Overview
This chapter covers introductory issues related to research on the coexistence of private label and manufacturer brands in food product categories ; these categories are also referred to as fast-moving consumer goods (FMCG) categories. The playing field for both private label and manufacturer brands is supermarket shelves . The research investigates how manufacturer brands and private label coexist in FMCG/supermarket product categories in a grocery retail landscape characterised by high retail concentration, and how relevant power is to this coexistence. Power, in this regard, is the influence or control that the two types of brands have on each other. Specifically, the chapter summarises the purpose and background of this research, its significance, the methodology employed in the investigation, the scope of the book and the contribution it makes.
Purpose and Background of this Book
The purpose of this book is to investigate the coexistence of private label and manufacturer food brands in FMCG product categories in a grocery retail landscape characterised by high retail consolidation and concentration , and direct competition between brands owned and managed by owners of the grocery retail shelves (private label) and those owned and managed by their suppliers (manufacturer brands). The literature reviewed in Chaps. 2, 3 and 4 of this book leads to the development of research questions and related issues. The primary research question of the investigation is: How do manufacturer brands and private label coexist in FMCG/supermarket product categories in a grocery retail landscape characterised by high retail concentration, and how relevant is power to this coexistence?
This primary research question is broken down into three subsidiary research questions:
- Does a grocery retail environment characterised by high retail concentration lead to an overdominance of private label in relation to manufacturer brands in FMCG/supermarket product categories?
- How important are aspects of strategic dependency between manufacturer brands and private label in determining the nature of coexistence between the two types of brands in FMCG/supermarket product categories?
- In an FMCG/supermarket landscape characterised by high retail concentration and direct competition between brands owned and managed by owners of the grocery retail shelves (private label) and those owned and managed by their suppliers (manufacturer brands), what role is played by power in the coexistence relationship between the two types of brands in the product categories ?
It is important to understand these issues because private label brands have become a common feature in FMCG/supermarket categories, and have also become a global phenomenon (ACNielsen 2005; Nielsen 2014). There is an increasing prominence of private label brands in supermarket product categories . Private label brands, however, belong to the grocery retailers , who own the retail shelves and are customers of the manufacturers; but at the same time these brands are competing with manufacturer brands that are owned by the grocery retailers’ suppliers (i.e. FMCG manufacturers). How does this coexistence work? This situation most certainly implies intricate relationships in the coexistence of manufacturer brands and private label brands, both of which have become a permanent feature in most supermarket categories around the world. It is noted that in the FMCG manufacturer–retailer relationship, the balance of power has largely shifted to the retail chains because of a number of factors that include retail consolidation and concentration, the power of information on the part of the retailers, and the retailers’ increasing emphasis on private label (e.g. Hogarth-Scott 1999; Hollingsworth 2004; Hovhannisyan and Bozic 2016; Stanković and Končar 2014; Sutton-Brady et al. 2015; Weitz and Wang 2004). Retail consolidation and concentration have been linked with driving private label brand shares to high levels (e.g. Burt 2000; Cotterill 1997; Defra 2006; Hollingsworth 2004; Nielsen 2014; Rizkallah and Miller 2015). If the grocery retail chains have the power and will, they may decide to go all the way in terms of private label dominance . Some researchers (Hoch et al. 2002a, b) have noted that the private label is privileged in the way it controls its own marketing mix as well as the marketing activities of competitor brands . This situation has made it necessary to conduct research that seeks to better understand private label and manufacturer brand share trends (Chimhundu et al. 2011), given that the odds seem to be stacked against manufacturer brands in what one study (Kumar and Steenkamp 2007) has referred to as the radically altered FMCG landscape.
Additionally, an intensive investigation of the coexistence of the two types of brands in selected food product categories was seen as a good way to establish a richer picture of the situation, including an assessment of what one author (Baden-Fuller 1984: 525) has referred to as “retail strategic thinking in the area of retail brands ”. Furthermore, in the environment of retailer power , consumer focus is stressed in the category management literature as a factor that is commonly recognised as having an influence on the balancing of manufacturer brands and private label in the product categories (e.g. ACNielsen et al. 2006). The mainstream academic literature has, however, fallen short of giving adequate attention to other key factors such as the influence of aspects of strategic dependency between the two types of brands on the determination of how they coexist. In view of the conflicting views in the literature on the relative contributions of manufacturer brands and private label to product innovation in the categories (Aribarg et al. 2014; Coelho do Vale and Verga-Matos 2015; Conn 2005; Hoch and Banerji 1993; Lindsay 2004; Olbrich et al. 2016; Silverman 2004; Steiner 2004) and category support (e.g. Anonymous 2005; Putsis and Dhar 1996), this book further investigates these issues with a view to arguing that aspects of strategic dependency that enhance private label in the categories have relevance for the determination of policies that govern the coexistence of the two types of brands in FMCG/supermarket categories. This research direction, having been initially refined and reported by Chimhundu et al. (2010), has now undergone full development in this volume.
The explicit theory employed in this research is that of power (Dapiran and Hogarth-Scott 2003; French and Raven 1959; Hunt 2015; Mintzberg 1983; Raven 1993). This is in view of the power wielded by the retail chains in relation to manufacturers, as has already been mentioned. The bases of power are examined in relation to the coexistence of manufacturer brands and private label, and particularly in view of the radically altered (Kumar and Steenkamp 2007) grocery retail environment . The research seeks to establish the dominant source(s) of power employed, as well as the implications for the continued coexistence of the two types of brands in the categories.
Significance of the Book
The context of this research book is the ...