Branded products are facing increasing competition worldwide from private label goods from intermediaries. Thanks to an increase in price sensitivity and a decrease in brand loyalty as consumers look to save money, private label products are enjoying significant penetration in many regions. A study of seven countries by the Private Label Manufacturers Association revealed that private label market share has exceeded 40 percent in the United Kingdom, Germany, Belgium, and Switzerland. Market share for retailer brands is at an all-time high in France and Spain, where one of every three products sold carries a private label.
While private brand success is known to be strongly affected by economic conditions and the self-interest of retailers who want to improve their bottom lines, other factors contributing to the growth include improved quality and the development of segmented private brand products. Some private label brands even have a premium category now. Emboldened by the success of private label brands, manufacturers have expanded this “privatization” to new product categories, hoping to expand the success.
This is an excerpt from Dr. Czinkota’s book Global Business: Positioning Ventures Ahead, co-authored by Dr. Ilkka Ronkainen.
Michael R Czinkota and Ilkka A Ronkainen, Global Business: Positioning Ventures Ahead (New York: Routledge, 2011), pg. 187.