The intense competition in retail markets has driven retailers to offer their own products that have somewhat similar quality at affordable price. The so-called “private label” becomes an attractive solution for customers that cannot afford to buy branded products.
According to global survey on private labeling, performed by AC Nielsen in 2005, they found that consumers in 38 markets continue accepting private labeling as good alternatives especially in markets where private labeling has existed for a long time. On average, in the Europe like Pacific regions, private labeling is perceived to be preferred choice by 78% of their consumers, followed by North America (77%), and Asia (51%).In terms of individual country, private labeling becomes the most preferred choices in Netherlands (91%), followed by Portugal (89%), and Germany (88%) (Shelf Impact, 2005).
The situation suggests that private labeling now becomes the savior for consumers and serious threat for branded producers. Since the private labeling has been adapted in many countries worldwide, this paper will discuss about private labeling of Welch Foods in United Arab Emirates (UAE).
- Company Background
Welch Foods is a well-known producer of juices, jams, and jellies made from Concord and Niagara grapes. Since the company only produces particular type of grapes that only grows in the United States and some parts of Canada, it becomes the Welch’s competitive advantages.
However, as globalization and open market policies are adopted by several countries to ensure fair competition, Welch Foods face serious threats as giant retailers start aggressively their private labeling strategy on variety of products including juice products.
- Private Labels and Its Impacts on market
By definition, private labeling refers to products or services that produced or manufactured by one company to offer under another company’s brands. Usually, retailers’ name appears on the packaging of the products and offer customers much lower price than other branded products.
In case of Welch Foods that face intense competition from other branded juice products and private label in the UAE, the company must deal with private labeling strategies that retailers or supermarkets performs. Therefore, in order to cope with pricing strategies that retailers perform to undermine branded products, Welch Foods have two options.
First is to form an agreement with retailers to produce store brands for the retailers. This private labeling of Welch has following benefits:
- It prevents competitors (juice producers) to take opportunity of private labeling with retailers/supermarkets
- Reduce promotion costs since it is such a joint promotion program
- Obtaining more shelf space in retailers’ outlets
The second option is to produce second layer products if the retailers have conducted private labeling with Welch’s competitors. By delivering second layer products, the company can match the retailers’ private label products.
- Case of Welch Foods in United Arab Emirate (UAE)
The fast growing of private label industry also exist in the United Arab Emirates (UAE). During the Private Label Middle East (PLME) – Dubai 2007, the number of foreign companies that are interested in entering UAE through private label strategy is increasing (AME Info, 2007).
The situation suggests that Dubai becomes one target market of private label industry. AME Info refers Dubai as the gateway to private label industry ion the Middle East in which in the exhibition there are about 100 exhibitors from more than 20 countries want to enter UAE through private labeling.
According to AC Nielsen survey, 84% of UAE consumers know at least one private label. This is much better than United Kingdom of Saudi Arabia (only 67%). Due to the intense competition in retail industry, Welch Foods must provide counter strategy to compete with already-in-market private labels.
In simple ways, Welch Foods must perform marketing plan that consist of the following activities:
- Identification and Choosing Market Segments
For most products, there are always a number of different markets into which the product can be sold. Furthermore, within each market there are also a number of market segments that will also need special attentions. These segments are based on age, sex, tastes and preferences, religious beliefs, demography, income, etc. The importance of identifying and choosing between these different segments lies in several requirements. First, identifying between market segments is required to tailor the product quality characteristics. Second, it is important for designing promotional efforts. Third, it is important to design distribution and sales strategies.
- Designing the Marketing Mix
The marketing mix design (product, place, promotion and price) is derived from the identification of market segments performed earlier. It is the answer to some of these questions: who will be our customers?, where are our customers?, what are the average income level of our intended customers?, who are our competitors?, what are their apparent strengths and weaknesses?, how will our product be better?, how will our product be distributed?, etc.
- Enhance Packaging and Building Brand Image
The first impression obtained by consumers about any product comes from its brand image and packaging. A simple attraction toward product label or packaging could lead to a lifetime of product loyalty. Thus, the design of a label, design of a package and the quality of materials used for packaging is a critical factor that has considerable influence in determining sales number.
(‘Marketing’. n.d; Lake, 2005)
AME Info. (2007). Private label industry on growth path across the Middle East. Retrieved November 15, 2007 from http://www.ameinfo.com/135804.html
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John Stanley About.com. (2007). Brands versus Private Labels. Retrieved November 07 from http://retailindustry.about.com/library/uc/02/uc_stanley2.htm
Kotler, Philip. (2000). Marketing Management. New Jersey: Prentice Hall
Lake, Laura. (2005). How To Develop a Marketing Strategy in 5 Easy Steps. Retrieved November 14, 2007 from http://marketing.about.com/cs/advertising/ht/5steps2strategy.htm
SBA. (2003). Target Market. Retrieved November 14, 2007 from Available at: http://www.sba.gov/starting_business/marketing/research.html
Shelf Impact. (2005). Consumers: Private label ‘good alternative’ to other brands. Retrieved November 14, 2007 from http://www.shelfimpact.com/archives/2005/09/consumers_private_label_good_a.php