The name is absent

brands that where previously protected by the risk of delisting are now involved in
delisting decisions. This means that the delisting effect tend to become stronger over
time. To the extent that retailers boost their non- price strategies and develop stronger
and stronger store brands. In other words, if over time SL increases, then the level of
BL to avoid delisting increases as well.

Thus, the interaction between the mechanism of delisting and the evolution of private
labels determines a dynamic process which may finally involve the entire ranking of
brands in the likelihood of delisting. To the extent that consolidation, reputation, and
store loyalty of retailers tend to increase, even the number two and three in each
category may find themselves pushed off the shelf. Brands which are not leading are
increasingly confronted with the risk of being delisted and replaced by private labels.
As vertical competitive pressures grow, even major food manufacturers may face the
risk of delisting. Finally, store brands may become a threat for market leaders
themselves. Thus, we have the following proposition:

Proposition 3: To the extent that store loyalty increases, even the strongest brands in
each category (i.e. the number two and three) are confronted with the risk of being
delisted and replaced by private labels.

4. Empirical evidence and managerial implications

This section examines some empirical patterns and evidence supporting the key
predictions of the above framework. The first prediction of our conceptual framework
is that vertical competition increases upstream incentives to adopt non- price
strategies. In such competitive environments, product innovation and differentiation
become more and more crucial strategies.

This prediction is well supported by Boston Consulting Group’s advice to
manufacturers in front of the rise of private labels. In fact, the advice is to invest in
brands with advertising, promotion, and merchandising and push a steady stream of
new products to create an appropriate level of brand loyalty. As noted by Brady et al.
(2003), this advice is based on the evidence that private label development is
negatively affected by investments in innovation brand equity so that building a brand
with strong customer loyalty as well as continuous innovation is one of the best
defenses against private labels (Brady, Brown and Hulit, 2003).

Several recent works have documented that product innovation is one of the strongest
competitive weapons against private label for manufacturers (Galizzi and Venturini,
2005; Ball. 2004a; Floricel and Miller, 2003; McTaggard, 2004). An explicit link between
vertical competition and pressure to innovate is pointed out by Ball et al. (2004) who
write: “Marketers of everything from pet food to to soft drinks feel pressure to
innovate, for a variety of reasons. Powerful retailers [...] are quicker than ever to pull a
lagging product off their shelves, sometimes substituting their own private- label
version”. Cullen and Whelan (1997) find that “the rate of new product introductions by
dominant brands increased over the period 1988 to 1993 [..and this] not only reflect a
firms’s ability to innovate but also reflect a strategy to dominate shelf space”

It should also be noted that our framework is consistent with the increasing emphasis
on product innovation in food manufacturing. Food markets are increasingly

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