6 tips for implementing Private Label brands

Brands are important for:

(1) Representing a specific value promise;
(2) Personifying a product, service or experience;
(3) Creating emotional connections with products and services; and
(4) Being the main contact points with customers making the purchasing decisions easier.

At the end, the value of a brand resides in its capacity of generating future cash flows. A “stained” brand may hurt importantly a company, putting in jeopardy its future.

In view of that, large companies, owners of big brands, invest heavily in developing, supporting and protecting their brands. This is also materialized in the protection of the price level positioning of the brand.

The dissemination of brands in distribution (retail), or yet, private label brands, apparently, took place in the 70s as a reaction to high inflation. At that time these brands were of low quality and low price.  Currently, private label brands are positioned in different levels of price and quality, including at the level of the big brands of manufacturers.  Worldwide the market share of private label is estimated at 17%. Europe is the region with higher share, especially in Switzerland, Spain, Portugal, United Kingdom, Germany, Belgium and France. In Brazil the market share is estimated at 6%.

The logic behind private label brand in retail is that of offering “value” for the customer`s money.  The customer will pay less for a product “homologated” by the retailer. For the retailer is a way of altering the balance of power unfavorably to the manufacturers and, equally, creating differentiation, and, as a consequence, incrementing its margins.

The categories that work in private label are those that have a low level of differentiation or product and brand and yet a high sensibility to price and high purchasing frequency.  Examples of products with higher chances of success are: Milk, Grains e Cleaning Products.

The growth and expansion of private label brands depends on marketing investments; on creating a portfolio/line of products (premium, average and first price); and, also, innovation.

What to pay attention to when deciding for developing private label brands?

1.    You may test first!

Private label is owned by the retailer. It is its responsibility to create, register, maintain, etc.
An alternative, testing first, would be working with an exclusive brand.  An exclusive brand is owned by a third party company that grants the retailer with the exclusive rights over its use for a given agreed time. This is, also, an interesting option for those low quality products avoiding the image risk. Its use should not be prioritized as once the retailer build the brand, making it grow, and lose the rights over its use.  

2.    If the decision is to create a private label brand and use it, then register and protect it

a.    Before registering a brand is important to be clear on which categories it will be used to select the ‘classes’ under which will be registered.
b.    Additionally, when thinking in the brand and before spending too much money in its development conduct an investigation to check if the such a brand is not already taken (registered by a third party).
c.    Follow up the registration of similar or equal brands in other categories and use the right to oppose.
d.    Keep evidence of the use of the brand, as it will help to protect it. A non used brand has its legal protection reduced.

3.    The selection of the manufacturer of the products under your brand is risk management

a.    Carefully select the supplier: conduct a research, visit the plant, check references;
b.    Make use of a lab to conduct, periodical, analysis of the products; and
c.    Do not be afraid of breaking up with the supplier, replacing it for another. The beauty of a private label is its “portability”!

4.    Do not save on packaging development; and

5.    Position the private label brand product next to the branded one, in order to give opportunity to the customer to decide (.... and at the same time “increment” the cost of branded products!).

6.    Bring help! This avoids undesireble costs and reduce the learing curve.

This may be done by bringing a professional from a retailer that has private label brands (i.e.: Carrefour, Pão de Açucar, Makro to name a few with strong private label brands). Or, alternatively, bring a consultant that may help develop the area and train your team!

Retailers or distributors must always consider and study the addition of private label brands in their assortment.

At 2B Partners Consulting we are dedicated to help companies to address the questions above thru the services of advisory board, interim management, managerial applications and consulting focused on financial advisory, operations improvement and organizational efficiency. Contact us to obtain more information by sending an email to This email address is being protected from spambots. You need JavaScript enabled to view it.