Manufacturer Brand and Private Brand

Manufacturer Brand and Private Brand

“To survive in such a competitive market place, companies must build brands in order to create a strong differentiation in the market, attract customers with a credible value proposition and to constantly engage customers in ways that would endear them to the brand and to the company” said Martin Roll, the brand guru. These words encompass the whole ethos behind investment in branding.

Manufacturers with their financial prowess invest huge amount of money to make their brand name visible to the consumers against its competitors. This huge spending, if successful may ensure a strong brand and a loyal customer base.

Successful retailers became inspired by the success of manufacturers and came up with products using their own brand name. This was ensured by outsourcing production activities of their products to other manufacturers. This naturally left the retailers to concentrate more on marketing their product and developing their brands rather than focusing on production. These retailer made brands were known as private brands.

Retailer’s brands gained prominence after the entry of discount stores like Kmart and Wal-Mart during the 1960’s. Retailer brands improved their market share further during periods of recession when lower priced private brands were sought by consumers. But the 80’s, private brands were a force to reckon with.

Private label brands were traditionally defined as generic product offerings that competed with their national brand counterparts by means of a price-value proposition. Often the lower priced alternative to the “real” thing, private label or store brands carried the stigma of inferior quality and therefore inspired less trust and confidence. Yet, they still grew and prospered by providing consumers lower priced options for what was often a low involvement purchase decision. Retailers continued to push more and more private label products into different categories of the marketplace because they represented high margins and the promise of profitability with little to no marketing effort.

The intense competition between private labels and manufacturers brand makes up the core of this write up. This article will try to delve into the US consumer market where this battle or competition between these two categories of brands is more profound.

Private Labels Vs Manufacturer Brands: History

The Great Atlantic & Pacific Tea Company (A&P) was one of the first retailers to enter the fray. Begun as a single store in New York City, A&P eventually evolved into a huge chain of small groceries. The chain got its start by taking a smaller profit on items like tea and coffee that were generally high-profit items for smaller groceries. Even in 1911, 62 years after its founding, A&P was carrying only 25 different kinds of products.

National brands at A&P had to fend for themselves against these in-house brands. Although Cream of Wheat once refused to sell to the Tea Company because of the chain’s cost-cutting practices, A&P retained the upper hand in the distribution tussles into the 1930s. In the post-WWII years, however, the retailer discovered