Private label explained

A private label, also called a private brand or private-label brand, is a brand owned by a company, offered by that company alongside and competing with brands from other businesses.[1] [2] A private-label brand is almost always offered exclusively by the firm that owns it, although in rare instances the brand is licensed to another company.[3] The term often describes products, but can also encompass services.

The private-label process contains a company that manufactures products, while another company brands and sells those products. In this field of food and beverage, private labeling enables brand-holders to create personalized products for their target markets.[4]

The most common definition of a private label product is one that is outsourced, in which a firm is contracted to make a product under another name.[5] [6] [7] However, it can also define products made in retailer-owned firms.[8] For example, in 2018, The Kroger Company had 60% of its private brands produced by third parties; the remaining 40% was manufactured internally by plants owned by Kroger. Private-label producers are usually anonymous, sometimes by contract. In other cases, they are allowed to mention their role publicly.

Etymology

The term private label originated in retail, but has since been used in other industries as well. Probably the best known private-label brands are store brands, which are managed by supermarket and grocery store chains. Examples are Simple Truth by Kroger and Great Value by Wal-Mart. Store brands compete with national brands or name brands, like Coca-Cola or Lay's.

The term private-label product overlaps with the term white-label product. They are sometimes used interchangeably, but they don't mean the same thing. A private-label product is created exclusively for a client, who sets specific demands on what the product or service must contain.[9] A white-label product is not created exclusively for one company, and although white-label manufacturers might offer customizations to their products, these are usually limited.[10] The specifications of a private-label product are set out by the client, whereas a white-label product is more generic and already designed.[11] [12]

Store brands

In the supermarket and grocery store industry, the term private label/brand is almost always used, even if the same product is sold non-exclusively to multiple retailers with different packaging (white label/brand).

A store brand, also called a house brand or, in British English, an own brand, is a private-label brand trademarked and managed by a retailer. This brand is almost always offered exclusively at the chain store that owns it, although in rare instances the brand is licensed to another company.[13] Examples of store brands are Simple Truth by Kroger, Great Value by Wal-Mart, Kirkland Signature by Costco, Clover Valley by Dollar General, Market Pantry by Target, and Specially Selected by Aldi.[14] [15] Store brands can also be eponymous, or named after the store, such as Joe's O's cereal by Trader Joe's.[16] Store brands compete with national brands, also called premium brands or name brands,[17] [18] [19] with its items sometimes being called brand-name products.[20] Examples are Coca-Cola, Lay's, and Kellogg's. The general appeal of store-brand products is that they are usually offered at a significantly lower price than their name-brand counterparts.

Most private-label store brand products are manufactured by third parties, but some are made by companies owned by the retailer.[21] For instance, a vice-president of The Kroger Company stated in 2018 that approximately 60% of their private-label products are outsourced. The remaining 40% is manufactured internally: in 2018, Kroger owned 38 plants, including 19 dairy farms, 10 bakeries, and 2 butcheries, strategically spread across the US.[22] Similarly, Safeway Inc. owned 32 plants as of 2012.[23] Most retailers prefer to keep the identity of their suppliers private, and accordingly have non-disclosure clauses in their contracts, making it difficult to determine the producer of a private-label product.[24] [25] In a few cases though, the manufacturer is allowed to mention it publicly,[26] is revealed through a product recall, or in rare instances, is stated on the product itself. For example, the bags of Kirkland Signature coffee by Costco feature the text "Custom roasted by Starbucks".[27] [28]

Private-label brands emerged in the 19th century.[29] Until the early 20th century, their general focus was on delivering quality at a price below that of the national brands. In the first half of the 20th century, the quality of private brands diluted and their standards dropped. In their competitive struggle against national brands, low prices were considered more important than quality. In the second half of the century, this trend gradually reversed.[30] As quality and visual appearance improved, private labels rose to prominence in the 1970s and '80s.[31] By the 1990s, they were increasingly seen as a threat to the established brands.[32] Also, from the '90s onwards, a premiumization of store brands began to occur,[33] giving rise to more expensive premium private labels.[34] [35]

