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Private label brands are shifting from the ‘me too’ perception to ‘trend setters’ with increasing creativity and product innovation and establishing themselves as market drivers. The US private label foods takes a share of 27% of all new food introductions or a whooping 1800 new food products in numbers. The facilitator for this new spurt in private label sales, besides the turbulent economy, is the changing consumer perception of the in house brands. Previously private labels used to compete on price by providing the customer discount and economy private labels.

tescoRealizing that the price war is detrimental to their brand value, retailers are shifting their focus to the premium market, constructing a brands to offer distinct lines. People no longer look at private labels as ‘cheap alternatives’, but with different grades – budget, middle of the road, premium; people now have the flexibility to choose how much they want to spend on the large variety offered by these in house brands. About 70% of TESCO’s customers purchased its in house premium brand ‘Finest’, recording sales of 1.5 billion pounds in Great Britain in the year 2008.

Many factors are fuelling the growth of private labels – well informed customers, supplier overcapacities, centralised supply chain and consolidation of international players. The present retailer is empowered as his control of the supply chain includes choice of suppliers, products ingredients, certification and quality standards, packaging size and design. He also has immense control over the point of contact with the customer as well as large information resources about the customer preferences which helps him in making faster and better decisions with respect to the shelf space, marketing, promotions, presentation and assortment and variety of the line and most importantly price positioning.

In the years to come, with private labels taking the lead on creating new niches and product innovations, both manufacturers and brand managers have to face the challenges posed by the private labels that are more premium, more purse friendly, more variety, better designed and simpler to market with larger profits.


October 24, 2009 at 1:05 pm Leave a comment

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