Manufacturer and retailer brands: Is strategic coexistence the norm?

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Australasian Marketing Journal j o u r n a l h o m e p a g e : w w w. e l s e v i e r. c o m / l o c a t e / a m j

Manufacturer and retailer brands: Is strategic coexistence the norm? Ranga Chimhundu a,*, Lisa S. McNeill b,1, Robert P. Hamlin b,2 a b

School of Management and Enterprise, Faculty of Business, Education, Law and Arts, University of Southern Queensland, Toowoomba, Australia Department of Marketing, School of Business, University of Otago, Dunedin, New Zealand

A R T I C L E

I N F O

Article history: Received 12 June 2013 Revised 3 November 2014 Accepted 20 November 2014 Available online Keywords: Manufacturer Retailer Brand Strategic Category

A B S T R A C T

This article reports the results of research that investigated long-term strategic relationships between manufacturer and retailer brands, in the FMCG/supermarket industry, within New Zealand. The research utilised a multiple-case study methodology involving near-census samples of supplier and retailer managers drawn from several product categories. Data was collected via in-depth interviews and instore category observation. The research found a clear perception among managers that manufacturer brands have a greater collective capacity for product innovation and marketing support than retailer brands. Retail managers believed that category dominance by retailer brands was not desirable, as retailer brands would then not be able to replicate the product innovation and related marketing activities of manufacturer brands, which would be detrimental to long-term growth and profitability of the categories studied. As excessively high retailer brand share in categories compromised overall product innovation and category support, respondents believed that varying optimum levels of retailer brand penetration existed for each category, and that these levels should be actively maintained over the long term. There was no evidence of retailer manager ambitions to either exceed these optimum points or to eliminate manufacturer brands. © 2014 Australian and New Zealand Marketing Academy. Published by Elsevier Ltd. All rights reserved.

1. Introduction This article describes research on the nature of the strategic relationships between retailer and manufacturer (supplier) brands within five fast moving consumer goods (FMCG) categories in the grocery industry of a developed economy (New Zealand).1 The strategic relationship between manufacturer and retailer brands is an important research area, given the increasing prominence of retailer brands in the grocery industry, and the perception that they

Glossary of Abbreviations: FMCG, Fast Moving Consumer Good, includes food and other low involvement frequently purchased items; SKU, Stock Keeping Unit, a single item/product; ST/R/W/Y/W, Interview identity codes. This research received category B clearance from the University of Otago Ethics Committee. In order to preserve anonymity in line with interviewee agreements and ethical consents, quotes are only identified by industry group and interviewee letter/number code. Specific categories are not identified. * Corresponding author. Tel.: +61 7 4687 5759; fax: +61 7 4631 1533. E-mail address: [email protected] (R. Chimhundu). 1 Tel.: +64 3 479 5758, E-mail: [email protected]. 2 Tel.: +64 3 479 8161, E-mail: [email protected]. 1 Throughout this article, the term ‘retailer brand’ is used to describe brands that are owned by the retailer and the term ‘manufacturer brand’ is used to describe those that are not. There are a wide number of equivalent terms that may be encountered in this context. Retailer owned brands may be described as: ‘retailer brands’, ‘house brands’, ‘store brands’ ‘supermarket brands’, ‘private label brands/products’ or ‘own label brands/products’. Non-retailer owned brands may be described as: ‘manufacturer brands’, ‘proprietary brands’, ‘supplier brands’, ‘independent brands/ labels’ or ‘national brands/labels’.

offer a challenge to established manufacturer brands (with over 17% aggregate share world-wide; shares of 20% in the USA, 46% in the UK and 4% in Japan (Steenkamp and Geyskens, 2013)). A majority of the academic research undertaken in this area has assumed that the nature of the retailer brand challenge is hostile, with a retailer management objective of continuing retailer brand growth and development, with no identified end point to the process, short of total retailer brand dominance and the elimination of their manufacturer equivalents: e.g. “In our work, we focus on the generic battle between store brands and national brands,…” (Steenkamp and Geyskens, 2013, p. 7); a focus also taken by other researchers (e.g. ACNielsen, 2005; Anselmsson and Johansson, 2009a, 2009b; Herstein and Gamliel, 2004; Kumar and Steenkamp, 2007a, 2007b). In addition, the recent comprehensive review meta-analysis of academic retailer brand literature conducted by Gooner and Nadler (2012) is entirely predicated by direct brand-on-brand competition. This position did not accord with the researchers’ own ongoing, but informal, observations of management behaviour within the supermarket FMCG sector. As a result, in-depth research on the relationships that existed between retail and manufacturer brand managers within a single category (dairy products) in New Zealand was undertaken. This research revealed a high, but unstated, level of strategic cooperation between the two types of brands within this category. This cooperation supported a long term ‘optimum’ equilibrium position for retailer and manufacturer brands within the categories (Hamlin and Chimhundu, 2007). This article reports the results of the replication and extension of this earlier research

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in order to establish if these findings could be extended beyond a single product category. 2. Theoretical background The literature that is of specific relevance to research on brand related managerial behaviour can be divided into two major streams; research on the management of retailer and manufacturer brands, and research on the management of the categories within which these brands operate. The second stream can be further divided into two discrete sections; research on the category management process itself and research that directly addresses the nature of the relationships between manufacturer and retailer brands within the category. 2.1. Retailer and manufacturer brand management Retail consolidation, the concentration of market share into the hands of small numbers of retailers, has been an almost ubiquitous feature of food markets in developed countries since the end of WWII (Reardon and Timmer, 2012; Wood, 2013). The degree of current concentration varies, with a share of just over 30% of US large format (15,000 + stock keeping units, SKUs) retail sales controlled by the largest four retailers (Kaufman, 2014), 75% of UK large format retail sales is held by the ‘big four’ UK retailers (Brooks, 2013), Australia, with the ‘big three’ (Woolworth’s, Coles and Aldi) controlling nearly 93% of the grocery retail trade between them (Roy Morgan Research, 2014) and New Zealand, the most concentrated retail food market in the developed world, where a duopoly of Foodstuffs and Progressive Enterprises hold over 95% of the large format market between them (Kedgley, 2014). Studies undertaken in several developed economies over a considerable period of time have indicated that retail consolidation gives more power to grocery retail chains in relation to manufacturers, and that this increase in relative power supports a rise in the aggregate market share of grocery retailer brands (Anselmsson and Johansson, 2009a, 2009b; Burt, 2000; Burt and Sparks, 2003; Coriolis Research, 2002; Cotterill, 1997; Galbraith, 1952; Porter, 1976; Steenkamp and Geyskens, 2013). Retail consolidation, and its attendant increase in and use of retailer power, is seen to be the major factor in retailer/manufacturer brand dynamics within this stream of research. These sources have not identified any specific ‘end point’ for the reported trends of retailer brand growth and development that lies short of the eventual total elimination of manufacturer brands (Hoch et al., 2002; Huang and Huddleston, 2009). This assumption of a persistent retailer advance is also implicit in the broadly accepted concept of the ‘generational’ or ‘evolutionary progressive’ development of retailer brands. Laaksonen and Reynolds developed a four-generation classification to conceptualise retailer brand development (Laaksonen, 1994; Laaksonen and Reynolds, 1994). The classification, which has yet to be theoretically superseded, classifies retailer brands on an evolutionary basis; grouping them into first, second, third and fourth generations. Firstgeneration retailer brands are generic, have no name, use simple technology and are of lower quality and image than leading manufacturer brands. Second-generation retailer brands are of medium quality but are seen as lower than leading manufacturer brands, and lag behind market leaders on technology. Third-generation retailer brands are of a quality that is comparable to leading manufacturer brands and are close to the leading brands on technology. Fourthgeneration retailer brands are of similar or better quality than leading manufacturer brands and can take the lead in innovation. The conceptualisation of retailer brand development as a progressive process does imply that a portfolio of all four generations is progressively created as the retailer moves up the generation ladder and expands their market share (Ailawadi and Harlam, 2004;

