Throughout the 1990s, interest in private label brands in the U.S. grocery industry has increased. Store brands currently account for slightly less than 15 percent of total dollar sales. In several European markets, private labels have been even more influential — for instance, in the United Kingdom, they accounted for 20 percent of sales in 1971 and 36 percent in 1994.1 With current demographics guaranteeing low growth in consumer spending on food and packaged goods far into the next century, private labels can be a formidable force in an already highly competitive grocery environment. The disposable diaper market suggests that, when not supported by a continuous stream of product innovations, categories can turn into commodities, rendering the retailer’s built-in distribution an even more valuable resource. Retailers get quick, cheap sales feedback that allows them to mimic what works for national brands while avoiding more costly mistakes. For example, being close to the customer has helped Starbuck’s turn a long-declining commodity into a value-added, distinctive store brand. Consequently, national manufacturers have become more alert to the threat of private labels, most retailers have taken steps to exploit the opportunity, and many smaller (and a few larger) manufacturers have begun to supply private label alternatives.
In this paper, I focus on the food retailing industry, where private labels are the dominant “brand” in about... To read the complete article, login or sign-up using the form below.
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