Private Label Companies
Manufacturers make private label products and services to sell to other companies. Other companies then sell these products under a brand name. Private label goods and services are available in a wide range of industries from food to cosmetics to web hosting. Private label goods are lower cost alternatives to regional, national or international brands, although recently some private label brands appear as premium brands to compete with existing name brands. Retailers have extended the concept of private label to identify a brand with a store. This concept known creates store brands. Private labeling can be a far more profitable business than selling nationally advertised brands. The use of private label goods goes well beyond the supplying brands, though certainly this is the most frequent situation in which a customer will have contact with a private label good. Several corporations source an extremely wide range of products from specialized manufacturers, which may or may not own the brand. There are several reasons for this business practice. Firstly, a company having identified a business opportunity in a new product or groups of products, may assess that setting up a new production line or facility may require a substantial investment in equipment, human resources, patents and so forth. In many cases, a viable alternative is to source from a specialized company that already has such investments and that has spare production capacity. If the two companies find that the market situation allows avoiding or minimizing direct competition without compromising market shares, then both companies may find an agreement whereby the specialized manufacturer supplies the goods to the other. The methods to reduce cannibalization are general marketing practices such as: dedicated distribution channels, different image and customer perception of the brands, pricing, separate regional presence etc.