Presentation on A Study of Private Label Brands

Submitted by : Rashika Gupta(M00111) Chirag Jain (M00110) Abhijit Tripathi(M00109) Submitted to: 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 FY13 Apparels & Accessories: USD 755 Mn Food & Grocery: 510 Mn Home Improvement: 280 Mn Footwear: 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 Fabric Cost (2.2 m/100 ) National Brand 220 Private Label 220

Fabrication Cost
Direct Cost 27% Manufacturer Markup Direct cost to Retailer

100
320 86 406

100
320 0 320

Indirect Costs
Cost price to retailer EXERCISE Sales Tax

41
447 61 27

13
333 47 21

Cost price to retailer

Trade Margins (%) Trade Margins MRP Source Crisil Research

536
33 293 825

400
39 268 675

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 dailys 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

CONS
Inventory risk Higher R&D expense Higher marketing expense No markdown or return allowance from branded suppliers

Freedom in pricing strategy

Increase bargaining power with both national brands and PL factories

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: Questionnaire Sampling method: Random Sampling Type of Research: Descriptive

Findings - Consumer Research analysis

Awareness of PLB
30% NO

70% YES

Source Crisil Research

Findings - Why purchase Private label brand

12 10 8 6 4 2 0 Source Crisil Research 11 9

Quality

Affordable

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 Harpic

60 Rs for 500ml

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