CHAPTER 2

INTRODUCTION TO PRIVATE LABEL:

INTERNATIONAL & INDIAN SCENERIO
2.1 Concept of Private Label

The increasing popularity of the retail sector in developed countries in the 19th
century saw a tremendous rise in the number of departmental stores and supermarket
chains; that further gave birth to concept of private-label goods 1 (Steenkamp and
Dekimpe, 1997). Initially private labels were introduced in the grocery section with
much cheaper prices compared to the branded products. The poor economic
conditions in many countries in the mid 19th century made customers more price
conscious, and led them go for these products. Simultaneously improvements in
quality, taste and packaging to some extent attracted the customers as well 2
(Edgecliffe, 2001). In recent times, various product innovations have made these
items quite popular in the retail market. Private Labels are top sellers in many product
categories sold in the US supermarkets3 (Quelch and Harding, 1996).

The term-‗Own brand’ acknowledges the power of the retailer. ‗Own brands’ are
articulated and developed in a way that they not only fit with the brand promise of the
retail store, but if effective, they also give consumer drives a key point of departure to
enhance and celebrate the overall retail brand proposition so as to keep consumers
coming back for more.

The Private Label Marketing Association defines store brand products as “all
merchandise sold under a retail stores private label. That label can be the stores own
name or a name created exclusively by that store. In some cases, a store may belong
to a wholesale buying group that owns labels, which are available to the members of
the group. These wholesaler owned labels are referred to as controlled labels’.4

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2.2 Classification of Private Label5

Private label can be classified as under:

 Individual Brands / Quasi Brands:

Individual / Quasi-brands, invented controlled labels with no store association, work

most successfully in a limited assortment environment to create the illusion of
selection. Specific brand names are created for specific market segments and/ or
categories. eg. Aldi, Lidl, Netto.

 Store Brands:

Store brands, where all private labels carry the name of the store, have been very
successful at driving high levels of private label penetration in supermarkets. It
carries the retailer’s name, such as Westside, Food World, Big Bazzar, Sainsbury
Albertson’s and Safeway. Store brands offer a choice to the end consumer, for the
retailer, they are tool for increasing business and winning customer loyalty. Retailers
have realized that while consumers can buy a national brand anywhere; they can only
buy their store brand at their store.

 An Umbrella Brand / Group Brands:

Group brands, where all private labels carry a common non-store name, are most
commonly used by retailers with more than one store fascia
Where a common brand name is used across multiple categories – e.g. Splash
(Lifestyle), Bare (Pantaloon). A private label is more than a product with the name of
the retailer /store – it needs to be seen by the end consumer as different products.
There must be a clear perception that ‗it is produced by this store’. Private labels or
store brands exist in a wide variety of industries, from apparel to food to health and
beauty aids. Following table illustrates strengths and weakness of different private
label strategies:

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2.3 Significance of Private Label6,7,8

Across the globe retailers become more sophisticated and competitive, the role of
private labels in their stores, changes from that of a price – fighter to being a value –
added marketing differentiator. This is indicated by the fact that the volume of
private-label brands are starting to diversify their offering beyond the expected,
enabling them to compete more effectively in existing product categories and foray
into new and different product categories that have traditionally been dominated by
national brand players. Following are few reasons for the development of private
label by retailers.

 Need to create unique merchandise.

 Need to create loyal customers.
 Need to earn increased margins.
 Changing consumer habits.
 Identification of need gap.

The changing consumer tastes and the need to fill a gap in the product offering is the
key reasons for retailers to opt for offering a private label. This gap may be due to the
non-availability of particular product / category. The retailer may also seed to create a
competitive advantage in his domain by aiming to offer a product that is unique and
thus, also build in on customer loyalty.

Offering a product or a range within a product, which gives the customer newer
reasons to visit the store every month or week, is something that every retailer would
aspire for. Private labels also allow the retailer to build a brand which is associated
with the store and therefore, with an experience.

The most significant advantage that a private label allows a retailer is that of earning
a level of margin which may be higher than what is offered on other brands that he
chooses to retail. A private label basically involves the retailer doing the designing,
merchandising, sourcing and distribution. Thus, his cost is under his control and

40
spread across a limited range of activities. Promotions are mainly done in store and
thus, his cost of goods sold is much lower compared to that of national brand.

Finally, the retailer may also vary the offerings of the private label across
geographical boundaries on the basis of the variation in consumer preferences or to
seed a competitive advantage in a new geographical region.

