Private label

Private label products are those manufactured by one company for sale under another company's brand. Private-label goods are available in a wide range of industries from food to cosmetics. Private label brands managed solely by a retailer for sale in a specific chain of stores are called store brands. 

They are often positioned as lower-cost alternatives to regional, national or international brands, although recently some private label brands have been positioned as "premium" brands to compete with existing "name" brands. Such brands are generally less expensive than national brands, as the retailer can optimize the production to suit consumer demand and reduce advertising costs. 

Goods sold under a private label are subject to the same regulatory oversight as goods sold under a national brand. Consumer demand for such brands might be related to individual characteristics such as demographics and socioeconomic variables.

Prevalence
Growing market shares and increasing variety of private label consumer packaged goods is now a global phenomenon. However, private label market shares exhibit widespread diversity across international markets and product categories. Empirical research on private label products has been of substantial interest to both marketing academics and managers. Considerable work has been done on well-defined areas of private-label research such as private-label brand strategy, market performance of private-label products, competition with national brands, market structure, and buyer behavior.

A Food Marketing Institute study found that store brands account for an average of 14.5 percent of in store sales with some stores projecting they will soon reach as high as 20 percent of all sales. Store branding is a mature industry; consequently, some store brands have been able to position themselves as premium brands. Sometimes store-branded goods mimic the shape, packaging, and labeling of national brands; for example, "Dr. Thunder" and "Mountain Lightning" are the names of the Sam's Choice store brand equivalents of Dr Pepper and Mountain Dew, respectively.

Examples 

Richelieu Foods is a private-label company producing frozen pizza, salad dressing, marinades, and condiments for other companies, including Hy-Vee, Aldi, Save-A-Lot, Sam's Club, Hannaford Brothers Co., BJ's Wholesale Club (Earth's Pride brand) and Shaw's Supermarkets (Culinary Circle brand). McBride plc is a Europe-based provider of private-label household and personal care products.

In 2007, there was a recall in the United States of more than 60 million cans of pet food sold under more than 100 brand names made by Menu Foods. The mass recall openly revealed that competing brands are often made by the same manufacturer. However, ingredients, designs and quality may differ substantially among the labels produced by the same manufacturer.

Economic assessment
Research has found that some retailers believe that, while advertising by premium national brands brings shoppers to the store, the retailer typically makes more profit by selling the shopper a store brand. The Fashion Institute of Technology has published research on store branding and store positioning. Grocery chains such as Aldi and Save-A-Lot primarily sell store brands to promote overall lower prices, compared to supermarket chains that sell several brands.

Private Label Manufacturers Association 
The Private Label Manufacturer's Association (PLMA) in the United States categorizes private-label manufacturers into four categories:
 Large national brand manufacturers that utilize their expertise and excess plant capacity to supply store brands.
 Small, quality manufacturers who specialize in particular product lines and concentrate on producing store brands almost exclusively. Often these companies are owned by corporations that also produce national brands.
 Major retailers and wholesalers that own their own manufacturing facilities and provide store-brand products for themselves.
 Regional brand manufacturers that produce private-label products for specific markets.

See also 
 Private Label Strategy
 Badge engineering
 Copacker
 White-label product

References

Further reading
 
 Kumar, Nirmalya; Steenkamp, Jan-Benedict E.M., Private Label Strategy - How to Meet the Store Brand Challenge. Harvard Business Press 2007
 Private Label Manufacturers Association International Council

Category:Brand management