Big Bazaar: Private label push

Byravee Iyer / Mumbai December 1, 2009, 20:00 IST

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.”

Click here to visit SME Buzz

Also Read
Related Stories News
Now

- Analysts' corner
- Pantaloon Retail to raise Rs 500
cr via QIP
- Pantaloon QIP to start today
- Pantaloon: A new format
- Experts stress on tapping retail
sector
- Future group draws out
expansion plans
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.

Big bazaars score over kiranas

Posted on July 23, 2010 by retailnu
EARLYthis year, when escalating prices were crunching household budgets, modern retailers were more responsive
in cutting or holding prices of day-to-day products than traditional retailers, thanks to their ability to check operational
costs bargain hard with suppliers and launch private labels.
According to a study by The Nielsen Company, modern retail dropped prices by more, or increased them by less, for
more product categories than traditional retailers, or kiranas, between the last quarter of 2009 (Oct-Dec) and the first
quarter of 2010 (Jan-Mar).
“The power of modern retail lies in the scale and efficiencies which we have built over the years,” says Kishore
Biyani, CEO of Future Group that operates retail formats such as Food Bazaar, Big Bazaar, Pantaloon and KB’s
Fairprice stores.
The Nielsen Shop Census study compared prices of 47 commonly used items including toothpastes, washing powder
and confectionery. Modern retail dropped prices by more, or increased them by less, than traditional retailers for 29
product categories while traditional retailers did better in 18 categories.
It collected data from 16,000 stores (11,000 urban and 5,000 rural, in both modern and traditional retail) in 462 towns
and 1,427 villages.
During this period, the rate of inflation, as measured by the Wholesale Price index, was hovering around 10% and
food inflation was more than 12%.
In the past two years, modern retail has been able to significantly cut operational costs related to real estate rentals,
energy costs and increase persquare-feet productivity of employees leading to savings in people costs.
They also launched private labels to get a better grip on selling prices and profit margins, and some savings were
passed onto customers.
Higher collaboration with small and medium suppliers as well as distributors of large FMCG companies helped them
cut costs in transportation and logistics.
Efficiencies of scale helps one source the goods closer to the manufacturer says Mr Biyani. In 2009, Big Bazaar
sourced 26,000 tonnes of rice, 4 crore pieces of clothing, 20 lakh suitcases, 36 lakh mixer-grinders, 45,000
manufactured beds, 20 lakh bedsheets and 19,000 LCD TVs. Each of these figures will be higher by a minimum of
30% for the year 2010, he says. “Such large sourcing allows us to get better prices directly from manufacturers and
producers.”
Big Bazaar is the largest player in the segment contributing over 33% of modern retail sales. Other top retail formats
competing with traditional kirana for essential purchases include Reliance Retail, Aditya Birla Retail’s More and
Spencer’s Retail.
Kumar Rajagopalan, CEO, Retail Association of India, says strong sourcing power helps modern formats offer better
prices. “They have done away with the extra level of intermediaries,” he says.
Meanwhile, grocers too are working on protecting their turf by leveraging on their strengths such as customer
relationships, home delivery, credit facilities and expanding their product portfolio.
Top FMCG companies such as Hindustan Unilever, Procter & Gamble Marico and Godrej have begun adopting
kiranas, teaching them category management and effective merchandising to counter big retailers and their private
labels.
Bharatiya Udyog Vyapar Mandal (BUVM), the biggest national-level association of mom-and-pop stores, has formed
city-centric associations that negotiate directly with manufacturers such as Unilever and P&G and do away with any
middlemen.
This helped kiranas offer 5-20% discounts on MRP of branded products like detergents, shampoos soaps, oil and
atta.
“When prices rose due to inflation some kirana stores offered customers the option of paying in instalments apart
from extending them credit for a month,” says Vijay Prakash Jain, secretary general of BUVM that comprises 17,000
state and district-level associations across 27 states.
Interestingly, kiranas managed the prices of items such as detergent bars toilet soaps, shampoo, packaged tea and
iodised salt better than modern retail, according to the Nielsen study.
Currently, traditional retail, both grocers & chemists, constitute over 95% of total sales in the country.
Modern trade at just 3-5% of the total national industry sales, had grown aggressively at over 35-40% contributing to
over 15-25% sales for most consumer goods companies last year.