„The factory „Rivona“, which produces various products for the retail chain „Norfa“, of course, labels them with our trademarks.
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For example, the trademarks „Kolumbo“ and „Sodžiaus“, uniting various food product groups, the dairy products marked with the trademarks N, „Piemenėlio“ or „Piemenėlio Excellence“, meat and fish and canned products „Rivona“, „Duončiaus“ bakery products, as well as various „Onex“ electronics and electric household goods produced in other companies, are particularly popular among buyers,” says D.Dundulis.
The buyer’s choice determines
He calculates that self-produced products with private labels account for about 15% of total turnover. A few more percent of private label products are ordered to be produced by other companies. However, in certain product groups, private label products can make up about 50%, e.g., kefir, milk, sour cream, about 40%, e.g., meat, and only 5% or less, e.g., yogurt.
„I think we offer a sufficient selection of private label products and do not plan to increase them. The buyer must have the opportunity to choose from various manufacturers and brands. Our goal is to trade those products that the buyer chooses,” says the head of „Norfa“ and „Rivona“. „We order private label products from other manufacturers only if we see that it will benefit our buyer, usually meaning we can offer a lower price. If such products cannot offer any tangible benefit to the buyer, there is no point in having them. Then we offer products with the manufacturers’ own brands. By the way, our brands compete on equal terms with them for shelf or display space and buyers’ money. So if the buyer does not choose products of our brand, they will be removed from sale and their production discontinued.”
He points out that manufacturers themselves often heavily advertise their brands, which are widely known and quite popular throughout the country, trusted, and their price satisfies the buyer.
More rational – only quality products
According to him, it is still possible to hear that private label products of retail chains are cheaper because they are of lower quality.
„Of course, there are various quality products both from manufacturers themselves and private labels. But it should be known that whether milk, meat, or other products are produced in factories in large quantities according to strict technologies and using appropriate raw materials. Any idea to produce part of the production of lower quality would mean changing the components and technologies, adjusting equipment, etc. And producing in smaller batches means increasing the cost price of all products. So, for example, at the Alytus dairy, a „Rivona“ production unit, we see no point in experimenting with cheaper raw materials; only quality dairy products with various labels are supplied to buyers from here. This is more rational for the manufacturer, and the buyer remains satisfied with the quality of all our products,” explains the head of „Norfa“ and „Rivona“.
And when baking bakery products, even the highest quality ingredients make up only a small part of the production cost – most expenses are for energy and wages. Therefore, according to D.Dundulis, only quality ingredients are used in the „Rivona“ Culinary workshop bakery in Kėdainiai, and bread is baked only in the traditional way from natural sourdough, which is matured for three days.
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„Maybe for some, under certain circumstances, it pays off to make concessions on product quality, but for us, it is more rational to produce and offer the buyer products of consistently high quality without deteriorating their components,” says the head of „Norfa“ and „Rivona“.
Is a private label product always cheaper?
According to him, the biggest influence on the lower price of private label products is advertising and marketing expenses: „For our own brands, we either have none or they are exceptionally low compared to the similar expenses that major manufacturers allocate for advertising their products.”
„The buyer may be surprised, but even the packaging can have a big impact on the final product price. For example, choosing a single-color package or label will be produced much cheaper than a multi-color luxury one. The quantity of ordered labels is also important – the more you order, the lower the unit price. So, recalling the previously expressed thoughts, if you can sell only a few products with a private label, maybe it is more rational to offer the buyer products with the manufacturer’s brand,” considers D.Dundulis.
He also reminds that the packaging price, which is included in the final product price, is influenced by its weight. The heavier it is, the more the retailer has to pay for packaging waste management.
„Probably, in summary, it can be said that private labels are created for certain buyer groups when the sense of such a solution is seen, when it is possible to meet buyers’ needs. And if the buyer ‘votes’ with their money for such an offered product, it means we met their expectations,” says the head of „Norfa“ and „Rivona“. „In recent years, we have not offered new private labels because we do not see such a need. „Rivona“ and other manufacturers currently fully satisfy our buyers’ needs, offering a reasonable product assortment and value at a price acceptable to the buyer.”
„Rivona“ is a member of the international organization uniting manufacturers producing private label products, PLMA (Private Label Manufacturers Association). It regularly presents its products at the annual exhibitions organized by PLMA. Founded in 1979, the organization unites over 5,000 companies from more than 80 countries.