Kumar and Steenkamp, 2007a; Nenycz-Thiel and Romainiuk, 2012). Third generation retailer brands have been present on supermarket shelves in numbers for at least twenty years (Ailawadi and Keller, 2004). Fourth generation retailer brands have been somewhat slower to emerge, with some high profile failures, such as the introduction and subsequent withdrawal of a major fourth generation retailer range by Coles in Australia in 2002. More recently, very high-end retailer brands that might be described as fourth generation have started to appear, with Tesco’s ‘Venture Brands’ and Morrison’s ‘NuMe’ being two examples in the UK, the latter clearly displaying the innovation infrastructure that matches the fourth generation requirements under Laaksonen’s (1994) typology (Balfe et al., 2012; Dawson, 2013; IGD, 2012). Research recently published in the British Food Journal showed that, far from growing aggressively, retailer brand shares had been stable, or growing very slowly, in all but one of the aforementioned countries since records became available between 20 and 50 years ago (Chimhundu et al., 2011). The one exception to this, Great Britain, showed aggressive growth to levels far in excess of the comparable economies by the year 2000, at which point a precipitous fall occurred, followed by a slow decline in the succeeding five years. This information does not appear consistent with the paradigm of an aggressively expanding and evolving retailer brand portfolio. It may well be that this universal paradigm is not incorrect, but rather is not fully applicable to a situation that has become increasingly complex in recent years as new retail formats that do not conform to either that of the ‘big box’ or of the of multi-brand category emerge and acquire significant market share (Bacon, 2014; Wood and McCarthy, 2014). On-line sales are one such format that has been well documented (Rafiq et al., 2013). But in the UK, these growing ‘non-conformist’ retail food and brand formats also include Marks and Spencer with their smaller store footprints and monolithic ‘St Michael’ and ‘Simply M&S’ brands, and Aldi and Lidl, with their broad portfolio of seemingly manufacturer branded products that are in actuality retailer branded products (Brandes and Brandes, 2012). Thus, simple measures of retailer brand sales must be considered as only part of a picture within which retailer brands continue to be important and continue to grow, albeit in a much more complex and harder to track manner. Likewise, the concept of an evolutionary progression of retailer brand generations may only meaningfully apply to certain larger full service retail formats, which are not necessarily themselves the way of the future (Tackett and Planet, 2014). The M&S, Aldi and Lidl retail brands mentioned in the previous paragraph for example are hard to categorise in this manner outlined by Laaksonen and Reynolds (1994) due to an absence of branded alternative products within their immediate retail environment. 2.2. Category management The category is perceived to be the key strategic unit of FMCG marketing (Desrochers et al., 2003; Dupre and Gruen, 2004; IGD, 1999; Joint Industry Project, 1995). The importance of the category in strategically managing FMCG brand offerings is emphasised in the literature (Ailawadi and Harlam, 2004; Dupre and Gruen, 2004). Planning with regard to brand and product offerings within each category may be driven by analysis of consumer needs and consumer value (Desrochers et al., 2003; IGD, 1999; Nielsen, 1992). It seeks to enhance business results (Dupre and Gruen, 2004; Dussart, 1996; IGD, 1999; Kracklauer et al., 2004, Cachon and Gürhan Kök, 2007). Category management is described as a joint process that involves manufacturers/suppliers and retailers (Alvarazo and Kotzab, 2001; Desrochers et al., 2003; Dupre and Gruen, 2004; Lindblom et al., 2009). It involves partnership/cooperation/sharing of information (Dussart, 1996; Hutchins, 1997; IGD, 1999; Kurtulis and

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Toktay, 2011) and categorisation of FMCG offerings into product categories (Basuroy et al., 2001; Desrochers et al., 2003; Kracklauer et al., 2004; Nielsen, 1992). ‘Category management’ is not a generic process, and the analyses undertaken and decisions made are usually highly specific to individual categories. These differences may be driven by specific consumer characteristics for the category as noted above, but they may also be driven by the wide range of specific roles assigned to individual categories within a large retail platform, ranging from ‘image creator’ to ‘turf defender’ (Ajula et al., 2006; Dawson, 2013). Category specific logistical issues also have an influence on how category objectives are set up, and how relationships within the category and its supply chain develop (Faccio et al., 2013). 2.3. Manufacturer brand and retailer brand competition Category management research across the marketing, management and logistics literature has focussed on the relationships and differences between the owners and managers of manufacturer and retailer brands, rather than the relationships and differences between the brand types themselves. Some studies have examined retailer/ manufacturer brand share trends and business cycles (economic factors) or industry power and structural factors (e.g. Baden-Fuller, 1984; Coriolis Research, 2002; Hoch and Banerji, 1993; Hoch et al., 2002; Lamey et al., 2007; Quelch and Harding, 1996). Other studies have investigated the subject from a merchandising perspective (e.g. Gomez and Rubio, 2008), some have dwelt on competition and brand image issues relating to the two types of brands (e.g. Cotterill et al., 2000; Hultman et al., 2008; Mills, 1999; Miranda and Joshi, 2003; Nenycz-Thiel and Romaniuk, 2011; Verhoef et al., 2002; Wu et al., 2011), and yet other research has investigated retailer brands and manufacturer brands from a historical perspective (e.g. Herstein and Gamliel, 2004; Steiner, 2001). Hoch et al. (2002) demonstrated the significant role of brand strategy factors in influencing retailer brand trends; however, the research did not go on to describe the relationship between these strategies and the two types of brands concerned. Another research stream has taken the perspective of brand equilibrium within a category via the route of active ‘like on like’ brand competition between the two brand types (Cotterill et al., 2000; Hultman et al., 2008; Mills, 1999; Miranda and Joshi, 2003; Verhoef et al., 2002). This assumption underlies the extensive literature on the impact of retailer brands on innovation (Anselmsson and Johansson, 2009a; Martos-Partal, 2012; Pepe et al., 2012). The research described above is primarily driven by consumer data. It assumes that innovation is driven by independent retailer and manufacturer strategies. It also assumes that these strategies are referenced to the overall market share and growth of retailer brands within a specific category, and that they are driven by an environment of active, undirected and confrontational competition. The possibility that the overall category requirement for innovation is set by consumer expectations, but is established at the category level by means other than direct competition between retailers and manufacturers, has been considered by a smaller body of managerial research pioneered in the academic field by Jap (1999). The outcomes of this research indicate that the causal linkages between retailer brand share and category innovation level may lie in the opposite direction to that which has been indicated by consumer driven research (ECR-Europe, 2003; Glynn et al., 2012; IGD, 2009; Kottila and Rönni, 2008; Morris and IGD, 2011; Nijs et al., 2013; Sheu et al., 2006; Vázquez et al., 2005). 2.4. The case for brand collaboration and equilibrium The literature streams addressing category management, retailer brands and retailer brands’ relationship with manufacturer brands deliver an apparently contradictory picture. The literature that concentrates on brands suggests that retailer brands are incorrigibly

