TOTAL LICENSING
promotions, increased volumes (33% in the marketplace. This income an obvious point of differentiation
more free!) and one-time discounts, is measured by the direct income between your brand and the private
hoping to keep the customer from associated with the use of the brand label products. Innovation is an area
straying in the first place. Among in some cases (licensing income), the that the private labels are exploring
other goals, these efforts are designed price premium associated with the with relish, and a national brand
to give the consumer a break on the brand when compared to a generic cannot afford to play catch-up against
price when it is most needed, without offering, the increased market share the in-store brand offerings.
having a permanent effect on the price obtained by the brand, or some Third, maintain your good relationships
or value associated with the branded combination of these elements. It with retailers and develop new ones.
product. is often measured by analyzing a While it pays to be careful with the
Another impact is the perception of hypothetical licensing relationship that selection of stores in which you offer
higher quality among the private label features the actual revenue generated your brands, it also helps to drive
products, especially the in-store branded by the brand. sales when you have more product on
products. As consumers discover the As these various impacts reduce the display in more places.
relatively recent perception of higher growth in revenue associated with Unless you can procure your own
quality for the private label items, it national brands, and in some cases the retail space, you are fairly dependent
becomes more difficult for national actual revenue, the value of the brands on the retailers to sell your brands.
brands to distinguish themselves from is similarly reduced. Don’t underestimate the value of a
these competitors. To differentiate It may not always be obvious that a good retailer relationship.
their products, it is imperative for brand has lost value when it is still Finally, if you have the wherewithal
the national brands to focus on the showing respectable growth, but when and it makes sense for your product
quality of their ingredients, their top- McKinsey & Co. reports that private category, outlet stores or company-
Footnotes
level production standards and their label sales could steal $55 billion in owned brand specific retail operations
1 “Trade Dress & Private
consistent delivery on the brand annual sales from national brands by may provide additional growth or
Label” Powerpoint presen-
promise. 2016, very few national brands will a cushion against the private label
tation, David G. Greene,
These impacts are readily apparent to likely be spared. offerings of the retailers. It may also
Locke Lord Bissell &
most brand managers. One that may help to compete against the other Liddell, LLP
be a source of increasing difficulty, yet Strategies for Success national brands in your category. It
2 Klein-Becker USA, LLC v.
still not fully appreciated, is the impact There will always be an element of certainly enables a greater degree of
Product Quest Mfg., Inc.,
on shelf space access. Competition brand loyalty in the marketplace, control over the presentation and
429 F. Supp. 2d 1248
for shelf space has always been fierce especially for luxury brands or other marketing of the branded products at
(D. Utah 2005).
3 Private Label
among national brands, with the brands that provide a lifestyle-oriented the point of sale. Niketown stores are
Manufacturers Associa-
increasing cost of slotting fees being message. Also, certain brands will just one example of this.
tion,
www.plma.org.
the primary evidence. always be viewed as providing good
4 www.supermarketnews.
For example, the restatement value for the price, which gives them Conclusion
com/research/private_la-
of revenue associated with the some level of protection against the Private label products are becoming a bel_report/index.html.
introduction of FASB EITF 01-9 in private label onslaught. For the rest, competitive force in their own right.
5 Financial Account-
December 2001 indicated that these there are steps one can take to ensure The impact on the value of national
ing Standards Board,
fees may be as high as 15% of revenue the best chance of weathering the brands is direct in the case of lost sales
Emerging Issues Task
for many food companies. Obtaining private label storm. and indirect in the case of increased
Force Statement 01-9, Ac-
counting for Consideration
access to prime retailer shelf space First, always deliver on the brand difficulty or expense in getting your
Given by a Vendor to a
has always been difficult for a new promise. When you are meeting your products on the retailer’s shelves. The
Customer (Including a Re-
offering, even one with ties to a well- loyal customers needs in a way they strategy to minimize the impact of
seller of the Vendor’s Prod-
known national brand. It is even more have come to rely on, they will tend private label activity is simple: innovate,
ucts). This accounting rule
difficult now as retailers carve out to stick with you through trying times. deliver on your brand promise and changed the treatment
shelf space for their own functional This does not exclude offering new maximize your retail exposure, either
of slotting fees increased
equivalent offerings and in-store products or updated packaging. As through retailer relationships or your
cost in making a sale to
branded products. long as the quality, value and brand own retail network. Competition has
a reduction in revenue,
As private label products get closer to image is in place, the brand promise never been easy and it is likely to get
forcing a restatement of
revenue in many cases,
national brands in terms of perceived will still ring true. This will help more difficult. A creative strategy for
and allowing a glimpse
quality and retailers make it more national brands avoid losing ground. staying one step ahead of the private
as to the magnitude of
difficult to secure shelf space for their Second, to ensure that the brand label phenomenon will be obligatory.
these fees.
products, national brand managers continues to grow, a strategy of
6 “The Hidden Cost of
have begun to feel the pinch in terms innovation and creativity is essential. David Drews is a Director at Consor Shelf Space” by Julie For-
of the growth they can achieve and the If your brand promise includes being Intellectual Asset Management. He
ster, BusinessWeek, April
corresponding value of their brands. first to market with the latest exciting can be reached at 858.454.9091, or
15, 2002.
The value of a brand, by and large, is a widget or improvement, make sure
ddrews@consor.com. © 2008 David
7 www.supermarketnews.
function of the income it can generate you do just that. This will also provide Drews. All rights reserved.
com/research/private_la-
bel_report/index.html.
47
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