Retail Case Studies

Study I :Private Labels

Will The Fizz Last (March17, 2010)

http://businesstoday.intoday.in/index.php?option=com_content&task=view&id=142
93&issueid=84

In October last year, retail chain Big Bazaar approached Haryana - based KCL Foods and
asked it to make breakfast cereals for Big Bazaar's private-label Tasty Treat. It was the
second attempt in months by Big Bazaar to enter breakfast tables with its own brand. The
category has been growing at 20-25 per cent annually for the last two years and a deal
with KCL would give it better margins, and more bargaining power with national brands.

Murginns, KCL's breakfast cereal, had been on Big Bazaar's shelves and gaining
consumer acceptance. So KCL agreed and introduced three variants for Tasty Treat. In
the first month, the three gave Big Bazaar sales of Rs 50 lakh. The next month, Big
Bazaar pulled Kellogg's cereals from its 148 stores over a margin dispute, even though
the multinational accounted for around 75 per cent of its breakfast cereals sales. Total
sales fell, but Big Bazaar still sold around Rs 1 crore worth of breakfast cereals that
month. "The sales dip was not as big as expected. The litmus test is now when the market
leader is coming back," says Sanjeev Khemka, President, KCL Foods. (Big Bazaar has
signalled a truce with Kellogg's.)

Private label portfolio of major retailers

FUTURE GROUP

Fresh n Pure, Cleanmate and Caremate (FMCG), Tasty Treat and Premium Harvest (food
& grocery), Koryo and Sensai (consumer electronics), John Miller and Bare (apparels)

SPENCER'S
Smart Choice (food & grocery and FMCG), Great (consumer electronics), Island Monks
and Mark Nicolas (apparels)

RELIANCE RETAIL

Sudz, Endurf, Calcident and Dazzle (FMCG), Reliance Value, Healthy Life, Good Life
and Dairy Life (food & grocery), Network, DNMX and First Class (apparels)

MORE

Feaster and Kitchen's Promise (food & grocery), 110 Per Cent and Fresh-O-Dent
(FMCG)

KCL Foods is just one of the many companies that flourished in the downturn by feeding
the appetite of retail chains for cheaper products and bigger margins — and are now
poised for a national presence. Take Asian Lakto Industries, which supplies packaged
juices and soft drinks to retail chains under their private labels, or JHS Svendgaard
Laboratories, which began as a contract manufacturer of oral care products in 1996 for
the exports but is big in dometic private labels.

According to consultants Technopak Advisors, the private label market is worth around
Rs 4,500 crore (including apparel, food and grocery, home electronics, and footwear).
Private labels, also referred to as inhouse or store brands, are not new to India. But the
downturn created both a new "push" (retailers searching for higher margins) and new
"pull" (customers seeking cheaper options). Now, even as the economy looks up, these
private labels are not slowing down. Santosh Desai, MD & CEO, Future Brands, agrees
that the downturn created a fresh demand from consumers.

"Consumers looking for alternative to conventional brands are increasingly switching to

low-priced high-quality private labels," he says. Industry watchers say private labels are
no longer considered lowquality versions of national brands, and, in several cases, these
brands are becoming the first choice of many consumers. Neeraj Poddar, Director, Asian
Lakto Industries, says his company has contract manufacturing tieups with Reliance
Retail, Bharti Wal-Mart, Future Group, Vishal Retail, and Aditya Birla Retail's More. On
an average, private-label beverages are sold at prices 10-15 per cent below that of
national brands but give the retailers higher margins.

Neeraj Poddar ,Director, Asian Lakto Industries

Private label manufacturer for Reliance Retail, Future Group, More, Bharti Wal-Mart and
Vishal Retail

Turnover: Rs 45 crore

Contribution of private label to total turnover: 30 per cent

Contribution of private label to total turnover by 2012: 40 per cent

Asian Lakto also owns two brands sold through traditional shops. "At present, 30 per cent
of our total turnover (Rs 45 crore) is private labeling, while our own brands make up the
rest... By 2012, private labeling will account for 40 per cent of the total projected
turnover," says Poddar. KCL Foods, a part of the paper packaging firm KCL Ltd, entered
the market in August 2007, before the downturn, with its cornflakes. The challenge then
was to build the right product at the right price. Then came the downturn, followed by the
deal with Big Bazaar. At present, Murginns is selling through 14 retail chains and
traditional kirana stores and contributes 75 per cent of KCL's turnover of Rs 2 crore a
month. The rest comes from contract manufacturing for Big Bazaar.

