Leonid Abayushkin, General Director of the Federal Purchasing Union CJSC System T3S, Moscow

• How to find the right supplier
• Is it worth selling a branded product similar to your own?
• How to design packaging for your products
• How to choose a product for production under your own brand
• How to make private label products in demand

Production of goods own brand dictated by market realities. It is no secret that with increasing competition, the margin from branded goods is directed by transcontinental corporations and simply large manufacturers to aggressive advertising. Due to intrusive advertising, such products are in demand by consumers. And the more in demand they are, the greater the dependence on them becomes for the retailer, who is forced to sell them. The conditions in this case are dictated by the manufacturer. Therefore, large retailers are striving to create their own management of both the brand and margins. This is essentially the idea behind private labels. (products of own brands - private label - Editor's note).

How to use private label products to improve your store's image

In Russia, the production of private labels is only gaining momentum, while in the assortment of Western retail chains, goods under their own brand sometimes predominate. Their share in the assortment varies depending on the type of store:

• in discounters - 80%;
• in regular supermarkets - 30–40%.

The norm is a situation where private labels occupy a third of the turnover and revenue of a foreign retailer, and two-thirds of the margin. The network can no longer exist without these goods: it will simply be economically untenable. And this is a general trend in market development, and not an isolated example.

And although domestic retailers, when creating private labels, use the same criteria as foreign ones - low price, popular product category - this cannot be called simple copying. Now the world market is developing progressively, and, accordingly, the need for changes is natural. It’s just that, as a rule, changes appear earlier in Europe and America than in Russia.

So far, additional benefit does not play a big role for them - a criterion that is actively used by Western retailers. Namely, foreign stores pay special attention to healthy, environmentally friendly products. Among Russian companies, few use this approach in competition with branded goods. But in vain.

Private label products from alcohol to pet food

Since the Federal Purchasing Union "T3S System" was created in order to help retailers extract more economic benefits from their activities, we are obliged to create private labels - this is a priority direction of development.

Today we produce products in the lower and middle price segments.

They are often similar in appearance to leading brands on the market. Of course, we are not talking about mixing brands, but there is a leading product in the segment, and it is logical to build on it. We are not the first to do this.

Almost all key categories of food and non-food products are produced under T3S Systems’ own trademarks: from alcohol to animal feed. There are six main brands in total. It would be wrong to say that some of them are more significant and some less. Each brand is created for a specific group of goods.

All brands are umbrella (names of products in which the name of the manufacturing company dominates, and advertising of the company’s products displays its logo. - Editor’s note). Accordingly, their name should fit well with the maximum range of products and be universal. Although, of course, there is an emotional component. For example, in the brand name “Praise”. Praise is a bright word that carries approval of the product, taste, quality and, finally, the manufacturer.

Average share of private label articles in networks included in the T3S System:

• in network income - 6%;
• in network turnover - 4%;
• in assortment - 2.5%.

I would like to emphasize that this is the “average temperature in the hospital.” In some networks these figures are 3–4 times higher, but in some they are lower. In general, everything depends on the retailer’s attitude towards its own brand. Giving these products the right place on the shelf through display and other merchandising means can help grab the customer's attention. Well, since the cost of a private label with similar quality is always lower than a branded analogue, sales of these goods will increase.

Since we already produce products in most product categories. In order to choose which goods to produce, we analyze the assortment matrices of the networks included in the T3S System, study analytics of consumer preferences, etc.

As they enter other price categories and become more clearly structured according to product range, brands may change. Based on Western experience, you can successfully manage 25–30 private brands. And the brand should be limited by price positioning or category.

Production under our own brand

We do not have our own production. We produce all private label products at enterprises that have proven themselves on the positive side in the market with proven and guaranteed quality and a well-functioning management system. Often the same enterprises make products under well-known brands.

We cooperate with manufacturers who:

• understand why it is profitable for them to produce private labels;
• are cost leaders in their field;
• have experience in producing goods with the selected level of quality.

We hold tenders for the production of each item. Next, at the initial stage of work, we approve the recipe and obtain control samples. Organoleptics (a method for determining product quality indicators based on an analysis of the perceptions of human organs. - Editor’s note) the product is controlled using these samples. They are tested in certified laboratories for safety and compliance with GOST and TU.

Third party companies also design and produce packaging. Today we are developing budget private label lines. Accordingly, simplified packaging is used. You can't make an expensive wrapper for a cheap product. Today we deliberately simplify packaging, making it primitive. As we enter more expensive price segments, the quality of the approach to packaging design and the emotional, image presentation of the product will certainly change.

• Store traffic: how to measure outlet traffic yourself

The practitioner tells

Maxim Kozuro, Head of the chain of stores "Family Capital", St. Petersburg

When opening the store, we wanted to attract customers with a unique offer. Entering the market only with branded products is now useless: you will not be different from your competitors. Therefore, we initially launched production, and on its basis we opened a chain of stores under our own brand.

