More and more domestic companies are choosing to produce under the brand of major retail chains, in the so-called "private label" system, in a bid to ensure their sales amid the financial crisis. On the long term, this compromise can turn into "a death sentence" for many brands that "will no longer be able to fight against the current", management consultants believe.
To secure constant turnover, Farmec, the biggest Romanian-held cosmetics producer, this summer started producing for Carrefour French hypermarket chain, announcing that around 5% in turnover would come from products that do not carry the name of the firm.
"Collaboration with Carrefour started in August, with the contract being sealed on a one-year period, with the possibility of extending it. The partnership with the French retail helps us cut production costs through bigger sales and we're currently in talks with other companies for partnerships in the segment of private labels," stated Farmec management.
A similar decision was made by companies such as Elmi Prodfarm, producing Elmiplant, or Fresh Up Cosmetics. In a period of low consumption, companies are choosing between promoting their brands on their own through aggressive marketing campaigns, which entail high costs and doubtful results, and supporting sales through a compromise in which the brand is not foremost.
"(...) What's important is to ask yourself for how long you can swim against the tide. If you are innovative and have a strong brand, you can fight on a long term, but if you lack creative and financial power for marketing campaigns, you choose to produce for major retail chains at a good quality level, but at much lower costs. On long term, this strategy will lead to the disappearance of some domestic brands," Ionut Pascu, project manager of Roland Berger Strategy Consultants, told ZF.
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