Presentation on

A Study of

Private Label Brands

Submitted by : Submitted to: Chirag Jain (M00110) Prof. Abhinava Singh

Flow of Presentation

• Retail Industry• Private label brands• Primary Research• Findings• Conclusion

Retail Industry – Meaning of Retailing

• All the activities involved in selling goods or services directly to final consumers for their personal, non business use.

• Retailers can be classified as: Store retailers Non store retailers

Retail Industry - Organized Retail

• Any retail outlet chain (and not a one shop outlet) which is professionally managed, (even if it is family run) has accounting transparency (with proper usage of MIS and accounting standards) and organized supply chain management with centralized quality control and sourcing can be termed as an organized retailer in India.

Source- (Dept. of Company Affairs)

Retail Industry - Overview

Retail Growth in India Organized retail growth in India

Private Label Brands

• Private brands also known as store brands, own brands and merchandise brands.

• Private brands are products developed by a retailer and available for sale only from that retailer.

• Private brands products that carry the name of the seller, not the manufacturer

• They are often positioned as lower cost alternatives to regional, national or international brands, although recently some private label brands have been positioned as "premium" brands to compete with existing "name" brands.

Source – Crisil Research

Market Overview of Private label Brands

• Less than an estimated 7-8 per cent (US$ 1.4-1.6 billion) of organized retail sales

• 10 to 12% growth rate• 75% share of food items in total private label brands • Key Segments, their sizes in FY13Apparels & Accessories: USD 755 MnFood & Grocery: 510 MnHome Improvement: 280 MnFootwear: 155 Mn

Source – Tata

Market share of Private label Brands in food sector

Source – Nielsen company

Percentage share in Private Label

Source – Crisil Research

Why private label brands

• Grow of Middle-class

• Changing Lifestyle

• Consumer Choices

• Critical factors for high-end users

• Market Expansion

Source – Crisil Research

Types of Private Brand

• Generics• Copy cats• Value Innovators• Premium Store Brands

Source – Crisil Research

Cont…

Generic private brands• Generic – very low promotional , very low margin.• Same or better quality at better price , average

20-40% less than national brands.• Example- Big bazaar “LOOKS” = “LUX” (6) = (10) Both Lux & Looks are kept in same shelf for sale.

Source – Crisil Research

Cont…

Copy Cats Private brand• In this category only the brand name will be

copied (which almost sounds like original).• The copycats are mostly manufactured within

the company by the retailer him self

Source – Crisil Research

Cont…

Cont…

Premium Store Brand• Premium store Private Labels are more expensive

than national brand & will have superior quality, good features & design.

• Example- In Globus F21 is very superior quality wise & offers better features & design especially for women segment.

• In west side 80% of the merchandise are own brand & they are far superior in quality as compared to national brand.

Source – Crisil Research

Marketing mix of Private label brands

Price• Lower than the national brands approx 5% -

20%Product

• Quality is improved as consumer rating• Increase focus on product presentation and

packaging

Source – Crisil Research

Cont..

Promotion• In house advertising• SMS channels• Loyalty programs

Place• Increase availability in terms of stores• Keep with national brands

Source – Crisil Research

Growth factors of Private Label Brands

• Consumer Value

• Retailer Profitability

• Consumer Confidence

Source – Crisil Research

Where Do Store Brands Come From

• Only buy their favorite store brand at their favorite store• Manufacturers of store brand products fall into four

general classifications:• They are large national brand manufacturers that utilize their expertise • They are small, quality manufacturers that specialize in particular product lines and also produce national brands.• They are major retailers and wholesalers that own their own manufacturing facilities.• And they are also regional brand manufacturers for specific markets.

Source – Crisil Research

Store Brands Meet All Standards and Requirements

• Meet the same exacting standards and requirements as all the major national brands

• Label the product to meet the store's specifications• Store brand products are tested and analyzed for

quality and safety by independent companies before they reach the shelves

• Good and attractive packaging design• Store's name or symbol is on the package – assure to

the customer the product is manufactured to the highest quality standards and specifications

Source – Crisil Research

Store Brands: The Smarter Choice

• American shoppers estimated $32 billion in annual savings

• Difference is the so-called marketing tax, which consists of advertising and promotional

Source – Crisil Research

Counter Strategy of National Brand

• Develop unique products and stay ahead as a trend leader

• Create own stores

• Never compromise on quality

• Increase brand loyalty

• Develop a compelling marketing strategy

• Evaluate production cost Maintain net price (minimal

promotions & discounts)

