Wait, Mr. Retailer, you do need my manufacturer brand. ~ Brand Mix

Friday, April 17, 2009

Wait, Mr. Retailer, you do need my manufacturer brand.

The Private Label path to retail dominance continues apace, now with even more pace since the economy started tanking. Vast swathes of manufacturer brands are at risk as their share of shelf space is squeezed to make way for the latest retailer own-labels.

The U.S. is, by no means, the leader in private label sales. Many countries in Europe, especially Switzerland which has almost a 50% Private Label share, are further down the path.

But now, here's news from one retailer in Spain, one of those highly developed Private Label markets, that gives manufacturers a new line of argument about why their brands should stay on the shelves, albeit not a particularly attractive one.

Mercadona is Spain's leading grocery chain and reported strong sales growth in 2008 as it drove down prices to put the squeeze on the competition. As part of its cost-cutting program to support this strategy, Mercadona has been focusing on private label and aggressively cutting back on manufacturer brands. At the end of 2008, it cut its product lines by a further 8%.

The removal of so many manufacturer products did provoke somewhat of a consumer backlash with complaints that the choice available was now too limited.

But also (and finally), here is the interesting point noted by Ugo Ceria posting on JWT Anxiety Index: With so few manufacturer brands left, smart shoppers don't feel so smart any more because they can't see how much money they are saving by buying private label.

So there you have it, manufacturers. Your new argument is: "Please, Mr. Retailer keep us on the shelf. Perhaps no-one will buy our product but all those who buy yours will feel so much better for it." As I said, not attractive but if it works, it works.

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