The three giants of retail are betting on their own brands, launching a silent battle against brand manufacturers.

　　Seven & i Holdings Co., Ltd., the world's largest convenience store company, recently announced in Beijing the launch of its first global strategic product under its own brand in the global market—"Yosemite" wine, officially entering the Chinese market. Previously, Seven & i had already entered the Chinese market with Ito Yokado, 7-11 convenience stores, and Wangfujing (600859) Yanghua Tang supermarket.

　　Just half a month ago, Walmart, the world's largest retailer, revealed that the core of its global procurement strategy is to continuously increase the direct procurement of Walmart's own brands. Currently, Walmart's private label annual procurement exceeds US\$100 billion, but the proportion of direct procurement from manufacturers is less than one-fifth. If the direct procurement ratio is increased to the long-term target of around 80%, Walmart could save US\$4 billion to US\$12 billion.

　　As is well known, Watsons, the world's largest personal care company, established its current leading position through its own brand. Among the three major retail sectors, the three retail giants Walmart, Seven & i, and Watsons, all ranked first globally, have unanimously placed their core development strategies on "private brands".

　　Continuously expanding the proportion of private brands

　　According to Makoto Kura, General Representative of Ito Yokado China, "Yosemite" wine is produced by The Wine Group, the world's third-largest wine producer, and utilizes international commodity development capabilities and unified raw material procurement to reduce production costs.

　　Makoto Kura stated that the launch in China will begin sales simultaneously in approximately 130 stores across Beijing, Tianjin, and Shanghai, including 7-11 convenience stores, Ito Yokado Beijing, Wangfujing Yanghua Tang, Auletto (DAYS) Western Restaurant, and Chengdu Ito Yokado. The wines available are dry red and dry white varieties, priced at only RMB 68 per bottle.

　　Previously, Walmart had 40 private brands globally, 23 of which are global brands, including two brands exceeding US\$1 billion—ASDA and George clothing. Walmart insiders stated that private brands are typically 5% to 20% cheaper than national brands.

　　It is reported that Walmart is about to relaunch its private brand "Great Value," which has become the largest brand in the US food market. They tested up to 5,250 private label products, referencing well-known brands, and improved the formulas of 750 products. According to Walmart's official website, the company has introduced more than 10 private brands to China, with nearly 50 varieties, mainly focusing on non-food items.

　　Makoto Kura also stated that on November 4 last year, Yosemite wine was simultaneously launched in approximately 15,000 7-11 stores in Japan and the United States. By January 2010, sales exceeded 1 million bottles, becoming a record-breaking best-selling product. "We are very confident in the Chinese market."

　　Leveraging "big brands" to pressure channel giants

　　"In fact, retail giants like Walmart and 7-11 hardly need to do specialized advertising or require professional salespeople like ordinary companies to gain huge brand recognition. Currently, every Walmart and 7-11 customer can see their private brand advertisements on the back of the receipt, in addition to advertisements on shopping mall DM posters and shelves." A retail industry analyst said that in contrast, brand manufacturers like Procter & Gamble spend a lot on advertising.

　　On the other hand, these multinational retail giants are using their relatively monopolistic retail networks and procurement advantages to launch "invisible wars" against well-known brands at prices lower than those of brand manufacturers like Procter & Gamble.

　　A competitor of Watsons, who declined to be named, told reporters that Watsons' new private brand development strategy is not a supplement to the store's imperfect product structure, but mainly focuses on best-selling and potential new products in the store, adopting a close-following strategy. When the market performance and data analysis of potential new products in the store show a significant growth trend, Watsons will immediately imitate and follow up. Many people therefore directly define the wide range of Watsons' private brand products as "imitations" or "special offers" of best-selling products among Watsons' first-line agency brands. "These brands, along with Watsons' advertising campaign, have taken a large share of sales from first-line brands in second- and third-tier cities with low brand awareness."

　　Reporters learned that Walmart is also starting to try this strategy in the United States to capture a larger market share of well-known brands at lower prices.

　　In Germany, due to the massive market encroachment of private label products, Tropicana's market share experienced a sharp decline in three years, plummeting from 20% in 2000 to 2% two years later. In February 2006, Kraft Foods, the producer of Oreo cookies and Oscar Mayer luncheon meat, had to announce the closure of 20 factories and lay off nearly 8,000 employees after private brands eroded its market share. Analysts believe that as multinational retail companies continue to expand in China, their private brand strategies may also put enormous pressure on existing local brands.