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Private labels
1. PRIVATE LABELS:
NEW SUCCESS MANTRA FOR
RETAILERS?
By Group 9:
Prity Jha
Vikas Marwaha
Arpit Mohanty
Kaustaba KV
Sumit Kumar
Mohit Pandey
1
Akash Tyagi
2. WHAT ARE PRIVATE LABELS?
Products that are typically manufactured or
provided by one company for offer under
another company's brand.
Products like tasty treat, koryo, john miller all
are classified as private labels.
Not manufactured by large scale
manufacturers
2
3. RISE OF PRIVATE LABELS
19th Century- 20th Century-Large Brand Creation by
Inconsistent quality Scale Manufacturers the usage of mass
products produced by replaced small scale communication tools
local farmers farmers like TV, Radio.
Present- Focus of
Retailers on Private 21st Century-
Labels has Retailers dominate 1970's-Retailers
increased. Top the manufacturers. began to develop
Retailers like Wal- Top 5 retailers are 2- national and
Mart earns about 40 3 times by sales of international chains
% of their sales from top 5 manufacturers
private labels
3
4. FOCUS OF WORLD’S MAJOR RETAILERS ON
PRIVATE LABELS
50
Major part of the
sales of the top 40
40
retailers in the
world comes 30
25 25
from private 20 17
labels
10
0
Wal-Mart Kroger Safeway SuperValu
4
5. APPROACH OF INDIA’S MAJOR RETAILERS
TOWARDS PRIVATE LABELS
Depth of Private Labels by Retailers
Ebony 10%
Spencers 10%
Subhiksha 19%
Shopper's Stop 20%
Foodworld 22%
Indiabulls/Pyramid 30%
Nilgiri's 38%
Pantaloon 75%
Reliance 80%
Trent 90%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
% Share in Private
SOURCE: Image Retail Report 2009 quoted in KFMG's Indian Retail: Time to Change Laces Report
5
6. WHY ARE COMPANIES GOING FOR PRIVATE
LABELS?
Different -
iation
Freedom to
Lower Price create their
but higher own
margins marketing
plan
Benefits
of Private
Labels
Freedom Strong
with pricing Customer
strategy Positioning
Safeguard
against
economic
downturns
6
7. 1. DIFFERENTIATION
Develops
exclusivity
and Creates
Trade mark
Creates the
store brand
And better
sales
opportunities
Increases the overall
profitability
7
8. 2. HIGHER MARGINS
Eliminates
Increased the middle
Supply man
Chain
Efficiencies
Reduces
cost of
delivery
Higher Margins
8
9. 3. FREEDOM TO CREATE OWN MARKETING PLAN
Independence to the retailer to use its own
innovative marketing strategies
For National Brands, Poor marketing strategy by
the manufacturer not only result in the failure of
product but also erodes the profit margin of the
retailer.
For Private Labels can use its own marketing
strategy and budgets
9
10. 4. FREEDOM WITH PRICING STRATEGY
Similar to the marketing strategy, private
labels also gives the retailers a chance to
adopt their own pricing strategy.
Shields retailer from the losses due longer
shelf life of poorly priced products.
Retailers can directly pass on the price
benefits to the customers
10
11. 5. STRONG CUSTOMER POSITIONING
Helps in developing the customer loyalty.
Since private labels are unique to one retail
chain, there is the possibility for retailers to
cultivate a sense of brand loyalty.
By nurturing customer loyalty, retailers can
have significant advantage over its
competitors.
11
12. 6.SAFEGUARD AGAINST ECONOMIC DOWNTURNS
Act as a shield Private label sales growth (%)
against the Emerging Markets 17
economic downturn
and global North America 7
recession. Latin America 5
Asia Pacific 5
Higher Margins at
lower price, offered Europe 4
by private labels World 5
helps retailer in
maintaining the Source: Images Retail Report 2009
healthy sales during
recession.
12
14. NEEDS >> WANTS >> DEMANDS
Historically, private labels have not been too keen
on innovation.
Have mostly been trying to imitate national brand
competitors rather than looking at consumer needs
directly
The only differentiating factor would be to sell the
goods at a lower price
The branded labels would then be forced to reduce
their own price to survive the competition, thereby
erasing the margins for themselves and for private
labels alike
14
15. PRIVATE LABELS & INNOVATIONS
It is more important for private labels to innovate
and customize to stay in the market and retain
margins
Imperative to find out the customers needs and
then create wants and desires based on those
needs
An advantage - Retailers know their customer base
better than branded companies and can develop
products that fit their unique customer attributes.
Can have customized products for a small base of
consumers. Big brands would have to cater to a
larger and a more diverse population
15
16. HOW DO PRIVATE LABELS BRING OUT LATENT
NEEDS?