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aggressive in nature, and that any coexistence that occurs between retailer and manufacturer brands occurs against a background of ongoing retailer brand growth and brand development, to a future point that seems to have no identified equilibrium position/role for manufacturer brands. The category management stream draws more complex conclusions about the relationships between retailers and manufacturers, but it does so in the context of motives and behaviour of the individual players/stakeholders within the category, rather than the brand types themselves. However, in both streams a process of active ‘like on like’ brand competition is assumed. Only a restricted stream of literature (Dawson, 2013; Glynn, 2007, 2009; Glynn et al., 2012) considers the possibility that retailer and manufacturer brands may have specific and distinct strategic roles within a category that are related to their fundamentally different nature, and that the entire FMCG industry may already be operating category management practices in accordance with a long-term appreciation of that fact. Only one published source that lies outside of the marketing literature (Steiner, 2004), has taken this analysis further, and considered the possibility that the appreciation that retailer and manufacturer brands are different at a very basic level, and that an appreciation of this difference has developed into active cooperation between manufacturers and retailers in order to optimise the deployment of the distinct assets/competencies represented by the two brand types. Steiner (2004) comments in his abstract that: “There is some ominous recent evidence that the vigor of national [manufacturer] brand/ private label [retailer brand] competition is sometimes being diminished by collusion between the two kinds of brands.” However, despite the fact that Steiner’s work has now been cited 194 times, the articles within which it is cited remain focussed on active competition between retailer and manufacturer brands. Given that the assumption of a total retailer brand takeover of the grocery industry is at least implicit in the retailer brand and category literature (unless something happens to disrupt the observed processes), it is worth considering what this outcome would require. Large supermarkets are very powerful organisations. However, could they individually replace the highly focussed technical, managerial, logistical innovation and marketing capabilities of Unilever or Proctor & Gamble? More specifically, could they do so several hundred times over simultaneously, and in an ongoing manner? This is what a total retailer brand takeover in the 200+ categories of the FMCG industry would require. Furthermore, this does not take into account the global economies of scale that the major manufacturers enjoy relative to their largely nationally based retailer counterparts. It is thus necessary to consider the possibility that there are limits to retailer power in FMCG markets, and that the collective innovative and managerial capabilities of the independent manufacturing sector are essential to category growth, because they cannot be economically or effectively replicated by the retail sector, unless the very high level of retail consolidation currently seen at a national level becomes a global phenomenon, and this scale of global retail consolidation is both tolerated and is sustainable/manageable over the long term. There are some examples of retailers who have largely eliminated manufacturer brands; Aldi, Lidl and Marks & Spencer (M&S) are the best known examples. However, these retailers do not operate in a vacuum. While manufacturer brands may not be physically present within the stores concerned, they may well still be highly influential by these retailers’ observation and imitation of successful innovations/trends in manufacturer brands in the larger format stores that still command the majority of sales in the markets where these stores operate. This may also drive a reported desire to locate outlets near larger format retailers: “They want to be near the main game in town,” Harriman said. “In Houston, they [Aldi] like to locate near Randall’s [Local dominant large format retailer] locations” (Copeland, 2013). Also, as discount and small format store sales reach

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levels approaching saturation, and growth becomes harder to achieve, Aldi, for example, is introducing significant numbers of manufacturer brands to drive further growth and differentiation within that sector (Tackett and Planet, 2014). A large-format retailer might therefore reasonably conclude that the elimination of manufacturer brands, from either the marketplace or their stores, would be neither feasible nor desirable. Thus, the two types of brands would coexist with one another, and a longterm equilibrium would become established between them within each category, expressed by relative market share of the two brand types. The two types of brands differ, and therefore would have different strategic roles to play in the categories relating to their respective strengths. While not exclusively restricted to these two roles, the primary function of the established first to third generation retailer brands would be to generate margins, while the primary purpose of manufacturer brands would be to drive innovation, with some support from third and fourth generation retailer brands in the appropriate situation. This would in turn suggest that differing consumer expectations of innovation at the category level would express themselves in differing market shares between manufacturer and retailer brands within individual categories. In order to sustain the desired level of innovation in any given category, continued investment by the independent manufacturing sector in innovation would have to be supported/encouraged/managed by the retailer in order to augment the retailer’s own investment in category innovation – if any. This retailer management of manufacturer innovation might well involve refraining from activities that might undermine the actual or perceived current and future earning power of manufacturer brands in the category. The large scale and aggressive expansion of third generation retailer brands and/or introduction of fourth generation retailer brands and the related diminution or delisting of their manufacturer equivalents would represent one such activity. The continuing relative rarity of fourth generation retailer brands some 25 years after the broad introduction of third generation brands into the marketplace by retailers, despite the continuing growth in relative retailer power over the intervening period, is indicative of such management processes (Chimhundu et al., 2010, 2011). These market shares for retailer and manufacturer brands within any category would be in dynamic rather than static equilibrium, and would reflect developing consumer demand as well as competitive and logistical pressures. Over the long term, considerable structural changes may occur, as retailer management strategies and objectives for the category and its population of retailer and manufacturer brands develop. The development of the specialty cheese market in New Zealand is a good example of this: Twenty years ago, choice of cheeses was very limited in New Zealand, and the premium/specialty cheese category was virtually non-existent. The cheese category had heavy retailer brand penetration. Since then specialty cheese has expanded from a handful of ‘top-shelf’ products to a category in its own right that commands equivalent shelf space to its low value equivalent in most stores. The specialty category was developed by manufacturer brand and product innovation, and remains dominated by two main multi-branded manufacturers with a large number of small niche suppliers. The rate of innovation and ‘roil’ within the specialty cheese category remains extremely high relative to the standard cheese category, and the category continues to grow in terms of its revenue and the SKUs on offer. After 20 years of development, retailer brand presence in the specialty cheese category is negligible despite the very high prices/ margins that are available in the specialty category. It has remained high but stable in the mainstream cheese category over the same period. This situation is indicative of retailer brand management policies that differ sharply for the two categories. These policies may change as the specialty cheese category matures.

