In a global study on private labels, Nielsen has found that Indian shoppers have undergone a change of perception about private labels. Around 70 per cent of the 501 Indian respondents agreed that the quality of store brands were as good as name brands, though not necessarily of higher quality.
While modern trade accounts for only nine per cent (compared to 50 per cent in other Southeast Asian countries) of the Rs 2.13 lakh-crore fast-moving consumer goods (FMCG) market, it has been one of the most successful private label markets in Southeast Asia. About five per cent of all modern trade sales come from store brands (versus one per cent in China, 1.7 per cent in Indonesia and three per cent in Thailand). Private labels in FMCG (grocery stores, supermarkets) grew 27 per cent between 2012 and September 2014.
Ranjeet Laungani, executive director, Nielsen India, says, “In various studies, we have found that modern trade shoppers who find private label quality is improving to be at par with name brands is increasing every year, by 16 per cent compared to last year, for example.”
Laungani says the shopper has become a lot more price-aware and a lot more value conscious: “In 2014, 88 per cent of shoppers noticed that prices were increasing; in 2012, it was only 30 per cent; 52 per cent said that they knew the prices of the items they regularly buy, an increase from 37 per cent in 2013.” This could work in favour of private labels, that cater to the value-sensitive buyer.
Sarbani Sen, associate director, Nielsen India, says, “A new generation of shoppers is less brand-loyal, open to trying new products and are looking to trim their shopping bills.”
This would delay the scope to premiumise retailers’ own brands portfolio, though. While most players (grocery chains include brands like Food Bazaar and Spencer’s) have own brands across price-points, some are still offered at large discounts and with freebies. Though many say that they feel like a smart shopper when they buy a store brand, that is because a large number think it is important to get the best price on a product and that store brands are extremely good value for money (see chart). Not many, though, would be willing to pay more or the same for a store brand and many still believe that name brands are worth the extra price.
Laungani says, “But consumers’ perception of improving quality over time could create scope for a tiered strategy. While the intent of stores brands was initially to be a cheaper alternative, as consumers evolved and trusted private labels, retailers premiumised and offered a multi-tiered offering with different brands in different price-points. In India today, it is still largely a value play.”
The chief executive officer of a supermarket chain, who is however, without the mandate of the official spokesperson, says, “So far, the private labels we have seen are low-tech, more formulation-dependent products. With time, there would be scale, which would lead to a better quality of products. Store brands are an extension of the retailer’s brand. So, the quality has to be maintained and that can be done even at the current scale of operations. We have done well with our own brands of olive oil and bakery products. While our olive oil is mainly to get non-users into the fold, our bakery products are at a premium to outside brands.”
Devendra Chawla, CEO, food business, Future Group, says, “Our brands are independent ones and work across the price spectrum. India is under-branded and we need more brands to grow consumption.”
Laungani says, ” In India, a private label serves two purposes. For some consumers, it is a cheaper alternative. For others, it is a way to upgrade consumers from loose commodities to packaged food products.” Commodity-driven, high-purchase items are the categories where private brands fly; while it is milk and bread in the US and other developed markets, it is ghee, rice and wheatflour in India.
With the traction of private labels and consumers’ changing needs, name brands should increase their focus on innovation to differentiate and keep shoppers from switching, concludes Nielsen.