Becoming a Private Label Supplier: Opportunities and Challenges

Abstract

The private label strategy has been adopted by reta ilers who seek a competitive advantage through the commercialization of products sold unde r their brand names. The adoption of such strategy has created new demands for suppliers , who need to reevaluate their manufacturing structure in order to decide whether they should manufacture such products. In Brazil, we can notice an evolution on the concept o f private labels, whereby retailers worked to eliminate the image of cheap products by placing an emphasis on quality products and standardized packaging. More recently, consumers ha ve gradually accepted the idea of premium, exclusive and top quality private labels t hat are not necessarily cheaper. The main purpose of this qualitative study is to explore the benefits for Brazilian manufacturers to provide private label products. Our objective is to understand why some manufacturers decide to become private label suppliers and how this bene fits them. Thus, in order to explore the opportunities and challenges of private label suppl iers, we classified six Brazilian manufacturers from the food industry according to t heir strategic motivations and other manufacturing aspects. As main findings, we can sta te that the adoption of private label strategy improved the suppliers’ manufacturing abil ities, mainly because they are audited by retailers. Thus, manufacturers have gone through a learning process as they qualify as private label suppliers. The constant audits made by retail ers generated the need to change the business vision, as well as improvements on managem ent techniques and production process. From these changes, it became possible to offer pro ducts with superior quality and achieve a greater recognition and credibility in the market. Moreover, manufacturers are willing to deliver innovative products to private label market , which allows retailers to achieve consumer loyalty through product innovation