PB products of hyper markets: 24% cheaper

than national brand products

PB products of big discount stores are 24% cheaper on the average than national brand products.

The price difference in tissues and detergents were bigger (30%) than foods (22%).  For daily necessities, pickled radishes (45%), facial tissues and tooth brushes (40%) recorded big price differences.      

Private Brand (PB) products: The products independently produced for the big discount retailers in conjunction with contracted manufacturers, or self developed goods under their own brand name. These products are distinguished from the National Brand products which are manufacturer’s branded products.

The Korea Consumer Agency (President: Myung-Hee PARK) investigated the prices and labeling of 37 PB products and NB items in 7 major retail stores and the KCA released the price comparison results below. 

※ Surveyed hypermarkets: E-mart, Home plus, Lotte mart, Korea Agricultural Cooperative Marketing, GS mart, Homeever, Mega mart,

Except for prices, consumers were more satisfied with NB products than PB items in terms of product quality and safety.  Ham, sausage and instant coffee mixes contained less of the main raw materials compared to NB items.

7 of 10 Consumers showed favorable perceptions for the PB product expansion since lower prices would contribute to the price stability.

Survey Results

PB products: 24% cheaper than NB goods

The prices of 37 popular PB products were compared to same sized or same weighted NB goods. 

The survey found that PB products are 24% lower on average than NB goods.

The most popular NB products sold in the same category and same level showed 25% price difference compared to PB items.  PB products were 20% less costly than the NB products which were produced by the same manufacturers.        

< Price Difference between PB & NB products >

* Analysis method: Comparison of unit price between PB products and NB goods

Lower PB product prices reflect no marketing cost such as advertisement budget and labor cost for sales staff at stores.

The price difference in tissues and detergents were bigger (30%) than foods (22%).  For daily necessities, pickled radishes (45%), facial tissues and tooth brushes (40%) recorded big price differences.        

Some of the PB goods were different from NB items in terms of main raw materials

Consumers are advised of the fact that while in most cases, PB goods are cheaper than NB products, some PB goods contain less main raw materials than NB items   

‘For Hanagadeug Bulgogi Ham’ and ‘Hanagadeug Vienna Sausage’, PB products were less costly than NB goods with a 11.1% and 29.9% difference in cost respectively.  However, PB goods contained 30% less pork than NB products, in which some portions were replaced with chicken meat.

More over, the unit price for the PB products (I.e. ‘E-mart star mix mocha gold’, ‘Home plus mocha gold coffee mix’ ‘Wiselect mocha gold coffee mix’) was 6.3~30% cheaper than the NB product.  However, PB instant coffee mixes were found to contain less coffee, with 12%, 12.5%, 11.7% less coffee mix respectively.  Which means there is a 0.7~1.6% difference of instant coffee content.  

According to the price labeling guideline, notified by the Ministry of Knowledge Economy, the price per unit should have been indicated on the products (18 products subject to mandatory labeling, 56 PB products, and 125 NB goods).  However, 3 PB products (5.4%) and 7 NB goods (5.6%) didn’t bear the label to show the price per unit.
  

Consumer awareness of the PB products

Among 704 participants in the consumer survey, 68.6% of consumers replied that ‘PB goods should be increased more’ and consumers were more favorable toward PB product expansion.

The main reasons were ‘Price stability due to affordable prices (35.8%)’, ‘Wide range of selection (29.3%)’ and ‘Good opportunity for small & medium sized enterprises (26.4%)’.   

Consumers were satisfied with the ‘price’ of the PB products, and ‘safety’ of the NB goods. Except for prices, consumer satisfaction with PB products was lower than with NB items in terms of product quality, safety, A/S, packaging and design. 

30.3% of consumers replied that they have experienced dissatisfaction and damages caused by PB products, 1 out of 10 consumers were compensated. They indicated that the PB product damage redress process was more complicated and longer than ordinary goods.  

Recommendations and Consumer Precautionary Measures

The Korea Consumer Agency suggested the following recommendations having considered that PB products are on the increase globally and they contribute to the consumer welfare;

▲ Joint product development programs are needed to be encouraged between big discount retailers and manufacturers in order to tackle unfair business practices and promote PB item production and distribution. 

▲ Big discount retailers are required to put the explainary notice on the lower content of raw materials in PB products at the stores since they have said that PB products have similar quality with lower prices compared to NB items.  

The consumers are advised to go over carefully the labeling information on products.