Source – Crisil Research

Costing of National Brand V/s Private Brand

ITEM OF COST National Brand Private Label

Fabric Cost (2.2 m/100 ) 220 220

Fabrication Cost 100 100

Direct Cost 320 320

27% Manufacturer Markup 86 0

Direct cost to Retailer 406 320

Indirect Costs 41 13

Cost price to retailer 447 333

EXERCISE 61 47

Sales Tax 27 21

Cost price to retailer 536 400

Trade Margins (%) 33 39

Trade Margins 293 268

MRP 825 675

Source – Crisil Research

Advantages

• More margin for retailers Example.- Shoppers stop have only five private brands and it

accounts to 20% of their annual turnover. • Private labels can offer huge discounts which the national

brands cannot offer. Example.-Big Bazzar offers noodles, pasta, soups under their

label “TASTY TREAT”. They introduced cornflakes for Rs 99 with free bowl worth Rs 60.

• Rise of customized products.Example- Spencers daily’s private label “EKTAA” has food items based on cultural and geographical considerations.

Source – Crisil Research

Pros & Cons of Private Label Brands

PROS

• Exclusivity & differentiation

• Bring customer loyalty

• Better margin

• Better control in deliveries

• Brand equity

• Freedom in pricing strategy

• Increase bargaining power with both

national brands and PL factories

CONS

• Inventory risk

• Higher R&D expense

• Higher marketing expense

• No markdown or return allowance

from branded suppliers

• If product fails, will create negative

image

• Quality control, complex production

& import issues

Source – Crisil Research

Future of Private Label Brands

• Private label sale to kirana stores• Nielsen estimates the spend on private labels

in the country to grow five times to reach $500 million, or about Rs 3,000 crore, by 2015

Apparels & Accessories: 31% p.a Food & Grocery: 36% p.a Home Improvement: 22% p.a Footwear: 27% p.a

Cont…

IN COSMETICS

• Pantaloons: Star and Sitaara

IN GROCERIES• True Mart – Uttam (Cereals, Masala Powder, Dry Fruits ) Big Bazaar – Tasty Treat, R-select aloo bhujia, Haldi healthy life,

Dubar rice, Supergrade rice, Sharbati atta, Amara , Externa handwash, Mupz, Scrubz, Shinze. Freshomz , Exlelz

Primary Research

Did Qualitative Research in which we have interviewed:

1. Mr. Kisan Satta (H.R. Head, Reliance fresh)2. Mr. Akash P. Modale (Marketing manager,

Pantaloon Fashion & Retail Ltd.)3. Prof. Devang Patel ( Faculty head, Xcellon

Institute)4. Mr. Pratik Parikh ( Regional Marketing head,

Nestle)

Quantitative Research

Sample Size: 20 respondent.Research Objective: To measure the awareness

and perception of people toward private label brands

Research tools: QuestionnaireSampling method: Random Sampling Type of Research: Descriptive

Findings - Consumer Research analysis

Know about private brands

70%YES

30%NO

Awareness of PLB

Source – Crisil Research

Findings - Why purchase Private label brand

0

2

4

6

8

10

12

9

11

Quality Affordable

Source – Crisil Research

Findings - Point of Parity & Point of Differentiation

Points of parity• Quality of Product• Packaging

Points of differentiation • Price • Layouts(Pictorial

presentation)• Sales Promotion• Push strategy

Source – Crisil Research

Findings - IMC tools used by Retailer for store brands

• Cross Promotion

Source – Crisil Research

Cont…

• Price comparison promos

Source – Crisil Research

Cont…

• Pictorial presentation layout

Source – Crisil Research

Findings - Sales Ratio

• Reliance 40% - 60%

• Pantaloon 80%- 20%

Source – Crisil Research

Findings - Private Label Brand v/s National Brand

Expelz

60 Rs for 500ml

Harpic

• 26 Rs for 200ml

Source – Crisil Research

Cont…

• Buy 1 get 1 free No offer

Source – Crisil Research

Findings - Counter Strategy of National Brand

• Never compromise on quality

• Increase brand loyalty

• Combine effort by offering customer service

• Visibility – Off store and In store

• Not big threat from private label brands

Source – Crisil Research

Findings - Consumer Perception toward retail brands

• Women are especially likely to check out store brands

• Retail Brand name is more important • Prefer to buy due to price difference and same

quality• FMCG and apparel categories are more

preferabale

Source – Crisil Research

Conclusion

• Store image affect private label brand perception• Not use Retail brand name in product brand• The brand awareness perceived quality, service

level, store layout, price discounts, shelf display etc; affect the consumer perception of private labels.

• Growth in specific private label segments like food and apparel segments are growing at a faster rate.

Source – Crisil Research

Thank you