Manufacturers Should Consider Supplying Private Labels, Says Rotman Marketing Professor  

TORONTO - Manufacturers of brand-name products should reconsider their adversarial views towards private label goods and position themselves to capitalize on the opportunities they provide, recommends a marketing professor at the Rotman School of Management in an article in the current issue of Harvard Business Review.

"The manufacturers' view of private labels is misguided," says David Dunne, adjunct assistant professor of marketing at the University of Toronto's Rotman School of Management. "In many cases and for many reasons, supplying private labels can make good economic and strategic sense for manufacturers of brand-name products,"

Dunne explains private-label products have traditionally been loathed by manufacturers who view them as cheap products that make consumers more price-sensitive. But he points out that under certain conditions it makes economic sense for manufacturers to produce private labels. Producing premier private labels such as Loblaws "President Choice" brands offers manufacturers the potential for increased margins, improved relations with retailers and growth into new categories. Private labels can also be used by manufacturers to attack the market leader and gain market share. Dunne also points out there are substantial cost economies to supplying private labels as revenues increase with very little investment.

Dunne's article appears in the May-June 1999 issue of the Harvard Business Review. It was co-authored by Chakravarthi Narasimhan, Philip Siteman Professor of Marketing at Washington University's Olin School of Business in St. Louis.

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