Impacts of the Production of Private Labels on Food Retailing and Its Suppliers in Hungary

Abstract

The aim of this paper was to explore the spreading of Private Label (PL) food products in Hungary. We examined the aspects and strategy of both the suppliers and retailers, with special regard to the opinion of consumers in Hungary. In order to explore the strategy of Hungarian suppliers and retailers regarding PL products, we carried out in-depth interviews with experts of 5 retailers and 24 supplier companies in 2010 and 76 supplier companies in 2014. The research in 2010 concentrated on only PL producers, the research of 2014 examined the whole Hungarian food industry from many aspects, using a representative sample. According to in-depth interviews and statistical data, the Hungarian consumers more and more accept PL products. The third and fourth generations of PL products provide a very favorable price/value ratio, which is very important for the price sensitive Hungarian consumers. The increasing ratio of PL products urges the suppliers to take part in this business. According to the interviewed Hungarian food processors, the most important advantages of production of PL products are capacity utilization, calculable income and the large production volume. The most significant disadvantages are the low profitability, brand “cannibalization” and replacement of products and suppliers.