Generic brands are often associated with store brands. Generic products were first introduced in the United States in 1977,[36] [37] [38] quickly winning market share from national and private-label brands.[39] A 1981 academic article described them as products "without brand names, in very plain packages with simple labels and usually sold at prices below both the national and private brands with which they compete". Packages of generic products often feature only the name of the type of product it contains, e.g. "Beer" or "Batteries". Nowadays, the terms generic brand and store brand are sometimes used interchangeably.[40] [41] The term generic can be used as a pejorative toward store brand items that are perceived as bland or cheap.[42] [43]

A private-label brand is often produced by the same company that manufactures the national brand of that product.[44] Different brands target different consumers. For instance, Kimberly-Clark makes Huggies diapers, but also produces a Walmart budget version.[45] Allegedly, some store-brand items are identical to their name-brand counterparts: they are said to be literally the same product, except for the packaging and price. In other cases, a manufacturer can have multiple formulas for one product, creating a private-label version using one method and the national-label version using another.[46] In 2007, a mass-recall of contaminated pet food products brought to light that more than 100 different brands of pet food, both premium- and private-label, were in fact produced by a single company: Menu Foods Inc. in Ontario, Canada. The ingredients and recipes they used differed substantially among brands, depending on what their clients specified.

In the United Kingdom, supermarkets have been criticised for "fake farm" private label brands.[47] [48]

In fast food

Fast food restaurant chains sell their products under their private-label brands. Their core items are usually fries and meat-based items, but they might also offer brownies, muffins, cookies, and salads. These private-brand products are offered alongside national-brand products, such as soft drinks by Coca-Cola or Pepsi, and ice creams co-branded with Oreo or M&M's.

In finance

A private-label credit card (PLCC) is a type of credit card that can only be used at a specific company or chain of companies. Since this is virtually always a retail business, they are also called store cards.[49] [50] The retailer partners with a bank that issues the cards, funds the credits, and collects payments from customers. The cards themselves are branded with the logo of the store, but not the bank.[51] Examples are the Target Debit RedCard (issued by TD Bank, N.A.),[52] the Walmart Reward Card (issued by Capital One),[53] and the Amazon Store Card (issued by Synchrony Bank).[54] PLCCs also do not carry the logo of the payment network (e.g. Visa or Mastercard), but they do use that network for transactions.

Private-label store credit cards are sometimes compared to but not the same as co-branded credit cards. These cards usually feature the logo of the payment network, and sometimes the logo of the bank.[55] Unlike PLCCs, co-branded cards work like 'normal' credit cards, usable at any place where that type of card is accepted.[56] For instance, warehouse chain Nordstrom offers a Nordstrom Store Card (private label) and a Nordstrom Credit Card (co-branded), both issued by TD Bank, N.A. and using Visa's network.

Benefits of private label

See also

External links

Notes and References

  1. Web site: Marshall . Hargrave . How Private Brands Matter . . https://web.archive.org/web/20220328163920/https://www.investopedia.com/terms/p/private-brand.asp . 28 March 2022 . live.

  2. "Any time a product is packaged under a label owned by a retailer, it can be called private label."