"When Big Bazaar came to us, we were running at around 18 per cent of our total
capacity (600 tonnes a month). The deal gave us a stable source of revenue," Khemka
says. For KCL Foods, margins on both Murginns and Tasty Treat are similar (eight per
cent). Big Bazaar, though, gets 4-5 per cent more from every packet of Tasty Treat
cornflakes sold compared with what it gets from Kellogg's. Dynamic pricing also attracts
customers to the private labels. For example, Kellogg's cornflakes sells at Rs 130 for a
475-gm pack. Tasty Treat is priced at Rs 125 for the same weight, but is given at a
discount and sometimes with a freebie. "In the next 30 months, we are expecting to touch
an annual turnover of Rs 100 crore, with Rs 15 crore coming from private label
business," says Khemka.

Rahul Mehta

Managing Director, Creative Garments

Private label manufacturer for Shopper's Stop, Future Group, Lifestyle and Vishal Retail

Turnover: Rs 350 crore

Contribution of private label to total turnover: 10 per cent

Contribution of private label to total turnover by 2013: 20 per cent

Vineet Kapila, President, Spencer's Retail, says the private labels' share of the overall
consumers' bills has gone up significantly in the last one year. In 2008, private labels
accounted for 25 per cent of the average bill. "In the last one year, it has more than
doubled to around 50 per cent. We are seeing good repeats in our nectar juice drinks
category, where the market share of our private label brand is 30 per cent," Kapila says.

Private labels offer margins of 20-25 per cent against 12-15 per cent on the normal
brands. Margins in apparel and accessories business can go up to 40 per cent.

Says Anand Ramanathan, Manager, KPMG Advisory Service: "The obvious reason for
the success of private labels is their price advantage which is made possible by the
minimal spending on their brand promotion." Such spending is incurred only when the
private label gives discounts or bundles two-three products.

The push factor is also evident from the fact that almost all the retailers—big or small—
are expanding their private label portfolio. While the Future Group, of which Big Bazaar
is a part, is planning to launch its own toothpaste brand "Sach", Spencer's has lined up
launches in FMCG, apparel and electronics. Kapila says Spencer's has launched over 60
products across different categories over the last one year, "way above the number we
have ever launched in a single year".

"Due to higher margins, we have given slightly higher than the fair shelf space to our in-
house brands," Kapila says. Today, private labels fetch 18 per cent of Spencer's total
turnover; by the next 18 months, the share is expected to touch 30 per cent. A notable
success in retail has been Trent Ltd, the Tata retailer, which relied heavily on private
brands at its Westside stores right from the start. As Trent's Managing Director, Noel
Tata, told BT in an interview recently, "You have a lower turnover with a higher margin
in private label. And margins are what pay the bills."

Sanjeev Khemka

President, KCL Foods, Private label manufacturer for Future Group

Turnover: Rs 24 crore

Contribution of private label to total turnover: 25 per cent

Contribution of private label to total turnover by 2012: 15 per cent

Asian Lakto's Poddar has added Reliance Retail and Bharti Wal-Mart over the past 12
months, and even its existing clients are expanding their product portfolio by adding
flavours. According to a 2009 KPMG report, Indian Retail: Time to Change Lanes,
private labels account for 10-12 per cent of the organised retail product mix in India,
against 17-18 per cent globally. Saloni Nangia, Vice President (Retail & Consumer
Products), Technopak Advisors, says: "In the last one year, the private labels' growth (30-
35 per cent a year) has outpaced the growth of the organised retail market (25 per
cent)…growth will continue to remain the same."

Delhi-based JHS Svendgaard has seen it all: for the first three years of its existence, it
supplied exporters. Then, it tapped export markets directly, signing deals with US retail
majors and FMCG companies. In 2002, it bagged an order from Subhiksha Retail to
make toothbrushes and pastes for it. Today, it has a good 40:60 mix of exports and
domestic sales, in rupee terms, and makes private label items for Spencer's, Bharti Wal-
Mart, and REI Agro as well as FMCG companies such as Dabur, Oral-B and Sahara
India.

Nikhil Nanda, Managing Director of JHS Svendgaard, says his private label business had
been almost nine per cent of total turnover but fell to five per cent this year after
Subhiksha, the south-based chain, collapsed. Nanda expects domestic retail to account for
nearly 20 per cent of sales by 2015. "The overall market for in-house oral care brands is
likely to grow 40-50 per cent over the next five years," says Nanda. In oral care, national
brands offer margins of 25 per cent, and private labels an average of 60 per cent. "So
stores will always try to create more excitement around their own labels," Nanda says.