The argument above displays significant incompatibilities with a significant portion of the assumptions and findings of the academic research literature described earlier, and summarised by Gooner and Nadler (2012). Most notably, it predicts that identifiable equilibrium points for the relative market share of manufacturer and retailer brands exist for specific situations and environments, and that in many cases these equilibrium points have already been arrived at. While these shares may change in the future, they will change as a result of planned changes in the optimal equilibrium point as perceived by the retailer at least, and not as a result of direct retailer/manufacturer brand competition. These predictions required support via more formal research. Exploratory research to examine propositions related to this dynamic equilibrium concept of retailer/manufacturer brand relationships was conducted, using a large interview sample of both retail and manufacturer managers operating in a single major FMCG category in New Zealand (Hamlin and Chimhundu, 2007). The concept of an optimal share of retailer brands within a single category, based on the need to preserve innovation by manufacturers, was strongly articulated by both retail and manufacturer managers, without any prompting on the part of the researchers. These preliminary results supported the arguments for an established dynamic equilibrium noted above. 3. Research propositions An extension of this research was therefore undertaken to explore the stability of these results over a wider range of FMCG categories. The research aimed to examine the three propositions below: P1 – There is a consistent appreciation that manufacturer and retailer brands have separate and specific roles to play in a category. P2 – There is a consistent appreciation that the strategic role of manufacturer brands is based upon the collectively greater power of the manufacturer sector to innovate. P3 – An equilibrium between retailer and manufacturer brand shares exists within any specific category, and is related to the level of innovation required to support that category. 4. Methodology The research set out to gain an in-depth understanding of managerial positions relating to the propositions. A multiple-case study methodology was considered to be appropriate (Perry et al., 1999; Yin, 2003). This approach was employed for its capacity to tackle ‘how’ and ‘why’ questions (Robson, 1993; Yin, 2003), and to draw on multiple data sources, in addition to interviews to address these research issues (Yin, 2003). The study was undertaken in New Zealand and involved the collection of data from FMCG retailers, manufacturers and consultants. Earlier research had involved only a single case study involving a dairy products category. This study aimed to expand upon this earlier work. Five food categories were selected for the study. These categories were selected as they were consistently organised as separately defined categories in all large supermarkets in New Zealand, and they displayed varying levels of retailer brand activity within them. The categories were: Milk, flour, cheese, breakfast cereals and tomato sauce. Each of the five categories was taken as a case. In addition, at another level, each of the two grocery retail chains, QR and ST was also taken as a case (i.e. embedded cases). New Zealand shares many commonalities with North American and European FMCG markets. It is a fully developed economy, with consumer behaviour patterns that are very similar to larger American and European economies. The large majority of these sales are made via large footprint stores (20–30,000 SKU) that are similar

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Table 1 Summary of retail environment.

Structure Market share (% national grocery) Main retail platforms Private label brands

Retailer 1

Retailer 2

Cooperative 54% 1 large format discount 1 large format high full service 1 × 1st generation monolithica 1 × 2nd/3rd generation with category specific presentation

Corporate 41% 1 large format full service 1 × 1st generation monolithic 1 × 2nd generation monolithic

a A ‘monolithic’ retailer brand has a similar presentation format in all categories and sales situations.Source: Table compiled from the literature.

to those found in Europe and the USA. The dominant retailers deploy retailer first to third generation retailer brands extensively through their networks, with at least one such brand present in nearly all the categories studied, and usually two. The remaining sales in each of the categories studied were accounted for by brands owned by a small number of powerful manufacturers. Some of these manufacturers were locally (New Zealand) focussed, while the remainder were local subsidiaries of major international companies, with a significant brand presence in other developed markets. The environment is summarised in Table 1. New Zealand FMCG retailing differs from other developed economies in three important aspects. Firstly, its level of retail concentration with 95%+ of all FMCG sales accounted for by two retailers is higher than any other economy, and is only approached by that of Australia, whose previously stable retail duopoly has been challenged recently by the arrival and rapid growth of Aldi. Secondly, the larger of these two retailers, Foodstuffs, is a cooperative owned by its individual store owners, although it produces some of its retailer brands, and purchases most of its major manufacturer branded products, centrally. Category planning and development has central support within Foodstuffs, but comes in the form of recommendations to individual store owners rather than head office dictate. Finally New Zealand produces far more food than it consumes and has one of the most open economies in the world, especially with regard to Australia where the CER allows free trade in many categories of manufactured food. The very high level of retailer and manufacturer concentration, coupled with New Zealand’s small size and geographic isolation, meant that all brand related decision making and appreciation within the five categories could be definitively associated with a small group of individuals. Thus, the sample used in this study did not represent a census of these key ‘players’, but the researchers were confident that it represented a substantial majority of them. As with all research, the sample used confers strengths and weaknesses on the results acquired. The very small population of market participants is clearly atypical of larger economies, but the advantage for qualitative research in gaining a census rather than a potentially unrepresentative sample may be set against this. Most importantly, the current culture in New Zealand retailing meant that the target managers were in almost all cases prepared to cooperate with the researchers. Data collection was undertaken through a combination of indepth interviews (using a semi-structured interview protocol), instore category observation (using a category observation form) and other documentation (collected from the respective companies and from websites). The interview guide (topic list) that was used to conduct the in-depth interviews is shown in Supplementary Appendix S1. A semi-structured protocol in this case meant that the interviewer did not deliver a set list of questions, but entered into a general (recorded) conversation on the topic of category management with the respondent. The research propositions were addressed

