INTRODUCTION

WELCOME to the world of private labels. Store brands, own labels, private labels, call
them what you will, but retailer-owned brands have arrived in India. Private labels are
brands owned, merchandised and sold by retailers themselves. They are also called in-
store brands. From apparel, healthcare products and furnishings to consumer items,
private labels are making their presence felt in a variety of retail items in the country. In
the dogfight world of Indian retail, the private label is emerging as a new business
model. Most retail chains in the country are increasingly relying on private labels to
bridge the gap in their product mix and are targeting specific needs of consumers.
Though, private labels at present constitute about 5% of the organized retail business,
experts feel they can grow up to 30% once retail brands develop in the country.

Retailers like Pantaloons, Shopper’s Stop, More; Reliance and Vishal Mega mart are
expanding their range of private label products from cosmetics and food to clothing to
improve the profit margins of their stores. Retailers have realized that by having top
quality private labels they can differentiate themselves from other stores and become
destination stores. Private labels also give retailers a chance to bring in unique
products in their supply chains that have not been branded before and it’s a win-win
situation even for the producers who get a chance to display their produce.

PRIVATE LABEL SHARE 09-12

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C 20
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Private label strategy
The differentiating factors in merchandise for retailers these days
are the private labels. The transformation of store brands/ private
labels has built a WHOLE NEW SCENARIO. The UK and Belgium
lead the list of private labels with over 43 percent in terms of
volume. Private labels range from aluminum foil, tissue paper, to
apparel and food and groceries. This is found most suitable for
supermarkets, hard discount stores and specialty stores. The
growth is found to be almost more than 60 percents worldwide,
more than manufacturer’s brand. These private labels lack in
quality over market leaders.

Indian context

The old mom and pop store now provides home made wheat flour
(Atta), rice spices, and even wafers (namkeen). Sweet shops in
India like kc das rasogulla of Kolkata and panchi petha of Agra,
chirag din of Mumbai in apparel. Spencer’s RPG group has ready
to eat food with 25 % private labels.

Big bazaar hypermarket. Generates a turnover of 200 crores from

private labels.Nilgiri in Bangalore offers private labels in dosa and
idlI,aditya Birla group--more offers non liquor beverages.

These days most of the space is occupied by private labels

mainly known as type 1 labels type 2 private labels have more
value added to them. In terms of packaging branding and
contents.ex- dadima pickles, smart choice jams both by
Spencer’s.

With its private labels giving it higher margins and revenues, Pantaloon Retail is
planning to spin them off into individual store brands in the near future. The retail major
has identified four of its leading private labels to add to its retail format considering the
healthy growth rates registered by each of them.

Labels such as John Miller, Bare, Agile and Rig have been shortlisted to make a foray
into the retailing industry as standalone format stores.

Private labels generate between 75 per cent and 80 per cent of their revenues. Some
of these brands have taken a natural level of growth in certain areas and plans for
exclusive stores for them are being formulated.

% of REVENUE GENERATED
(PANTALOONS)

20% Other
Brands
Private
80% Labels

WHY PRIVATE LABELS

• Differentiating factor - as the competition is pacing up
retailers is left with similar kid of merchandise. private
labels are usually manufactured by a company and sold
under the brand of another company’s I have seen this
practice in retail ex- MORE most chains are promoting them
aggressively becks private label/store brands portfolio
provide them a powerful margin. Provides a strong tactical
and strategic benefit to retailer.
• Private labels make available the benefits to the retailer
wherein he has his very own product and without the effort
of making it by himself.
• Having ownership rights to products, he is allowed to do all
the revisions and editing that he wants. Likewise, he can
incorporate any value that he desire, any illustrations or
images and add in any additional content and include his
byline after revising the product.

• Private label materials” include information products, which

are the easiest to work on.

• You can brand your own name. Almost anybody purchasing

something prefers to buy from someone they trust and
know. With your Private labels, you are able to display your
name in the product as the manufacturer then you are
supplying consumers with important information. Then
when consumers are pointed to your site, seeing your name
once more, they instinctively have that certain feeling of
knowing and trusting you.

• Substantially higher margins than a brand name products.

• Greater freedom with pricing strategy.

• Freedom to create your own marketing plans.

