Supermarket brands’ development causes worries

Supermarkets have been trying to develop the product with their own brands, while enterprises have become the manufacturers who do the outsourcing for supermarkets.

According to representatives of some big supermarkets, there are some 100 companies, production workshops, craft villages and cooperatives are doing the outsourcing for the retailers.

Manufacturers doing the outsourcing for others

The owner of a garment workshop in district 10 in HCM City said that if he brings products to supermarkets to sell, he has to pay the discount rate of 35 percent and some other kinds of expenses.

Besides this, he will only get money 60 days after bringing products to supermarkets. In general, the business cost for selling products at supermarkets is about 45 percent. Meanwhile, if his company does the outsourcing for supermarkets, the business cost would be less than 10 percent.

Cao Tien Vi, Chair of the Saigon Paper Corporation, also said that it is unwise to refuse the proposal to do the outsourcing for supermarkets. “Supermarkets are big distributors, therefore, even though when doing the outsourcing, we do not get high profits, we still have to do in order to get other preferences from the retailers,” he said.

Le Thi Thanh Lam, Deputy Director of SG Food, said that the volume of products her company makes for supermarkets now accounts for 65 percent of the total production. Lam that her company and supermarkets have been cooperating for mutual benefits.

“The products with supermarkets’ brands can sell very well,” she said

While some manufacturers see the outsourcing for supermarkets as a kind of cooperation for mutual benefit, other manufacturers say they have no other choice than accepting to do the outsourcing for supermarkets.

The owner of H Food Company said that a supermarket once asked H Company to do the outsourcing for it. As H refused to take this job, the supermarket placed orders with another manufacturer. The low prices of the products (30 percent lower than H’s products) plus the sale promotion programs offered by the supermarket, has led to the fact that H’s products became unsalable. Finally, H’s products have been weeded out from the supermarket’s shelves, because of the low sales.

An egg supplier also said that as she refused to provide eggs under the supermarket’s brand, the supermarket will chose another supplier. As the products are displayed on advantageous positions, and cheaper, they have been selling very well, though the eggs are smaller.

Different ways for manufacturers

Most of the products with supermarkets’ brands are food and drinks. These are the products supermarkets can be sure about the quality through the purchasing and verifying procedures.

Lam from SG Food, said that only the original products with specific characteristics which have special tastes or new processing technique are being sold by the company under the brand “SG Food”.

Nguyen Thi Ngoc Lien, PR Director of Kinh Do Group said that Kinh Do is making the products for selling under the brand of Kinh Do, and it is also making the products for supermarkets. Since the latter products are only sold at supermarkets, Lien does not think that they would be a threat to Kinh Do.

Lien stressed that the main distribution channel of Kinh Do is the network of shops, kiosks at traditional markets and sales agents. Besides, the products under supermarkets’ brands are just low cost products, which are simple and do not have any special characteristics.

Meanwhile, Nguyen Huu Toan, Director of Sanding–a fashion company, said that his company has stopped making the products for supermarkets. “We tried our best to make products, but the profits were too low. Only supermarkets could benefit when their turnover increased,” he said. – SGTT

Tags: vietnam retail industry, Vietnam retail market, Vietnam supermarkets