BRANDS VERSUS PRIVATE LABELS - FIGHTING TO WIN

How real is the private-label threat to branded products? What should national-brand manufacturers do about it? On the one hand, manufacture rs have reason to be concerned. There are more private labels on the m arket than ever before; collectively, unit shares of store-brand goods place first, second, ore third in 177 of 250 supermarket product cate gories in the United States. But many manufacturers have not fully rec ognized two important points in considering this threat. First, privat e-label market share generally goes up when the economy is suffering a nd down in stronger economic periods. In the depth of the 1981-1982 re cession, it peaked at 17% of sales; in 1994, when private labels recei ved great media attention, it was more than two percentage points lowe r at 14.8%. Second, manufacturers of brand-name products can have sign ificant influence on the seriousness of the challenge posed by private -label goods. In fact, in large part, they can control it. It is diffi cult for managers to look at a competitive threat objectively and in a long-term context when day-to-day performance is suffering. But the a uthors strongly advocate keeping the private-label challenge in perspe ctive. To help managers gain this perspective, they analyze recent dev elopments that have boosted the private-label market. Then they highli ght the considerable strengths of the brand name. Managers at brand ma nufacturers are cautioned about their own reliance on private-label pr oduction; those that have not entered that market are counseled not to do so. Finally, the authors offer winning strategies that manufacture rs can use to fight private labels and maintain the long-term health o f their brands.