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Market-Based Solutions to Vital Economic Issues
Research
May 1, 2018

The Future of Private Label Markets: A Global Convergence Approach

Abstract

Private labels (PLs) represent a major opportunity for retailers, and a severe threat to brand manufacturers. However, considerable heterogeneity can be observed in PL growth rates across markets, creating ambiguity about their future growth potential. This poses a formidable challenge to both brands and retailers on how to allocate resources across different markets to prepare for the future. To offer more insight in the steady-state levels that can be expected for PLs around the world, the authors take a forward-looking approach by means of a convergence model. This approach is applied to a unique dataset with a broad geographic scope, spanning almost 70 – emerging and developed – countries, across up to 60 product categories. The authors find evidence for a global partial convergence of PL shares, with substantial remaining heterogeneity across markets. They also find that strategic portfolio and store-format decisions play a substantial role in shaping these long-term levels, where new products will be key to both retailers and manufacturers. Moreover, especially for retailers, important differences are found between emerging and developed markets.

Note: Working papers, including any findings, may differ from the final version chosen for publication in academic journals.


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