The Impact of Private Labels on FMCG Companies in India

Published by: Datamonitor

Published: Nov. 16, 2009

Table of Contents

Overview

Catalyst

Summary

Table of Contents

Table OF FIGURES

Table OF TABLES

THE FUTURE DECODED

INTRODUCTION: After household care, private labels pose most threat in the food and beverages category

TREND: Private label evolution in India is emulating Western markets

Import of locally unavailable products and repackaging with retailer's logo

Private labels available as a value alternative

Different variants of private labels made available under the value and premium range

Private labels launched to address specific consumer segments

Private labels launched with higher order value proposition

Key takeouts and implications: The next stage of evolution for Indian retailers will be to focus on products targeted at specific consumer segments

TREND: Retailers are expanding their private label portfolio and targeting multiple consumer segments through tiered pricing and claims

Having established a significant presence in the household care segment, Indian retailers are now launching private labels in ready-to-eat foods, beverages and personal care segments

After beginning as an 'economical alternative', some private label offerings are now tiered across different price points

Retailers are building private label brands with product attributes that mirror national brands

Retailers are investing in individual brands comparable in quality and price with the national brands

Key takeouts and implications

INSIGHT: Indians are attaching significant importance to natural/organic ingredients in personal care products but not in the food and beverages category yet

Key takeouts and implications: FMCG companies looking to differentiate their offerings from competitors can focus on organic products

INSIGHT: Customer service, convenient store opening hours and in-store ambience are key influencers for purchase decisions

Key takeouts and implications: Indians are increasingly preferring modern retail formats for shopping which has made the role of retailers more significant

INSIGHT: Private label adoption among Indian consumers is not only based on price but also perceived quality

Key takeouts and implications: Success of private labels in the household category increases their propensity to trial in the food and beverages and personal care categories

ACTION: Differentiate product offerings with unique packaging and product design to avoid competition from private labels

Results-led innovation has been vital in continually engaging consumers and preventing basic commodity status of products

National brands need to invest in innovative packaging to clearly differentiate themselves from private labels

ACTION: Focus on new customer segments for generating higher growth

FMCG companies should consider launching several variants of their products to cater to localized needs or different consumer segments

FMCG companies should increase focus on product development and logistics to target the high growth rural market

Launch of low cost products for rural India can help FMCG companies boost earnings

ACTION: Determine whether you want to manufacture private label brands or not

APPENDIX

Definitions

Methodology

Further reading and references

List of Tables

Table 1: Private labels launched across categories by Reliance, More, Spencer's, and Big Bazaar

Table 2: Illustrative price comparison between More's private labels and leading national brands

Table 3: Sach tetra milk launched with product claims similar to leading national brand Nestle

Table 4: Indian consumers attach significant importance to natural/organic ingredients when purchasing personal care products

Table 5: Indian consumers consider private labels as good as national brands in quality in the food and household care categories

Abstract

• Changing consumer attitudes and shopping behavior in India with the launch of private label FMCG brands
• Insightful analysis into consumer's attitudes, beliefs and motivations behind private label versus famous brand purchases
• Focus areas for FMCG companies in terms of product development and positioning to avoid competition from private labels
• Geographic scope is India

• Information of private labels strategies of retailers in India and highlights the implication on FMCG companies
• Consumer insights to help FMCG companies in framing their product and marketing strategies
• Suggests actions which FMCG companies can follow to avoid competition from private labels

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