Looking for gaps in the market that branded players
cannot fill
"Tesco Finest". Tesco Finest introduced the idea of ready
meals and chilled foods
Difficult for branded players to prepare and distribute
Exceeding the effectiveness of similar products from
big brands
Certainly less risky to duplicate a successful product
But if the products have a definitive differentiating factor that
the original lacks, will work in their favour
More and more US retails introducing products that are USDA-
certified, „green‟ and support health and wellness.
16
17. HOW DO PRIVATE LABELS BRING OUT LATENT
NEEDS? (CONTD…)
Targeting wants that ideally become needs
needs are more or less rational i.e. no emotions are
involved
wants are very emotional, and products and services
addressing emotions will be more successful.
Ethnic Merchandizing - depending on the
demographics of a store location
bringing non regional products into right ethnic
catchments
Subhiksha retails south Indian pickles in RK Puram at
Delhi.
17
18. NEEDS
Not only beneficial for retailers but are equally
beneficial for the customers.
Needs are basic human requirements.
Products like wheat, rice, sugar etc.
Private label products of same quality are
available at lower prices.
Example: Big Bazaar sells 5 kg sugar under the
brand name of Renuka, which is around 15-20
% cheaper than other 5 kg packs available in
the shop.
18
19. WANTS
Needs directed to specific objects/services
that might satisfy the need.
Segments like Microwave ovens, TVs
Big Bazaar has developed Koryo brand for
catering the demand of the customers in the
category Microwave ovens and television.
19
20. DEMANDS
When a private label becomes highly
successful, it grows from private label to
private brand.
The superior quality at lower price creates
demand for the product.
Example John Miller from Pantaloon
20
21. VARIOUS PRIVATE LABELS OF BIG BAZAAR
Product Brand Name Need / Want / Desire
Sugar 5kg Renuka
Ghee 2kg Fresh n Pure Need
Detergent Clean Mate
Microwave-Ovens, TVs Koryo Wants
Apparel John Miller Demand
21
22. JOHN MILLER – AN ILLUSTRATION OF SUCCESS
Facts about John Miller
Decade old brand which came into
existence in 1995 as an extension of the
Pantaloon
Targeted at the premium segment
customer
Priced at a range of Rs 300- 600
Over the years, John Miller has grown
from a private label to a private brand
22
23. KEYS TO THE SUCCESS OF JOHN MILLER
Was one of the very first private label apparel
product that came into existence in India.
The brand provides higher quality at lower
price.
Tough competitor for brands like Peter
England.
Price range of John miller shirts are in the
range of Rs 300-600, significantly lower than
branded shirts like peter England.
Attractive option for value buyers.
23
24. MATURITY OF JOHN MILLER
Maturity Phase-
Presently, John
Miller is in maturity
phase. The quality
Second Phase- This is of prime
was more like a importance. It has
transition phase, grown as a Private
where the focus brand from Private
slowly got shifted on Label.
product quality along
Initial Phase- with product price.
During this nascent
stage, the focus
was more on price
rather than quality
24
26. STRENGTHS
• High Local Reputation: MORE FOR YOU…the private
label received the “Most Admired Private Label” Golden
Spoon Award at Food Forum India.
• Joint business plans: With other fmcg companies and
farmers as well
• Membership offers: ClubMore for memebers
• High Capital Reserves: Has a huge capital reserve
because of the $28 billion Aditya Birla Group.
26
27. STRENGTHS CONTD..
• High Variety of Products: High Promises to be a one
stop solution for everyday needs with an assortment of
over 4000 products.
• Growing Private Labels: Private labels contribute to
around 18% of the whole stock as compared to the 5%
industry norm. This provides greater margin to the
company and lower prices to the customers.
• Country wide presence: More than 600 supermarkets
all over India.
27
28. STRENGTHS CONTD..
• Delivery Services: The megastore offers free home
delivery, variable mode of payment and discounts.
• Strategic Locations: Strategically located in cities to
increase footfall.
• Intelligent Promotional Offers: Promotional offers
on private labels shown near the entrance, thus
tempting the buyer to purchase a private label as
compared to another brand.
28
29. WEAKNESSES
• Substandard Quality: Some of the items sold under
Feast label were found to lack in quality. Secondly
they were even found to be of inferior
quality, especially for the price they were sold at.
• Lack of Variety: In terms of either the product itself
or the flavours of the product. Most of the products
only seemed to be an imitation of the big players in
the market.
(Feedback had been collected from people who used
Feast's Corn Flakes and Chatpata which is a
competitor to Kurkure)
29
30. WEAKNESSES CONTD..
• High Price: Feasters, the private label owned by
more, sells most of it's goods at a higher price, or in
some rare cases at par, compared to the market
leaders.
