He said that Naivas Supermarket has invested about Sh70 million on their private label, that has been on the rise.
He says the brands creates an identity for the retailer and differentiates them from other retailers.
“My best product right now is our sugar that sells at 22 percent against other brands; we are looking at getting in more products and with our labels contributing 15 percent of our total turnover in the next three years.
Kenya Association of Manufactures (KAM) Chief Executive Officer Betty Maina supports the practice pointing out that it’s giving opportunity to local manufacturers to take their products to the shelves.
“The private labels are giving opportunities for growth to manufacturers because it’s an added business opportunity as the supermarkets are reducing the marketing costs,” she said.
Maina however urged supermarkets not to use that channel to import goods that can be made locally.
“My fears are the danger of supermarkets taking advantage of private labelling to facilitate importation of products that can be made locally; now that will kill the industry,” she said.
She also says that these products might dominate the supermarket shelves, leaving some brands stranded pointing out that manufacturers have a choice.
“Many manufacturers who supply branded products to the supermarkets are also manufacturers of the private labels. This can provide some certainty in the short-term, and increase production volumes – but firms who accept these arrangements know full well that they are effectively competing with themselves, potentially cannibalizing their own margins and reducing their long-term competitiveness,” she said.
She revealed that KAM was monitoring the situation.
Supermarkets routinely use private labels to fetch strong profit margins that offset minimal gains on top industry brands with high costs of acquisition.
Globally – for the likes of Tesco in Britain – house brands account for more than 40 percent of sales while Turkish brand BIM (Birlesik Magazal) house brands account for 80 percent of the total sales.
