Is Producing a Private Label Counterproductive for a Branded Manufacturer?

Abstract

Branded food manufacturers vindicate the use of excess production capacities (idle otherwise) to justify their production of retailers' brands. We study the distributor and food manufacturer's private label strategy for production within a framework featuring endogenous store brand quality, bargaining power, possible differences in production technology and potential capacity constraint for the branded manufacturer. According to the structure of capacity constraint (applying to both products or private label only), the retailer may prefer to choose an independent firm whereas he selected the branded manufacturer when unconstrained. The conclusions of our article thus partially confirm branded manufacturers' thinking: they may produce store brands when they are not capacity constrained

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Replaced by

Fabian Bergès, and Zohra Bouamra-Mechemache, “Is Producing a Private Label Counterproductive for a Branded Manufacturer?”, European Review of Agricultural Economics, vol. 39, n. 2, March 23, 2011, pp. 213–239.

Reference

Fabian Bergès, and Zohra Bouamra-Mechemache, “Is Producing a Private Label Counterproductive for a Branded Manufacturer?”, TSE Working Paper, n. 09-130, December 2009.