Private Label: The Simple Explanation

Private label products are manufactured by a contract or third-party manufacturer and sold under a retailer’s brand name. Private-label products or services, also known as "ghost or phantom brands", are typically those manufactured or provided by one company for offer under another company's brand. As the retailer, you specify everything about the product – what goes in it, how it’s packaged, what the label looks like – and pay to have it produced and delivered to your store. This contrasts with buying products from other companies with their brand names on them.

Private-label goods and services are available in a wide range. They are often positioned as lower-cost alternatives to regional, national or international brands. Although, recently some private label brands have been positioned as "premium" brands to compete against existing "name" brands while increasing sale dramatically. Many existing branded companies take their brand to a higher level by adding more product line varieties through "Private Label" There are many well-known branded companies whose product lines are all provided by another company through Private Label. Several well known franchises, supermarkets and big box store chains stock Private Label product lines from other companies.

Today private-label quality levels are much higher than ever before, and they are more consistent, especially in categories historically characterized by little product innovation. The distributors that contract for private-label production have improved their procurement processes and are more careful about monitoring quality. Private label food brands are a $117 billion business accounting for 19.4 percent of retail food sales in the U.S. While most food categories have been struggling, private labels have grown at a rate of 8 percent per year.

Store brands account for about one of every four products in a supermarket— and they're branching into niches that lack national-brand competition: balsamic vinegar, for instance, or chocolate-covered raisins and so on. Their popularity is understandable, considering that they typically cost 18 % to 38 % percent less than name-brand counterparts, according to an industry expert. Some of the store brands are more than 30 percent cheaper.

Although private label products are typically sold at a lower price point than their name brand, some private label brands are now being positioned as premium products, with the higher price tag to prove it.
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