Nikhil Nanda

Managing Director, JHS Svendgaard Laboratories

Private label manufacturer for Spencer's, Bharti Wal-Mart and REI Agro

Turnover: Rs 30 crore

Contribution of private label to total turnover: 5 per cent

Contribution of private label to total turnover by 2015: 20 per cent

Creative Garments, a Mumbaibased apparel maker, is another player aggressively

expanding in private labeling. After almost two years of cajoling by Future Group and
Shopper's Stop, Creative's Managing Director Rahul Mehta decided to move into the
apparels business in 2003. Starting with 100-odd pieces, it now churns out 5,000 pieces a
day for private labels. Creative still exports 80 per cent of its output, while the rest is split
equally between private labels and own brands. This year, when exports fell, it was saved
by the private label business. "Total turnover is likely to remain at last year's
level...Thanks to the private label business, we have been able to break the fall in
turnover," says Mehta. In the next three years, private label division will account for 20
per cent of revenues, he says.
National brands are not running scared. LG Electronics, for one, is confident that price
alone will not win the battle. L.K. Gupta, Chief Marketing Officer, LG Electronics India,
says: "The emergence of private label in a growing economy like India is
inevitable…Through our research, we have found out that 15-30 per cent of the consumer
durable purchases are made primarily on the basis of prices."For these consumers, buying
a product with basic features is good enough, says Gupta.

"The only way national brands can maintain their market share is to keep spending
money on product innovation and brand building," he says. He also cites after-sales
service and warranty schemes as his big advantages. "I doubt private labels have the
capability to offer something like this," Gupta says. For private labels this is not a
priority. Their focus: get a national presence without any brand building.
 Study II

Big Bazaar, Food Bazaar boycott Kellogg’s over margin row

http://economictimes.indiatimes.com/News/News-By-
Industry/Services/Retailing/Big-Bazaar-Food-Bazaar-boycott-Kelloggs-over-
margin-row/articleshow/5221025.cms?curpg=1

| DELHI: After boycotting Cadbury in 2008 over margin differences, Kishore Biyani is at
it again: this time it‘s Kellogg‘s at the receiving
end. The country‘s largest retailer has decided to boycott the breakfast cereal brand
across various retail formats after the US firm turned down its demand for higher
business margins.

Future Group will sell the existing inventory of Kellogg‘s in its stores such as Food
Bazaar and Big Bazaar, but will not take new stocks from next week, a company official
familiar with the development said. When contacted, Kishore Biyani, CEO of Future
Group, said, ―We believe in collaborative relationships to build demand and
consumption. Both sides have to understand each other‘s needs and work together to
drive growth.‖
Kellogg India MD Anupam Dutta was unavailable for comment.

The conflict has been brewing for some months now and discussions between the two
have hit rocky terrain in recent weeks.

The retailer was demanding 15-16% margin from Kellogg‘s, up from around 12% now,
said a Future Group official requesting anonymity.

With the cereal maker refusing to bulge, Future Group is now looking at pushing its own
labels Tasty Treat range of cereals in place of Kellogg‘s, he said.

A person close to negotiations between the two parties, however, said the talks were still
on and that Future Group was yet to throw out the brand that commands more than 70%
share in the country‘s breakfast cereal market estimated at close to Rs 400 crore. Future
Group will boycott Kellogg‘s only if the talks fail, he said.

Defending the demand for higher margins, he said the cost of holding Kellogg‘s stocks
was high because of its large-sized packages take up significant shelf space in stores.
Also, only a few of the breakfast cereal maker‘s several variants do well, he added.

This is the latest development in a series of conflicts between modern retailers and fast-
moving consumer goods (FMCG) companies. While retailers are demanding higher
margins, consumer product firms accuse the retail industry of pushing its own labels at
the expense of established brands.

In retaliation, manufacturers are working closely with the traditional trade that is
contributing higher growth in recent months, according to industry estimates.
―Companies are passing on a lot of margins to the traditional formats through discounts
and promotions, which may have upset modern retailers,‖ said an analyst tracking the
retail sector in a leading foreign brokerage house.

Like other FMCG companies witnessing healthy growth in smaller towns and cities,
Kellogg too is bullish on tier-two and tier-three towns and cities
riding on localised variants and low-priced packs, especially the Rs 10-packs that
account for more than 10% of its overall volumes.

