Private Label is not the friend you think you need

 

This will be unpopular and comes without evidence ,but with plenty of experience.

With retailer private label in grocery on a long term upward trend and dependant on country,category and retailer market profiles ,reaching national  market shares of  50% is not uncommon. Against this backdrop  it is easy to see the manufacture of private label as a smart business  move. My experience in Multinationals over 30 years suggests the complete reverse. 

Suggested benefits  : 

Improves customer relations and this enhanced  relationship helps our brand as well

Consumers know , like and trust  private label  and they also  have a strong purchase price  and value advantage over most brand leaders.

If we don't someone else will/ we're locked out of eg 50%of the market, a non brand retailer.

Helps overhead/capacity management. 

Considerations against:

I never experienced private label being profitable,  even  at Gross Profit level. 

Does not improve account profitability or payment times.

Customers request open book costing  and proprietary recipes at sharply reduced prices.

Difficult to protect proprietary  recipe or technical secrets .

Contracts are under regular review,  yearly at least in my experience, so prices cannot easily be raised. Contract volumes are often divided between several  suppliers.

Requires a dedicated business  team of sales ,marketing ,product development  ,supply chain  people. Regulatory burden on factories is higher than internal only. 

Volumes can be very high, and managing capacity peaks and troughs,especially if you lose the contract. beware large  write offs on eg new designs,inventory .

Rarely delivers brand benefit  as retailers also have separate teams.

Reduces internal focus on building our brands.