  3. .
  4. https://blog.brand-mart.com/private-labeling/ brand-mart
  5. Web site: Stella . Morrison . How Private Labeling Works . business.com . https://web.archive.org/web/20220502080909/https://www.business.com/articles/private-labeling-details/ . 2 May 2022 . live.
  6. Web site: MBA Skool Team . Private Label Meaning & Definition . MBA Skool . https://web.archive.org/web/20200918200522/https://www.mbaskool.com/business-concepts/marketing-and-strategy-terms/10716-private-label.html . 18 September 2020 . live.
  7. Web site: Rasha . Mahmoud . Private Label: Definition, Example, Pros & Cons . Retail Dogma . 31 May 2020 . https://web.archive.org/web/20220502081438/https://www.retaildogma.com/private-label/ . 2 May 2022 . live.
  8. Web site: What is Private Labeling? . Ecommerce CEO . Orbit Local LLC . https://web.archive.org/web/20220304223721/https://www.ecommerceceo.com/learn/private-labeling/ . 4 March 2022 . live.
  9. Web site: Rob . Starr . White Label vs. Private Label Products: What's the Difference? . Small Business Trends . 7 April 2022 . https://web.archive.org/web/20210510065930/https://smallbiztrends.com/2019/10/white-label-vs-private-label.html . 10 May 2021 . live.
  10. Web site: White Label vs Private Label – What's the Difference? . That Company . 11 April 2020 . https://web.archive.org/web/20200526025805/https://www.thatcompany.com/white-label-marketing/white-label-vs-private-label . 26 May 2020 . In a white label relationship, while the provider or manufacturer may offer a range of customizations to fit specific needs, they specify the design, parts, ingredients, or offerings..
  11. Web site: Brittany . Henneberry . What is Private Label Branding? Private Label Definition and How it Works . Thomasnet.com . Thomas Publishing Company . https://web.archive.org/web/20220503182031/https://www.thomasnet.com/articles/custom-manufacturing-fabricating/what-is-private-label-branding/ . 3 May 2022 . live.
  12. Web site: Matt . Ellis . Beginner's Guide to Private Labeling and White Labeling . Ecomdash . 11 March 2021 . https://web.archive.org/web/20210414110431/https://www.ecomdash.com/beginners-guide-private-labeling-white-labeling/ . 14 April 2021 . live.
  13. Book: Fitzell, Philip B. . Private Labels: Store Brands & Generic Products . 1982 . AVI Publishing Company . Westport, Connecticut . 978-0-87055-415-5 . 4 .
  14. Web site: Louis . Biscotti . Private Label Brands Roar At Retail . . 2 May 2019 . https://web.archive.org/web/20201202101846/https://www.forbes.com/sites/louisbiscotti/2019/05/02/private-label-brands-roar-at-retail/ . 2 December 2020 . live.
  15. Web site: One more way Aldi maintains its low-price reputation: Specially Selected products . brick meets click . 29 March 2021 . https://web.archive.org/web/20210331015757/https://www.brickmeetsclick.com/one-more-way-aldi-maintains-its-low-price-reputation--specially-selected-products . 31 March 2021 . live.
  16. Web site: Katherine . Baker . 15 Healthy Cereals You Can Get Your Hands on at Trader Joe's . Spoon University . 26 April 2017 . https://web.archive.org/web/20170822210915/http://spoonuniversity.com/lifestyle/healthy-trader-joe-cereals-jumpstart-your-morning . 22 August 2017 . dead.
  17. Web site: ((Chron Contributor)) . Store Brand Vs. National Brand . Chron . https://web.archive.org/web/20220324055030/https://smallbusiness.chron.com/store-brand-vs-national-brand-68294.html . 24 March 2022 . live.
  18. Web site: Trent . Hamm . The Only Difference Between Brand Names And Generic Groceries Is The Mental Block . . 28 July 2012 . https://web.archive.org/web/20220502215514/https://www.businessinsider.com/the-only-difference-between-brand-names-and-generic-groceries-is-the-mental-block-2012-7?international=true&r=US&IR=T . 2 May 2022 . live.
  19. Web site: Laurin . Generic vs Name Brand Foods – Is there really a difference? . The Dinner Daily . 23 April 2015 . https://web.archive.org/web/20210410115623/https://thedinnerdaily.com/generic-vs-name-brand-foods-is-there-really-a-difference/ . 10 April 2021 . live.
  20. Web site: Hitesh . Bhasin . Generic Brand Definition – Difference from Brand Name . Marketing91 . 8 May 2020 . https://web.archive.org/web/20200920231329/https://www.marketing91.com/what-is-generic-brand/ . 20 September 2020 . live.

  21. "The label owner may manufacture his own private label products or have them manufactured and packaged to certain specifications by outside sources, including imports."

