FUTURE OF PRIVATE LABEL BRANDS

Private label brands are produced by one company for offer under another company’s

brand

Brands vs Private labels

Brands High Innovation rate

High product differentiation

Longer purchase cycle

Heavy promotional activity

Private labels Low innovation rate

Minimal product differentiation

High price sensitivity

High purchase frequency

India is one of the most successful private-label markets in the south-east Asian region.

Private label grew 27% between2012 and September 2014.

DRIVERS FOR PRIVATE LABEL BRANDS GROWTH

• New generation of shoppers is less brand-loyal and more open to trying new products.

• Higher margins, cheaper price and better bargaining power for the retailers.

• “Cash-strapped consumers' perception of the products as a 'cheaper option' changes,"

• Diverse spread of spending power and generic competition at the lower end of themarket.

Goods like fruits, vegetables can draw premium price from consumers at top of pyramid – Thus a option of private

branding

At bottom of pyramid, consumer would be willing to accept the low cost product at minimal quality – Potential of developing private label suited to this segment

Degree of Private label pene-tration in major Indian players

Trent Reliance retail Pantaloon NilgirisPiramid Food World

PRIVATE LABEL GROWTH DRIVERS IN DEVELOPED MARKETS

• CONSOLIDATION

• EXPANSION OF THE “HARD DISCOUNT” FORMAT

• CONTINUED ECONOMIC SOFTNESS

• INNOVATION

• NEW CHANNELS

WINNING STRATEGIES FOR PRIVATEL LABEL PLAYERS IN INDIA

• USE PRIVATE LABEL AS A POINT OF DIFFERENTIATION.

• INCREASE IN - STORE VISIBILITY OF PRIVATELABEL PRODUCTS.

• HIGHLIGHT THE VALUE FOR-MONEY PROVIDED

• UNDERSTAND LOCAL NEEDS AND PREFERENCES.

• INVEST THE TIME AND RESOURCES TO EDUCATE CONSUMERS AND BUILD TRUST IN PRIVATE LABEL

Conclusion

• Private retailers will occupy 50 per cent of the market the world over. At 50 per cent, they begin to saturate.

• If they try to occupy more than this, then consumers feel that there aren‘t enough choices.

• In countries such as Switzerland and the UK, private labels have reached this limit and these markets have saturated.

References

• T.Subha, R. Kirthika, P. S. Narayanasamy. Private Label Brands in Indian Retail Industry

• Nielsen, The State of Private Label around the world

Created by:Mohd Wasil

IIT Delhi

During Internship bySameer Mathur, IIM Lucknow