Private label brands have been gaining popularity for many years as customers have learned that the quality tradeoff can be minimal. Time magazine today ran an article, "Aldi: Grocer for the Recession". With consumers under pressure, which brands or categorie do you think are most vulnerable to inroads from private label?
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The packaged food industry in general are most vulnerable to private label competition. The problem minimal differentiation between products. For example, private label chips are equal or better than brands like Lays potato chips.
Consumer are smart shoppers. Once they tried private label and liked it, there is no going back to brand products. Private label will always win on price because there is no marketing costs. The only way for brand products to win is focus on providing top quality.
The low-end electronics products category, such as memory sticks, cables, and other peripherals are the most prime targets. They roll of the same production lines as brand name products in many cases, but with a different brand name, different color, or different logo.
It's always most difficult to protect brands at the low end of the market. It's inevitable brands will grow more vulnerable over time, except in rare cases where people are extremely brand loyal, such as brands of mayonnaise or cigarettes.
Battery brands.
Walgreens and CVS private brand sales have gone considerably up in categories like over-the-counter non-prescription drugs, beauty care and personal care products. These stores, located all around the country, have levered on their strong name and pricing advantage to gain consumer trust on their own labels.
Aspirin, cold medicine, eye drops, vitamins, body lotion; the biggest brands in this and many other categories are vulnerable to sales lose and pricing pressures in this time of economic crisis and consumer cutbacks.
Have you switched?
The most vulnerable brands are those with low priced, commodity type products. As consumers look to cheaper alternatives products that have little differentiation from brand to brand are an easy switch. For example, oatmeal, tea or plastic baggies.
Office/school supplies such as pencils, pens, erasers, paper, and notebooks are very vulnerable to private labels. The main concern of parents and office buyers is to find the best prices for these articles. They have noticed that the quality is the same in private labels, and that these items will usually just last the school year anyway, therefore they don't really care about the brand. Companies like Office Max and Office Depot have taken note of this and are making a killing selling these products.
The brands that are most vulnerable to private label competition are everyday household, kitchen, and cleaning products. For example, foil, plastic wrap, sponges, toilet bowl cleaner, bleach, dishwashing soap. These products provide the same benefits as the brand name products. In an uncertain economy, consumers are going to be more willing to give-up name brand products in these categories as they will when shopping for their laundry detergent and shampoo. Consumers are more loyal to their brand of shampoo than they are to the foil they use in the kitchen.
There are numerous brands and categories that are vulnerable to private label competition, especially given the current economic environment. From food commodities to paper products, consumers will be looking for ways to pinch pennies.
For example, many people cannot tell the difference between a Chiquita banana and a "generic" banana, or a Vanity Fair napkin versus a store brand napkin. These are quick choices consumers can make at the store and they will see immediate savings in their bank accounts.
I think the obvious answer is that Product Categories with the lowest levels of Brand loyalty are most vulnerable to private label competition. From my perspective, as a consumer, those categories would be home cleaning supplies, gasoline, packaged foods, and home furniture. All of those categories currently have private label offerings, but I think there is a real opportunity for a retailer to make a major push to specialize in private lable offerings in one of those categories. The established Brands in those categories, such as PineSol, Exxon Mobil, Kelloggs cereal, and Ethan Allen furniture, would need to revist their Brand positioning and ensure they continue to maintain loyalty with their loyal customers.
I think grocery foods are the most vulnerable in a recession because most people find very little difference between the brand name and a private label. Cheese, eggs and milk for example will be consistent across brands. Kraft and Deans will struggle to continue to differentiate and add value to the brand through tough times.
Another brand category is pain relievers such as Advil. Private labels have emerged within this category.
I think grocery foods are the most vulnerable in a recession because most people find very little difference between the brand name and a private label. Cheese, eggs and milk for example will be consistent across brands. Kraft and Deans will struggle to continue to differentiate and add value to the brand through tough times.
Another brand category is pain relievers such as Advil. Private labels have emerged within this category.
I would guess pain relievers are quite vulnerable to private label competition. People are used to getting generic medicines at this point due to insurance plans, and I would guess drug stores like Walgreens and CVS or stores with pharmacies like Target and Wal-Mart have very successful private label pain relievers.
As consumers grow more price sensitive in a weak economy, cheaper private label substitutes should be able to ramp up competition, as the added value of a brand name will be of diminished importance. Brands in food, home/office supplies, and OTC drugs are likely candidates to face competition, since many products are viewed as undifferentiated commodities.
During recent history the private label business has evolved from strictly low involvement consumer packaged goods, to goods and even financial services. As big box retailers expand and improve their offerings, more and more companies will be affected by private labels.
Some brands/companies that I believe are highly vulnerable to private labels are Procter and Gamble, Eli Lily, Sony and depending on what happens with the financial crisis regarding personal banking, Bank of America.
To combat the push from private labels companies must continue to innovate and give customers a reason to purchase their brand over the private label choice.
The most vulnerable brands to private label competition would be those of products with little potential for differentiation, and thus less customer loyalty. Food products like milk, eggs, meat, bread, pasta, frozen vegetables and cheese would be among the most affected.
The over-the-counter pharma industry is completely vulnerable to competition once a patent runs out. But this is not really a secret; I'm stating the obvious. Even still, people will pay more for a brand (Advil, Tylenol) after a patent expires and generics are available. This says a lot about the power of branding.
Any brand that does not have a strong emotional connection with the consumer is vulnerable to private label competition. Shoppers are usually looking to save money (especially during a recession). Obvious answers are commodities like water, milk. etc...Also other CPG products are vulnerable because there are so many private label substitutes now. Consumers don't have as much emotional connection with a gallon of milk as they do with a new shirt (that everyone will see). Other factors include 1)will other people see the product and 2)how much does it cost.
Consumer products and food items that exist mostly as a commodity product without much value-added manufacturing are most vulnerable to private lable competition.
Items like paper towels, toilet paper, bottled water, and milk exemplify products that can be branded, but often provide little differentiation over the competition. In difficult economic times, the producers of these products must go to great lengths to show consumers how their products are differentiated, add value, and can justify higher prices than private labels.
Commodity itens are the most vulnerable to private label competition. If you look at the products at Costco, there is always a Kirkland Signature alternative, the Costco private label. Such items as milk, assorted nuts, socks, etc all that these alternatives.
Commodity brands like milk, socks, assorted nuts, and water are all items that are easily subject to private label competition. If you go into Costco, Kirkland Signature, Costco's private label, is found for almost all items, but especially amongst commodity items.
Commodity products are most vulnerable to private label competition since the differences are likely to be minimal. Over the counter pain killers are a good example.
Products that are low-end and have little ability to differentiate. Many have the same benefits and as consumers realize they can get the same product for a lower price they will begin to switch to private labels. Many grocery items are good examples of these products and this is what Aldi has taken advantage of.
Products such as canned goods and medications are most vulnerable to competition from private labels. These products are exactly the same no matter which brand you buy, making it difficult to attract consumers to a more expensive version of the product.
excellent !
Brand Strategy and Positioning
Great post. You know we all think about this very topic. Today many industries are vulnerable to private label competition. So even Brand products needs a brand strategy to sustain in the market.Brand Harvest have worked with several clients spanning size and category in building a strong brand.
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