The cereal maker is planning to scale up its distribution footprint to reach about 2,000
towns and cities in the next couple of years, up from around 1,400 now. The company
recently rolled out a new breakfast cereal for kids, Honey Loops, nationally.

The Indian subsidiary of the $13-billion, Michigan, US-based Kellogg Company, is

among the fastest growing units for the company worldwide, although on a smaller base.

Future Group had last year boycotted Cadbury India on the premise that the chocolates
maker did not cut uniform deals with all modern retailers and gave better deals to
international retailers who may have larger stakes in global markets. The issue was sorted
out later.

The country‘s largest retailer is yet again showing off its growing clout. Now it‘s playing
a cereal killer.
 Study III

India's organised retail story has just begun

http://economictimes.indiatimes.com/features/brand-equity/Indias-organised-retail-
story-has-just-begun/articleshow/5503259.cms

The end came after months of a tense stand off. Hectic talks and parleys between the two
parties, sometimes muted and sometimes threatening led to a

nought. Finally, the Kellogg‘s brand was pulled off the shelves from 148 Big Bazaar
stores.

―We pleaded with them to listen to us and understand the issues. At the end, it was a
futile exercise and some what humiliating to go to them again and again,‖ a senior
official from the Future group says, commenting on the imbroglio. When Big Bazaar
banned Kellogg‘s, it replaced the counters with its private label Tasty Treat corn flakes
on the shelf.

The claim by Big Bazaar officials so far on the off take of the private labels performance
vis-a-vis Kellogg‘s is encouraging. If Big Bazaar with its strikingly similar colours and
packaging to Kellogg‘s packs is able to entrench itself in the breakfast cereals category, it
will open a new chapter and another front between the fledgling own labels programme
of retailers and national brands in India.

The Kellogg‘s-Big Bazaar fracas indicates that the working relationship between retailers
and brands will remain a stormy affair. Both parties will test each other to assess the
strain one can take in this battle for shelf space. Even as officials at Future group claim
that Kellogg‘s refused to acknowledge the reason behind the increase in margins which
the retailer was asking for, Kellogg‘s response is it didn‘t make business sense.

―We can‘t accede if they ask for the moon,‖ the Kellogg‘s executive states. He adds that
even Carrefour, Wal-Mart in developed markets never remove market leaders from the
shelves and terms it as an ―unnecessary show of strength‖. Industry observers call this
tussle as a natural progression as both parties are trying to settle into a marriage. ―Even
today modern trade constitutes around 4-5% of the total trade serviced by national
brands. So brands were not looking at it seriously, where as retailers after tasting blood
with private labels feel emboldened,‖ says Asitava Sen, director, business consulting, The
Nielsen Company.

Thomas Varghese, CEO, Aditya Birla retail says private labels currently accounts for
approximately 19% of his company sales across categories with around 13 power brands
and store brands covering almost 300 SKUs at More stores. ―Large international brands
across countries have also had competition from private labels and now the time has
come for them to face similar competition here as well,‖ he says.

SHELF HELP

The private label programmes definitely got a fillip courtesy the slowdown. While
consumers held back on high ticket purchases, there was a downgrading by consumers
which the retailers seized as an opportunity with the store labels. Devendra Chawla,
business head - private brands, Pantaloon retail says the growth from zero to Rs 180 crore
turnover for own labels is a result of same value at less mark up. Citing the example of
foods and beverages, where the company has presence from — from noodles to colas —
Chawla says it‘s an engine for growth in the time to come.

Damodar Mall, customer director, Future group seconds the thought. ―Most of the
purchases are non branded and therefore it‘s a open level playing field right now.
Category will expand, consumers will change, who will win? The jury is still out,‖ says
Mall.

At the same time, national brands have been working with the unorganised trade under
taking retail initiatives like the Supervalue Stores from Hindustan Unilever (HUL didn‘t
respond to our queries) and Purple Kings initiated by Cadbury with varying degree of
success. Sen however reckons the partnering with conventional trade has its own pangs.

―After all, its franchisee management and brands are going through a learning curve here
as well. But identifying the high net worth stores and nurturing them makes a lot of sense
and is lot easier compared to developing relationships with modern trade.‖

So the road ahead means some smart manoeuvring both by retailers and brands. Aditya
Agarwal, director, Emami admits that getting shelf space is a challenge as retailers
increase their focus on private labels. ―Brand building will play a major role. We plan to
increase our investment on brand building, come up with more SKUs and merchandising
for modern retail to fight this game of private labels,‖ says Agarwal, adding that there
will always be a set of consumers who are price conscious and not brand conscious.

