Cross-category effects and private labels

Abstract

Umbrella effects, or the ability of a brand in one category to generate sales for store brands in other categories, may explain the growth in private labels. We estimate the potential umbrella effects among private label products using a generalised multiple-discrete-continuous extreme value (GMDCEV) model. We find significant positive associations between private label sales in some categories with private label sales in other, related categories. Our results suggest that food retailers would be well-served to develop store brands across categories that are related in either use or production, ‘dairy’ and ‘meat’ private labels, for example, instead of creating uniform umbrella brands as is often the practice.