• You will increase your sales.

• You have control over the stock inventory.

• Create a positive image of yourself for your customer which will lead to stronger
customer loyalty.

• Reduce dependence on brand names for sales.

• Positions the product better in a tight economy.

• You will not walk into Wal-Mart and see the same dechlorinator that you sell on
a shelf with a retail price lower than what you pay your distributor.

• After building customer loyalty for months, your customers won't turn around and
order the same products from an online megastore because they are only
available from you.

• You can start up a private label with us for less than $1,000.

• In almost all cases we can make product as it is needed or we can warehouse it

for you. We can also drop ship product directly to your customer and they will
never know you did not ship it.

• We do private labels for even the traditional mom and pop pet store all the way
up to the guys who supply the mass market stores

• We can have merchandise into your hands in as little as three weeks.

• We make products for public aquariums. They don't trust $5 million worth of
sharks to just anybody. We use very high grade raw materials. Our formulations
are thoroughly tested for safety and efficacy. That's why we are one of the few
U.S. companies that meet the exacting standards of the Japanese aquatics
market

• No manufacturing cost and no fixed cost.

• No research and development cost to be recovered.

• No extra sales force is required.

• Advertizing, marketing, transportation is not required since

they have existing infrastructure and promotion is in house.

• Increase sales for retailer in addition to margins the cost

advantage helps retailer to be flexible with the pricing of
store brands.

• Slowly slowly customer shows brand loyalty and starts

purchasing the other offerings of same brand.

• With your exclusive brand you can, if you wish, enter the entire Out-of-Home
market supply for coffee, selling to restaurants, the hospital and health care
field, hotels, catering trucks, stadiums, indeed every other nook and cranny of
 the market. The potential volume in the Out-of-Home market is many times more
than in coffee service itself.

• You can sell the mystique as well as the real quality of your coffee, enabling you
to achieve a higher average selling price (though many operators make the
mistake of selling their private label for a lower price than the national brands)

• The packaging and labels can be custom tailored to meet specifications,

including product name, description, company's logo and contact
information.

• Private labeling allows for greater control over many factors - including
sales, marketing, and distribution. Retailers can have complete control over
product distribution with private label products

• The products are only available from the retailer - customers will not go
into a popular megastore and find the private brand product at a lower price.
Customers will not find the private brand product somewhere else on the
internet either.

• With private labeling, retailers can acquire products that are already
developed, or that can be changed and re-branded in an individual fashion.
Basically, retailers can control many business aspects, and create their own
unique product

• Many find the current recession benefits store brands, as consumers look to
pinch pennies where they can without giving up quality. "The recession is
definitely having an impact on private label," says Jim Roth, senior customer
development manager for Raskas Foods, Inc. in St. Louis. With more than 80
percent of the business, Raskas is by far the nation's largest supplier of private
label cream cheese. "Over the past year private label is starting to significantly
 outpace the Kraft Philadelphia Brand," says Roth, adding that historically Kraft
controlled about 62 percent of the cream cheese business, but it's now down to
around 52 percent. "This year Kraft is off about 2 percent, while private label is
up 2 percent," he says. "Cream cheese pricing is based on the commodity
markets, but the difference between Kraft and private label is that when the
commodities drop so does the private label price—Kraft doesn't. There is more
aggressive pricing out there, and due to the economy people might be switching
over to private label products."

• 'Masterstroke'

Burt Flickinger III, president of Strategic Resource Group, a New York City-
based retail consultancy, calls the hiring of Lee "a strategic master stroke for
Albertsons." At Safeway, he says, Lee was a key architect "of what's arguably
the finest food and drug private label program in the U.S."

Flickinger notes that Lee rationalized a number of underperforming private

brands out of Safeway's product mix, in many cases reducing categories to the
two leading national brands and private label. He says Albertsons has always
had a good private brand program and that Lee is moving it up to very good.
Over time, Flickinger predicts, Lee will raise Albertsons' program to the level of
great.

A hold USA, another mega-chain placing a heavier emphasis on private label, is

rolling out a new line of store-branded competitors to leading-brand carbonated
soft drinks. The lineup features two varieties of cola: Rally, which the chain
describes as having a classic all-American flavor, and Spin, with a
"contemporary" taste. Other new offerings are Quist, which has a lemon-lime
flavor; Ramp, with citrus flavor; and Dr. Bob, billed as an exciting flavor with a
unique, vibrant aroma.

