Game Changers in MODERN RETAIL

This strategic move has won trust among consumers and brought in revenues as well.

According to a report by Neilsen on the FMCG sector in 2011, modern trade shoppers in India spend over $100 million on private label goods every year and this amount is expected to reach $500 million by 2015. Despite the relatively recent rise to prominence of private label products in India, it is already close to seven per cent of modern trade sales. Key is the value-seeking Indian consumer and their comfort with unbranded/generic products.

“From the consumer perspective private labels brought out by well-known retail chains provide two benefits. One, she has the comfort of buying a product that has the retail chain’s name on it which will assure her that it is a quality product. Two, she will probably get a better price than she would get for a branded product from an FMCG company,” says Divyaroop Bhatnagar, Managing Director, YFactor Marketing Pvt Ltd.

 “They [consumers] are open to trying new products, this is driving private label consumption.  This trend is being seen now even more than before. Moreover, with younger audiences, with higher disposable incomes, they constantly seek best value for money products and services,” explained Kunal Dhawan, Head – Marketing & Private Label, Aditya Birla Retail Ltd.

Market Scenario –
Room for more

“FMCG is still a very under-branded and under-penetrated market if we look at certain product categories including ketchup, jams and others. There is not enough competition still in the market, it’s all about participating. India is growing at 5-6 per cent, so everybody is growing and there is enough space for all to expand. This is why private brands have emerged,” points out Chawla.

“We have been pitching our private label as a competing brand in our stores, like any other manufacturer’s brand. A lot of effort goes in development to ensure that consumers’ expectation from the product is exceeded at all times. To reinforce further confidence in private label products we emphasize a lot on product sampling. Nothing works better than the product talking for itself. The only favour done to the private label in terms of visibility is that of giving it the coveted eye-level shelf space,” informs Gaurav Bhargava, VP Marketing, Max Hypermarket India Pvt ltd.

Pricing: The differentiator

Strategic pricing and promotions, as Chawla puts it, holds true for every company across globe. Specifically pricing in FMCG products is imperative as consumers along with quality also look at the best deals.

According to the Neilsen report, inflation in the market is another reason that is encouraging Indian shoppers to be more discerning with many seeking value through promotions, sales and through private label brand purchases.

Retailers place private brands almost 15-20 per cent cheaper as compared to other brands which co-exist in the store. Moreover, there are promotional deals that are running almost throughout to catch the eye of new consumers, increasing the list of loyal customers.

“The access to both modern and traditional trade formats coupled with an awareness of various deals being offered in the market, allows the consumer to make a more informed value-for-money shopping decision,” says Roosevelt D’Souza, Executive Director, Nielsen India.

“Pricing plays a very important role. The consumer is cost conscious and will go for a brand/product that is at a reasonable price. This is particularly true of ‘low involvement’ products,” says Bhatnagar.

Is it buy or still a try?

The Indian consumers are very loyal to brands that have existed for decades now in the Indian market so much so that the product is known by the brand name; for instance Rin has evolved as a generic brand. But with time passing, offering the best of price points along with creating a loyalty among consumers, the private brands are now becoming a spontaneous buy rather than being a ‘let’s try’ buy.

Though in categories where brands are aplenty, it’s still a far fetched option but in terms of categories such as jams or ketchups where the brands are limited, private brands are being bought in a frequent manner. According to Chawla, “in categories which have limited brands we have made a mark with consumers while more popular categories we are working towards growing our popularity with consumers.”

“We have witnessed customers walking up to our floor staff and specifically asking for private label products,” says Bhargava.

There are product categories which are in nascent stages and private brands in modern trade have acted as the catalyst of propagation of the product category. “The fact, that modern trade has evolved alongside the evolution of, for instance breakfast cereals in India, and introduced private labels in this category, has allowed modern trade to enjoy a good share of this pie. Hence, private label does impact the consumption pattern in totality, thereby growing the total potential,” avers Bhargava.

Talking about consumption patterns, Future Group is making a difference. “It’s all about understanding Indian consumers. The need is to understand the consumer patterns and their living lifestyle. The need is to create a connect with customers, rather than changing their patterns,” Chawla avers.

More to come

It has been almost a decade since the emergence of modern retail, and private brands as an integral part of developments. In the years gone by, these brands have now gained visibility and trust among consumers. Now is the time to explore new product categories which will create a new revolution in the FMCG arena.

The product categories would include home cleaning segment, eatables including ketchups, noodles, jams and a few others.

“The business has been growing at a rate of 30-40% in past few years. In 2013, we are looking at a growth rate of another 30-40 per cent as we are getting into new product categories and have recently launched new brands,” concludes Chawla.