With organised retailing gathering momentum, private labels are all set to get increased shelf space. Take the case of Spencer’s. About 25% of all goods displayed in its store counters are private labels. This figure is set to rise in the future.
“We will soon be including a bigger range here and are currently working on the same,” says Samar Singh Sheikhawat, vice president-marketing, Spencer’s Retail Ltd.
Hyderabad-based Heritage Foods (India) also has a fair share of private labels on display in its stores. “If you leave fruits and vegetables which constitute 25% of our mix, our private label component will be 27%,” says Santhosh Unni, head, operations and marketing, Heritage Foods (India). The company currently stocks Farmers Pride (staples), Fresh@oven (bakery) and Heritage (dairy) products. Heritage now plans to expand its inhouse labels to other categories such as processed foods, cleaning aids and general merchandise.
Moreover, private labels have a huge impact on bottomline.”The margins of private labels are usually double than that of branded products,” points out Sheikhawat. Not only that, in certain product categories, private labels fare better than branded products. For instance, Food Bazaar’s Care Mate hand wash has been a fast moving product. “As a category, hand wash hasn’t grown much in the last few years. We introduced Care Mate by offering a unique price proposition,” says Shadhashiv Nayak, chief executive officer, Food Bazaar. Food Bazaar’s hand wash, detergents and oral care products are priced 20% to 25% lower than market prices. “Private labels can become a good vehicle to drive consumption,” offers Nayak. The company’s private label business is doubling every quarter.
When it comes to local tastes and preferences, private labels hold an edge over national brands. And this is extremely pronounced in food categories. “A national brand can only offer limited varieties. But a private label can be localised to a great extent,” explains Nayak. Food Bazaar’s Tasty Treat pickles not only use local ingredients but also the oil is suited for the local palate. In western India, pickles are prepared in groundnut oil while it is coocked in sesame and mustard oil in south and east.
Also, consumers have given a green signal to retail chains stocking private labels. “Consumers are willing to try out private labels if they are assured of quality, service and price,” says Sheikhawat. The inherent supply chain inefficiencies in the Indian marketplace is also expected to given private label business a big boost. “Inhouse labels help address the last mile problem. In many cases, they make for the supply chain inefficiencies of national and regional brands,” says Nayak.