• Examples:
A one litre bottle of Feasts Mango drink is sold at Rs
45 whereas Frooti offers 1.2liters at Rs 50
500 grams of Feast's tea powder cost Rs
160, whereas the same quantity is sold by Tata Tea
for Rs 144
30
31. WEAKNESSES CONTD..
• Packaging: More had very little option for customer
testing unlike Big baazar, and every product was
sealed and packed in fixed quantities (mostly 1kg
and 500 grams packs). The only exception to this
was rice which was available for closer inspection
from the customers.
• Limited Geographical Presence - eg. in entire
UP, More is present only in Noida and Ghaziabad
that is NCR
31
32. OPPORTUNITIES
• Huge growth opportunity: As the current market
share of the organized sector in retail is about 4%
thus there is a huge opportunity available. The
organized retail sector is expected to grow stronger
than GDP growth in the next five years.
• Growth in Tier 1-2 cities: Targeting Tier 1-2 cities to
increase market penetration.
• Global expansion: Presence of ABL in 125 countries
gives it an opportunity to setup stores abroad.
32
33. OPPORTUNITIES CONTD..
• Growing Market: The organized retail sector is
expected to grow stronger than GDP growth in
the next five years driven by changing
lifestyles, increase in income and favourable
demographic outline.
• FDI: Government approval of FDI in retail sector
will give it a huge boost.
• Rural Retailing: Rural retailing holds a lot of
future potential.
33
34. THREATS
• Intense Local Competition: Competitions from
other retail giants like Big Bazaar, Reliance
Fresh, Trent, etc.
• High Inflation: Inflation has been on a high for a
long time affecting operating costs and margins.
• High Resistance from Unorganized Sectors: The
unorganized sector has dominance over the
organized sector in India because of low
investment needs and nostalgia factor.
34
35. THREATS CONTD..
• Complex Supply Chain Management: Supply chain for
perishables, the system is too complex. Government
regulations, lack of adequate infrastructure and inadequate
investment are the possible bottlenecks for retail companies.
• Complex Taxing System: Differential Tax Rates for different
states makes operations difficult to manage.
• Employees: Labour rules and regulation are also not followed in
the organized retails. The sector is unable to employ retail staff on
contract basis.
• High Zonal restrictions: Lack of lands and zonal restrictions
makes it difficult to find good properties.
35
37. POLITICAL FACTORS
FDI Policy: Opposition to Foreign Direct
Investment from small traders affects retail
industry.
Land Allocation policies: Land and
property acquisition and Land-Use
conversion is time consuming and complex.
Local politics: Local politics plays a big role
in setting up ventures.
37
38. ECONOMIC FACTORS
Inflation: Due to inflation the cost of production increases rapidly due
increase in cost of required raw materials, labor etc, thereby increasing
cost of commodity and decreasing its demand.
Economic Growth: With a rise in GDP, the purchasing power a
country‟s people increases and they tend to demand more of premium
products.
Effectiveness of financial institutions: In India, the retail sector has
not yet gained the „industry status‟ which makes it difficult for retailers to
acquire funds from financial institutions.
Efficiency of free market: In India the retail sector is open to all, hence
it is fiercely competitive. Retailers like MORE find it difficult to capture
and maintain a profitable market share.
Quality of infrastructure: There is a lack of proper infrastructure like
roads, electricity, cold chains, distribution ports and commercial property
most retailers have to confine their operations mainly to the urban and
metro areas.
38
39. SOCIO-CULTURAL FACTORS
Young Consumer: Young India is exposed to early money
making capabilities and better living standards.
Availability of Easy Credit: Presence of credit cards and debit
card has increased the appetite for buying.
Awareness level: Rise of social media and other mass
communication tools has played to the benefits of both buyers
and sellers.
Aspiration: Changing aspiration value of the customers provides
an opportunity in front of the retailers to catch the opportunity.
Conversion from net saver to net spenders
Unemployment: High level of unemployment adversely affects
the industry.
Increase in no. of working women: Because of increase in the
work force of women, the families are looking for convenience.
39
40. TECHNOLOGICAL FACTORS
Supply Chain Management: It has made possible high
participation of the manufacturer and retailer in the market flow of
commodities.
Inventory Management: Advanced planning and scheduling and
inventory management has been incorporated in large retail
houses to bring down inventory expenses.
Demand Forecasting: Demand forecasting, merchandising and
seasonality management tools which if effectively used can
change fortunes.
Data Mining: Understanding of market demand patterns and
consumer buying behavior to arm themselves with the best
offerings.