by guiding the respondent into relevant areas rather than ‘prompting’ the subject to deliver specific responses. The terms ‘competition’ or ‘collaboration’ or anything else that might prompt specific responses relating to the nature of the relationship were specifically avoided by the interviewer. Notes were written up and relevant quotes retrieved off the tape immediately after each interview. This helped to facilitate initial and continuous data analysis, as well as critical reflection as the data were being collected. The amount of data collected via in-depth interviewing was typical of the data that one would collect over a research interview duration of up to an hour, for each interview (and less in some of the interviews). The main stage of data analysis, which was conducted after all the interviews had been completed, involved generating detailed research interview data from the tapes. These records were then used as the basis for content analysis to derive research conclusions on each of the research issues. Forty-four interviews were conducted: A total of 30 interviews were held with executives and managers from two grocery retail chains (21 interviews in the larger retail chain QR, and 9 interviews in retail chain ST). In addition, a total of 11 interviews were held with executives and managers from manufacturers/suppliers in the five product categories, and a total of three interviews were held with industry experts/consultants. In-store category observation exercises were carried out in each of the five study categories in 18 stores. This category observation helped to establish the positions of participating brands and suppliers in the categories studied. This information was then triangulated with interview data. Tables 2, 3 and 4 carry further details of the research interviews conducted. 5. Results and discussion 5.1. Results P1 – There is a consistent appreciation that manufacturer and retailer brands have separate and specific roles to play in a category. From the interviews, two key themes on the separate roles played by manufacturer and retailer brands in the categories emerged, supported without prompting by all three main groups of participants. Firstly, retailer brands are expected to deliver a higher level of profit as they generally enjoy higher profit margins than manufacturer brands. Their main role is seen as profit generation: “We make good money out of the private label [retailer brand] and it’s good value as well … The profit is good for us and there is the good side for the customer as well; so the more we can sell it the better, but not to a point where we just have [name of retailer brand] only on the shelf; we need the choice” (Interview Q5c). “We obviously do favour house [retailer] brand because of the margins in it, but you have always got to merchandise for how

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Table 2 Research interviews, grocery retail chains. Organisation Retail chain QR Head office Supermarket chain Q Supermarket chain R Retail chain ST Head office Supermarket chain S Supermarket chain T

Research participants

Mode of interview

3 head office executives (joint interview), one retailer brand company executive, and one sister company manager (3 interviews) 6 supermarket stores (Q1 to Q6); 9 managers interviewed (8 interviews as one was joint) 6 supermarket stores (R1 to R6); 10 managers interviewed (10 interviews)

Face-to-face Face-to-face Face-to-face

One head office executive 3 supermarket stores (S1 to S3); 5 managers interviewed (5 interviews) 3 supermarket stores (T1 to T3); 3 managers interviewed (3 interviews)

Face-to-face Face-to-face Face-to-face

Source: Table compiled from research interview data.

much you are going to turn over as well … So when you are relaying everything onto the shelf, you have got to allow for the profit margins because you sort of have got to try and entice the customers to buy something you are making money on …” (Interview R1a). Secondly, manufacturer brands are expected to drive innovation and grow the categories: “You need that branded product [manufacturer brand] to drive innovation. You need that branded product to drive promotional programmes…” (Interview QR3). “The manufacturers’ brands have a lot more money invested in probably carrying the other house [retailer] brands, but you couldn’t have it the other way round” (Interview R2b). “Bear in mind that private label [retailer brand] is traditionally not innovative in that we don’t enter into categories that are not already developed; so innovation for us comes down to looking for new product ideas mainly within existing categories” (Interview QR2). “I think what happens there is, once the manufacturer grows the category, and that could be through innovation, then some of the house [retailer] brands would pick up on that innovation …” (Interview W5). “Private label [retailer brands] have … a tendency in general to pick up the ones [manufacturer innovations] that are successful” (Interview Y1). In this regard, entering into categories that are “already developed” by manufacturer brands; relying on manufacturer brands to “drive innovation … drive promotional programmes”; and, the money invested by manufacturer brands that enables the “carrying [of] … house [retailer] brands”, are all indications of manufacturer brands taking the lead on innovation and in growing the categories, and also that manufacturer brands are expected by all participants to

play this role, for the benefit of both retailer brands and manufacturer brands. P2 – There is a consistent appreciation that the strategic role of manufacturer brands is based upon the collectively greater power of the manufacturer sector to innovate. This proposition addressed two issues; resources for product innovation and rate of product innovation (as they relate to manufacturer and retailer brands). The term ‘resources’ incorporated facilities, financial and technological resources, as well as expertise and related aspects. Table 5 summarises the responses regarding resources for product innovation: In assessing resources for innovation, a description of resource requirements for innovation in the chosen categories was established early in the interview process via interviews with consultants. Then, based on the information collected via interviews, websites and documentation, an assessment of each retailer and manufacturer organisation was undertaken to determine the organisation’s capacity to undertake product innovation in-house. The following is a list of the precise resource requirements taken into account: facilities (specifically product development laboratories and pilot plants); software (specifically computer software and food labelling software); technical human expertise (inclusive of product development technologists, packaging technologists, innovation managers and laboratory support staff); financial resources and marketing capabilities. The organisations were then organised into innovation capacity categories (none, low, medium or high). The assessment undertaken was essentially a matter of visualising where each specific firm would fall, on a continuum. As for the classification system, ‘high’ means the firm has the whole list of specific resource requirements; ‘medium’ means the firm has some of the specific resource requirements, and ‘low’ means the firm has very little in terms of specific resource requirements for innovation. The column indicated “high” in Table 5 therefore consists of organisations that have full capacity to carry out their own product innovation activities, while organisations described as ‘low’ tend to have limited

Table 3 Research interviews, manufacturers/suppliers. Organisation

Research participants

Mode of interview

Manufacturer W1 (Flour and breakfast cereals) Manufacturer W2 (Breakfast cereals) Manufacturer W3a (Milk and cheese) Manufacturer W3b (Flour) Manufacturer W4 (Breakfast cereals) Manufacturer W5 (Breakfast cereals) Manufacturer W6 (Tomato sauce) Manufacturer W9 (Milk) Manufacturer W10 (Cheese) Manufacturer W11 (Tomato sauce) Manufacturer W12 (Flour)

Brand manager Marketing manager National business manager key accounts: Grocery Sales director NZ Brand manager CEO Marketing manager Business development manager Managing director Owner Food division manager

Face-to-face Face-to-face Telephone Telephone Telephone Face-to-face Telephone Telephone Telephone Telephone Telephone

Source: Table compiled from research interview data.

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The following quotes represent typical responses:

Table 4 Research interviews, consultants. Organisation

Research participants

Mode of interview

Consulting company Y1 Consulting company Y2

Director Business development manager Managing director

Face-to-face Telephone

Consulting company Y3

7

Telephone

Source: Table compiled from research interview data.

“It would be manufacturer brands … I would say 10 to one, maybe more, 15 to one [manufacturer brand/retailer brand ratio on innovation output respectively]” (Interview R1a). “Most of the innovation and marketing would be done by the proprietary [manufacturer brand] companies” (Interview R5a). “It’s [innovation] minimal in private label [retail brands] …” (Interview ST1a).

capacity for innovation and tend either not to innovate or outsource such innovation as is undertaken. The “high” column is dominated by manufacturers (particularly large companies). Neither of the retail chains is in the “high” column. Responses for the retail chain (QR) suggested that this may also be an outcome of a strategic choice not to invest in R & D facilities and related human resource expertise, and to leave innovation activities to manufacturers. Table 5 shows that manufacturer brands possess superior resources for innovation relative to retailer brands. In addition, nine research participants mentioned (either directly or indirectly) the superior capacity for innovation on the part of manufacturer brands. Greater collective capacity for innovation would enable manufacturer brands to innovate at a higher rate than retailer brands. The rate of product innovation was assessed through the analysis of interview summary data (Table 6) and from the 21 interviews in retail chain QR, 14 interview participants gave comments supporting the position that manufacturer brands innovate at a higher rate than retailer brands across the industry. There is strong agreement in this regard across the entire spectrum of research participants with no dissenting positions. The eight responses from manufacturer respondents shown in the table cover all categories studied, thereby providing triangulation across the categories.

