The second largest Japanese daily newspaper Asahi Shimbun with a circulation of more than 7.96 million for its morning edition and 3.1 million for its evening edition reported this fascinating story on the growth and promotion of Private Brands in Japan. The story has a remarkably similar feel to many of those written about the growth of US Private Brands by the mainstream media.
Development of private brands are expected to be a priority for major supermarkets and other retailers, following the lead of at least one company that saw remarkable results in procuring and distributing its private label after the Great East Japan Earthquake.
Half a century after their creation, private brands now have a high profile, said Yoshiharu Yuki, professor of business design at Rikkyo University Graduate School.
“The ratio of private labels to national brands has increased sharply in the past three years,” he said. “The massive earthquake awakened supermarkets to the importance of private branding, its effectiveness and challenges. I believe companies will value daily necessities and will review their supply systems.”
Aeon Co., an operator of a major supermarket chain, set up a disaster management office at its headquarters in Chiba only 15 minutes after the earthquake struck northeastern Japan on March 11.
The office immediately began confirming the safety of its employees and customers as well as the extent of damage to its stores.
The company found stores in Kesennuma and Ishinomaki, Miyagi Prefecture, were heavily damaged.
It also learned that distribution centers in Chiba Prefecture and Miyagi Prefecture, which controls distribution of commodities to six prefectures in the Tohoku region, were knocked out.
The management office reorganized procurement and supply of more than 5,000 items sold under its Topvalu label.
“We should deliver Topvalu milk from Aso, Kumamoto Prefecture, and Hokkaido. Our brand of cup noodles produced in Saitama Prefecture should be redirected to the Kansai region and delivered to the disaster-stricken areas via a land route along the coast of the Sea of Japan.”
Using its nationwide supply network, the company set up a special distribution system to deliver daily necessities to the disaster-stricken areas.
More than 11,000 containers of milk produced in Aso appeared on store shelves in the Tokyo metropolitan area every day from March 25 and milk from Ishikari, Hokkaido, was delivered to the Tohoku region.
Hiroshi Yokoo, senior managing executive officer, said the company’s private brand supply chain functioned well during the emergency.
“Unlike the national brands of large manufacturers, we, as a private brand, can easily and quickly determine the extent of damage and distribution situations of our business connections. We were able to make use of Aeon’s supply network to aid the disaster-afflicted areas,” Yokoo said.
Aeon’s private-brand strategy has benefits for local areas where products are grown or manufactured.
Earlier this year, Aeon bought pears from Niigata Prefecture through its own network and commissioned production of a private-brand canned shochu-based beverage, which sold about 200,000 cans in the area of production and in the Kanto region.
Kazumi Uchiyama, president of Aeon group company Aeon Topvalu Co., said, “Private brands can play a role in promoting areas of production.”
For a long time, private brands were considered synonymous with “cheap.”
But after the global financial crisis in 2008, major manufacturers lowered prices of national brands.
Supermarkets and other retailers adopted a quality control system and began broadening their price ranges, adding higher-priced products.
Aeon and Coop Kobe have a quality control and inspection systems comparable to major food manufacturers.
Aeon’s Research Institute for Quality Living Co. checks to see if all the products are made to specifications. Even business partners commission Aeon to inspect their products.
Not all companies, however, are trying to lower prices for its private brands.
Seven & I Holdings Co., operator of Seven-Eleven and Ito-Yokado stores, has developed a premium “Gold” series. “Gold” beef curry, for example, while relatively expensive, aims to offer quality and taste matching that of specialty stores.
Seiyu Ltd, a retail chain operated by U.S. Walmart Stores Inc., utilizes the parent company’s global procurement network. For instance, Seiyu sells high-quality wine chosen by certified wine experts, from 580 yen for a 750-ml bottle.