HA NOI – (VNS) Supermarkets hope to see a spike in profits by teaming up with private labels to produce affordable and enticing store brands.
|Trend in store brands is gaining supermarket large profits.—File Photo
The strategy hopes to emulate the success of the private brands, which have been a major success story in recent years, while using supermarket buying power to expand the supply chain, said Ha Noi Supermarket Association chairman Vu Vinh Phu.
Phu added that producers will have to re-label their products with supermarkets names before becoming private label products sold in supermarkets.
Supermarkets earn more
Taking the lead in developing private label products are supermarkets such as foreign invested Big C (600 products) and LotteMart (650), as well as Viet Nam's Co.opmart with around 100. All are mainly developing private label products for food and home-care facilities.
Phu said private label products are normally 3 to 20 per cent cheaper than their equivalents, a sure-fire way of attracting consumers.
He explained that store brands are cheaper because they cost little or no money to promote.
He predicted that the number of store brands would grow from 10 per cent to 20 per cent of the total sold in supermarkets across the country in the next few years, bringing in huge profits.
LotteMart strategy director Kim Tae Ho said over the last three months, sales of private store brands have spiked by more than 50 per cent compared to the same period last year, while sales of other products have grown slightly.
Manufacturers face risks
The success or failure of supermarkets greatly influences the fate of manufacturers, who agree to label their products with supermarkets brand names.
Manufacturers can earn large amounts of money if supermarkets sell products well; however the risks are more tangible, said Sai Dong Garment CEO Nguyen Anh Ngoc.
Ngoc said a manufacturer who labels its products with a supermarket name can face ruin if the supermarket decides to choose another makers' products to label.
"We have to reduce our shirts price or they will stop buying", he added.
Ba Huan company deputy director Pham Thanh Hung said over 30 per cent of their eggs are being sold to supermarkets who are asking the company to label its eggs with their brand.
"The supermarkets will stop buying our eggs if we refuse to label our eggs with their names", said Hung.
Another risk is that labeling products with supermarkets names will gradually obliterate manufacturers' names from consumers' minds, limiting their opportunities for the future.
Store brands are still better choice
Labeling products with supermarkets names is a good choice for small and medium manufacturers at the moment who account for more than half the market, due to their fame and prestige, said Phu.
Phu added small and medium manufacturers, with their limited scale and budget, can gain higher profits than expected if supermarkets choose to work with them.
According to Sai Gon Paper company director Bui Duc Hue, producers can sell their products at a high price to supermarkets if they know their products strength and make them unique. - VNS