Brands believe that retailers shouldn‘t discount the pull factor of national brands. ―Private
labels has to be there for modern trade to survive. At the same time, retailers need
national brands to grow categories for their own labels to ride,‖ states Sunil Sethi, ED,
sales and customer development, Cadbury. Despite the differing points of view, retailers
know they need the national brands and manufacturers realise the importance of a new
channel like modern trade.

This applies for OTC brands as well. Case in point: GlaxoSmithKline Consumer
Healthcare (GSK) joined hands with Shoprite from South Africa which runs a cash-n-
carry format. The company worked closely with Shoprite to help grow two categories –
Antacids and Pain Balms which do not get purchased from the modern trade, explains
Navneet Saluja, EVP - sales, GSK. ―We worked closely with Shoprite and drafted a
channel strategy for modern trade, where cross-category and checkout placements were
identified as an opportunity to create a shopping occasion through impulse buying.‖ As a
result of this exercise, the antacid category has grown 6 times in Shoprite and pain balm
category has doubled, states Saluja.

Another trend likely to gain root according to industry experts is brands sticking to its
core proposition and resisting the temptation to become a retailer themselves. Citing the
example in fashion retail, Govind Shrikhande, CEO, Shoppers‘ Stop says that apparel
brands opened their own stores in the hope of increasing off take. ―So inside a mall, they
are present in MBOs (multi brand outlets) and also stand alone. So they are killing
business opportunities for everybody as there isn‘t enough throughput. ―Instead why
don‘t you pay me 30-35 % margin, I give you the shopping experience, get the
throughput and achieve the sales target,‖ he states.

Indeed the jury is still out on how exactly will the changes shape up the modern trade
landscape in the future. For along with the changes on the shelves, there has been a
course correction on retail network as well as back end. The organised retailing story is
by no mean over, infact, it‘s just begun.
Case Study –IV : Big Bazaar: Private label push

http://www.business-standard.com/india/news/big-bazaar-private-
label-push/378124/

Big Bazaar, the hypermarket of Pantaloon Retail, has come out with a breakfast cereal
range under its private label, Tasty Treat. Big Bazaar already sells noodles, pasta,
vermicelli, soups, namkeens, chips, toast, khari, papads, jams, pickles, carbonated drinks,
ketchup and fruit beverages under the brand. It has now added breakfast cereals to the
range.

The breakfast cereals will be available in three variants — plain cornflakes, chocolate-
flavoured Choco Gols and honey-flavoured Honey Circles. There are two reasons for
launching the product, says Pantaloon Retail‘s head of private brands, Devendra Chawla.
―One is that private brands give us far higher margins, and the second is that cornflakes
as a category is under-penetrated and has a lot of scope to grow.‖

The market for breakfast cereals is still small. While the packaged food market is valued
at Rs 33,234 crore, the organised breakfast cereal market is just Rs 250 crore — less than
one per cent. But the market is growing fast, given the growing health consciousness in
the country, especially the urban middle class. Kelloggs monopolises the market for
breakfast cereals with its range of flakes. Some other multinational players have also
shown keen interest in this market. PepsiCo has already entered with its bestseller brand,
Quaker Oates. Heinz India, which has a hugely strong bond with households because of
its Complan health drinks, too has joined the bandwagon.

In spite of the presence of a large number of players in the branded packaged food
segment, Tasty Treat is growing at about 70 per cent. This perhaps has given Big Bazaar
the confidence to try its luck in breakfast cereals as well.

In a recent development, Pantaloon Retail, promoted by Kishore Biyani, has boycotted

Kelloggs at all its retail formats for turning down its demand for higher margins. Not
surprisingly, Big Bazaar is pushing its own brand of cornflakes now. This is not the first
time Big Bazaar is doing this. A while back Cadburys and PepsiCo owned snack food
brand Frito Lay had to bear the brunt.

As an introductory offer, the cornflakes brand will be priced at Rs 99 along with a free
bowl worth Rs 60.

According to Chawla, the brand will provide 10 to 15 per cent value when compared to
rivals. ―We have the option of pricing it lower as we don‘t have to pay intermediaries and
can pass on that advantage to consumers,‖ says Chawla.
 Case -5

Instant noodles: Rivals turn the heat on

Nestle's Maggi
http://economictimes.indiatimes.com/articleshow/6079650.cms

In the 1980s, marketers in India kept trying to push exotic food options down the throats
of a mostly unwilling, unadventurous Indian consumer. The
kilometre long queues that greeted the launch of Parle‘s
Big Byte soon dwindled to nothing and Voltas‘s Cookie
Feast arrived with a bang and left without a trace of ever
having existed.

