What keeps brand managers in manufacturing companies awake at nights? Would you say rival brands that are snapping at their heels? You would be way off the mark. The answer is private labels owned by the retailers themselves, which are also known as store brands or own labels.

Should manufacturers really lose sleep over what the retailer is doing? Well, private labels are large in developing markets — they account for 40 per cent of Wal-Mart sales ($126 billion or Rs 5,16,600 crore), 50 per cent for Tesco ($36 billion or Rs 1,47,600) and are eating into a larger chunk of the organised retail sale in developed markets. In Germany, for instance, private label has shot up from 12 per cent of sales to 34 per cent. This has, in effect, changed the balance of power between brand manufacturers and retailers, giving the latter a decided advantage when negotiating terms with the brand manufacturers. And apart from the multibrand retailers, a category of private label-only retailers has also been created — Ikea, Toys ‘R’ Us, Zara — who sell only private label brands.

The writing, say Nirmalya Kumar and Jan-Benedict E. M. Steenkamp, is on the wall: private labels are growing faster than manufacturer brands. They are ubiquitous across categories and they now compete on quality — in fact, they are now brands! Private label share is expected to grab almost 22 per cent of sales in developed markets by 2010.

Kumar and Steenkamp trace how private labels have evolved from ‘cheap and nasty substitutes’ to the real thing. Indeed, ‘copycat’ private labels still remain a strong strategy for retailers. However, the copycat no longer depends on the price advantage to fight the branded product; it has improved on quality and offers a value proposition to the consumer. Similarly, the earlier theory that that recessions fuelled private labels while an economic boom resulted in growth of brands no longer holds good.

The book is well structured. The first part deals with retailer strategies on private labels and what they are doing or should be doing. The second half examines manufacturer strategies for taking on private labels. The research cited by the authors shows that retailers now have a range of superior private labels which can match and, in some cases, outperform brands, as Tesco’s ‘Finest’ range does. Besides, consumer perceptions of brands have also changed. A smaller number now believe that manufacturer brands are worth the premium they charge. At the same time, concerns about quality and the social stigma attached to store brands have disappeared.

The book details the range of strategies that private labels can deploy. From copycats (lookalikes of a leading brand that are cheaper) to premium store brands (both ‘premium- lite’, which offers equal quality at a lower price to a major brand and ‘premium price’, which offers higher quality and price — the best that money can buy) to value innovators. The last is usually sold by hard discounters, but would also include labels brought out by retailers that are both unique and offer a price advantage. Ikea and the Swedish clothing chain H&M are examples of products that have pared prices by stripping away packaging or advertising.

With India on the cusp of a retail revolution, some of the case studies should provide food for thought. Among the leading retailers of private labels is Tesco, which has a large portfolio spanning the entire price range. So from a ‘pile it high, sell it cheap’ approach, Tesco has moved into a more consumer-focused chain where private label offerings are the core of the strategy.

Wal-Mart, on the other hand, casts the net wider on private labels to create a ‘house of brands’. The only caution for retailers is that there should be a judicious mix of private labels and brands.

The second half of the book outlines how brand manufacturers react or can react. For a start, it advises them to accept the fact that retailer private labels are brands and here to stay. To act as if private labels do not exist is myopic, it says. So also the tendency to consider private labels as inferior products that consumers would tire of quickly and hence not ‘worthy competitors’.

The book also advises manufacturers not to fall into the other trap of undertaking private label production for retailers. This is often done to fill idle capacity but entraps manufacturers into what the authors call the vicious circle of dual strategy. What happens is that their own brands come under pressure, lose market share and the resulting excess capacity is used to manufacture more private labels. So, it goes on.

Instead, manufacturers should fight back by innovating: changing the way they look at consumers, seeking out early adapters for ideas, using sound marketing techniques and adopting a rigorous product development process. The authors offer some good examples: Campbell’s soup as an innovator for anticipating consumer changes (chilled soups in cartons being an example) while P&G is cited for developing product experiences based on two moments of truth: one when the consumer sees the product on the shelf and second, when the consumer uses the product at home. Ultimately, it must be accepted that there is always a premium for manufacturer brands, they say.

The book lacks examples from Asia, now considered the last frontier for modern retail. All the same, it should get retailers in India thinking. Given that consumers are experiencing modern retail and brands at the same time, private brands might have a better chance of acceptance in India. The brands Stop from the department chain Shoppers’ Stop, and Fresh and Pure from Food Bazaar have become fairly strong labels. And by the same token, manufacturers might attempt to invade the retail space themselves as Raymond has in garments, or even set up their own channels for the consumer as Unilever did with Sangam, an online grocery service.

On the other hand, could the Indian model be the same as in the US where private labels have underperformed, given the splintered retailing industry such as we have here and the geographic and regional differences? It is a thought provoking book, and it comes at the right time for Indian retail. What I foresee is sleepless nights for all!

I am reading The Travels of a T-shirt in the Global Economy, by Pietra Rivoli. He explains the complex issues of trade, globalisation, market-power and market imperfections through the life of a single T-shirt.

We are at the dawn of a new era where we can expect opportunities that come with the shifting of innovation from the western world to developing countries. This is captured very well in Tom Friedman’s book, The World Is Flat. I have increasingly focused on educating myself in this trend, given its direct ramifications on the Indian IT industry. I rely on recommendations from friends, specific blogs, and websites like shelfari.com.

Despite its name, The Definitive Drucker is not anything that Drucker has written. Instead, this is an interpretation of his writings and teaching by Elizabeth Haas Edersheim, a management consultant and Drucker fan, who use examples to tell the reader what he meant. It is an ambitious effort — and quite unnecessary. Drucker was a wonderfully lucid writer who never had any problems explaining precisely what he meant. His writing was sharp and a pleasure to read. Why would anyone want to interpret him?

When George ‘Slam Dunk’ Tenet resigned as director of the CIA in 2004, he had a lot to complain about. After seven years at the helm, his tenure was reduced to those two four-letter words that ultimately made him Dick Cheney’s — and America’s — scapegoat for Iraq.

So, he had a serious chip on his shoulder. But surely, one may feel that a man whose job was to protect state secrets wouldn’t rush to divulge them to the public as soon as he was relieved of this responsibility. One would be wrong. It seems as though At the Center of the Storm: My Years At The CIA (Harper Collins) seeks to expose the secrets behind the Bush administration. But does it?

Is this simply CIA disinformation wrapped up as an expose? On the face of it, he is a perfect candidate — cast as the fall guy, angry at the administration and well-informed for the past decade on US intelligence. There are no startling revelations, no inside information. It is, in fact, something of a letdown.

Where Tenet does score high is when he switches tone to a more personal view on the future of terror and threats to the US. Here, his experience becomes incredibly valuable. And some of his views are interesting — if that could be possible when reading about terrorism — to read. Take his view on the current global climate of terror and his opinion of the crucial role US foreign policy plays in it. Tenet, remember, served pre- and post-9/11.

Ultimately, there is the problem of the book’s credibility. However much Tenet criticises the Bush administration and its handling of intelligence, one question pops up continually: his primary duty as the CIA director was to his job and not to White House policy. So, his silence during the build-up to the Iraq war makes him just as guilty as the US President.