Principles of Marketing (MKTG3324_600)

Assume you are part of the management team of a cookie manufacturer. A major supermarket chain has approached your firm to manufacture a private label version of one of your best-selling and most profitable cookie product lines. The supermarket chain would like a cookie that is a similar design, look, and reasonably similar quality (can be a little less).

While they want the packaging to look fairly basic (to communicate a lower price biscuit), but they want it clear to consumers that the product is comparable to your popular cookie line. They want to purchase this new product at a 25% lower price than they now pay for your current cookie line. They then plan to retail both products, virtually side-by-side, with the private label version retailing at $1.99, compared to your cookie normal retail price of around $2.50.

1. Do you think this private label product will be strong competitor?

2. Loyal customers switch?

3. Would you decide to manufacture the competitor private label cookies for the supermarket, or decline?