Which makes Maggi noodles all the more of an oddity.

It‘s the last man standing, a survivor, a brand that
created and dominated a category throughout its
existence. Along the way, it lost a few of its launch
flavours like Capsica, and even made a few disastrous
missteps like the ‗sweet‘ noodles and the change of
flavour in the flagship for a brief period in the mid-90s. But in the near two decades of its
existence, Maggi has been the only show in town when it comes to noodles. Even today,
it leads the pack with a 90% plus share. The brand has been successfully extended into
sauces, soups and pasta.

The big difference between now and even half a decade ago is there is finally a well
defined pack for Maggi to lead. Many other marketers want their forks in the noodle bowl
including those that fight Maggi‘s parent company Nestle tooth and nail across several
other categories. There are finally signs of a battle raging in the Rs 1,000 crore instant
noodle market with aggressive competitors like HUL and GSK.

HUL has entered the fray with Knorr Soupy Noodles, GSK launched Foodles and though
ITC denies any interest in the space, the market is rife with rumours of the Sunfeast brand
being extended into the noodle category. Other brands that may not have the huge money
power of the multinational giants but which are piggybacking on the opportunity afforded
by modern trade are Ching‘s Secret and Smith & Jones from Capital Foods and the
Future Group‘s private label brand Tasty Treat. Also present in certain pockets for nearly
a decade are the likes of Wai Wai and Top Ramen.

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The instant noodles category is growing at +20% CAGR. The large size of the category
and its growth rate presents an attractive opportunity for brands. Shubhajit Sen, VP -
marketing, GSK says, ―Category penetration of 40%+ indicates noodles widespread
acceptance as a regular grocery item for many Indians. Noodles per se have become
accepted by Indians — it can be seen in its various avatars as street food and food you
serve to guests, give your children to take to school etc.‖ What makes Foodles unusual is
that it is being offered under the Horlicks brand.

Explaining the decision, Sen says, ―Horlicks was always sweet, even the biscuits and
cereal bar. We wanted to extend the brand into a savoury or salty kind of product and
Foodles was an opportunity to do that.‖ Foodles was first launched in the South and Sen
says it has achieved 5% of market share within three months. According to GSK, it has
managed to garner 3% within the first month in the east. Knorr‘s Soupy Noodles presents
a chance to accomplish several targets with just one product.

Known only for soups, which constitute a minuscule category in India, HUL is betting on
the soupy noodles to expand the footprint of the Knorr
brand to areas beyond urban markets. ―Noodles in India
is about 12 times bigger than soups and everyone who
consumes soup also knows about noodles. A typical
Indian family has 25-30 packs of noodles in a year,
whereas soups are not too popular. It is mostly
consumed by the higher SECs,‖ says Sidharth Singh,
VP, packaged foods, HUL.

Ching‘s Secret has a long, hoary history trying to take

on the might of Maggi nearly a decade and a half ago
with a more traditional Chinese noodle offering. While
this found no takers, it is still part of the arsenal at Capital Foods. The marketer is
fielding both Ching‘s Secret as well as Smith & Jones, with the former aimed at a more
youthful demographic. Ajay Gupta, CEO, Capital Foods suggests there‘s enough room
for everybody: ―Maggi has not just established the category, but grown the market as
well. There are a lot of consumers entering the category, which is seeing a 20-25%
growth year on year.‖ While the main plank in urban areas is still convenience, people
across small towns are hooked because of the sheer variety available.

However even before HUL and GSK, the relatively obscure Wai Wai has been very
popular across the North East and the East. Wai Wai is built around the USP of being a
genuinely instant noodle that can be eaten directly from the pack unlike Maggi which
requires at least two minutes worth of cooking.

G P Sah, VP and CEO of Choudhary Group which manufactures Wai Wai says, ―No
other brand has such an option.‖ Sah even claims leadership in the North East, with Mi
Mi a smaller variant of Wai Wai at the second position, and Maggi a distant third. Not to
be left behind are retailers like Food Bazaar that launched noodles under the Tasty Treat
brand. According to Devendra Chawla, head, private brands, Future Group, ―In our
country where taste and food preference changes every 200 km, instant noodles has
crossed this journey most effectively breaking the barrier.‖

Through its long history, Maggi has burnt through a wide range of positioning lines and
statements. When Maggi entered the country, Nestle used TV heavily to familiarise
consumers with the brand. Its initial campaign ‗Fast to Cook, Good to Eat‘ became a
catchphrase and ‗2 Minutes‘ gesture of the Maggi mom was widely imitated. The 25th
anniversary campaign around the theme ‗Mein aur Meri Maggi‘ acknowledged a
generation that has grown up on the brand and which is now poised to include it in the
diet of its children.

