Large retailers, including Hypercity, Future Group and Spencer’s Retail, are introducing their own products or private labels to cash in on a host of benefits.
The under-penetrated segment offers?better margins, higher sales through product differentiation and flexibility to price goods competitively compared to well-established brands. Still at a nascent stage, the organised retailing has around 8% share in the $400-billion retail industry. Private labels constitute roughly 10% of the organised retail.
K Raheja Group’s Hypercity, which has plans to open three to four stores every year, will launch Hypercity Everyday and Troz (liquid cleaners) in November. The company expects more than 25% of its sales to come from private labels by end of FY11.
Hypercity head (buying merchandising and supply chain) Ashutosh Chakradeo said, ?We have an in-house design team to develop the labels. Moreover, we are in direct dealing with farmers to source products for food segment.? With private brands in the portfolio, large retailers will have an appetite to absorb the cost increases or any fluctuations in the back end, he added. The existing private brands of Hypercity are in the mass segment and its price points range from Rs 99-299.
Spencer?s Retail sells close to 650 products, out of which 60% are private brands with an annual sales growth of about 40%.
Meanwhile, Future group is also betting on private brand. Recently, it launched Ekta brand for the food segment to retail staples based on cultural and geographical considerations.
“Consumers understand that retailers like Future group place a lot of emphasis on quality. There is also differentiated offerings like Ekta, the foods community brand, which we have just launched,? said Future Group business head-private brands Devendra Chawla.
Currently, the company has rolled out its rice variants in Maharashtra, Kerala and West Bengal. It plans to bring products such as wheat, cereals, papad, and poha under the same brand over the next year.
?In many categories, India still is under penetrated and we will participate in the consumption story through our own brands such as corn flakes, ketchups, jams and pastas,? Chawla said. Private brands contribute 20-25% of the total retail business of Future group. Chawla expects to increase the sales from private brands to 30% of the overall food business He also expects the FMCG portfolio to increase in next few years with new launches. Food and home care segment of Future brands include Tasty Treat, Premium Harvest, Fresh & Pure, Care Mate and Clean Mate.