Supermarkets rushing to develop products with their own brands

The movement of supermarkets developing the products with their own brands has put many producers in a bad fix.

According to the Center of Business Study and Assistance BSA, there are about 50 domestic enterprises which are outsourcing products for supermarkets.

Saigon Co-op, a big retailer in the south, for example, now cooperates with 45 manufacturers who make products which bear Saigon Co-op’s brands. These include well known names such as Kinh Do confectionary, Lix detergent, Saigon paper, Phong Phu textile, Sanmiguel brewery, SG seafood, Dong Nai food processing and craft villages.

To date, Saigon Co-op has a wide range of products which bear its own brands, from vegetable oil, rice, eggs, processed food, to cosmetics and fashion products.

The competition heating up

Metro Cash & Carry, a foreign retailer, is considered the pioneer in the movement. Aro has been well known as Metro Cash & Carry’s brand for essential goods (500 food and 200 non-food products), while Fine Dreaming for non-food products (cosmetics, detergent…), Sigma for office equipments, and H-Line for integrated products used in restaurants and hotels.

Big C has also continuously been launching new products bearing its brands. In 2007, “Wow! Gia hap dan” (attractive prices) trademark was launched into the market, while “Bakery Big C” was introduced in early 2009. Prior to that, 250 specific products under Big C’s brands were marketed.

The move has been followed by domestic supermarket chains. In August 2007, Saigon Co-op launched the products with Saigon Co-op brand. By 2010, the turnover from products with Saigon Co-op brand increased by five times. In February 2011 alone, the products alone brought the turnover of 70 billion dong.

Vinatex, the supermarket which specializes in distributing fashion products, has launched three new trademarks which target men, women and children clients. Vinatex designs the products, then other manufacturers make the products for it.

Currently, Vinatex is not only distributing the products within its chain which includes 60 sale points nationwide, but it has also opened shops which sell specific products.

A threat to manufacturers?

Customers are really the biggest beneficiaries from the movement, because they can purchase the products with the same quality with the products already existing on the market at lower prices. In general, the products bearing supermarkets’ brands are understood as the products for popular customers, which are 10-30 percent cheaper than the same kinds of products available on the market.

However, analysts say that the lower prices do not mean that the products have lower quality. They are cheaper simply because the distributors do not have to pay for marketing campaigns.

However, while supermarkets have been benefiting customers, they have been threatening the existence of manufacturers. A notebook with the brand “Wow! Gia hap dan!’ manufactured by Hong Ha Company is priced at 3900 dong, just equal to a half of the price of a Hong Ha brand notebook.

However, manufacturers have been reassured that the existence of the products with supermarkets’ brands would not much affect their production, and they could not be a threat to the manufacturers.

In fact, manufacturers well understand the targeted customers and the supply sources on the market; therefore, they can adjust their business plans when necessary. Besides, supermarkets’ products have been distributed through the modern distribution channel, while they are less popular at traditional markets.

A director of a company that makes consumer goods, also said that though his products have to compete with the products bearing supermarkets’ brands, this has not affected the company’s operation and sales. The products with supermarkets’ brands mostly target low or middle income earners.

Meanwhile, BSA has pointed out that when doing the outsourcing for supermarkets, manufacturers can optimize their production capacity and cut down expenses, which allows them to increase turnover and profits. – Vietnamnet

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