For its Soupy Noodles, HUL is occupying a plank that‘s not dissimilar to what Maggi
started with: a mini meal when children return from school and before they leave for play
or tuitions. But HUL hopes to build traction for the soup habit via the already fairly well
established noodle habit.

The powder in Knorr Soupy Noodles is not simply a tastemaker or spices‖ says Singh,
but actual soup powder, with a taste and consistency similar
to Knorr‘s flagship product. ―It is a quick hunger filling
snack. Just soup is not a good for that time and nor do
kids find it particularly exciting. But when you give
noodles with a combination of soup they like it. This is
our position of strength as well as differentiation,‖
explains Singh. HUL has roped in Kajol to help push
Knorr soupy noodles.

Anaheeta Goenka, ED, Lowe says, ―When a kid is given

something new to eat he is quite fussy about it. So to
engage better with them and to make the experience fun,
we used the route of a game play in the TVC. The ‗Thoda Khao, Thoda Piyo‘ proposition
helped the kids understand how to consume the product and made it fun at the same
time.‖

In the case of Foodles, nutrition is going to be the differentiator, remaining consistent

with the plank already occupied by Horlicks. ―We are targeting those consumers who
may have hesitated from participating in this category because of any lingering doubts.
We have positioned Foodles as the more nutritious noodles,‖ says Sen. So besides the
regular flavour, Foodles will also be available in a multi-grain option. While health is a
big concern, Nestle‘s own Dal Atta variant was not well accepted due to the difference in
taste. Maggi on the other hand is going deeper into flavour-based variants inspired. The
first of these is Thrilling Curry.

―While masala is still the most popular, the thrilling moments that people shared with us
as part of the ‗Mein aur Meri Maggi‘ campaign has given us ideas to launch a number of
new variants in the coming months,‖ says Shivani Hegde, GM - foods, Nestle India.

The masala flavour is being keenly contested by Captial Foods as well via its Smith &
Jones brand. Ching‘s Secret is aimed at youth between ages 16-25, where there is a
demand for something spicier. ―Maggi was the leader for kids, but as they grow up their
needs change and that is the space we have tried to occupy with Ching‘s Secret,‖ says
Gupta. Another brand banking on masala is Tasty Treat that offers spicy masala and have
flavours like Punjabi masala and Mumbai masala waiting in the wings to cater to local
tastes.

Apart from variants and positioning, most players acknowledge that trial is the ultimate
moment of truth. HUL have ‗food ambassadors‘ at modern retails outlets to encourage
sampling. Ching‘s Secret has gone the college route to get closer to its youth
demographic. ―We have sponsored a large number of college shows in the country last
year and are also targeting the youth aggressively through Facebook,‖ says Gupta. The
Ching‘s Secret community on Facebook has over 118,000 fans following the brand.

While the new entrants sweat it out, Nestle isn‘t sitting tight. Continuing its efforts of
engagement, it organised a nutrition awareness drive in the largest slum in Asia, Dharavi
a few months back. ―We spoke to people about the importance of health, hygiene,
micronutrients and gave them an opportunity to understand the product,‖ explains Hegde.
Nestle also does trade activities involving education of shopkeepers, direct contact
programs and initiatives like the Nestle Minithon to engage with consumers.

When Nestle launched the Chottu Maggi the intent was wider reach, ―we wanted more
consumers to have access to the product and enjoy the Maggi
experience,‖ says Hegde. While Nestle took this step
based on insight and market research, other brands
today, know the importance of a smaller SKU in
pushing the brand. Wai Wai‘s variant Mi Mi is in the Rs
5 space. While the product was largely targeted towards
kids, Sah says it also helped get more people to sample
the product. For Capital Foods, single pack sizes are
important for acceptance of the brand in non-urban
cities. ―The aspirations are same, there is a lot more
money in non-urban areas and most of it is going into
foods,‖ says Gupta.

However in the case of Knorr Soupy Noodles, it is a case of demand being more than
supply. Currently their product is available only in single packs of Rs 10, however Singh
of HUL says that the demand for bigger packs is getting louder, ―The bigger pack is
being demanded by households with children. But we haven‘t been able to get into more
markets as we don‘t have enough capacity to expand,‖ says Singh predicting nation-wide
availability by the end of June.

