PRIVATE LABEL VS. MANUFACTURERS’ BRANDS - A HEALTHY COMPETITION FOR A HEALTHY FOOD MARKET

Every day we are confronted with thousands of different brands and labels in physical but also in online shops. Many of them are manufactured products that companies produce themselves, but many are what is called a private label product, which the Private Label Manufacturers Association (PLMA) defines as: “Private label products encompass all merchandise sold under a retailer's brand. That brand can be the retailer's own name or a name created exclusively by that retailer. In some cases, a retailer may belong to a wholesale group that owns the brands that are available to only the members of the group.”

According to the US National Commission on Food Marketing, the private label or distributor’s label is merchandise packaged mainly to a distributor’s specifications either by a distributor or a manufacturer for resale only by a distributor, under a brand name owned by a distributor. (US National Commission on Food Marketing, page 1)

This way, a company or a retailer wishing to market a new brand or a new product does not need to possess the whole manufacturing facility in order to create the product, but can simply contract a manufacturer to produce the wanted product under the company’s desired brand name. So the cost of production is comprehensive and manageable, and there is no need for any investment into machinery or industrial setup.?

The benefit for a consumer is that the product consists of the same ingredients as the manufactured good, but is purchasable at a lower price. The consumer can also trust the private label brand name as it mostly belongs to the trusted retailer and is marketed under their own brand name: “For the consumer, the private label represents the choice and opportunity to regularly purchase quality food and non-food products at savings compared to manufacturer brands, without waiting for promotional pricing. Private label items consist of the same or better ingredients than the manufacturer brands, and because the retailer's name or symbol is on the package, the consumer is assured that the product meets the retailer's quality standards and specifications.” (US National Commission on Food Marketing, vii)

Competition between retailers’ and manufacturers’ brands is an important factor in the food market because of its implications for food prices, bargaining power of different groups within the industry, product innovation, and market structure.?

The US National Commission on Food Marketing did a study via a questionnaire, where they asked the consumers about their preferences when it comes to retailers’ and manufacturers’ brands. In general, the respondents to the survey on attitudes toward food brands thought that some people bought well-known brands because they believed they were better, and that other people bought less-known brands because they were cheaper, or the persons were searching for different brands or products. “The two surveys, one on consumer goods in general and one on foods, complement each other. Both indicated that many consumers are price conscious and do switch brands. This creates a favourable climate for private label products having comparable quality at lower prices as compared with advertised brands.” (US National Commission on Food Marketing, page 84)

The company Selectum does not only offer the private label manufacturing of snacks but is also a member of the PLMA, which shows the importance of this vast network for us as an external producer. Selectum participated in the last PLMA 2022 fair in Amsterdam on 31 May & 1 June 2022 where we had the opportunity to present the innovative Paddies snacks to international retailers and global companies.?

SOURCES:?

https://www.plmainternational.com/industry-news/private-label-today

Special Studies in Food Marketing; US National Commission on Food Marketing; Technical Study No. 10; Washington DC; June 1966