The New World of Private Brands

There appear to be several patterns of private labeling developing in the United States' economy. Although this paper concentrates mainly on the standard concept of a private label or brand, i.e., a product supplied by an independent manufacturer to a retailer under a brand designated by the latter, there have been a series of activities in the market suggesting that the standard concept may be too narrow. For example, the growth of forward and vertical integration in the channel is, to some extent, restricting the latitude for bargaining between manufacturers and retailers over the supply of such labels. With multiplying unilateral integrated arrangements, independent manufacturers and/or retailers may be finding themselves increasingly excluded from potentially profitable private brand arrangements.

For specific examples in the food industry, see Small Business Problems in Food Distribution. Hearings before Subcommittee No. 5 of the Select Committee on Small Business, House of Representatives, 86th Cong., 1st sess., Part I, Vol. I (Washington, D.C.: U.S. Government Printing Office, 1959).

See “Battle of the Brands: Price-Conscious Buyers Help Private Labels Expand Market Share,” Wall Street Journal, May 24, 1965, p. 1.

Morse Leon , “The Battle of the Brands,” Dun's Review and Modern Industry, May 1964, p. 53.

“More Growth for Private Label Foods,” Printers' Ink, March 20, 1964, p. 5.

To measure the present magnitude of private branding in the food industry, the National Commission on Food Marketing has undertaken a separate major study on this topic to be completed by July 1966.

Galbraith John K. , American Capitalism (Boston: Houghton Mifflin Company, 1956), pp. 111–112.

Buzzell Robert D. Slater Charles C. , “Decision Theory and Marketing Management,” Journal of Marketing. July 1962. p. 10.

“Dual branding” here connotes a policy of supplying both private label products and promoted products sold under manufacturers' brands. Kellogg and Seagram oppose dual branding while some of their competitors, such as General Foods and Barton Distilling Company, have practiced the policy for years.

“Battle of the Brands,” op. cit.

Note that such lower average retail prices have typically not been reflected in Bureau of Labor Statistics' data, which possibly do not account for the alleged growth in private label sales. The sampling procedure used by BLS may need to be redesigned.

Stern Louis W. , “Approaches to Achieving Price Stability,” Business Horizons, Fall 1964, pp. 75–86.

“Battle of the Brands,” op. cit.

FTC Docket No. 7129, Trade Reg. Rep. 16, 191, Nov. 28, 1962.

Borden Company v. FTC 339 F 2d 133 (1964).

The Commission will, no doubt, continue to rely upon the line of decisions in the following cases, when examining various private label arrangements: Page Dairy Co., 50 FTC 395 (1953): United States Rubber Co., 46 FTC 998 (1950); United States Rubber, et al., 28 FTC 1489 (1939); Goodyear Tire and Rubber Co. 22 FTC 232 (1936).

FTC, Economic Inquiry Into Food. Marketing, Part II (Washington, D.C.: U.S. Government Printing Office, 1962), pp. 12–13.

“Ready for Instant Growth,” Business Week, April 24, 1965, pp. 69–74.

Two examples of smaller firms that have grown relatively large by producing solely for private label arrangements are Franklin Manufacturing Company (division of Studebaker Corporation) and Colonial Corporation of America. See Morse Leon , op. cit., p. 98.

FTC. op. cit., p. 14.

Mueller Willard F. , “Processor vs. Distributor Brands in Food Distribution,” statement given before the 35th Annual Meeting of Farm Cooperatives (Houston, Texas: Jan. 13, 1964), p. 8.

For an excellent discussion of the opportunities afforded to small-scale retailers, see Doody Alton F. Davidson William R. , “Growing Strength in Small Retailers,” Harvard Business Review, July/Aug., 1964, pp. 69–79.

FTC, op. cit., p. 71, and Mueller , op. cit., p. 9.