“Private label would be 5%” (Interview ST2). “There is more innovation from the manufacturer; from the branded product, obviously …” (Interview W3a). “Manufacturer brands drive the category, bring innovation and generally drive promotion. So, it’s not the role of store [retailer] brands. Store brands are a follower … There is … almost no innovation in private label [retailer brand]” (Interview W2). “In my opinion, it’s all driven by the [manufacturer] brands at this stage …” (Interview W6). “…the supplier who has to constantly innovate to stay ahead of the private [retailer] brand; and if it is successful, then the private brand takes up the idea as well” (Interview Y1). Even within the retail chain that seems to have a more aggressive and ambitious stance on retailer brands, retailer brand rate of innovation in proportion to manufacturer brands is described by a key manager as only a small percentage of total innovation in the categories: “Private label [retailer brands] would be 5%” (Interview ST1). In addition, most of those who commented on an estimate percentage gave figures that are consistent with this figure.

Table 5 Resources for product innovation. Industry/Nature of organisation

Company

In-house technical capabilities for product innovation/new product development (Resources) High

Medium

Low

None

Grocery retail chains

QR ST W3 W9 W1 W3 W12 W3 W10 W1 W2 W4 W5 W6 W11

– – ✓ – ✓ ✓ – ✓ – ✓ – ✓ – ✓ –

– ✓ – – – – ✓ – – – ✓ – ✓ – –

✓ – – ✓ – – – – ✓ – – – – – ✓

– – – – – – – – – – – – – – –

Manufacturers (Milk category) Manufacturers (Flour category)

Manufacturers (Cheese category) Manufacturers (Breakfast cereals category)

Manufacturers (Tomato sauce category)

Source: Table compiled from research interview data and other data from websites and documents.

Table 6 Summary of rate of product innovation reported by sample. Theme

Retail chain QR (n = 21)

Retail chain ST (n = 9)

Manufacturers (n = 11)

Consultants (n = 3)

Aware of manufacturer brand superior capacity for innovation Manufacturer brands innovate at a higher rate than retailer brands Retailer brand innovation improving Retailer brands innovate at a higher rate Retailer brands expect positive gains from manufacturer brand capacity for innovation There are also perceived benefits for manufacturer brands in the process (e.g. capacity utilisation)

16 14 – – 14 4

7 5 – – 4 –

10 8 2 – 10 3

2 2 – – 2 –

Source: Table compiled from research interview data.

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Table 7 Summary of sample’s perceived implications of retailer brand over-dominance of categories (Innovation perspective). Theme

Retail chain QR (n = 21)

Retail chain ST (n = 9)

Manufacturers (n = 11)

Consultants (n = 3)

Over-dominance of retailer brands would have a negative impact on category innovation (and support) Retailer brand share rise would mean more innovation to reverse the trend Innovation in some categories not entirely a function of New Zealand based innovation Over-dominance of retailer brands would have a positive impact on category innovation (and support)

10 1 – –

3 1 –

4 3 – –

2 1 –

Source: Table compiled from research interview data.

The responses indicate that manufacturer brands are perceived by all participants to have a superior collective capacity for innovation, and that manufacturers contribute the bulk of product innovation within the milk, flour, cheese, breakfast cereals and tomato sauce categories. No responses indicated any willingness or ambition by the retailers to modify this situation. P3 – An equilibrium between retailer and manufacturer brand shares exists within any specific category, and is related to the level of innovation required to support that category. The sample’s perceptions of a non-equilibrium position/growth (over-dominance by retailer brands within categories) are summarised in Table 7. These results suggest strong support for the view that an overdominance of retailer brands in the categories studied would have a negative impact on category innovation and development. Similar comments range across the categories and research participant groups. The following comments are typical of the interview responses: “If private label [retailer brand] becomes too big, then the proprietary [manufacturer] brand will withdraw from marketing, innovation … and that’s where it all comes from because private labels aren’t innovators” (Interview QR1). “If private label [retailer brand] is too dominant, you don’t get the same degree of new product development and the onus then ends up on the retailer to develop the new products” (Interview QR3).

the manufacturers then don’t have the money to invest in research and development …” (Interview W3b). “That will kill innovation long-term … because the profitability won’t be there for the supplier. So, they have got to watch out that they don’t kill their source of innovation; otherwise the whole thing grinds to a halt” (Interview Y1). The responses above reflect a virtual unanimity of opinion among retailers, manufacturers and consultants; namely, that retailer brand over-dominance would negatively impact upon the level of innovation and marketing support on the part of manufacturer brands due to diminished resources and lack of incentive to reinvest within the categories. This over-dominance, beyond a perceived ‘optimal’ point of equilibrium, would eventually damage categories and all category participants; retailers included. The complete lack of tension with regard to retailer brands’ ‘following’ of manufacturer innovation, and the fourth and fifth quotes above indicates that a system a bit like patent protection is in operation, in that a manufacturer will be deliberately given a period of grace to profit adequately from the innovation before the retailer version of it appears. Additional comments, from two respondents, would seem to suggest a counter-argument that an over-dominance of New Zealand supermarket categories by retailer brands would not have a negative impact on manufacturer brand innovation where the innovation is not driven from within New Zealand:

“If it [retailer brand] becomes too dominant, then it slows down the growth of the category … they [manufacturers] are going to spend money to make their product number one or they are going to spend money to invest in new technology or new products or something like that, which keeps the category alive; … our house [retailer] brand comes along behind and just gets dragged along, driven up by their spend at no cost to us” (Interview R2a). “At the end of the day, as we head more and more into private labels [retailer brands], the amount of innovation and development that’s coming from the manufacturers will decline because

“Their [i.e. multinational brands/suppliers] innovation in New Zealand or even in Australia is not really a function of New Zealand or Australia. It is a function of some kind of global countries of excellence where they try and continuously develop new products” (Interview Y3). “When you have international ownership of the multinationals …, they still have that power to innovate at head office level and push it all back down through each company; … whereas the small companies, we develop something and we are dependent on purely the New Zealand market size to gain a return on the investment” (Interview W2).