Customer Support Activities: Better customer support and
grievance addressing has been possible due to advancement of
Technology.
Going Online: Effective online activities can be used for building
customer relations, advertisement & promotion, customer support
and brand building. 40
41. ENVIRONMENTAL FACTORS
Environmental policies: Environmental
policies are becoming more stringent than
before.
Hygienic condition: Proper Hygiene should
be maintained across stores.
Green Stores: Building Green stores can
reduce the operating costs as well as create
goodwill.
41
42. LEGAL FACTORS
Custom Duties: Duties are levied on
imported goods.
Rigid building laws: Rigid building laws
makes procurement of retail space
difficult.
Pro-tenancy laws: Presence of strong
Pro-tenancy laws makes it difficult to evict
tenants and this is posing problems.
High stamp duties: Very high stamp
duties on transfer of property affect the
42
44. SEGMENTATION, TARGETING AND
POSITIONING OF PRIVATE LABELS
•Segmentation: On the basis of
Demographic, Geographic, Psychograph
ic, Behavioral and other factors
•Targeting: Target the relevant segment for a
particular private label.
•Positioning: Devise the positioning strategy to
position the private label in the targeted segment.
Illustration by MORE‟s Feasters.
44
45. SEGMENTATION
Factors
Geographic
City-Tier 1, Tier2, Tier3, Metros
Demographic
Age, Family size, Income, Occupation,
Psychographic
Lifestyle
Behavioral
Loyalty Status
45
46. TARGETING
Factors
Geographic
Tier 1, Tier2, Tier3
Demographic
Young people in medium income group
Psychographic
health conscious lifestyle
Behavioral
low loyalty status
46
47. POSITIONING
Private label product
Target Customers
Benefits
Value Proposition
Point of Parity
Point of Difference
Differentiation Strategy
47
48. POSITIONING STATEMENT:
To young working customers in medium income
group, who are conscious about their
health, “Feasters corn Flakes” is a high quality
widely available product at lower price. With
Feasters corn Flakes, you can get best quality and
healthy breakfast at lower price.
48
49. Positioning Diagram for Feasters corn
Flakes
High Quality
Kelloggs
Corn Flakes
more.
Feasters
Low Price High Price
Mohun’s
Feasters
Low Quality
49
50. A visit to the supermarket of Aditya Birla Group
MORE. hamesha extra
RDC Address :
Opposite Gurudwara,
10/51, Ground Floor,
Sector - 10, Raj Nagar,
Ghaziabad - 201002
Tel : 9540055532
50
51. A LOOK AT “MORE.”
Aditya Birla Group Retail Chains:-
Super-market
Hyper-market
“more.” – supermarket – food items, personal
care, home care, merchandise, apparels, staples,
bakery, dairy products, drinks, etc.
Over 640 more. stores across India
In UP – Noida & Ghaziabad only
51
52. OWN/PRIVATE LABELS
Feaster‟s 110%
Kitchen‟s Promise Pestex
Best of India Paradise
Select Germex
Enriche
52
65. THE SURVEY ANALYSIS
You enter a
supermarket (say
Big Bazaar or
More) and you see
Britannia biscuits
besides a private
label (Feasters)
offered at the same
price. How likely
are you to buy the
latter?
67. DISADVANTAGES
The disadvantages of private labels are:
Highly competitive market.
If even a single product doesn‟t live up to
the expectations of the customers, then the
image and brand value of the retailer as a
whole goes down.
67
68. DISADVANTAGES CONTD…
Risks of getting into a price war, thereby
reducing margins even further
High inventory cost
Excessive focus on private labels inside stores
Intellectual property rights can be a issue
Excessively dependent on the supplier
68
69. PRECAUTIONS
They should have large base of loyal
customers before launching private labels
Strong QA and QC checks are required
The main objective should be to provide
value for money products and not to target
the branded products
69
70. PRECAUTIONS CONTD…
The retailer must take into proper
consideration the price-quality and
willingness to pay(PQ&WP) quotient
The Indian players can study the business
models of Wal-Mart and Sears to understand
the nuances
70
71. CONCLUSION
Private labels are a quite attractive
proposition because they create a win-win
situation for both the customer and retailer
Lower prices and higher margins
Quality is comparable to that of national
brands
71
72. CONCLUSION CONTD…
If the customers needs for value-for-money
products are met then they can become
huge success stories like John Miller
The business needs to be handled with extra
care and detail from the retailer as the
products are directly his liability
72
73. CONCLUSION CONTD…
The organized retail sector on the whole has
a huge growth potential which can be
exploited
More deep market penetration required
Innovative marketing and promotional
activities are the need of the hour
73
74. We will be happy to answer any queries!!
THANK YOU
74