  22. Web site: Lawrence . Aylward . Crowning Kroger . Store Brands . 23 February 2018 . https://web.archive.org/web/20211009112959/https://storebrands.com/crowning-kroger . 9 October 2021 . live.
  23. Web site: Kathie . Canning . Is Self-Manufacturing Right For You? . Store Brands . 4 January 2012 . https://web.archive.org/web/20220503190359/https://storebrands.com/self-manufacturing-right-you . 3 May 2022 . live.
  24. Web site: Sophie . Hirsh . How Trader Joe's, Whole Foods, and Kroger Make Their Store-Brand Products . Green Matters . 4 January 2022 . https://web.archive.org/web/20220407184222/https://www.greenmatters.com/p/who-makes-store-brand-products . 7 April 2022 . live.
  25. Web site: Vince . Dixon . What Brands Are Actually Behind Trader Joe's Snacks? . . 9 August 2017 . https://web.archive.org/web/20220411065156/https://www.eater.com/2017/8/9/16099028/trader-joes-products . 11 April 2022 . live.
  26. Web site: Stefanie . Tuder . How La Boulangerie Bounced Back and Into Trader Joe's and Costco . Eater . 28 October 2016 . https://web.archive.org/web/20210331033143/https://sf.eater.com/2016/10/28/13407940/la-boulangerie-factory-product-san-francisco . 31 March 2021 . live.
  27. Web site: Serah . Louis . These are the big brands hidden behind Costco's Kirkland label . MoneyWise . 23 December 2021 . https://web.archive.org/web/20220412015231/https://moneywise.com/life/lifestyle/the-big-brands-behind-costcos-kirkland-signature-items . 12 April 2022 . live.
  28. Web site: Laura . Willcox . The Untold Truth Of Costco's Kirkland Brand . Mashed . . 22 February 2022 . https://web.archive.org/web/20220319175942/https://www.mashed.com/738166/the-untold-truth-of-costcos-kirkland-brand/ . 19 March 2022 . live.
  29. .
  30. .
  31. .
  32. John . Quelch . David. Harding . Brands Versus Private Labels: Fighting to Win . . January–February 1996 . https://web.archive.org/web/20160524140733/https://hbr.org/1996/01/brands-versus-private-labels-fighting-to-win . 24 May 2016 . dead.
  33. David . Dunne . Chakravarthi . Narasimhan . The New Appeal of Private Labels . . May–June 1999 . https://web.archive.org/web/20210421112408/https://hbr.org/1999/05/the-new-appeal-of-private-labels . 21 April 2021 . dead.
  34. Web site: Mary Ellen . Shoup . Deloitte report: What does the future hold for the food retail sector? . FoodNavigator-USA . 19 June 2020 . . https://web.archive.org/web/20200621095248/https://www.foodnavigator-usa.com/Article/2020/06/18/Deloitte-report-What-does-the-future-hold-for-the-food-retail-sector . 21 June 2020 . live.
  35. Web site: The rise of premium private label and its impact on discount retailers . nielseniq.com . . 2 August 2019 . https://web.archive.org/web/20220503204452/https://nielseniq.com/global/en/insights/analysis/2019/the-rise-of-premium-private-label-and-its-impact-on-discount-retailers/ . 3 May 2022 . live.
  36. John J. . Wheatley . 1981 . The Effect of Generic Products on Consumer Perceptions and Brand Choice . Advances in Consumer Research . 8 . Kent B. . Monroe . Ann . Abor . Association for Consumer Research . 166–169 . https://web.archive.org/web/20201020223143/https://www.acrwebsite.org/volumes/9804 . 20 October 2020 . live.
  37. Martha R. . McEnally . Jon M. . Hawes . January 1984 . The Market for Generic Brand Grocery Products: A Review and Extension . . 48 . 1 . 75–83 . 10.2307/1251313. 1251313 .
  38. .
  39. News: Margaret . Yao . Clorox vs. Chlorine Bleach: Generic Products Are Winning Noticeable Shares Of Market From National Brands, Private Labels . . 10 August 1979 . 6. .
  40. Brad . Tuttle . Brand Names Just Don't Mean as Much Anymore . . 1 November 2012 . https://web.archive.org/web/20220120175010/https://business.time.com/2012/11/01/brand-names-just-dont-mean-as-much-anymore/ . 20 January 2022 . live.
  41. Web site: Laura . Heller . 10 Secrets About Store Brands . Forbes . 29 June 2011 . https://web.archive.org/web/20110903071648/https://www.forbes.com/sites/lauraheller/2011/06/29/10-secrets-about-store-brands/ . 3 September 2011 . live.

  42. "Similar stores like Aldi ... have a private-label concept but have not transcended the stigma of "generic" as Trader Joe's has, nor have they mastered the art of brand deception (or perception)."