Table 8 Summary of supply situation for manufacturer brands in sample product categories. Category

Number of brands observed on the shelves

Domestic (Local) manufacturer/ supplier

Overseas manufacturer/ supplier

Overall supply situation

Milk Flour Cheese

13 brands 10 brands 9 brands

None One brand One brand

Domestic/local supply (from within New Zealand) Largely domestic/local supply (from within New Zealand) Largely domestic/local supply (from within New Zealand)

Breakfast cereals

17 brands

4 brands

Largely domestic/local supply (from within New Zealand)

Tomato sauce

8 brands

13 brands 9 brands 8 brands (One of the brands however, is supplied by a multinational subsidiary based in NZ) 13 brands (Two of the brands however, are supplied by multinational subsidiaries based in NZ) 8 brands (One of the brands however, is supplied by a multinational subsidiary based in NZ)

None

Largely domestic/local supply (from within New Zealand)

Source: Table compiled from category observation data and data from documentation supplied by some research organisations.

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This called for an analysis of data collected via category observation, to determine whether supply in the studied categories was domestically-driven or foreign-driven, and this information is outlined in Table 8. As can be seen in Table 8, the categories studied have a dominant domestic supply situation, which makes the counter-argument irrelevant with respect to the studied categories. Therefore, because of the dominant domestic supply situation, the argument of negative impact on innovation due to retailer brand over-dominance holds water for the categories studied. In addition, a significant number of interview participants stated, without prompting, that these category specific differential equilibrium points existed: “There is a point [of retailer brand share] though, where we can kill the [specific] category” (Interview R5a). “The point where suppliers stop innovating” (When defining points within a specific category at which retailer brand growth would not proceed) (Interview ST1). These quotes are consistent with earlier research within the milk category (Hamlin and Chimhundu, 2007, p. 191). “Between [percentage figure] and [percentage figure] share is the maximum that we would want to go. The reason is that the higher you go the less money the manufacturers make, and therefore they stop innovating … That [innovation] is the manufacturer’s job and we have to make sure that we give them enough room to be able to keep doing that job”. 5.2. Discussion The study found that there was a consistent appreciation that manufacturer brands and retailer brands had separate and specific roles to play in a category, with manufacturer brands driving innovation and growth of the categories and retailer brands having the main role of generating profit. In addition, there was a consistent appreciation that the strategic role of manufacturer brands is based upon the collectively greater power of the manufacturer sector to innovate. Manufacturer brands were found to have a generally greater collective capacity for product innovation than retailer brands. The research found that the equilibrium level between manufacturer and retailer brands in the categories took into account the level of innovation required to support the categories. In this regard, retailer strategic thinking was that, since the bulk of the innovation in the categories is contributed by manufacturer brands, and both manufacturer and retailer brands benefit; retailers would therefore not wish to jeopardise the innovation capacity and marketing activities within the categories by being over-dominant. Retailers could drive towards over-dominance if they wished, through heavily tilting merchandising measures in favour of retailer brands and through severely rationalising the categories. With a two-firm concentration of 95%, the retailers have the power to achieve this. However, the strategic stance of the retail chains is that they choose not to do so, as adequate space has to be allowed for manufacturer brands to continue to do the job to which they are best suited. Therefore, with respect to the five categories studied, strategic coexistence seems to be the norm. While this would represent a stable situation that is established by means other than direct competition, there are reasons to believe that this relationship is not collusive. For quite some time retailers in most developed economies have possessed a scale and level of concentration that gives them the power to crush individual manufacturer/supplier brands at will. This article set out to investigate why, in the most concentrated of these markets, these most powerful of retailers have not yet done so. The answer appears to be that they do not believe that they are in a position to do so, because doing so would antagonise a third

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extremely powerful (but not omnipotent) party in the equation; the consuming public. The outcomes of this research support an earlier proposition (Hamlin and Chimhundu, 2007) that suggested that consumers, retailers and manufacturers form a ‘trifecta of power’, based upon each of the three parties’ capacity to reward/punish the other on the basis of fulfilled or unfulfilled expectations on a variety of measures, including excitement/innovation. As these expectations vary for each category, they come into balance and thereby produce a specific equilibrium point that is unique to that particular category. This equilibrium is not therefore an outcome of collusion between any two parties. To put it bluntly, retailers might prefer to eliminate manufacturer brands from the point of sale, but they believe (rightly or wrongly) that the reaction of the consuming public to such an act would outweigh any benefits to be derived from it. What is new about this research is that it has established through an intensive, unique study of five food product categories in a very highly concentrated grocery retail environment by world standards (i.e. a duopoly), using triangulating sources of evidence, that there is strategic coexistence between retailer brands and manufacturer brands, and that this strategic coexistence is influenced by the amount of innovation that is contributed to the product categories by both manufacturer and retailer brands. While we acknowledge that the study by Anselmsson and Johansson (2009a) found no empirical support to the effect that retailer brands negatively impact innovativeness in grocery categories, this may have been influenced by two main factors acting in combination. Firstly, the retailer brand share levels may not have gotten to a point where manufacturer brand innovation would have been affected. Our research argues that there is a level, in each category, at which innovation starts being negatively affected. If that level had not been reached, then there is no way their research could have picked it; let alone through a study that investigated the whole subject from the perspective of the consumer. Secondly, the grocery retail concentration level of the industry they studied (Sweden) differs significantly from the industry of our study. Sweden, with a fivefirm grocery retail concentration ratio of approximately 70% (Defra, 2006; IGD, 2005) is a far cry from New Zealand’s two-firm concentration ratio of over 95%, and this has implications on power relationships in the categories. If the top five firms in Sweden are controlling 70% of the industry, then if this is to be reduced to the top two firms, to draw direct comparisons with the New Zealand grocery industry, it will be even much lower than the 70%. Therefore, manufacturers in Sweden are expected to have more options and are probably less likely to be dominated by the retail chains. Consumer choice and ‘like on like’ brand competition has been prominent in the academic literature on retailer brands, category management and the nature of coexistence between manufacturer brands and retailer brands in FMCG/supermarket product categories. Share levels for manufacturer and retailer brands in the categories have, in the past, largely been looked at from a sales and profit optimisation perspective. This study illustrates that other deeper, underlying factors (that have not been given much prominence in mainstream academic literature to date) are at play as well, especially strategic dependency between manufacturer brands and retailer brands. Manufacturer brands’ greater collective capacity for innovation is an important aspect of strategic dependency that shapes the nature of an apparently stable coexistence between the two types of brands in the categories; making a strong case for strategic coexistence as the norm. Managerially, from the results of this study, it can be suggested that an alternative model taking into account the long-term strategic health of the categories from an innovation and category support point of view is equally legitimate in the optimisation of manufacturer brands and retailer brands in the categories. Therefore, a category managerial effort that constantly strives to establish the optimum equilibrium that ensures a maximum level of

