More and more domestic companies are choosing to produce underthe 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 thecurrent", management consultants believe.
To secure constant turnover, Farmec, the biggest Romanian-heldcosmetics producer, this summer started producing for CarrefourFrench hypermarket chain, announcing that around 5% in turnoverwould come from products that do not carry the name of thefirm.
"Collaboration with Carrefour started in August, with thecontract being sealed on a one-year period, with the possibility ofextending it. The partnership with the French retail helps us cutproduction costs through bigger sales and we're currently in talkswith other companies for partnerships in the segment of privatelabels," stated Farmec management.
A similar decision was made by companies such as Elmi Prodfarm,producing Elmiplant, or Fresh Up Cosmetics. In a period of lowconsumption, companies are choosing between promoting their brandson their own through aggressive marketing campaigns, which entailhigh costs and doubtful results, and supporting sales through acompromise in which the brand is not foremost.
"(...) What's important is to ask yourself for how long you canswim against the tide. If you are innovative and have a strongbrand, you can fight on a long term, but if you lack creative andfinancial power for marketing campaigns, you choose to produce formajor retail chains at a good quality level, but at much lowercosts. On long term, this strategy will lead to the disappearanceof some domestic brands," Ionut Pascu, project manager of RolandBerger Strategy Consultants, told ZF.
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