We ourselves began to produce almost the entire line of dairy and fermented milk products (milk, baked milk, kefir, fermented baked milk, yoghurts, sour cream, butter, cottage cheese), except for cheeses. They also opened a sausage shop that produces doctor’s sausage, minced ham sausage, premium ham, frankfurters and small sausages. We are aimed specifically at producing products of daily demand, and not delicacies. This is also why they planned to organize bread production. Now we produce, in addition to bakery products, pasta.

The name “Family Capital” was chosen to emphasize family values ​​and promotion of a healthy lifestyle. We deliberately refused to sell, let alone produce, unnatural products, alcohol and cigarettes, in order to emphasize that our products are for those who care about their families.

We do almost everything ourselves, even packaging. The concept of the logo and packaging was developed by our in-house designer, and we produce the packaging at our own facilities.

We only buy raw materials for now. For example, milk is supplied to us from one of the farms in the Leningrad region, and first it goes to the laboratory. We specially purchased the necessary equipment, and all incoming raw materials are accepted by laboratory technicians.

We look for suppliers both on the Internet and by calling farms. Sometimes we just go to the farming areas of the region, look around, get to know the owners of the farms we like. Unfortunately, there is no single database that is currently relevant; independent search is still more effective. When discussing cooperation with suppliers, we always inspect the farm: what the animals are fed, how they are kept. If we are satisfied with everything and the farmer’s documents are in order, we enter into an agreement with him. For now we are working only with large farms, and we are also planning to start our own farm in the near future.

If you compare “Family Capital” with the private brands of large chains, the difference in price is immediately noticeable. Their products are usually in the economy class segment, but we cannot position our product in this way. Even compared to third-party manufacturers, our price per liter or kilogram is higher. But this is a very reasonable price for the quality offered. Moreover, it should be taken into account that buyers will not find analogues to our products from competitors, since natural products are now sold only by companies specializing in this and are not available for sale in stores.

The experience of the first two stores of the chain, which sold products of other brands, shows that the demand for our products greatly exceeds the demand for similar products from other brands. Therefore, now in all stores the assortment is represented only by our products.

Now we plan to produce 100% of everyday products under our own brand.

Packaging for private label products

Maria Adamova, Marketing Director of the U2B group holding. Packaging for business", Zheleznodorozhny (Moscow region)

One of the effective ways to get customers to pay attention to a product is thoughtful packaging. An important point: packaging of private label products cannot be expensive.

Who should be entrusted with creating packaging for private labels?

There are several options for organizing work on creating private labels.

1. The chain turns to a manufacturer who has all the necessary equipment for the production and packaging of private labels.
2. The chain itself is developing its production line, that is, creating the necessary capacity to produce cakes, semi-finished meat products, etc. For this, equipment is purchased, including packaging, and all procedures are fully controlled. For example, for packaging in chain stores, the simplest thermal packaging equipment of the “hot table” type is used. The product to be packaged is placed on a pallet (tray) of the appropriate size, the tray with the product is wrapped in food stretch film (PVC) and sealed on a heating table.
3. The chain entrusts the development of packaging to a specialized company (outsourcing).
4. A large manufacturer has its own chain of stores, through which it primarily sells goods under its own brand; Accordingly, the packaging is developed by him independently.

Some European chains own not only large processing plants (for example, the meat industry), but also agricultural land. Thus, the entire production chain is under the control of the retail network. The development of a similar scenario is also possible in Russia: for example, in the fall of 2010, the Thunder company (Magnit store chain) invested about 8 billion rubles. in the construction of a greenhouse complex in the Dinsky district of the Krasnodar Territory due to the fact that the managers of the network were not satisfied with the work of the suppliers of fruits and vegetables.

Packaging development stages

When developing packaging for private labels, it is necessary to proceed from the consumer properties of the product, requirements for shelf life, and market demands.

Stage 1. Collecting ideas. A special service of the store, responsible for bringing private labels to the market (or the corresponding division of the manufacturing plant), analyzes competitors' products and offers possible packaging options. Ideas on how to package a particular product can also come from suppliers of packaging materials.

Stage 2. Design development. The chain can develop the design of private label and packaging independently or use the services of a branding agency. It is best if the packaging design, as well as its shape, is developed when the brand is launched on the market by a branding agency that has relevant experience with the product of this product category.

As surveys show, buyers recognize private label networks based on two criteria:

• the name of the brand and the retail chain are the same;
• The product packaging is designed in the corporate style.

For STM, the name of the network is taken. As a rule, networks first create private labels in the low price segment according to the principle “the quality is the same as the products of recognized brands or a little worse, but the price is significantly lower.” The brand name is formed by adding to the name of the network a word indicating the price benefit of the product: Carrefour Discount with discount), Tesco Value Tesco price). Later, private labels are launched in the middle and high price segments. In the first of them, when naming a brand, only the name of the network is most often used (without qualifying words). And the brand name for premium-segment products is formed by adding to the name of the chain a word indicating the exclusivity and sophistication of the product: Carrefour Selection choice of Carrefour store), Tesco Finest the best from Tesco).

If the names of the chain and the private label coincide, the attitude of customers towards the store, as a rule, is transferred to the trademark. This makes it possible to more clearly control fluctuations in demand: if customer loyalty decreases, private label sales fall. I consider the private label chain of stores “Perekrestok” to be a successful example (the names of the brand and the chain are the same). The packaging design is made in a laconic style: the brand name is on a white background, and a lot of space is devoted to the image of the product itself. Everything is quite simple, but it’s hard not to notice Perekrestok’s products on the shelf.

