Manufacturer Dual Tracking Reshapes Retailer Private-Label Strategies
Study reveals how producing both branded and private-label products shifts bargaining power in supply chains.
1Dual tracking's rapid adoption
The practice of manufacturers simultaneously producing both branded and private-label products for retailers has grown significantly, particularly in response to increasing consumer demand for private-label goods. In the ready-to-eat breakfast cereal sector, this trend has become prominent enough to measurably impact retailer behavior. Manufacturers adopt this strategy to better utilize production capacity while maintaining their branded product lines.
2Cereal industry case study
Research focused on a specific instance where a leading breakfast cereal manufacturer began supplying both branded and private-label products. This created a unique natural experiment to observe how retailers adjusted their private-label strategies when facing a supplier that was also their competitor. The study tracked changes in product introductions and advertising expenditures following this shift.
3Retailers pull back on imitations
When manufacturers engaged in dual tracking, retailers significantly reduced introductions of private-label products that directly imitated those manufacturers' branded offerings. Advertising for such competing private-label products also declined. This suggests retailers consciously adjusted their private-label portfolios to accommodate dual-tracking manufacturers, rather than aggressively competing with them.
4Bargaining power rebalanced
Dual tracking fundamentally alters manufacturer-retailer dynamics by giving producers greater bargaining power. When manufacturers control both branded and private-label supply, retailers become more dependent on them, reducing retailers' ability to threaten switching to other suppliers. This power shift enables manufacturers to discourage direct imitation of their branded products.
5Strategic capacity utilization
For manufacturers, dual tracking offers a way to optimize production capacity. During periods of lower demand for branded products, manufacturers can keep facilities running by producing private-label goods. However, this creates inherent tension as the same production lines feed both branded products and their direct competitors.
6Reduced competition concerns
The study found that dual tracking actually lessened competitive pressures in some cases. With retailers pulling back on imitative private-label products, manufacturers faced fewer direct substitutes for their branded offerings. This counterintuitive outcome suggests dual tracking can be a defensive strategy against private-label competition.
7Selective portfolio adjustments
Retailers didn't abandon private-label strategies entirely, but became more selective. They continued introducing private-label products that didn't directly compete with dual-tracking manufacturers' branded items. This indicates retailers strategically reallocated their private-label investments rather than making across-the-board cuts.
8New vertical relationship paradigm
The findings suggest dual tracking creates a new type of manufacturer-retailer interdependence. Rather than pure adversaries, they become collaborators with competing interests. This complex relationship requires careful management but can lead to more stable supply chains with reduced destructive competition between branded and private-label products.