Growing Impact Of The “Private Label”

Posted: August 1, 2011 in Brand management, Marketing
Tags: , , , , , , ,

A few years ago I looked askance at a very famous football player with his family in a market when I saw him buying some “private label” products such as flour, sugar. Since they were all cheaper than the other well-known brands, I had a misperception that private label products colloquially known as “market brand” were second-class, did not have quality due to their low prices. However, the football player should have noticed the fact that private label products are qualified as much as major brands, earlier than me.

Recently, this misperception has been changing substantially in that the private label trade has a global volume of € 300 billion. Obviously, the most important feature that makes private label products attractive for consumers is their prices. Although they are sold at cheaper prices compared to major brands, private label products are qualified to compete with a lot of branded products in terms of quality.

But what is “Private Label” exactly? Let’s answer this question first. “Private Label” signifies a method of production where a specific retailer has a manufacturer make goods exclusively with pre-designated characteristics to carry the label of that retailer. It is an emerging sector in the world. It can be regarded as a very good preliminary of presence in foreign market for many firms if high cost of branding is considered.

Although development of market branded products started in 1980s, these products were used firstly in the USA 100 years ago by chain grocers called A&P. By the 1980s, private label products were used widely and expanded. The reason of this speedy development is the offer of chain supermarkets that sell their products equivalent or nearly equivalent to those made by national manufacturers to consumers at quite competitive prices.

On the other hand, private label emerged in Europe in 1970s as a result of the attempt made by French retailer Carrefour. Following this development, Continent company added a diverse array of private label products to its product range. Then, market brands were launched in Belgium, the Netherlands, West Germany, Sweden, Ireland and the UK.

A Wide Range Of Product

After consumers’ perception that market brands have poor quality has been eliminated, the sector is growing gradually year by year. Today, the sector has a volume of 300 billion dollar and it is expected that market share of market branded products will increase due to their price. Consumers are now more consciously making a comparison of price and quality. Therefore, market brand products are more advantageous.

Another factor that has an impact on prices of these products is the fact that they don’t have marketing costs such as advertising. As a result, they can keep their profit margins lower.

It is possible to find a full range of private label products although most of the production is made in the field of cleaning products and food industry. Because consumers generally prefer the products in this segment. Every year consumers spend more on private label product. However, it won’t be truism to regard private label produts as products which is sold only because of their lower prices. Around the world, there are many private label products which are of high quality, more attractive than market leaders and have a respectable prestige as well as consumer loyalty.

Consumer Loyalty Provided

Certainly, ever-increasing consumers’ demands have developed the sector. Especially in the recent period, a $ 22 of $ 100expenditure on fast-moving consumer products goes to private label products. Even in last 10 years the number of product category for private label products has increased from 1100 to 2600 products.

Especially in European countries, the usage rate of private label products is very high. In 2010, the sector grew by 53 % in Switzerland, 38 % in Belgium, 41 % in Germany, 42 % in Spain and in the UK. Market brands have become more popular among European shoppers. Market-branded products make up at least 40 % of all products sold across 5 countries. Although the major development has taken place in West European countries like France, Germany, Spain, the Netherlands and Belgium, some developing countries like Turkey, Poland, Hungary and Slovakia have gained strength substantially.

It Appeals To Consumers Of All Ages

As in the case of famous football player above, these products have been preferred consciously even by high-income consumers due to production quality and increasing product range although only middle and low-income consumers preferred them in the beginning of 2000s.

According to Ipsos MORI Research, among young consumers there is a powerful support towards market brands. These consumers are in the age range of 16-34 years. They often purchase market branded products and are more conscious compared to consumers of middle and top age group.

Meanwhile, it should be emphasized that it is not easy process to produce special branded products as it looks. So almost all of the global companies act carefully and rigorously while choosing the product on which they will put their brand and the manufacturer with whom they will work together. They want to make themselves a company with established standards, quality control in each stage of production in addition to a company managed contemporarily. Shortly, they want to have 100 % reliability and sustainability.

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