BRANDS VS

Private labels

HBR ARTICLE

Just because you are

paranoid doesn’t

mean they are not out to Get you

What was this ?

Well…………This was reaction of Brand-Name Manufactures to competion from private labels.

At times there is a reaction &

At times it Goes over

The over reaction comes when one of the two things are forgotten………

Firstly…..Private Label strength

varies with economic

conditions.

*Secondly… Brand Manufacturers can

control Private Labels.

Threat such as what follows threatens…….

Classic cola ,offered at 20%lower cost , had 65% share at Sainsbury & 15%at UK Market.

An over reaction or an under reaction is

not the Solution.

Managers should consider……

Lifetime of private labels whether it will grow or fade

Strength of Brand Name which is far

from dead.

Threats since 1990’s global context……

Narrowing gap btw Private Labels & Brands

Development of private label lines

Emergence of new channels such as mass merchandiser & e-commerce favors private labels

INDIAN CONTEXT……..

Private labels are at a nascent stage in India

Influence of retailers is huge and they favor it due to higher profitability

New channels such as e-commerce favor private labels such as Myntra

But the quality served by private labels is almost equivalent to the ‘ Kirana Stores’ we generally buy from

The private labels employ western ideas considering what favors the organization & not what Indian consumers desire

Thus….

Private Labels have way to go in India……….

&

Returning to global context……………..

These threats doesn’t mean an end to Brands !

- HBR CASE: What are brands good for ?

How can we forget the Brand Power?

Brand Power is

territorial

ownership of

values with the

ability to

influence masses

Strength lies in its name : It has a running start

Purchase process favors brand name

product.

Brands have value for retailers as

these are the traffic building agencies.

What would be more convenient , some retailer

argue, than to have consumers remember a

single store name

Retailers can’t overemphasis

on Private Labels

After all these……

Still Brands are tempted to enter Private Label manufacturing arena in order to…..

Use excess capacity

Invariably use private label opportunities to increase profitability

Consequences faced !

For manufacturers seeking only to use

excess capacity ,Private

Label Production can eventually become

narcotic

Next Step….

Supply of private-label goods in categories that are life blood of manufacturer’s branded sales

fate of the company…….

Company’s strategy becomes

confused &

it cannibalizes its brand name

products

After the pros & cons , what should a Brand

Name Manufacture do

?

The only recommendation

is……….

If you Don’t , Don’t start

Then, how to stem any further share gain by Private Labels ?

Whether a Dual Manufacturer or National Brand Manufacture only….

Follow the following…….

Invest in Brand Equity

Consistent investments

in product improvements raises costs

to Private Label Imitator

.

Innovate Wisely

Say ‘ NO’ to worthless

trade extensions

Use Fighting Brands sparingly

They take away purchasers of National Brands & rarely make profit.

Build Trade Relationships

Know about your end

customers, more than

anyone else.

Manage the Price Spread

Knowing the shape of your brand’s price

elasticity curve is

essential for smart pricing & maximizing

profit.

Exploit Sales Promotion Techniques

Enhance merchandisin

g of Brand

Manage Each Category

What works for

detergents, wont

necessarily work for soft

drinks.

Use category profit pools as a performance measure

Brand’s objective

should be to maximize

overall category

profit pool & its share of

that pool.

Take Private Label Seriously

Brands should

include in their

marketing plan on how

to limit Encroachment of Private

Labels.

Private Labels

Taking firm considered action, Brand-name manufacturers can

successfully fight

Private Label Challenge

RECAP

Stem Encroachment

by Private Label by

Innovating Wisely

Sparingly usage of Fighting Brands

Investing in Brand Equity

Managing Each

Category

Managing the Price Spread

Use category profit pools as a Performance

Measure

Take Private Label

Seriously

Building Trade

Relationship

Exploiting Sales

Promotion tactics

DISCLAIMER

Created by

Khushi Sahu

IIT BHU,during an internship by

Prof. Sameer Mathur, IIM Lucknow.

www.IIMinternship.com