Hpl Within the Private Label Industry
HIP had more than 28% share of $2. 4 billion in wholesale from the manufacturer in 2007. Also, HIP secured most major national and regional retailers as customers. We can think Hap’s market position is currently in safe harbor. But we can estimate that in future years, HIP will inevitably be involved in intense competition. On the one hand, as shown in Exhibit 2&3, the market of personal care products, as well as private label industry, tends to increase steadily but slightly annually.
This growth is driven by modest price increase and consumer acceptance. On the other hand, 80,000 new products launched each year. To cling to its market position and further develop to satisfy its mission, HIP may need greater share of the value chain, more shelf space and more products. In the past decade, HIP focus on manufacturing efficiency and its expansion is conservative. According to the case description, the company was operating on almost full capacity.
The conservative expansion also made the company is able to afford more debt (Hap’s long term debt has been cut nearly 50% over the last 5 years and is at $54. MM in 2007). It seems the expansion of capacity is necessary and possible to keep development potential. However, the feature of private label industry is that retailer control most links, making the relationship between manufacturer and retailer relatively loose and risky, which is the fundamental of the risk within the expansion proposal. Hip Within the Private Label Industry By rearward
