Private label can have many benefits for distributors, but it can also create challenges, including putting a strain on relationships with manufacturers, says JB Steenkamp, author of Private Label Strategy: How to Meet the Store Brand Challenge, in Private Label & Channel Conflict.
“The tension is that manufacturers often think that distributors unfairly rip off their innovations,” Steenkamp says. “… The manufacturers feel that they take all the risk and that the distributors essentially piggyback on the risk-taking behavior of the manufacturers."
Manufacturers may also feel like distributors are giving the private label brands more attention or that they are becoming less of a channel partner and more of a competitor.
By partnering with manufacturers on private label products, distributors can avoid channel conflict by presenting these new brands as an opportunity, rather than a threat.
Agreeing to manufacture private brands helps manufacturers gain access to new markets, participate in a bigger share of the business, get more branded products placed and build volume in plants without having to reposition products.
Read more about private label challenges in Private Label & Channel Conflict.