
PRODUCER
PRODUCER
Perspective by
GROUP 10
PRIVATE LABELS | STORE BRANDS | Perspectives?
5

7. 1st Generation
Lower quality and
cost (70’s)
2nd Generation
Lower quality
and cost, but
with retailer
brand
3rd Generation
Similar quality to
national brands;
“me-too”
positioning
4th Generation
Innovation and
quality
competitiveness;
specialized suppliers
GENERICS
STORE
BRANDS
OWN
BRANDS
CONSUMER
BRANDS GROUP 10 6
STORE BRANDS | Evolution

8. 8
Why do Stores
Introduce Store
Brands?

9. Retailer’s negotiation power
Respond market needs
1
2
RETAILERS
STORE BRANDS | Why do Stores Introduce Them?
 Distribution strategic evolution
 Consumer patterns evolution
 Lower price with similar quality
8
Market Conditions for Adoption
GROUP 10

10. Relatively mature markets
Fragmented supply structure and existence of
suppliers willing to produce
4
5
RETAILERS
9
Missing dominance by traditional, strong
leading brands
6
Market Conditions for Adoption
Existence of a modern retail system3
GROUP 10
STORE BRANDS | Why do Stores Introduce Them?

11. Brand
awareness
and reliability
Low
promotion
costs
Brand control
Increase
sales and
revenues
Quality control
Pricing
flexibility
Higher
market
share
RETAILERS
Competitive advantages
10GROUP 10
STORE BRANDS | Why do Stores Introduce Them?

12. Why do manufactures
produce private
labels?

13. PRODUCER
Leader Follower
 Manufacturer produce its
own trademark together
with Private label
 Strategy
 Optimization of productive
capacity
 Know-how
 Exclusively dedicated to
the production of Private
labels
 Emerging markets
 Know-how development
 Market share
 Regional production
12
Opportunities
GROUP 10
PRIVATE LABELS | Why do Producers Make Them?

14. PRODUCER
PRIVATE LABELS | Why do Producers Make Them?
Leader Follower
 National brand
cannibalization
 National brand weakness
 Loose market share
 Production inefficiencies
 Highly dependent on few
customers
 Highly threatened by low
prices and reduced margins
13
Threats
GROUP 10

15. 15
What about
consumers?

16. IMAGE PRICE
CONSUMER
PERSPECTIVE
QUALITY
STORE BRANDS | Consumer Store Brand Perception
Consumer Response
Most of the time I
can’t tell the
difference between
the store brands and
national brands
consumers say
sale prices
are the #1 driver
for all the shelf
impulse purchases
store brands or
private label brands
are okay
15GROUP 10SOURCE: American Pantry Study (Deloitte 2014)

17. GROUP 10
STORE BRANDS | Consumer Brand Survey
16
94 %
will continue to buy
private labels after
economy improves
65 %
Disagree that
store brands
have lower
quality than
national brands
5/10
Assumed to have
saved at least 25%
family budget
67%
Social responsibility
affects buying decision
57%
Consistency, quality
and price are the key
factors
92 %
Buys store brands
Source: Group 10 own survey
92%
Disagree that store
brands are for those
with low income

18. SOURCE: www.nielsen.com (Global Private Label Report)
20%NORTH AMERICA
8%
LATIN AMERICA
NA
AFRICA
33%WESTERN EUROPE
6%
CENTRAL- &
EASTERN EUROPE
5%
ASIA-PACIFIC
17%
AUSTRALIA
STORE BRANDS | Market Share
17GROUP 10

19. STORE BRANDS | Consumer Goods Share (%)
6
5,3
2,6 13,7
35,2
4,8
9,6 12,2
10,6
Others Packaged goods
Retail tissue and
hygiene
All FMCG
products
Home Care
Pet food
Hot Drinks
Soft Drinks
Beauty and
Personal Care
18GROUP 10SOURCE: Euromonitor International (November 2014)

20. Segmentation
of private label
ranges
Positive
gloomy
economic
outlook for a
higher
penetration of
private labels
Brand-
orientation
approach
Long-term
potential
growth
sustained by the
expansion and
consolidation of
modern retailers
supply chain
Greater
emphasis in
innovation, high
quality premium
brands and
advertising
STORE BRANDS | What’s Next?
19GROUP 10

21. STORE BRANDS | What’s Next?
Fierce competition from national brands will be higher...
20GROUP 10

22. GROUP 10
MBA Executive 14/15
Porto Business School
Porto, November 29th, 2014
PRIVATE LABELS | STORE BRANDS
21GROUP 10