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category innovation, support and growth, would be desirable. It should be noted however, that there would not be a standard formula in this regard, because category situations differ. So, a full account of the circumstances of each category would have to be taken into consideration. In addition, the results of the study have also shown that the strategic dependency in the coexistence of manufacturer and retailer brands is a well understood and systematically applied high level retailer strategy that is, however, not explicit in nature. To those who have a formal marketing training, these nonexplicit comments expressed by the sample may appear to be somewhat unsophisticated. We believe that this unsophistication is apparent rather than actual in almost all cases. The sample was heavily populated by individuals who have had an applied rather than formal training. Those that have had a formal training have typically had a focus on retailing and sales, rather than marketing. Ditto their usually extensive and apparently successful professional experience. The manner in which they deal with brands is similarly applied and empirical, and these interviews are in the majority of cases the first time that they have been called upon to articulate their experience within a more formal marketing and branding context. Their framing of concepts reflects that situation. These new insights have been generated by focussing not on consumer behaviour and sales data, but on the communities of retailing and manufacturing companies and managers that deliver the integrated category offer to the consumer. In acquiring these insights it must be acknowledged that the researchers were, perhaps uniquely, advantaged in that, within New Zealand, they had access to a compact and accessible community of this type, who were also prepared to furnish their insights via candid interview opinions. Researchers in other countries do appear to face difficulties in this area, especially with regard to retailers.

5.3. Directions for further research The research was limited to five FMCG/supermarket product categories in one country. Although this research possesses a high degree of depth, its findings may well be controversial when founded upon such a narrow base. It is envisaged that extending the study to more categories would provide an opportunity to test the research findings further. Also, there is a need to match and augment these qualitative findings with quantitative observation. Most notably research is required to acquire or estimate category shares for manufacturer and retailer brands to allow research relating equilibrium share to innovation rate to be undertaken within specific categories. The main study was based on the New Zealand FMCG/supermarket sector. While it shares many characteristics with the FMCG retailing sectors of many larger economies, its very high level of concentration is atypical. New Zealand retailers have yet to face a challenge from either a third full format retailer, or a discounter. In Australia a previously similar duopoly has already been challenged by the discounter Aldi. There is no published research however, describing how Australian retailers have reacted to this in terms of their retailer brand structure. It seems likely that this discounter challenge will be repeated in New Zealand at some point. When it comes, the reaction from the established players would represent an opportunity to replicate the research exercise described in this article. If the philosophy revealed in this research remains, and guides reactions to a challenge of this type, then the overall margins may fall, but the higher margins necessary to motivate producer brand innovation, as a point of differentiation will remain. The issue/ opportunity noted above notwithstanding, it would be desirable to extend the research to FMCG markets in other countries that possess more complex market structures and a higher degree of retail competitive stress. Such studies would still maintain the multiple-

case study approach which allows in-depth investigation of the specific FMCG industries chosen. Acknowledgements The authors would like to thank the large but anonymous sample of retail, manufacturing and associated managers whose frankness and cooperation over the last four years has made this research possible, and the anonymous reviewers of this article for their comments and suggestions. Conflicts of interest None. Appendix: Supplementary material Supplementary data to this article can be found online at doi:10.1016/j.ausmj.2014.11.004. References ACNielsen, 2005. The Power of Private Label: A Review of Growth Trends Around the World. ACNielsen, New York, NY. Ailawadi, K.L., Harlam, B., 2004. An empirical analysis of the determinants of retail margins: the role of store-brand share. J. Mark. 68 (1), 147–165. Ailawadi, K.L., Keller, K.L., 2004. Understanding retail branding: conceptual insights and research priorities. J. Retailing 80 (4), 331–342. Ajula, E., Bevan, K., Dawson, R., 2006. Category Management. Institute of Grocery Distribution, Letchmore Heath. Alvarazo, U.Y., Kotzab, H., 2001. Supply chain management: the integration of logistics in marketing. Ind. Mark. Manag. 30 (2), 183–198. Anselmsson, J., Johansson, U., 2009a. Retailer brands and the impact on innovativeness in the grocery market. J. Mark. Manag. 25 (1/2), 75–95. Anselmsson, J., Johansson, U., 2009b. Third generation of retailer brands – retailer expectations and consumer response. Br. Food J. 111 (7), 717–734. Bacon, R., 2014. Retailer brands are holding their own. Marketing Week, 18 June, 2014, Available from: (accessed 14.09.08.). Baden-Fuller, C.W.F., 1984. The changing market share of retail brands in the UK grocery trade 1960–1980. In: Baden-Fuller, C.W.F. (Ed.), The Economics of Distribution. Franco Angeli, Milan, pp. 513–526. Balfe, A., Planet, R., Trace, O., 2012. Private Label: Winning Shoppers with Innovative Package Design. Planet Retail, London. Available from: (accessed 14.09.09.). Basuroy, S., Mantrala, M.K., Walters, R.G., 2001. The impact of category management on retailer prices and performance: theory and evidence. J. Mark. 65 (4), 16– 32. Brandes, D., Brandes, N., 2012. Bare Essentials: The Aldi Way to Retail Success. BoD–Books on Demand, Hamburg. Brooks, B., 2013. Big four supermarkets lose share as shoppers flock to Aldi. The Grocer. Available from: (accessed 14.09.08.). Burt, S., 2000. The strategic role of retail brands in British grocery retailing. Eur. J. Mark. 34 (8), 875–890. Burt, S.L., Sparks, L., 2003. Power and competition in the UK retail grocery market. Br. J. Manag. 14 (3), 237–254. Cachon, G., Gürhan Kök, A., 2007. Category management and coordination in retail assortment planning in the presence of basket shopping consumers. Manage. Sci. 53 (6), 934–953. Chimhundu, R., Hamlin, R.P., McNeill, L., 2010. Impact of manufacturer brand innovation on retailer brands. Int. J. Bus. Manag. 5 (9), 10–18. Chimhundu, R., Hamlin, R.P., McNeill, L., 2011. Retailer brand share statistics in four developed economies from 1992 to 2005: some observations and implications. Br. Food J. 113 (3), 391–403. Copeland, 2013. Aldi to open no-frills grocery store in Waco on Feb. 28. Waco Tribune, February 26th, 2013. Available from: (accessed 14.09.09.). Coriolis Research, 2002. Responding to Private Label in New Zealand. Coriolis Research, Auckland, NZ. Cotterill, R.W., 1997. The food distribution system of the future: convergence towards the US or UK model? Agribusiness 3 (2), 123–135. Cotterill, R.W., Putsis, W.P., Jr., Dhar, R., 2000. Assessing the competitive interaction between private labels and national brands. J. Bus. 73 (1), 109–137. Dawson, J., 2013. Retailer activity in shaping food choice. Food Qual. Preference 28 (1), 339–347.

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Please cite this article in press as: Ranga Chimhundu, Lisa S. McNeill, Robert P. Hamlin, Manufacturer and retailer brands: Is strategic coexistence the norm?, Australasian Marketing Journal (2014), doi: 10.1016/j.ausmj.2014.11.004