Rose Partyware has recently improved its production process achieving better visual presentation of the product and even higher quality, cutting costs via elimination of a step in printing process which is no longer necessary. Up till now Rose Partyware has manufactured party goods solely under generic labels. However, as market situation changes, Rose's CEO Tom Rose has seemingly found himself between a rock and a hard place. Rose's major customer, Party! Chain store plans to launch a private label line of party goods and wants Rose to do the manufacturing. This happening just then Rose is preparing for a major branding effort creates a dilemma of which way should the company go, as current capacity isn't enough to support both private-label manufacturing and the branding campaign.
I suggest for Rose to pass on Party!'s offer and go ahead with creating own brand. Firstly, a myth of impossibility of branding a commodity good is totally busted by the example of toilet paper brands. Though Party! currently accounts for 20% of Rose's business, a long term relationship with it as its producer will surely have a negative effect on the relationship with customers in other sectors (especially the independent stores), it will push back or make utterly impossible own brand creation a well researched and promising opportunity. This relationship will also make Rose open for the retailer's pressure to squeeze margins on private label products.
Concentration on the branding effort on the other hand, while threatening with a loss (or substantial reduction) of sales to Party!, has more positive long term implications. Rose Partyware will obviously be the first to move in with its own brand in its market, the first one to create a standing image in the minds of consumers, they seem to have the ingredients needed to succeed. The successful branding operation may even force Party! into submission, as if customers seek a specific brand, stores are pretty much...
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