Private Label Manufacturing
The private label manufacturing has become a business model now available to manufacturers as well as brand owners. In this business model, manufacturers and brand owners compliment each other\\\'s economic activity by offering their respective specialized skills to create synergy in market place. Private label products are typically those manufactured by the earlier part of value chain and to be marketed by the later part of value chain under its brand and name. This means that the manufacturer company supplies goods to be marketed as a branded product of the brand owning company. In this way, the knowledge chain is clearly divided into manufacturing and brand management. This option is at times adopted by brand companies as a low cost alternative.
The private label manufacturing is categorized as follow:
i. SME manufacturers who specialize in particular product lines but have not developed their own brand strength to enter national, regional or international markets.
ii. Manufacturers having their own brands, also produce for other brands for optimum utilization of their expertise and plant capacities.
iii. SME manufacturers who specialize in supplies to major retailing and whole sale chains.
iv. SME manufacturers acting as store suppliers to specialist service companies such as hotel chains, tour operators, give aways, etc.
According to Private Label Manufacturers Association (PLMA) the business model is gaining consumer market share across Europe; whether it is in the emerging retail markets in eastern part or the most established ones throughout the region. Private label is becoming more popular with Europe's shoppers as well. Retailers are responding with bigger own brand program featuring innovative new products and greater value. Market share of retailer brands advanced in 18 of the 20 countries as tracked by Nielsen. Today, private label accounts for at least 24% of all consumer products in Europe, with Switzerland at 53%, Spain at 49%, UK at 47%, Portugal at 42%, Belgium at 39%, Germany at 37%, France at 36% and Netherlands at 27%.
Private label\\\'s long term future appears especially strong. The research for PLMA found strong support for private label among younger shoppers. Other findings on consumer attitudes include:
Private label is poised for further expansion.
The popularity of private label is spreading into new products, categories and formats.
Shoppers believe that private label products perform just as goods as manufacturer brands.
The private label business is unique and has its own dynamics, needs and objectives. Therefore, the business got united to form its own trade association that serves the industry exclusively. Founded in 1979, the Private Label Manufacturers Association is the international trade organization dedicated to the promotion of emerging business model. It has offices in Amsterdam (The Netherlands) and New York (USA) to represent manufacturers and suppliers worldwide. The clientele includes all in the value chain. PLMA also offers trade shows, programs and services that are specifically designed for its clientele. PLMA\\\'s annual “World of Private Label” show helps manufacturers and retailers to build their private label program. For this year, the event is scheduled to be held at Amsterdam on 22-23 May, 2012 and would include more than 3,600 exhibit stands, manufacturers from more than 70 countries, national & regional pavilions, pre-show seminar programs, new product expo and ideas supermarket.
The concept of private label manufacturing is yet to reach Pakistan although very few manufacturers may already be supplying to brand owners in Europe even without understanding the dynamics of this new business model. The current activity level is so low that it has not caught the eye of vast majority of potential manufacturers-cum-exporters. In the destination markets, it is a market reality and if attention is not paid to it, an opportunity may be lost for ever. The SME sector manufacturers of consumer products, therefore, need to look at this opportunity in order to adopt this business model.
A number of goods already manufactured and even at times exported from Pakistan can be dealt under this new model. Some of such goods are listed below as indicator only.
1. Food ingredients:
a) Spices and Rock salt
b) Fruits and their pulps
d) Fish and poultry products
a) Apparel, general
b) Sports wear
c) Casual wear
d) Hosiery products
e) Home textiles and toweling:
3. Home decoration
a) Of stone and marble
b) Of metals
c) Of textiles
d) Of wood:
4. Home hold utensils
a) Cutlery (flatware)
b) Kitchen ware
c) Gardening aids:
5. Office and school supplies
a) Writing instruments
b) Stationary items, and paper products
c) Other office supplies (plastic, metal, etc.):
6. Personal Care
a) Personal care instruments
b) Manicure instruments
c) Pedicure instruments:
7. Other instruments and goods
a) Barber, spa and beauty care instruments
b) Embroidery scissors, etc.
c) Sharing razors, etc.
d) Modular Furniture (wood, plastic, metal)
Adoption of this business model may not be easy and a lot of labor would need to put in. However, once the entry in this market has been made, the rewards are likely to be more then the efforts. The businesses desirous of availing this existing opportunity would need to make preparation so as to smooth adoption and entry in the market. Preparations would include the following:-
i. A clear cut focus on exports through private label manufacturing model. Dedicated staff/ department to deal with preparations and to spearhead market entry strategy is required. Otherwise, it would be only a half hearted attempt and chances of success would be small.
ii. Introduction of a proper quality management system covering all aspects of management, production and logistics aspects would be a must. Without it, the foreign brand owner may not even start negotiations.
iii. International certification under ISO, GAP, CE, etc. is also a must. The certification has to be chosen to suit the product to be supplied.
iv. The market place is quite competitive. Therefore, the supplier needs to ensure efficiency to its maximum in order to sustain competitive pressures.
v. Entry into market through this model would mean a long term relationship with the buyer/ brand owner. A long term commitment needs to be planned and shown to the buyer/ brand owner.
vi. Consumer driven demands like green productivity, environment friendliness, recyclability, needs to be catered to.