It is worth noting that most chains produce both food products (dairy products, juices, semi-finished meat products, chocolate) and non-food products under private label, so the packaging design must be universal - then the chain’s advertising will immediately apply to all goods produced under private label.

Private label has a unique name. The store does not always give its name to the private label. For example, the French chain Auchan has several private labels, the names of which do not say anything about belonging to the chain: “Patch of Good Luck”, “Sweet Island”, “Our Meal”, etc. The design of product packaging also often does not correspond to the corporate style of the store. In this case, consumers do not recognize the brand of the network, and this leads to fluctuations in demand and difficulties in forecasting it. At the same time, releasing a brand under a name different from the chain one has advantages, because in case of problems with the quality of some products, buyers do not transfer their dissatisfaction to other goods sold under other brands. This approach is often used to create brands for economy segment products. However, the original name is also assigned to premium segment product brands, and then the connection with the chain brand is maintained at the design level. For example, this is illustrated by the logo of the Auchan network (a bird) in the design of the Mmm!

• Trademark: how to register, use and protect

The practitioner tells

Danny Perekalski Marketing Director of the Dixie Group, Moscow

A special division is engaged in the creation and launch of private labels in the Dixie network. The design project manager is responsible for the development of packaging; he acts as a link between designers, manufacturers and partner printing houses.

The design development and selection of packaging for each product takes place in several stages and takes one to two months. The packaging of all goods is made at specialized enterprises and printing houses, then sent to manufacturers who package and pack the goods.

93% of all private labels in the chain are domestic products (the remaining 7% are imports: olives, olive oil, wine, canned vegetables). To date, the private trademark “D” has been assigned to 98 positions, including cereals, groceries, frozen berries and vegetables, canned vegetables, a line of snacks and dried fruits, preserved fish, olive and sunflower oil, drinking water, and wet wipes. The packaging of products for different product categories under the “D” brand is designed in the same style, but to highlight different products in the same line, we use additional color elements. For example, sparkling and still water "D" are indicated by different shades of blue.

Stage 3. Testing samples and ordering a trial batch

The manufacturer draws drawings and makes test samples of packaging. When testing, the following characteristics are especially important: shelf life, appearance, safety during storage and transportation. The tested packaging option is approved by an expert commission of the manufacturer and retail chain. The commission may include technologists, marketers, and the head of the sales department. The decision is usually made by the General Director, or the commercial director, or the head of the marketing department. Then a small batch of packaging is ordered, and the products appear on the shelves of the network. If the product is in good demand and there are no problems in the entire distribution chain, they move on to large quantities.

What types of packaging are used most often?

The choice of the optimal packaging option, of course, will depend on the properties of the product. Thus, for the convenience of storing food in the refrigerator or heating it in a microwave oven, choose packaging made from frost-resistant or heat-resistant materials. Polyethylene terephthalate (PET), in particular, has such properties. It is also often used to make packaging for carbonated drinks, butter and any dairy products. So-called doy-packs are produced from PET film laminated with polyethylene - bags with a lid and bottom for packaging mayonnaise and ketchup. When packaging fish and meat products, PET films are used mainly for slicing.

Polypropylene is also popular among domestic manufacturers. The film made from it is suitable for packaging bread and bakery products, vegetables, fruits, flowers and other goods.

Dairy products on the Russian market are presented in cardboard boxes, plastic bags or bottles, while in Europe preference is given to paper and cardboard packaging, as it is more environmentally friendly . Manufacturers try not to use glass: its fragility and weight create problems during transportation. In addition, the leakage of glass containers does not allow the product to be stored for a long time (see also: Examples of convenient packaging of goods under private label).

Examples of convenient packaging of goods under private label

Canned foods can be packaged in easy-to-open tins. Bottles with vegetable oil must have special dividers to make it easy to pour the contents. Cereal bags can be equipped with convenient valves for re-closing.

Other options for convenient packaging are shelf ready packaging (English – packaging ready for display; the product is packed in boxes and displayed on the shelf in this form) and multi-pack (English – container for several items combined in one package; example – 12 bottles in packaging with a handle for transportation).

How to reduce costs for private label packaging

The share of packaging costs in the cost of a product can range from 1 to 10% or even more: fluctuations depend on the packaging materials and equipment used. For almost every type of packaging, you can find the best solution in terms of quality, cost and attractiveness for the buyer.

An example of savings due to equipment and materials. When packaging bakery products, the cost of packaging in a bag with a clip can be 10%, and when packaging in polypropylene film - 1%. However, we must not forget about the cost of packaging equipment. Thus, for packaging in cast bags, you can get by with a small and inexpensive clipper, but for packaging in film, more expensive equipment is more likely to be required.

You can save money by optimizing the operation of packaging equipment and choosing the most suitable material. Let's compare two types of shrink film - polyolefin and PVC. PVC film with a thickness of 15 microns has a density of 1.35 g per cubic meter. cm, and the density of polyolefin of the same thickness is 0.92 g per cubic meter. cm. Therefore, a polyolefin roller weighing 20 kg will contain approximately 40% more film than a PVC roller of the same mass. Moreover, 15 micron polyolefin film can be used instead of 20 micron PVC film, providing additional benefits.

If you use plastic packaging for confectionery products, then in some cases you can select options from thinner plastic (however, its density should be sufficient for storage and transportation) and save up to 15% of packaging material.

An example of saving on design. Reducing the number of colors in an original design often does not affect sales, but allows you to save on the production of packaging materials. So, if you are going to pack bread in polypropylene film with the symbols of your company and purchased horizontal packaging equipment, then factors such as the number of colors in the package, the area and saturation of the fill, and the circulation will be important for the cost. By optimizing each of these factors, you can reduce the cost of film by 20%.

The practitioner tells

Kirill Mursepp, Director of private label management at Lenta, St. Petersburg

Packaging for private label goods, like the product itself, is produced at the supplier’s enterprise. We include in the annex to the supply contract requirements for the material, size, strength, safety of packaging and its labeling.

The cost of packaging and its share in the price of the product depend on the category of goods. For example, the cost of packaging bakery goods in polymer bags with the company logo is minimal. Packaging design for cheap goods is simpler: it should be concise, since buyers are attracted primarily by the price, not the design. In our stores this is the trademark “365 days”. The packaging of mid- and high-segment goods requires painstaking work by the designer: when purchasing goods of these categories, the buyer first of all focuses on the attractiveness of the packaging, and then evaluates the composition of the product, its taste, etc. Moreover, high-segment private label goods compete on the shelf with goods -analogues of leading companies and, therefore, must have an attractive appearance. For example, in our stores these are confectionery products of the Dolce Albero brand: the design (stylish logo on a light brown background) was developed in such a way that consumers would highlight this product as a premium one.

Expert advice

Alexander Tremasov, General Director of the Tremasov printing house network, Ivanovo

When developing a design project for your own products, you need to determine exactly who you are targeting, what emotions you want to evoke in the buyer, and based on this, think through all the details. The correspondence between the presentation of the product and its price is very important: a simple or too contrasting design evokes associations more with economy class goods, while the presence of small elements and deep colors create more confidence in the quality of the product. If a product looks more expensive than it costs, the buyer will decide that it is a scam, just as in the opposite situation.

Our company works with several private label manufacturers. In addition to custom printing, we also offer design services. Quite often we come across the fact that a customer comes with a requirement that goes something like this: “Make us this - we have this general design.” But we see that the layout he offers is already very outdated; buyers will have neither interest nor trust in it.

People love new things. To ensure that a product is always in demand, it is necessary to constantly change the packaging design. But it is important to do this competently, so as not to scare away customers with its exaggerated novelty. We have clients who constantly change the design of their products, but only slightly, so that the buyer continues to recognize their product. Some people order two types of packaging for the same product at the same time.

We are currently preparing a packaging design for meat products. It took a lot of work to convince the customer to change the design, but as a result the packaging looks much better and matches the price.

CJSC System T3S
Year founded: 2007
Staff: 60 people
Type of activity: concludes supply and marketing agreements with federal suppliers, coordinates and consolidates centralized orders, purchases and supplies of products for retail chains
Structure: within the framework of the Federal Purchasing Union CJSC System T3S, there are 48 networks with a total number of stores more than 1,800 and a consolidated trade turnover of about $1.9 billion. The total area is approximately 700 thousand m2; daily customer flow - more than 2 million people

Family Capital LLC
Year of creation: 2011
Number of stores: 8
Staff: 16 people
Area: from 20 to 50 m2
Turnover and profit: not disclosed

LLC "Chain of Printing Houses "Tremasov"
Year founded: 2002
Staff: 33 people
Services: custom printing of labels for products, production of plastic cards (including discount and payment cards), identification cards, plastic price tags, etc.

Maria Adamova Graduated from Vyatka State Humanitarian University with a degree in marketing and advertising. He has been promoting the company since 2006.

U2B group LLC. Packaging for business"
Field of activity: packaging production, supply of equipment and packaging materials
Territory: head office - in Zheleznodorozhny (Moscow region), representative offices - in Moscow, Yekaterinburg, Izhevsk, Yoshkar-Ola, Kazan, Kirov, Naberezhnye Chelny, Perm, Syktyvkar, Ufa, Cheboksary, Chelyabinsk
Number of personnel: more than 200
Number of company clients: more than 6,000 food industry and trade enterprises

Lenta LLC
Territory: head office – in St. Petersburg; regional representative offices - in Moscow, Volgograd, Nizhny Novgorod, Novosibirsk; 68 hypermarkets and 7 supermarkets operate in 39 cities of Russia
Number of employees: 22,000
Total retail area of ​​hyper- and supermarkets: 445,000 sq. m

Dixie Group of Companies
Field of activity: retail trade in food and consumer goods
Number of employees: approximately 40,000
Retail area: 583,583 sq.m. m
Revenue: 147 billion rubles.

Heat-shrink films are polymer films that can shrink and tightly fit a product under the influence of temperature.

Horizontal type equipment is used for packing piece food and non-food products into a three-seam pillow-type bag, which is formed from a roll of film. This type of equipment is also called flow-pack (English) in-line packaging). The packaging process on horizontal machines is high-speed.

Creation own brands It’s still not very common in Russia, but everyone has encountered them, one way or another. Most often they are found in hypermarkets and supermarkets, on shelves with familiar brands. Only the price differs: the cost of goods produced under a private chain label is usually 10-15% lower than that of analogues. This does not mean that the product is of worse quality, it’s just that the manufacturer has the opportunity to save on advertising by promoting products directly at points of sale, which significantly reduces the final price. In addition, private labels are created specifically for the audience of a specific trading platform, so manufacturing retailers can respond flexibly and quickly to their needs, which helps increase demand.

The creation of such brands is a requirement of the modern market. With their help, retailers gain control over part of the product, can attract customers and improve the store’s image. How does this happen? Let's find out.

The impact of private labels on store image

In Russia, as mentioned above, private labels are still not very popular. Changes in commodity-market relations originate in Europe and America, where they “settle down” and become commonplace, and only then attract the attention of domestic entrepreneurs. Thus, abroad a 30-40% share of own goods in a supermarket’s assortment is considered the norm. They account for a third of the turnover, two-thirds of the margin, and without these products the retailer can no longer exist.

Domestic retailers are still using simple copying, offering products at low prices from popular categories. In foreign practice, attracting customers with additional benefits is actively developing: for example, the production of organic products that compare favorably in their properties with branded competitors. This does not exist in Russia yet, but everything is striving towards this.

Today, the largest retailers produce almost all products in the food and non-food segments under their own brand: alcohol, tableware, animal feed, dairy products, and much more at medium and low prices. As a rule, their own products are similar in appearance to their branded counterparts, which is logical, since the retailer needs to start from something.

The name of the product must include the name of the manufacturer and a logo. This is where the entire network “goes”: a high-quality product that is cheaper than its analogues creates a positive image for the entire company.

Production of goods under your own brand

Retailers rarely have the opportunity to organize their own production - especially since we are talking about a very wide range of goods from all categories, from household chemicals to food. The purchase of private label goods is carried out from third-party manufacturers interested in creating their own brands and having the relevant experience. Certification for compliance with technical specifications and GOSTs takes place in independent licensed laboratories.

Third-party companies also produce packaging for goods and develop design, which is worth talking about separately.

Features of creating packaging for your own brand

There are two key points in this matter: the packaging should attract attention, but not be incredibly expensive. Therefore, great attention is paid to thinking through the design.

The development of packaging and release of products to shelves is carried out in stages:

1. Competitive products and their packaging designs are analyzed, after which ideas are collected and proposed.
2. The design is developed by our own design studio, branding agency or freelance specialists. The emphasis is on the presence of the chain name in the product name, as well as on a consistent design style: this way buyers can immediately recognize the private label.
3. A trial batch is ordered and tested. If the product is successful, the batch is increased and becomes part of the store’s permanent assortment.

"continues to explore packaging in its natural habitat. The topic of the third column arose from the “make a bigger logo” debate. Although this request is considered a cooler client idea than “playing with fonts,” the studio rarely encounters such requests. Gigantism is not in fashion now: customers are increasingly asking to shift the emphasis towards the product, image, text, but not the logo. According to Ohmybrand's observations, people rely on a large logo when nothing else good can be said about the product. In addition, there are segments in which the size of the logo does not matter at all, and the most striking example of this is private label, where the product and its price, as well as brand differentiation, are primarily important.

Private label, or your own brand, is always in a more advantageous position than products that enter the network from the front door. Private label design is created without regard to the face control of retail; it does not need to fight for a good place in the sun on the shelf or play it safe in the marketing field. In the supermarket, private label is at home, so he can move on to talking about the most important thing without unnecessary curtsies. For example, about what kind of product is hidden inside the package.

Simplicity and clarity of message: this is what private label design strives for when there are no budgets for supporting types of communication. In this case, the logo fades into the background: it mimics the main tone, is integrated into the overall geometry of the composition, acts as a modest “postage stamp” on the front part - in general, it behaves far from being the main one. Large, naturalistic product images or transparent packaging that showcases the contents are key techniques to keep your design honest and clear.

Design adaptation of private label “D” packaging by Quantum Graphics branding&design

We sell a product, read

Another way to communicate with the buyer “straightforward” is to call a spade a spade. Weight and expressiveness are achieved through font and color. In our opinion, the authors of the design for the Garant private label handled the task brilliantly: contrasting combinations, rhyming colors, recognizable font. The logo here stands on a par with the “Eco” icon and doesn’t even try to outgrow it.

"Garant" by "Axfood"

Williams-Sonoma

"ICA" by "Silver"

"Be.Better" by "Rexall"

Funny pictures

Using strong imagery is another technique to attract attention to the product, but not to the brand. Selling the image is more important than once again measuring the size of the logo with your neighbors on the shelf. But there is no need to bashfully hide the logo - let it be remembered as an element of a funny image and in the future be associated with the same positive emotions that are evoked by a hipster mustache on a bottle of milk or bright semicircles, in which, in a certain mood, you can see the silhouette of a thong.

"Pams" by Brother Design Ltd

"Pams" by Brother Design Ltd

Alternative brand

The mission of private label is to act as an alternative to “brands from the street.” Of course, a direct connection with a network or distributor is not always advertised. A textbook example on the Russian market is Tesoro olive oil, which provokes approximately the following thought chain: “What is this? I didn't notice it before. Looks like decent oil. It's not too cheap, which means it's good. Perhaps I’ll take it, since “Maestro” isn’t available.”

In the Russian market, such alternative brands have become established, first of all, in pharmacies: the number of private labels of the same “36.6” and “Rigly” allows these companies to be included in the category of grocery companies.

"Natura SPA" by "36.6"

"Natura Pure" by "36.6"

In the West, there are practically no categories that have not been mastered by private labels. And the higher the price segment, the less likely it is to detect even a hint of a specific “private label stamp”. We bet it never occurred to you that these brands are the brainchild of networks?

»

"Swiss" by "Tesco"

"Just for Kids" by Morrisons

"Delhaize" by "Lavierna & Cienfuego Design"

It doesn't get any cheaper

Private label also feels very comfortable in the economy segment, where cost is the main thing that the buyer needs to pay attention to. A minimum of elements, a self-explanatory name, two or three colors - that’s the designer’s entire arsenal. A striking (in every sense) example is “Red Price”, Perekrestok’s own trademark. Red-orange stripes, fierce layout and a self-explanatory name make it clear that the line will not hurt your wallet.

“Red price” by “Crossroads”

Sainsbury's

A radical approach is a sticker with the words “Small Price” as the only label.

Petit prix by Carrefour

Perhaps the behavior of a private label can be compared with the behavior of the offspring of famous parents: they try in every possible way to remain incognito and make people love themselves for who they are. Do you agree?

Ilyukha Sergey Guild of Marketers
The article was first published in the magazine “PROD&PROD Food Promotion” No. 2 for 2014

A private label (private label) is a brand owned by the entity that sells it. They can be created by individual retailers, as well as cooperatives and purchasing unions of chains, regional associations of wholesale and distribution companies, and large importers.

Abroad, private brands appeared as a result of the struggle between large retailers and manufacturers of famous brands. In the case when the market positions of both parties became approximately equal, the networks had to sell “promoted” products, overpaying the manufacturer for a big name and actually shifting advertising costs onto the shoulders of buyers. In the markets of different European countries, private labels account for different shares of turnover, but the trend towards its increase is observed everywhere.

Pricing and popularity among the consumer audience of these goods are largely determined by national characteristics, quality of life, consumption culture, development of national brands and many other reasons. In Europe, private label penetration is highest in Switzerland, the UK, Germany, Spain and the Netherlands, where private label market share exceeds 30% by value (Figure 1). Moreover, in volume terms, their share is even higher, since the difference in price between private labels and analogues of well-known brands in the Western market is 30-40%.

Despite the fact that Russian retail chains declare the development of private brands as one of their priorities from year to year, today, as can be seen from Figure 1, the share of these goods in the revenue of domestic retailers is an order of magnitude lower than in European countries. There are many reasons for this: starting from solving such a difficult problem as producing high-quality products at a low price, and ending with the no less complexity of its promotion. In addition, minimum batch restrictions make such products available mainly to federal chains, purchasing unions or regional associations of small retail chain stores.

According to the InfoLine agency, in Metro C&C the share of private labels in turnover is 11.2%, in Dixy – 10%, in Magnit for 9 months of 2013, sales of goods under its own brand amounted to 13.1% of the company’s retail revenue .

Part of the low penetration of such products in Russia is due to the fact that private labels here are cheaper than branded goods on average by only 10-20%, while in Europe the price advantage of private labels is on average 25-30%, and in the non-food category the difference can reach 40-50%. This fact significantly reduces their attractiveness for retailers.

Advantages of working with private labels

When deciding to introduce a product under its own brand to the market, the retail chain pursues the following goals:

1. Increasing loyalty to the network.

In this case, the private label product is intended to more fully satisfy the needs of price-sensitive buyers. All economy class brands are focused on this. Branded products are designed to fill niches in the product range and maintain the loyalty of regular customers. As a rule, the name of such brands is similar to the name of the chain store. Innovative products are produced in accordance with the latest market trends and trends and are intended for those who like to experiment and try the unusual.

2. Increase in profitability.

As mentioned above, most products produced under private labels, regardless of the price segment, positioning and tasks being solved, allow the network to increase profits. This goal is achieved through high sales volumes and optimization of the production process and logistics on the way from the factory to the end consumer.

3. Guaranteed quality.

As a rule, federal retail chains pay great attention to the issues of quality control of products produced under private brands, starting from the formation of technical specifications for the product and packaging and throughout the entire period of production and sales. Compliance with all required measures is a labor-intensive and quite costly process. At the stage of formation of the production of “own” goods, retailers assigned quality control responsibilities to employees of the private label development department, which most often turned out to be ineffective due to the workload and low competence of managers in purely technical matters. Recently, federal and even some regional networks and associations are paying more and more attention to the quality of their products, creating special services for this or attracting highly qualified specialists for outsourcing.

Guaranteed availability of goods.

Control of all stages of the production process allows you to optimally create a production schedule and ensure a sufficient quantity of it, taking into account the seasonality of sales and planned promotional activities. This protects the network from possible interruptions that could occur when working with the manufacturer’s brand.

It would seem that the advantages are obvious. However, when drawing up an economic model for working with private label products and comparing it with selling branded goods from the manufacturer, the retailer faces a number of additional costs. In order to estimate these costs, we will consider the full cycle of working with private labels, starting from the development of an idea, naming and ending with the disposal of unused packaging.

Production costs

When working with a manufacturer’s brand, the supplier comes to the retailer’s office, agrees on a price and promotional plan, provides a deferred payment (trade credit), delivers goods to retail outlets, provides assistance in merchandising, carries out marketing campaigns at his own expense and on his own, and pays a trade bonus . One drawback is that the products are presented in all competing chains, and the retailer is forced to keep a low markup.

In the case of private labels, the markup can be 15 or even 30 percent higher. But they are successfully “compensated” by additional costs.

The algorithm for working with your own brand is shown in Fig. 2.

The entire process of launching a new private label product takes from six months to a year and includes the following steps:

1. Determining a private label strategy, name, logo Forming a concept, strategy, creating a logo for your own brand is an important and expensive task that a retailer, as a rule, entrusts to a marketing agency. The costs of developing a chain brand are transferred to all goods released under private label.
2. Selecting a product category for product release. As mentioned above, private labels are designed to best satisfy any of the needs of the potential audience. Be that as it may, in order to form an optimal price offer for a non-unique product, it is necessary to obtain its lowest cost from the manufacturer, and this is only possible if the product has large sales volumes and the buyer is not sensitive to the brand. In addition, it is desirable that there is no clear leader in the product category. According to research conducted by Nielsen and analysis of private labels of leading retail chains, the most attractive sectors in this regard are dairy products, groceries, confectionery products, juices, water, beer, alcoholic beverages, as well as paper products, personal care products and household chemicals.
   According to the results of a study by PwC in Russia, conducted in 2010, more than 90% of private label turnover in the Russian Federation is accounted for by generic trademarks (the names of which are not associated with the brand of the chain or manufacturer) and imitators (umbrella brands). At the same time, a large share of private brands is concentrated in the “economy” class. In recent years, they have begun to actively develop in the middle and high price segments, but their penetration level is still insufficient.
3. Development of a strategy for bringing a product to market. Today, experts identify three main strategies for developing private brands:
   • Dumping. The most common strategy, since in conditions of market stagnation and the expectation of a recession, most consumers remain quite sensitive to the price of a product with acceptable quality.
   • Replacement of a competitor. A more complex approach that focuses on the tastes and established preferences of the buyer. The challenge is to replace leading products in categories where brand habit is not a major consideration. As a rule, this strategy is implemented gradually or in case of significant disagreements during negotiations with the sector leader. The path is quite risky, since it is not possible to avoid a decrease in the level of sales in quantitative terms and a certain loss of loyalty even when achieving complete replacement of a competitor in terms of profitability.
   • Brand extension. A strategy whose essence lies in the fact that buyer loyalty to the name of the retail chain is transferred to products under its own brands. In this case, the private label becomes a full-fledged brand, which allows it to be positioned as a direct competitor to a popular manufacturer in the same price segment, and over time it can go beyond the network.
   Based on the chosen strategy, the remaining requirements for the product are formed.
4. Development of specifications and packaging design. Certain costs are associated with the involvement of specialists in establishing the technical specifications of the product and designing its appearance.
5. Conducting a tender for production. In principle, this stage does not require any special costs. Different retail chains hold open or closed tenders. But after agreeing on the terms of price and production volumes, it is necessary to conduct a study of the production capabilities and reliability of the supplier, and this is already associated with business trips, the involvement of specialists and, as a result, additional costs.
6. Purchase of raw materials and components. As a rule, after agreeing on commercial terms of production, the supplier can only compensate for the costs expended. In this case, the costs of purchasing raw materials and packaging fall on the shoulders of the retailer. The main problem of releasing goods under a private label is that in order to obtain a competitive price it is necessary to purchase raw materials and components in large quantities, which leads to large advance payments, storage of containers, and sometimes products manufactured in large quantities, payment of credit funds (instead of a commodity loan in case of work under the manufacturer's trademark).
7. Next come the costs associated with product promotion, merchandising, regular quality control, and possible disposal of leftovers.
8. Another significant expense item is logistics. When producing private label goods, the entire logistics chain from the factory to the store counter is taken over by the retailer, and this, depending on the product category, can be very costly.

Let's estimate the total costs:

• trading premium – up to 10%;
• advertising, on-site placement for additional display, price promotions - up to 15%;
• logistics costs and merchandising – 2-5%;
• funds for launching the project, purchasing raw materials, quality control, disposal of residues - 2-5%.

As you can see, additional network costs can be up to 35%. And this is provided that there is also a 10-15% difference in price on the shelf. Apparently, the manufacturer must give a fifty percent discount on the cost of the main line when releasing a private label...

Hopes and Fears

What does a manufacturer expect and what does he fear when releasing a product under a private label?

There are several logical explanations why an enterprise can begin to produce goods under the private label of a retail chain:

• gaining network loyalty in order to introduce or expand a product line under your own brands;
• advertising of their brands and themselves as a manufacturer by associating in the minds of the consumer with the name of the retail chain;
• optimization of logistics for the supply of its products by increasing supplies to the Customs Union;
• receiving guaranteed and timely payment for goods;
• additional income.

The manufacturer's main concerns are related to the possibility of losses. They are due to the fact that the economic model of Russian enterprises differs significantly from the Western one.

In Europe, the production of private labels is carried out by companies that initially built their business on the principle of exclusively working with private labels of the network and were thereby spared from organizing an extensive sales and distribution system, which we see in Russia. They do not need marketing and sales departments, which, by the way, are quite expensive, otherwise these expenses are included in the cost of the goods. Thus, the European manufacturer can ensure the supply of products with acceptable quality at a reasonable cost.

The manufacturer's risks are as follows:

1. Receive a loss from cooperation due to the need to provide the retailer with a price lower than the full cost of production.
2. Become dependent on the seller due to the fact that when reorienting production to the production of private labels, you will have to reduce commercial divisions and the active sales department, as well as abandon the customer base that has been accumulated over the years. If the contract with the network is terminated or expires, it will be impossible to quickly restore sales volume, which will inevitably entail serious financial losses.
3. If a retail chain insists on releasing an “umbrella brand” similar to the TOP positions of its own range, there is a danger of substitution and crowding out of its products.

Win-win move

A huge number of manufacturers are seeking to supply retailers with private label products. How to get the contract you want? There is a simple and effective rule: you need to understand what guides the manager of a private label retail chain when making a decision, and make him an offer that you yourself would accept if you were in his place.

1. Assess the retailer's needs:
   • analyze the market and network assortment;
   • evaluate the network strategy when working with private labels;
   • formulate the requirements for the product needed for the network.
2. Weigh your own strengths and capabilities:
   • check whether you can sell a product with the required characteristics at the required price;
   • objectively assess your production capabilities: can you supply products in the required quantity without compromising existing sales volume;
   • identify the need for project financing and determine sources of raising funds;
   • identify suppliers of raw materials and components and make sure they are reliable and ready to provide everything necessary for the production of private labels;
   • Calculate the cost of production before and after launching a private label project. Track how the increase in volume affected costs. Develop a cost reduction program;
   • compare the economics of the contract when collaborating on your own brand and private label network;
   • formulate what goal you are pursuing;
   • Assess your risks and, if they are significant, draw up a program to reduce them.
3. Make an offer that will benefit both the retailer and you, and make it without waiting for a tender to be announced. Your offer will become much more attractive if you:
   • conduct preliminary research yourself;
   • simplify the quality control procedure or take on part of the costs;
   • minimize network costs for the purchase of raw materials and packaging and storage of finished products;
   • distribute the package of additional services provided to your brands and private label networks.

The proposed operating algorithm can be quite effectively implemented by both domestic manufacturers and importers. The weakening of the ruble exchange rate at the beginning of the year reduced the competitiveness of foreign goods. Nevertheless, the emerging trends towards a fall in the EURO exchange rate, an increase in imports of food products from European countries and the focus of a number of Western enterprises on the production of private labels for European retailers make cooperation with Russian retail chains in the production of private brands and their own imports promising.

Private label, Own brand or Private label is a trademark or brand of a retail chain. A private label will allow the retailer to fully control production, quality and pricing of finished products, manage the product matrix, profitability and sales margins. In Russia, under your Own Trademark (PTM), computer cables and mobile accessories are produced by GREENCONNECT Russia.

Advantages of manufacturing products underPrivate label in GREENCONNECT Russia:

• Full production cycle in St. Petersburg. Drawing up a product matrix, calculating profitability, developing unique models, packaging, production and distribution - all this is carried out by a team of GREENCONNECT Russia specialists.
• Prompt, timely production. After all approvals, development and production of test samples, production of any order is possible in just 4-10 working days.
• High production capacity. At its own sites in St. Petersburg, GREENCONNECT Russia produces hundreds of thousands of finished products per month. You will receive products under your brand in a timely manner and in the volume you need.
• Unconditional warranty. The chain's own brand is, among other things, an image project. GREENCONNECT Russia cares about the reputation of its partners, so product quality comes first. Multi-stage control at all stages of production and transparent terms of cooperation will allow any retail chain to remain confident in the quality of goods under its own brand.
• Own research and development department. Design development and construction of product samples, testing of technical characteristics, development and branding of packaging - the GREENCONNECT Russia team will do all this for you.
• Reducing your logistics costs and no minimum order quantity. We reduce your storage costs - we store the material ourselves, and produce and supply products as needed. There is no longer any need to order large quantities and keep products in your warehouse. We will produce exactly the quantity you need for your operational activities.