  43. News: Carolyn . Heneghan . Generic no more: How private label products compete with national brands . Grocery Dive . Industry Dive . 7 November 2016 . https://web.archive.org/web/20220503211953/https://www.grocerydive.com/news/national-branded-vs-private-labels/535667/ . 3 May 2022 . live . While national brands had colorful packages with pictures and words describing product quality, private label brands were called "generic," with bland packaging and branding. Consumers then often considered private label products to be of inferior quality compared to the national brands they stood next to..
  44. Web site: Laurin . Generic vs Name Brand Foods - Is there really a difference? . The Dinner Daily . 23 April 2015 . https://web.archive.org/web/20211124220746/https://thedinnerdaily.com/generic-vs-name-brand-foods-is-there-really-a-difference/ . 24 November 2021 . live . Another interesting piece of information: generics are often made by that national brand, in the same plant, from the same farm, the same dairy etc, but just packaged in a less flashy way..
  45. News: Ellen . Byron . 101 Brand Names, 1 Manufacturer . The Wall Street Journal . 9 May 2007 . CCXLIX . 108 . B1 . https://web.archive.org/web/20150403064933/https://www.wsj.com/articles/SB117867462888496739 . 3 April 2015 . dead.

  46. Sometimes suppliers have multiple formulas for one product; they might produce a private-label version using one formula and the brand label with another.

  47. News: Smithers . Rebecca . Tesco faces legal threat over marketing its food with 'fake farm' names . 5 July 2023 . The Guardian . 13 December 2017.
  48. News: White . Kevin . Quinn . Ian . Tesco takes flak over 'misleading' Farm brands . 5 July 2023 . The Grocer . en.
  49. Web site: Julia . Kagan . Guide to Store Credit Cards . Investopedia . https://web.archive.org/web/20220426045203/https://www.investopedia.com/terms/p/private-label-credit.asp . 26 April 2022 . live.
  50. Web site: Lee . Huffman . Dia . Adams . What's The Difference Between A Store Card And A Credit Card? . Forbes . 3 January 2021 . https://web.archive.org/web/20210510050439/https://www.forbes.com/advisor/credit-cards/whats-the-difference-between-a-store-card-and-a-credit-card/ . 10 May 2021 . live.
  51. Web site: Latoya . Irby . What Is a Private Label Credit Card? . . 9 June 2021 . https://web.archive.org/web/20220316195900/https://www.thebalance.com/what-is-a-private-label-credit-card-5188474 . 16 March 2022 . live.
  52. Web site: Target REDcard . . https://web.archive.org/web/20220207141514/https://money.usnews.com/credit-cards/td-bank/target-redcard . 7 February 2022 . live.
  53. Web site: Holly D. . Johnson . Walmart Rewards Card Review . The Balance . https://web.archive.org/web/20210416144239/https://www.thebalance.com/walmart-credit-card-review-4768192 . 16 April 2021 . live.
  54. Web site: Brendan . Harkness . Review of the Amazon.com Store Card . Credit Card Insider . 6 January 2020 . https://web.archive.org/web/20200926090439/https://www.creditcardinsider.com/reviews/amazon-com-store-card-review/ . 26 September 2020 . dead.
  55. Web site: kyle . Private Label vs Co Branded Credit Cards: What Is The Difference? . Via Travelers . 25 February 2022 . https://web.archive.org/web/20220303142636/https://viatravelers.com/private-label-vs-co-branded-credit-cards/ . 3 March 2022 . live.
  56. Web site: Elizabeth . Gravier . How co-branded credit cards work and the 5 most unique ones we found . . https://web.archive.org/web/20200604013243/https://www.cnbc.com/select/co-branded-credit-cards/ . 4 June 2020 . live . Like a store card or a loyalty card, using a co-branded card lets you access discounts and special deals. However, since the card is backed by a major issuer and/or network, you can use it anywhere that type of card is accepted..
  57. Book: Kumar . Nirmalya . Private Label Strategy: How to Meet the Store Brand Challenge . Steenkamp . Jan-Benedict E. M. . 2007 . Harvard Business Press . 978-1-4221-0167-4 . en.
  58. Web site: The potential for powerhouse Private Brands: an updated view McKinsey . 2023-05-19 . www.mckinsey.com.
  59. Web site: Barnes . Jo . 2023-04-25 . What Is Amazon FBA Private Label? . 2023-05-19 . Your Lifestyle Business . en-US.

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