Wai Wai will be rolling out its product across the country soon. It has set up
manufacturing plants in Sikkim, Guwahati and Rudrapur to help keep up with the
demand. When it moves beyond the North East into the rest of the country Sah thinks TV
would be the best medium to give them the recognition. ―TV is very important to help
our brand be recognised across kiranas and convenience stores. Just being present in
modern trade will not give us sustainable value,‖ he says.

While it is still early days for the category, the action in this space promises to get louder.
The success of noodles has made way for other ready-to-cook products like pasta and
macaroni. While Maggi has already entered the fray with its offering, the new entrants
are also eyeing this space with great interest. Only time will tell if ghar ka khana can ever
be substituted with pack se khana.

Case Study -VI

Discussion: Private labels' business in retail is overhyped

http://economictimes.indiatimes.com/News/News-By-ndustry/Services/Retailing/Private-
labels-business-in-retail-is-overhyped/articleshow/5978642.cms?curpg=1

Ramesh Srinivas, Executive Director, KPMG

YES: The first phase of organised retail growth in India was disrupted due to a series of
optimistic decisions taken by the players, and global economic slowdown accentuated the
crisis. The past one-and-a-half years have been a period of introspection and rectification
for most of the players in the retail arena. While most did take reactive and corrective
actions, the current environment will be unforgiving to those who make any more
mistakes.

Among the various revamped strategies adopted by retail players, one of the most talked-
about plans is developing a strong private label range. Many believe that private labels
may have the potential to resolve the challenges faced by the retailers, including lower
fill rates, poor margins, fewer product offerings, unfavourable vendor contracts. While
most of it is true, the retailers need to be cautious about relying solely on in-store labels.

Private labels are attractive in terms of higher business margins, but they can‘t compete
with the national and multinational companies in areas such as R&D, investments,
advertising and marketing spends due to lack of funding. Retailers in mature markets
have leveraged their brand to launch private labels successfully. In Europe, for instance,
private labels account for nearly a quarter of a retailer‘s sales.

With an estimated 7-8% share in the $400-billion industry, organised retailing in India is
still at a nascent stage. Private labels constitute roughly 10-12% of the organised retail
product mix, thereby accounting for a fairly small share in the total retail market. In an
under-penetrated industry, the retailer‘s primary focus should on building a strong retail
brand by providing customers a greater balance of price with quality, convenience,
consistency, innovation and enhanced in-store experience.

Private label is still an emerging concept in the Indian environment. The experience of
mature markets shows that the success of private labels hinges on the strength of the
retail brand. The success of any retailer would be determined by how they take a
balanced mix approach of building a unique business model to cater to Indian consumers
and plugging-in the demand gaps by offering selective private labels.

Devendra Chawla, Head, Private Brands Future Group

NO: Any product on the shelf becomes a brand in the shopping trolley the moment
consumer makes a choice. Consumer‘s choice adds all the meaning. The marketers‘
terminology of private labels and national brands ends with this two feet journey from the
shelf to the trolley.

While India‘s consumption story has begun, we are a under-branded nation and under-
penetrated in many categories. We need more brands. In the coming times, we can expect
many new brands, ―India relevant‖ brands especially in food category.

That the retailer is closer to consumer is a fact of life. Consumers are giving retailer‘s live
feedback and valuable insights. Then there is analytics of what‘s selling, where and how
much. The consumption story, need for more brands and consumer insights offers
retailers a unique opportunity to participate in this journey .

Aspiring India‘s Brands will be built in the Modern milieu. Think Packaged soup, corn
flakes , diapers. As you know Modern retail is 15-35 % in many categories while its
overall around 5 %. There will be Television built brands and there will be Shelf built
brands . Both will coexist . Marketers will find newer ways to influence the consumers.
Retail marketers will also go beyond only price & service and build benefit features to
their brands to differentiate.

Marketing tools and talent is available to retailers as well . Many common vendor
partners are producing for retailers & many FMCG even MNC brands so quality is taken
care of . Value proposition to consumers comes from direct to store supply chain savings
enhancing margins for retailer.

Private Brands straddle all price points in many high involvement categories . In Ghee,
we are brand leader with Fresh & Pure, and mostly No.2 brands in categories such as
soups, cookies, RTE snacks and ketchup. Moreover, Premium Harvest commands
premium in commodities.

Many more powerful brands will serve the Indian customers in 2020 – and some of them
will be retailer owned . Hype or no hype, is the writing on the wall.