The numbers speak for themselves: retailer brands have experienced impressive growth in Europe over the past few decades and are present in more than 90% of consumer packaged goods. A key question to answer is whether retailer brands will grow at the same pace all over the world, challenging brand manufacturers' market share globally. A recent study published in the Journal of International Marketing addresses this question and concludes that retailer brands' growth will vary across countries depending on market structures. The international development of retailer brands has been the cornerstone of many retailers' growth strategies for challenging the position of manufacturer brands. "It is of critical importance that brand manufacturers assess the threat of retailer brands by having a very good understanding of market attractiveness in terms of the potential threat of retailer brands," says leading researcher Andrés Cuneo, Associate Professor of Marketing at ESADE. "Our research sheds light on how market-structure factors influence the growth of retailer brands in different countries. The findings can help manufacturers' brand managers to better predict whether specific countries are fertile ground for retailer brands or, on the contrary, they are bastions for brand manufacturers to protect their market shares." Using panel data provided by Euromonitor International, researchers examined company data for a 10-year period across a sample of 46 countries in North, Central and South America; Western and Eastern Europe; the Middle East; and Australasia. The report analyzed manufacturing brands in four macro categories, including home care, packaged foods, tissue and hygiene, and pet care. Risk perception "In many markets, retailer brands are considered risky alternatives because consumers perceive them to be inferior in quality compared to manufacturer brands," says Prof. Cuneo. "The likelihood that consumers will choose a retailer brand increases when they perceive that the risk is lower." To reduce this perception of risk, global supermarket and hypermarket chains such as Carrefour, Tesco and Walmart have abandoned value propositions based on "pure price" and are adopting more sophisticated ones that target a wider range of consumers who are searching for lower risk and value alternatives. Retail distribution structure Why do retailer brands become major players in some countries but have a hard time gaining momentum in others? In the study, researchers looked at three key market structure factors that have a direct effect on the success of private label brands: retail distribution structure, type of retailer and logistic structure. These factors play a crucial role in promoting or inhibiting the ability of retailers to develop retailer brands. "The findings show that the retail distribution structure has the largest effect on determining the success of private label brands across countries," explains Prof. Cuneo. "The research proves that the more highly developed a country's retail distribution structure is -- i.e., supermarkets, hypermarkets and discounters -- the higher the retailer brand share will be." Logistics and global retailers The second factor influencing the success of retailer brands is a country's logistic structure -- that is, the quality of the country's trade facilities and the logistic performance it offers companies in terms of shipping and transporting products across the country. "When logistic structures are underdeveloped, they constitute a barrier for retailers to access suppliers and stores in a timely and efficient manner," says Prof. Cuneo. "Our findings confirm that the more highly developed a country's logistic structure is, the higher the chances of success." A third factor influencing the success of retailer brands is the presence of global retailers in the country. The report reveals that the number of retailers present in a market also influences the success of a retailer brand's expansion. "We have observed that global discounters play an important role in the growth of retailer brands: the higher the number of global retailers in a country, the greater the impact on sales," says Prof. Cuneo. This article was originally published in the first issue of Knowledge Pills, a new magazine by ESADE Executive Education featuring research-backed tips and advice for executives.

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Are retailer brands a competitive threat for brands globally?

09/2017

The numbers speak for themselves: retailer brands have experienced impressive growth in Europe over the past few decades and are present in more than 90% of consumer packaged goods.


A key question to answer is whether retailer brands will grow at the same pace all over the world, challenging brand manufacturers' market share globally. A recent study published in the Journal of International Marketing addresses this question and concludes that retailer brands' growth will vary across countries depending on market structures.


The international development of retailer brands has been the cornerstone of many retailers' growth strategies for challenging the position of manufacturer brands. "It is of critical importance that brand manufacturers assess the threat of retailer brands by having a very good understanding of market attractiveness in terms of the potential threat of retailer brands," says leading researcher Andrés Cuneo, Associate Professor of Marketing at ESADE.


"Our research sheds light on how market-structure factors influence the growth of retailer brands in different countries. The findings can help manufacturers' brand managers to better predict whether specific countries are fertile ground for retailer brands or, on the contrary, they are bastions for brand manufacturers to protect their market shares."


Using panel data provided by Euromonitor International, researchers examined company data for a 10-year period across a sample of 46 countries in North, Central and South America; Western and Eastern Europe; the Middle East; and Australasia. The report analyzed manufacturing brands in four macro categories, including home care, packaged foods, tissue and hygiene, and pet care.


Risk perception


"In many markets, retailer brands are considered risky alternatives because consumers perceive them to be inferior in quality compared to manufacturer brands," says Prof. Cuneo. "The likelihood that consumers will choose a retailer brand increases when they perceive that the risk is lower."


To reduce this perception of risk, global supermarket and hypermarket chains such as Carrefour, Tesco and Walmart have abandoned value propositions based on "pure price" and are adopting more sophisticated ones that target a wider range of consumers who are searching for lower risk and value alternatives.


Retail distribution structure


Why do retailer brands become major players in some countries but have a hard time gaining momentum in others? In the study, researchers looked at three key market structure factors that have a direct effect on the success of private label brands: retail distribution structure, type of retailer and logistic structure. These factors play a crucial role in promoting or inhibiting the ability of retailers to develop retailer brands.


"The findings show that the retail distribution structure has the largest effect on determining the success of private label brands across countries," explains Prof. Cuneo. "The research proves that the more highly developed a country's retail distribution structure is -- i.e., supermarkets, hypermarkets and discounters -- the higher the retailer brand share will be."



Logistics and global retailers


The second factor influencing the success of retailer brands is a country's logistic structure -- that is, the quality of the country's trade facilities and the logistic performance it offers companies in terms of shipping and transporting products across the country.


"When logistic structures are underdeveloped, they constitute a barrier for retailers to access suppliers and stores in a timely and efficient manner," says Prof. Cuneo. "Our findings confirm that the more highly developed a country's logistic structure is, the higher the chances of success."


A third factor influencing the success of retailer brands is the presence of global retailers in the country. The report reveals that the number of retailers present in a market also influences the success of a retailer brand's expansion. "We have observed that global discounters play an important role in the growth of retailer brands: the higher the number of global retailers in a country, the greater the impact on sales," says Prof. Cuneo.



This article was originally published in the first issue of Knowledge Pills, a new magazine by ESADE Executive Education featuring research-backed tips and advice for executives.

The growth of private label brands: A worldwide phenomenon?
Cuneo Zuñiga, Andrés; Milberg , Sandra J.; Benavente , Jose Miguel; Palacios-Fenech , Javier
Journal of International Marketing
Vol. 23, nº 1, 03/2015, p. 72 - 90
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