Brand versusprivate labels:

What are private labels?

Private Labels are Retailers own, control, and exclusively sell store brandsPrivate Label are a ‘Good Alternative’ to Other Brands, Offering the Same Quality & ValuePrivate labels are regarded as good Value for Money, and Quality on Par with the Big Brands.

TYPES OF PRIVATE LABELSStore brands - The retailer's name is

very evident on the packaging.Store sub-brands - Products where

the retailer's name is low-key on the packaging.

Umbrella branding - A generic brand, independent from the name

of the retailer.

Threat posses by private label

Improved quality of private label product

Private label quality levels are much higher than ever before and they are more consistent in categories

historically characterised by little product innovation

Development of premium private label brand

European supermarket’s success

In European supermarkets higher private label sales result in higher average pretax profit

Emergence of new channels

Mass merchandisers , warehouses clubs and other channels account for a growing percentage of sales of dry groceries,

household cleaning products etc

What drives private-label shares

Product category characteristics: the product is inexpensive, easy, low risk purchase for the consumerNew product activities: national brands are offered in few varieties , enabling a private label with a narrow line to represent a clear alternative to the consumer

Private label characteristics: private label goods have been available to consumer for many years , distribution is well developed.

Price and promotion factor: retail gross margins in the product category are relatively high

Strength of brands

Purchase process favours brand name products

Brand names simplifies the selection process in cluttered product categories

Brand name have solid foundation

The strongest national brands have built their consumer equities over decades of advertising and through delivery of consistent

quality

Brand strength parallels the strength of the economy

As economy emerges from recession manufacturers of national brands have increased advertising and won back consumers who turned to private labels

National brands have value for retailers

When a store does not carry a popular brand consumer are put off and may switch stores

If you don’t , don’t start

For manufacturers seeking only to use excess capacity , private label

production can eventually become a narcotic

Evaluating private label business

To evaluate the effect on the business as a whole and to keep private label operation under control

following steps must be taken

•Conduct a private label audit•Calculate private label profitability on both a full coast and marginal coast basis•Examine the impact of private labels on the market share of your national brand•Finally, close excess capacity

Winning strategies

National brands manufacturers should take the following steps to stem any further share gains

by private labels

Invest in brand equities

National brands manufacturers should focus on their brand first and make it as

strong as possible

Innovate wisely

Too many line extensions confuse consumer , trade and sales force and reduce the manufacturers

credibility with the trade as an expert on the category

Use fighting brands sparingly

Managers should be vary of launching fighting brands , fighting brands rarely makes money

Build trade relationship

The best consumer goods companies should know more about their consumer and their categories than any private

label

Manage the price spread

Private label sales are twice as sensitive as national brands to change in the price gap

Exploit sales promotion tactics

National brands should distribute coupons to households in areas where retailers are aggressively providing private label

products

Manage each category

Each product must be treated different from other as the price and relative profitability is different

Use category profit pools as a performance measure

Calculate the total profit for all participants in a category segment and then attributed percentage of the total to the

companies competing within the category

Take private label seriously

Every national brand marketing plan should include a section on how to limit the encroachment of private

labels

Private Label Growth in India

. In India there is a growing trend towards acceptance of private label brands and thus

their penetration is on the rise especially in the apparel, consumer durables, home care and

FMCG segments. India is still an under-branded country and in each category there is still a lot of scope for growth, this is where the private label

comes in and the story is looking good so far.

Few success stories of private labels

For instance, Future Group has already tasted the success with its Tasty Treat brand which is just behind Frito Lay in

the potato chips segment. Its Care Mate in the baby diaper segment has left behind Huggies in the in-store

sales. At Spencers, diapers and agarbattis sell more than market leaders across the store chain.

PRIVATE LABEL BRANDS IN INDIAN RETAIL

Reliance RetailReliance SelectReliance Value

Dairy Pure (dairy Products)Future Group

Tasty Treat(Processed Food)Sach (Toothpaste)

Ektaa (Community Food)Premium Harvest (Staples)

Fresh n Pure (Dairy Products)Cleanmate (Homecare)

Caremate (Personal Hygine) Aditya Birla Retail

More(Staples)Blue Earth(Apparels)

True(Footwear)

Big bazaar

Big Bazaar currently has seven different private labels including Tasty Treat, Fresh & Pure, Care Mate, Clean Mate, Quit, Wow and Maniarrs, offering 47 different product lines. Food Bazaar undertakes below-the-line in-store promotions such as attractive dangle.

John millers

• John miller is the first private label apparel brand of the future group. It is a brand is a decade old brand which came into existence in 1995.It is the perfect example of a private label which has not only survived for more than a decade but has also improved its brand image.

MOREIn 2007 the retail arm of Aditya Birla Group

known as Aditya Birla Retail Limited acquired a south based supermarket chain and ventured

into the food and grocery retail sector and expanded its presence under the brand

“more.‟ with two formats Supermarkets and Hypermarkets.

Private Labels of MoreFeasters, Kitchen's Promise, Best of India, Enriche, 110%, Pestex, Paradise, Germex.

CONCLUSION

The growth of private labels in the Indian retail industry is inevitable but retailers do need to keep a few things in mind. Promotion of own label and allocation of large shelf space at the expense of well-marketed national brands can depress the overall size and value of the category while on the other hand, joining hands with them and following principles of category management can create a win-win situations for both

Disclaimer

Created by Abhishek Sirohi HBTI Kanpur during an internship by prof

Sameer Mathur IIML. www.iiminternship.com