• They can personalize the products; add their own information, additional
materials, logos, titles, etc. This can all be done in a lot less time than it
would take to develop the product from scratch.
 • Private brands come from several different sources. Numerous companies
now offer contract manufacturing for private goods. Large national brand
manufacturers often supply private label brands. Occasionally, competing
brands are even made by the same large manufacturer. Ingredients, quality,
and designs often differ quite a bit among these products,

• Private brand goods are also acquired from small, quality manufacturers
that specialize in particular product lines. Often, these companies
concentrate on producing private label brands almost exclusively. There are
also regional brand manufacturers that produce private label products for
specific markets.

• Private label brands are available in a wide range of industries from food to
cosmetics. These brands help create a unique product and personalize a brand
for retailers. Retailers with strong private label brands create exceptional sales
opportunities for themselves. They can build value and recognition from the
customers. Private brand products allow retailers to differentiate their products
from competitors' products, and provide consumers with an alternative to other
brands.

BRAND BUILDING STRATEGY

The store brand products are benchmarked to the market leader

in terms of features and benefits and easily captures customer’s
mind due to low price.

A. leverages the branding of chain and customer’s response -

since the store brand and the market leader are of similar
features but since the store brand is low priced and promoted by
retailer the chances of buying the store brand increases
drastically. Ex - tea priced at 26 and brook bond at 40
B. now if the product meets customer's expectation then it
replaces the national brand

(Store brand / market leader brand ---------- similar

features and benefits----- replaces the market leader -----
becomes a brand.)

Private brands have unique

A. packaging,

B. design

C. pricing

The better best approach - 3 segmented portfolio

• good segment -- similar features low price

• Better segment --- additional features to market leader low /
similar pricing.
• Best segment --- enhanced offerings and comprehensive
with low cost.

STEPS FOR BRANDING

• Use a unrelated brand name

• Associate it with the store name for leverage.
• Differentiation
• Segment classification
• Packaging guidelines.

After this positioning has to be decided good better or best.

Ex- CFL introduced by leading private retailer.

INDIAN CONTEXT

In India it is largely based on pricing play Marks and Spencer has only store
brands. West side. It’s a chicken and egg story. Lifestyle retailer Shoppers'
Stop says its four store brands together account for approximately Rs 50 crore or
20 per cent of its turnover. Shoppers' Stop has four private labels - Stop, Life,
Kashish and Karrot - that extend to several categories. Shoppers' Stop is clear that
private labels are a significant part of the company's long-term game plan.
Shoppers' Stop expects its own brands to contribute to at least 40 per cent of
turnover in time, and is dedicating resources to the development of its private
labels with this objective in mind.

% of TURNOVER
(SHOPPERS' STOP)

20% Private
Labels
Other
80% Brands
For the Delhi-based Ebony, 25 per cent of apparel sales come from its private label
EbonyETC. Ebony's ETC brand accounts for 50 per cent of the sales in men's
apparel and 25 per cent of sales in women's and children's apparel respectively.
The growth of EbonyETC has been from 3 per cent of apparel sales to 25 per cent
of apparel sales in the span of 10 months

CONSUMER PERCEPTION

“I would rather go for a private label than paying almost the

double for the same quality”, said a customer picking up apparel
of a private label at one of the leading retail outlets in the
country. Globally, various studies show that educated and
affluent people buy more private labels as they do not need the
‘brands’ to make them feel that they are important. As
disposable income of the middle class increases, private brands
can expect a larger market share in the country. It is also very
evident from the sales figures of the various retailers that private
labels have started to consolidate their places in the minds of the
customers and are ready to take their toll on the other
manufacturer’s brands. All this shows that the people have
started to accept these private labels as a very reasonable
substitute for other branded products of the same category.
Private retailers will occupy 50 per cent of the market the world
over. At 50 per cent, they begin to saturate. If they try to occupy
more than this, then consumers feel that there aren’t enough
choices. They will continue growth in the other countries till they
reach the saturation level. And this will happen very soon in
India, too