"Develop Private Label products to make additional mutual profits"
The so-called private label (PL) brand is nothing new. The PL brand business has been around for a long time, and has been made successful by the discount chains especially. The assortment of Aldi and Lidl exists in more than 80% of PL brands. It's a key part of their business model. Also full service supermarket and hypermarket chains, such as Walmart (USA), DIA (Spain), Lenta (Russia), Carrefour (France), Tesco (UK), Rewe and Edeka (Germany) offer various private labels. The total turnover of private labels in the food industry is estimated at 40% (ACNielsen study, 2018) and growing which obviously shows the magnitude of this business model.
Due to the strong growth of PL brands throughout the world, FMCG manufacturers often face a dilemma of either developing an own brand or producing a private label product to be successful for a specific retailer.
The principle point is: "if your product is relatively easy to copy, then expect a significant number of private label alternatives to be available for a retailer to choose from. Even if the product itself is easy to copy, your cost of sourcing and/ or production becomes the critical point! However, if your product or product-quality is difficult to copy, then generally it is prudent to stay away from private label."
In this field DRC is specialized and able to point out the advantages and risks of either staying firmly as a brand, or entering the world of PL brands and contract manufacturing. We also can tell the story from the end consumer's perspective and help understand the customers' needs and retailer's PL brand strategy better. Consequently, based on our discount retail knowledge and insights, we hands-on support FMCG manufacturers and retailers in their strategic choices and PL brand implementation.
Click for our DRC Private Label services: