PMKT – Brazilian Journal of Marketing, Opinion, and Media Research
ISSN: 1983-9456 (Print)
ISSN: 2317-0123 (Online)
Editor: Fauze Najib Mattar
Valuation system: Triple Blind Review
Languages: Portuguese and English
Publication: ABEP – Associação Brasileira de Empresas de Pesquisa
Analysis of Private Label Management in Non-Metropolitan Brazilian Retailers
Análise da Gestão de Marcas Próprias em Varejistas de Médio Porte
Submission: 7 fev. 2013 - Approval: 25 jul. 2013
Daniela Vasconcelos Arruda
Master candidate in Business Administration from UFU. Specialized in Public Management by
FINOM. Graduated in Business Administration from ULBRA. Administrative technician at Goiás
Federal Institute.
E-mail: [email protected].
Address: Instituto Federal de Goiás - Campus Itumbiara - Av. Furnas, n° 55, Village Imperial 75.524-010 – Itumbiara/GO - Brasil.
Vérica Marconi Freitas de Paula
Doctoral degree in Production Engineering from EESC/USP. Master in Production Engineering
from UFSCar. Specialized in Business Administration from USP-FUNDACE/FEARP. Graduated in
Food Engineering from UNESP. Professor of FAGEN/UFU.
E-mail: [email protected].
Verônica Angélica Freitas de Paula
Doctoral degree in Production Engineering from UFSCar. Sandwich Doctorate (PDEE/CAPES) at
Harper Adams University College. Master in Business Administration from FEA-USP. Graduated
in Business Administration from FEA-USP. Graduated in Law from Universidade de Ribeirão
Preto. Professor of FAGEN/UFU.
E-mail: [email protected].
Analysis of Private Label Management in Non-Metropolitan Brazilian Retailers
Daniela Vasconcelos Arruda / Vérica Marconi Freitas de Paula / Verônica Angélica Freitas de Paula
ABSTRACT
Private labels have achieved more space on supermarkets´ shelves as this strategy may help increase
retailers´ competitiveness, impacting on their profitability. This paper aims at analyzing private
labels´ adoption and management in supermarket chains from non-metropolitan regions in Brazil, as
well as the selection process of private labels´ suppliers. In order to achieve these objectives, two
retailers were studied. Interviews were developed using a script previously applied in another
research and they were recorded and then transcribed. The dimensions: general aspects of private
labels, private labels management and selection and evaluation of private label suppliers were
analyzed. It was possible to notice that supermarkets adopt private labels seeking mostly customer
loyalty and to increase profitability. Retailers evaluate opportunities to introduce these products,
positioned as intermediaries (after leading brands). During the selection of private label suppliers,
aspects such as product quality and the manufacturer’s financial situation are analyzed. It is possible
to conclude that offering private labels is viable and may benefit non-metropolitan Brazilian
retailers as it promotes brand recognition, customer loyalty and profitability.
KEYWORDS:
Private label, private label management, supermarket.
RESUMO
As marcas próprias têm conseguido cada vez mais espaço nas prateleiras e gôndolas dos
supermercados. Essa estratégia pode viabilizar o aumento da competitividade do varejista e isso
impactaria na melhoria de sua rentabilidade e lucratividade. Considerando o efeito que a adoção de
marcas próprias pode ter, este artigo objetivou analisar o processo de adoção e gestão de marcas
próprias de redes supermercadistas de médio porte em cidades do interior, investigando também,
como os fornecedores dessas marcas são escolhidos. Para alcançar os objetivos propostos foram
estudadas duas organizações, utilizando um roteiro anteriormente aplicado em outra pesquisa para
consecução das entrevistas, que foram gravadas e transcritas. Foram analisados: aspectos gerais
sobre marcas próprias, gerenciamento de marcas próprias e seleção e avaliação de fornecedores de
marcas próprias. Foi possível perceber que os supermercados adotam as marcas próprias para
fidelizar seus clientes e aumentar sua lucratividade. Os varejistas analisam onde há oportunidade e
demanda para introduzir esses produtos, que são posicionados como intermediários (após a marca
líder). Na escolha dos fornecedores, são observados aspectos como a qualidade do produto e a
situação financeira do fabricante. Conclui-se que a utilização da estratégia de marcas próprias por
redes supermercadistas de médio porte em cidades do interior, é viável e pode ser benéfica
promovendo fixação da marca, fidelização de clientes e melhoria da lucratividade.
PALAVRAS-CHAVE:
Marcas próprias, gestão de marcas próprias, supermercados.
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Analysis of Private Label Management in Non-Metropolitan Brazilian Retailers
Daniela Vasconcelos Arruda / Vérica Marconi Freitas de Paula / Verônica Angélica Freitas de Paula
1. INTRODUCTION
Supermarket chains have great representativeness for the Brazilian economy, keeping considerable
growth rates as the 5.18% increase in sales from January to October of 2012, compared to the same
period of the previous year (ABRAS, 2012). In this context, research on strategies and forms of
management presented by the supermarket section can be considered relevant for both the practice
and the Academy.
Studying the practice of private labels management, considering that, gradually, their presence on
the shelves and gondolas of Brazilian supermarkets has grown, is one way to contribute with
knowledge to the Marketing area.
Most research, however, refers to strategies for adopting private label by the largest supermarket
chains, usually hypermarkets (SOUZA et al., 2009; ALMEIDA, 2010; PEZZINO; MATOS;
FERREIRA, 2010).
Researches with consumers, about their perception of private labels and decision-making elements
also are being held (PEETERS et al., 2006; FIGUEIRA JR., 2008; LION; MELLO, 2009; SILVA,
2009; SILVA; MERLO; NAGANO, 2012). Thus, there is a gap regarding research on the insertion
and management of private labels in chains that are not hypermarkets, as chains from nonmetropolitan regions.
Therefore, it is possible to ask: how does the adoption and management of private labels occur and
how are the suppliers of these brands chosen? In order to answer these questions, this paper presents
two main objectives:
 Analyze the process of adopting and managing private labels by supermarkets from nonmetropolitan regions.
 Discuss the selection of suppliers’ criteria for supermarkets from non-metropolitan regions.
In order to develop this analysis, two supermarket chains of Itumbiara/GO were chosen. They also
operate in the State of Minas Gerais and they both offer private labels.
2. THEORETICAL FRAMEWORK
2.1 PRIVATE LABELS
According to Santos, Campomar and Toledo (2010), brands provide meaning to the role of
consumers because, in addition to ensuring the quality of the product, they also provide emotional
satisfaction.
Any product that does not have a brand or that its brand name is not recognized becomes less
attractive to consumers. It is important that the strategic brand decisions are observed by companies,
mainly because the brands are sources of differentiation against competitors.
Branding strategies provide competitive advantages for organizations that use them properly and
they are also important as they are sources of profitability for organizations (PIATO; PAULA;
SILVA, 2011).
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Analysis of Private Label Management in Non-Metropolitan Brazilian Retailers
Daniela Vasconcelos Arruda / Vérica Marconi Freitas de Paula / Verônica Angélica Freitas de Paula
According to Cravens and Piercy (2008:267), “the strategic management of brands is a fundamental
issue in many organizations”.
One of the possible branding strategies is the private label, which represents an alternative of brand
identity for the company. In this case, retailers hire manufacturers to supply the products that will
be offered with the retailers´ brands.
It is important to mention that private labels are products which are, traditionally, property of
retailers or wholesalers and, according to Huang and Huddleston (2009), the term private labels is
often used with the same meaning of other terms, such as: private brands, own label, retailers
brands and store brands. In this paper, only the term private label will be used to facilitate
understanding.
Private labels are property of the retailer, controlled by the retailer and sold exclusively in its stores
(HERSTEIN; JAFFE, 2007). They can be developed exclusively by a retailer or by a third part
(HOCH; BANERJI, 1993).
Responsibility for this strategy falls totally on the retailer. By adopting private label in a given
product category, the retailer needs to play a series of marketing tasks that are normally performed
by the manufacturer, from the construction of the private label, passing through the steps of
development and production, to marketing and distribution. This means that the success or failure of
the private label is a responsibility of the retailer. However, although it seems laborious, a private
label program can be profitable (DHAR; HOCH, 1997; STEENKAMP; DEKIMPE, 1997).
It is common that retailers develop the design and specifications for their private labels and then
they hire manufacturers only to produce them. On the other hand, it is also possible that suppliers of
national brands (or manufacturers brands) work with the retailer to develop a special version of its
standard merchandise to be sold exclusively by the retailer. In cases like this, the design,
specification and product manufacturing are also the suppliers´ responsibility (LEVY; WEITZ,
2011).
Private labels started in Europe, where they have considerable market share. In Switzerland, for
example, private labels participate in the families’ life with 46%, in the United Kingdom 42%, 38%
in Spain, 30% in Portugal and 28% in France and in Germany.
The insertion of private labels, however, is not restricted to Europe (ACNIELSEN, 2011). This
strategy is disseminated in the international market, in countries such as Canada and New Zealand
(18%), United States (17%) and Australia (14%) (ACNIELSEN, 2011).
In Brazil, the participation of private labels is still limited. Research conducted by ACNielsen
shows that, in 2009, 2010 and 2011, the participation of private labels on the market was 4.6%,
4.8% and 4.9%, respectively (ACNIELSEN, 2011).
According to Piato, Paula and Silva (2011), private labels have emerged in Brazil in the decade of
1970 by the initiative of some multinational and national networks that have introduced generic
products in their portfolios.
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Analysis of Private Label Management in Non-Metropolitan Brazilian Retailers
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Only in the late 1980s other supermarket chains began to adopt this strategy, launching initially
basic products without much concern for the quality and brand image. The most important variable
was low price, but consumers had the perception that the quality of these products was lower than
the leading manufacturer brands.
As distributors realized several markets were based mainly on price, private label products were
developed considering strictly the cost factor to increase profit margins through offering reduced
prices to customers. As a result, low-quality products were developed, resulting in consumers
distrust about the quality of private labels (PIATO, 2006).
This perception that prices were low because the products had low quality turned out to be an
obstacle to the development of this strategy, both in Brazil and in other countries (PIATO; PAULA;
SILVA, 2011). In the current scenario, there was an improvement in these products quality, which
became known as third generation of private labels (ALMEIDA, 2010).
For Piato, Paula and Silva (2011), in this generation, private labels become followers of the leader,
so that both the quality and the price level approach the ones for manufacturers brands. With a
better development of private labels, with more options and communication, the difference in
quality between private labels and manufacturers brands has become almost unnoticeable.
Despite the fact that price and quality are still prevalent in the purchasing decision, other variables
are considered:
 Variety.
 Communication with the consumer.
 Credibility of manufacturers.
 Product brand.
Including the advantage to increase profit and customer loyalty, private labels can contribute to the
strengthening of the brand and corporate image, however, for this to occur, the major retailers have
to invest in intense and effective communication to strengthen their private labels and win
consumers’ trust (ALMEIDA, 2010).
Complementing with the vision of Huang and Huddleston (2009), the change in private labels
positioning was allowed by the improvement in the retailers’ operation, from simple national
brands´ distributors to an active role in the development and marketing of its own brands.
Although private labels have been widely developed by retailers, it is important to consider three
sets of actors that are affected by the entry of these brands on the market: retailers, manufacturers
and consumers (HOCH; BANERJI, 1993; PAULWELS; SRINIVASAN, 2004).
The supply-side is affected by retailer's decisions on allocations. The demand side is influenced by
the needs, expectations and behavior of consumers; and the number, competitiveness and actions of
manufacturers affect the competitive environment (HOCH; BANERJI, 1993).
Deciding to invest in private labels as a marketing strategy, retailers must consider the interest of
manufacturers in developing and of consumers in purchasing them (HERSTEIN; JAFFE; 2007).
Therefore, it is important to discuss some features about private labels for retailers and
manufacturers.
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Analysis of Private Label Management in Non-Metropolitan Brazilian Retailers
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2.2 PRIVATE LABEL AND RETAILERS
The decision to adopt private labels among its products is followed by some advantages and
opportunities, however, the risks and challenges involved in that decision are many, requiring that
the retailer be prepared to manage them (SANTOS; CAMPOMAR; TOLEDO, 2010).
To offer a private label in its store, for example, a retailer must be willing to: invest in packaging
and product registration; provide a space on the shelves and gondolas every day; and allocate
resources for communication.
The shelf space for private labels can be considered an opportunity cost, so the retailer must have a
minimum performance of these brands.
On the other hand, private labels allow retailers to track and manage their shelves and still create
another level of relationship with consumers (HOCH; BANERJI, 1993; CONN, 2005).
According to many authors, retailers may have advantages in offering private labels in their
portfolio. Some of them are listed in Chart 1.
CHART 1
Advantages of private labels for retailers.
ADVANTAGES FOR RETAILER
AUTHORS
Consumers´ loyalty to stores that offer private
labels increases.
Differentiation from other retailers
increasingly competitive environment.
in
an
Strengthening the bargaining power of the retailer
as with the increase in the success of private labels,
manufacturers are more willing to negotiate prices
with retailers. Sometimes, the simple threat of
offering a new brand in the market is able to get the
manufacturer to be more flexible in the
negotiations.
Decrease the dependence of manufacturers´ brands.
Private labels are sources of competitive advantage.
Increase profit and results due to private labels
higher unit margin.
Increase in the variety of products offered.
Allow retailers to prevent against possible shortages
of the product on the market.
Steenkamp and Dekimpe (1997); Pereira (2001);
Herstein and Jaffe (2007); Almeida (2010); Piato,
Paula and Silva (2011)
Steenkamp and Dekimpe (1997); Conn (2005);
Herstein and Jaffe, (2007); Piato, Paula and Silva
(2011)
Steenkamp and Dekimpe (1997); Pereira (2001);
Herstein and Jaffe, (2007); Piato, Paula and Silva
(2011)
Conn (2005); Pereira (2001)
Pereira (2001); Almeida (2010); Piato, Paula and Silva
(2011)
Pereira (2001); Pauwels and Srinivasan (2004);
Herstein and Jaffe (2007); Almeida (2010); Piato,
Paula and Silva (2011)
Pereira (2001); Herstein and Jaffe (2007)
Pereira (2001)
Although the list of advantages is extensive, there are some disadvantages that need to be
considered when a retailer decides to include or not private labels in its portfolio.
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Analysis of Private Label Management in Non-Metropolitan Brazilian Retailers
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As disadvantages it is possible to list: increased expenses with inventories, product development
and marketing; and lack of support from manufacturers in promotions and in the communication of
available items to the consumer (PIATO, 2006). However, private labels can be advantageous to
retailers if they know how to manage them.
Comparing with the 1970s, when private labels were introduced in Brazil, these brands outscored
some barriers, keeping the growth and increasing the credibility of the product with the consumer.
Conn (2005) asserts that private labels are no longer exclusively a me-too solution or a low price
offer. Many of them are exclusive brands, premium quality, with the same level of quality of
manufacturers brands.
Shono et al. (2007), from a study of ABRAS, pointed the following positioning strategies that
retailers adopt for their private labels:
 Premium or innovative products.
 Similar to the leaders.
 Intermediaries.
 First price.
Premium or innovative products are differentiated and have higher added value. These products
have higher price compared to their competitors.
When well accepted by the market, they can increase retailers´ profitability and promote customer
loyalty, as they are not found in other stores.
Similar products to the leaders are those that can be compared to their main competitors in terms of
quality.
Intermediaries are the slightly lower quality products compared with the leader products, with
prices between 20% and 30% lower.
First price is an alternative product that does not compete with the leading brands and are targeted
to consumers who seek a minor expense.
Private labels have entered the market as a low-value product, but, increasingly, retailers have
engaged in improving the quality of their products, with the goal of leveraging the image of their
chain and encouraging consumer loyalty to the brand.
The success of private labels strategy may be determined by the quality offered, as perceived
quality is quite related to the retailers´ power of conquering and, consequently, increasing market
share (STEENKAMP; DEKIMPE, 1997).
2.3 PRIVATE LABEL AND MANUFACTURERS
Manufactures of national brands also have their advantages to provide private labels to retailers. In
Brazil, according to Piato, Paula and Silva (2011), more often private labels are produced by
manufacturers that do not have famous brands and found on private labels a chance to sell their
products.
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Analysis of Private Label Management in Non-Metropolitan Brazilian Retailers
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However, in developed countries, private labels, according to Herstein and Jaffe (2007), are
produced by manufacturers of major international brands or domestic leading brands.
This may be explained due to the fact that international markets, mostly European, have greater
acceptance of private labels, which does not mean that investing in private labels does not have
advantages in emerging markets.
Some advantages for suppliers, according to some authors, are presented in Chart 2.
CHART 2
Advantages of private labels for manufacturers.
ADVANTAGES FOR THE MANUFACTURER
AUTHORS
Private labels can increase the sales volume and,
consequently, market share.
Steenkamp and Dekimpe, (1997); Pereira (2001)
Increased revenue.
Pereira (2001)
Ensure an additional space on the shelves of
supermarkets.
Reduce excess on idle production capacity, without
the costs of advertising and promotion.
Reduction of overhead costs. Gains on scale, growth,
increased cash flow and profitability.
The possibility of improving the quality of its
processes and products due to the clients'
requirements.
Pereira (2001)
Steenkamp and Dekimpe (1997); Pereira (2001);
Almeida (2010); Piato, Paula and Silva (2011)
Piato, Paula and Silva (2011)
Piato, Paula and Silva (2011)
Another relevant observation regarding the Brazilian market is that for small and medium-sized
manufacturing companies, with commercial limitations to develop a manufacturer brand, private
labels represent a possibility to thrive in a market where they had no strong performance previously
(PIATO; PAULA; SILVA, 2011).
3. METHODOLOGICAL ASPECTS
In order to achieve the proposed objectives, this research was outlined as applied, exploratory and
qualitative, field research as investigation mean with data collection through semi-structured
interviews. The nature of this research is applied because it has a practical purpose and was
motivated by the need to solve practical problems (VERGARA, 2009).
The method of qualitative approach was used based on the examination and reflection of
perceptions in order to understand social and human activities (COLLIS; HUSSEY, 2005).
As for its goal, the research was established as exploratory, since its purpose was to investigate the
unknown reality, aiming at expanding the existing knowledge on the subject (HAIR JR. et al.,
2005). Finally, field research was chosen for being:
Held where a phenomenon occurs or occurred or that offers elements to explain it. It may include
interviews, questionnaires, tests and participant observation or not (VERGARA, 2009: 43).
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Analysis of Private Label Management in Non-Metropolitan Brazilian Retailers
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The interviews were recorded and transcribed. An adapted semi-structure script previously applied
in Paula’s research (2008) was used. The original script was structured in parts, and the following
parts were used in this study:
 General aspects about private labels.
 Private labels management.
 Selection and evaluation of private label suppliers.
The analysis of this research’s results was based on the structure of the script. The dimensions
analyzed were: target market; location; time of private labels offering; motivation for launching
private labels; product lines offered by retailers with private labels; cases of failure of private labels;
main advantages obtained with the adoption of private labels; and the main selection criteria of
private label suppliers.
In order to ensure the internal validity and the reliability of this study, the procedures proposed by
Yin (2003a) and used by Paula (2008) were followed, highlighting:
 Data analysis with analogies to the researched theory.
 Research protocol previously tested.
The supermarket chains studied (here called Chain A and Chain B) were selected for the following
reasons:
 They meet the purposes of the research as they are located in non-metropolitan regions of Goiás
and Minas Gerais and they are medium-sized chains.
 Act in the same macro-region, headquartered in the same city and with branches in the States of
Goiás and Minas Gerais.
 For convenience, considering the researchers´ geographical access to them.
After a personal visit to the supermarkets and a first contact to determine who would be interviewed
in which chain, phone calls and visits were made to the stores and the date and time of the
interviews were set.
According to the data synthesized by Parente (2000:30), the supermarkets studied can be considered
as "supermarket" as they have sales area between 300 m2 and 700 m2 ; their portfolios include 4,000
items on average; and they have from two to six checkouts. This classification fulfills the
requirements of this research, which aimed at analyzing medium-sized supermarkets.
4. RESULTS ANALYSIS
4.1 ANALYSIS OF THE RESULTS OF CHAIN A
Chain A has nine stores located in non-metropolitan cities of the State of Goiás, generally located in
the city center. Most of the stores are mid-sized and directed to classes A, B and C. This Chain has
been offering private labels for about one year and a half.
The main factors for the development of these brands were: to create partnerships with
manufacturers and to take advantage of market opportunities in specific segments.
By deciding to name the private label with the Chain’s name, its intention was to strengthen its
brand by connecting the products to the supermarket brand. The product lines offered as private
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Analysis of Private Label Management in Non-Metropolitan Brazilian Retailers
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labels are: coffee, ice cream, sauces for salad and garlic in bulk. The retailer is in the process of
introducing private label in the category of soda.
As a criteria to chose the categories to offer private labels, Chain A evaluates:
 Market opportunity.
 Segment or product line opportunity.
 Number of national brands available in a particular category.
Chain A offers intermediate level private labels. The company has no premium line, the main focus
of the Chain is to offer quality products, but with lower prices.
The same categories of private label products are available in all stores of Chain A, without
distinction. So far all the products that have been released with the retailers’ brand are on the
market, there are no cases of failure.
According to Chain A, the main advantages with the adoption of private labels were:
 Profitability that private labels provide to the supermarket, as a result of the partnership with
suppliers, enabling the company to manage its profit margin better.
 Possibility to create a product that does not exist in a specific market niche, with greater or
lesser added value.
 Adding the brand name to a product, reaching a niche that may not be reached by national
brands.
Responsibility for private label management is outsourced, carried out by a consultancy in
marketing with the support of the commercial manager of the store.
Regarding the selection and evaluation of suppliers, the main criterion is the quality of the product.
Chain A also favors suppliers that have been working for a long time in partnership with the
supermarket, located in various regions of the country.
It is also important to note that Chain A has an exclusivity warranty defined in the contracts with
private label suppliers.
When the result of the products’ insertion is positive, the supermarket maintains the same suppliers
for a particular product category, in order to ensure a standard for the products. On the other hand,
for different categories suppliers may be different, because each one of them has its specialty. The
quality of the products is frequently checked.
In addition to commercial analysis, such as sales volume, product turnover and financial return,
Chain A also conducts a satisfaction research with customers of its products, to identify strengths
and weaknesses and to detect opportunities and threats of the market.
4.2 ANALYSIS OF THE RESULTS OF CHAIN B
Chain B has nine stores in the States of Goiás and Minas Gerais. As its location disperses, the
supermarket attends all classes: some stores attend classes A and B, while others have easy access
to most popular neighborhoods.
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Analysis of Private Label Management in Non-Metropolitan Brazilian Retailers
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The Chain has been working with private labels for five years and the reasons for their development
were:
 Attempt to increase the margin and increase profitability.
 Customer loyalty to the brands offered.
One of the advantages observed by the company with the commercialization of these products was
the customer loyalty, due to brand exclusivity. As a result, the supermarket also improved its
profitability.
Currently, the supermarket offers private label in several product lines: ice cream, coffee, rice,
beans, sauces for salad, spices, garlic in bulk and cookies.
When an opportunity to offer a new private label product is identified, the retailer chooses to invest.
Besides that, before launching a specific private label product, the supermarket removes the last
selling brands from its portfólio in this category to concentrate and focus on the private label.
All stores of this Chain offer all private labels. All products that were released with the supermarket
brand were well accepted by customers and they have been on the shelves since their launch,
representing more than 50% of the earnings of each category in which the private label is offered.
Private labels of Chain B are positioned as followers of the leading brands, their prices are smaller
than the prices of the sales leaders. It also makes the products viable, considering the level of
quality that the company seeks to maintain for its private labels.
It is worth commenting that both Chain A and Chain B position their private labels under the
leading brands, which could be categorized as an intermediary in the positioning of the private
labels.
Private labels in Chain B are managed by the purchasing team. The product formulation is the same
of the products already sold by the manufacturer, however the supermarket, through a technical
manager, sends these products to a laboratory to perform quality tests.
The packaging is defined by the retailer’s Marketing department, which is responsible to approve
the product image that will be manufactured and delivered by the supplier ready to be displayed on
the shelves.
Private label from Chain B is exclusive of the supermarket, and suppliers are prohibited of selling it.
The item coffee is an exception; the supplier may sell this product with the retailers’ brand in towns
where Chain B is not present.
In this case, the supplier pays for the right to use the retailer’s brand. This negotiation can be
considered beneficial for the supermarket as it may increase the margin on the value received for
the brand use and it is also possible to make its brand recognized in places where the supermarket
does not have stores.
The first criterion of the selection of suppliers is financial, as the supermarket wants to ensure the
continuity of private labels supply.
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After the approval of the financial situation, a food technician from the supermarket visits the
supplier to analyze cleaning, hygiene and organization. Finally, the quality of the product is
analyzed by external laboratory and it is verified if the product meets the requirements of the
supervisory institutions.
It is important to comment that due to commercial negotiation, Chain B chooses to maintain two
suppliers for the same product in some cases.
However, the supermarket maintains the same pattern (same characteristics) for these products,
regardless the supplier.
Chart 3 summarizes the vision of each Chain studied about the main points discussed on private
labels.
CHART 3
Comparison of private label management in Chain A and Chain B.
FEATURES
CHAIN A
CHAIN B
Target market
Classes A, B and C
Indistinct
Location
City center
Disperses
Time of private labels offering 18 months
Motivation for launching
private labels
Establish partnership with suppliers
Take advantage of market
opportunities
Product lines offered by
retailers with private labels
Coffee, ice cream, sauces for salad
and garlic in bulk
Cases of failure of private
labels
Main advantages obtained
with the adoption of private
labels
Main criterion of suppliers
selection
None
60 months
Increase the margin
Improve profitability
Retain customers
Ice cream, coffee, rice, beans, sauces
for salad, spices, garlic in bulk and
cookies
None
Profitability (increased profit margin) Improvement of profitability
Exploitation of untapped niche market Customer loyalty
Adding the retailer name to the
product
Product quality
Financial
5. FINAL CONSIDERATIONS
The analysis of private labels management for mid-size retailers located in non-metropolitan
regions of the States of Goiás and Minas Gerais (one of the proposed objectives for this study) has
identified that some of the reasons of these supermarket chains to invest in private labels are similar
to the motivating factors for hypermarkets. The reasons of the supermarkets studied to offer private
labels are:
 Customer loyalty.
 Increased profitability and profit margin.
 Consolidation of the partnership with suppliers.
 Leveraging market opportunities (using as a criterion the lack of products in that category).
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In the cases studied, the main benefits observed in the introduction of private labels were:
 Adding the retailer’s brand to a product.
 Reaching an untapped niche market.
 Improvement of profitability for the supermarket.
 Customer loyalty.
The formulation of the private label product can be the same as the supplier. The main difference
lies in marketing aspects, such as the brand, the labels and packages, which are defined by the
retailer marketing department.
The second aspect defined in the main objectives of this study was the criteria and requirements for
the selection of private labels’ suppliers. Regarding the evaluation for supplier's definition, the first
aspect analyzed is the quality of the product offered.
Another important issue is the supplier’s financial capacity to ensure that it will be able to provide
the product without interruption.
It is interesting to note that every supermarket follows its own strategies when hiring private label
suppliers, but when comparing the results of this study to the study developed by Yokoyama, Silva
and Piato (2012), with one of the three largest supermarket chains in the country, there are
similarities regarding this process.
Another interesting aspect is related to the positioning of the private labels. Both Chains positioned
their products as intermediaries – behind the market leading brand. The hypermarkets, on the other
hand, intend to invest in various positions for its private labels.
Yokoyama, Silva and Piato (2012) present a chain that offers in its private label mix: products
similar to the leading brand (representing 60% of all its private label products), mid-tier price and
also premium products.
Similarly, Grupo Pão de Açúcar, one of the most investing chains in private labels in Brazil, offers
high-quality, premium and higher price products, but it also invests in products to compete with the
stronger brands, offering products similar to the leading brands, guaranteeing lower prices
(SERRALVO; ESTENDER, 2008).
It is possible to infer that smaller retailers do not have physical structure and financial resources to
work like the major chains. It is important to note that Chain A claims that the private label
management is outsourced, performed by a marketing consultancy, which is supported by the sales
manager of the store, while in Chain B it is the responsibility of the purchasing team.
The study of Yokoyama, Silva and Piato (2012), held in a large chain, demonstrates that there is an
exclusive department to develop private labels independently of the supermarket commercial
department.
This difference from the Chains studied in this paper may be due to the impossibility to allocate
people to act exclusively with private labels, considering the size of the retailers, the amount of
private label products to be developed and managed, as well as the amount of investments that
would be required to establish this framework.
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Finally, another aspect not found in the literature related to private labels in large chains is the fact
that Chain B allows the marketing of one of its products (coffee) through another channel agent – in
this case, in places where the supermarket does not have stores.
This alternative is advantageous for the retailer as its brand can become known beyond its borders.
In addition, it contributes to increasing its margin, since the supplier pays a given value to use its
brand.
Considering the discussion of the main aspects involved in managing brands, this study contributed
to the debate of the process of adopting and managing private labels, but its major contribution was
the analysis of this marketing strategy applied to smaller retailers, located in non-metropolitan
regions, whereas most of the research about private labels management has been developed with
hypermarkets. In this way, it is noticeable that the adoption of private labels by smaller
supermarkets is viable and can be beneficial for these organizations on issues such as the
establishment of brand, customer loyalty and increased margin.
5.1 LIMITATIONS OF THE STUDY
As limitation of this paper, it is important to comment that as the field research was held with two
chains, the generalization to other organizations is not possible. Similarly, the results do not
represent the reality of mid-sized supermarket sector.
Nevertheless, the results discussed may represent a source of information for managers of
organizations that intend to adopt private labels. Or even for those who already use them, as these
results may be seen as a reference of practices that succeeded. And for scholars and researchers of
the topic, this paper may contribute with a small breakthrough in mapping the reality of managing
private labels in Brazil, making it possible to present some ideas for further research, as described in
the next section.
5.2 RECOMMENDATIONS FOR FUTURE STUDIES
This study has not examined the consumer’s vision about private labels that are offered by midsized retailers. It is interesting to investigate this aspect.
Similarly, it is interesting to perform an analysis with suppliers (manufacturers) of private labels for
the studied retailers, aiming at identifying the motivation to supply private labels, as well as the
perceived advantages and disadvantages.
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