Monday, March 12, 2012

The Private Label War.

Private label or store controlled CPG (consumer packaged goods) products have a lot going for them. 

They are less costly in part because they are not burdened by expenditures on marketing including advertising, promotions, and slotting fees (payments to get new products stocked in stories) and because their production and logistics are simpler and more efficient. Stores have control over the price and thus can provide customers with a guaranteed substantial price value. During the periodic times of recession, price becomes more important and private label brands can gain and hold customers. For many products, private label brands enjoy the best placement with stores. They can be at the eye level or even on end displays, for example. And the packaging can send cues that the product is similar to the national brands who, needing the cooperation of the retailers, are reluctant to make an issue of it. 

CPG private label share is just over 20% or so in the US and growing at a very slow rate. Given the advantages of private label brands the question is why have they not grown more over the years? Why are they not matching the performance in Europe where the share is much higher and growing faster. There are at least three explanations that David Aaker highlights in this wonderful article that provide strategic guidance to both private label brands wanting to break out and to national brands attempting to inhibit their growth. 

Read the three explanations here

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