2.4 Evolution of Private Labels

Private labels were defined as generic product offerings that competed with their
national brand counterparts by means of a price – value proposition. Often, the lower
priced alternative to the ‗real’ thing, private label or store brands carried the stigma of
inferior quality and therefore, inspired less trust and confidence.

While store brands offer a choice to the end consumer, while for the retailer served as
a tool for leveraging business and winning customer loyalty. Retailers have realized
that while consumers can buy a national brand anywhere; they can only buy their
store brand at their store.9

In the developed markets, private labels started out of economic necessity – for
providing a cheap alternative for low – emotion involvement goods such as butter,
eggs, flour and sugar.10 Generics, which were products distinguishable by their plain
and basic packaging, where the first type of private labels to appear on the horizon,
largely associated with low price and low quality.

Following table shows the Evolution of Own Brands11:

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 Table 2.1 : The Evolution of Own Brands (Private Labels)
1st Generation 2nd Generation 3rd Generation 4th Generation
Type of Brand Generic Quasi Brand Own Brand Extended own
brand, i.e.
No name Own Label segmented own
Brand free brand
Unbranded
Strategy Generics Cheapest Price Me-too Value Added
Objective Increase Increase Margins Enhance Increase and retain
Margins category the client base
margins
Reduce Enhance category
Provide choice manufacturer’s Expand product margins
in pricing power by setting assortment
entry price
Improve image
Provide better value Build retailer’s further
product image among
customers Differentiation
Product Basic and One-off staple lines Big category Image forming
Functional with a large volume products product groups
Products
Large number of
products with
small volume
(niche)
Technology Simple Technology still Close to the Innovative
production lagging behind brand leader technology
process and market leaders

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 basic
technology
lagging behind
market leader
Quality / Image Lower image Medium quality but Comparable to Same of better
and inferior still perceived as market leaders than brand leader
image lower than leading
compared to the manufacturer’s
manufacturer’s brands
brands Innovative and
Secondary brand, different products
alongside the from brand leaders
leading
manufacturer’s
brand
Approximate 20% or more 10 – 20 % below 5 – 10 % below Equal or higher
Pricing below the brand than known brand
leader
Consumer’s Price Price is still Both quality Better and unique
Motivation to buy important and price, i.e. products
value for money
Supplier National, not National, partly National, International,
specialized specializing for mostly manufacturing
own label specializing for mostly own brands
manufacturing own label
manufacturing
Source: Own brands in food retailing across Europe, H. Laaksonen and J. Reynolds, The Journal of
Brand Management, 2, 1994.

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2.5 Process of Private Label Creation12

Steps involve in the creation of the private label are listed below:

1. Defining the Objective

First step towards creating a private label is to start by defining the reason for
which the retailer wishes to create the private label. Some common reasons
for creating a private label are the need to create a competitive differentiation,
or to offer a wide and unique product range. The need to create a private label
may also be for enhancing the margin that he may be earning or to build
customer loyalty.
2. Defining the Gaps in the Market
After identification of the basic objective to create private label, the retailer
needs to understand the customer segment which is to be tapped. This
enhances a further understanding of the target profile of the customer and also
helps the retailer address issues with respect to the sensitivity of price on the
target audience, the level of experimentation within the segment and the level
of brand loyalty, if any.
The other aspect that needs to be liked into at this stage is the financial
implications of the private label. This will involve gaining an understanding of
the financials that would be involved in the creation of the private label and
the supply chain efficiencies that would be needed from the organization and
the supplier, in case the product is outsourced. After having determined the
objective for creating the private label, the retailer needs to determine the
strategy that he is going to adopt for the private label. The gaps in the offering
of the brands and products in the store and that of the competitors need to be
done. A decision needs to be taken in terms of the product mix and the pricing
strategy to be adopted. It is necessary to define the required product
specifications, standards, quality and estimated volumes.

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 3. Decision on Make or Buy and Sourcing
After having determined the basic purpose for the creation of the private label,
the method in which the sourcing of the product is to be done has to be
decided upon. This will involve a decision on make or buy. In case the retailer
decides to source the product, decisions with respect to the vendor or supplier
then need to be tackled. One needs to check the ability of the supplier to
provide products within the given time frame, at the required quality and price
levels, so as to enable the retailer to earn a suitable amount as a margin. In
case of products like apparel, it is necessary that the designs and styles of the
products provide are different from those available with other retailers and
brands.
4. Determine the Marketing and Sales Strategy
The product secured also has to be marketed within the store environment.
This will involve communication within the store and at times,
communication in vehicles of mass media.
5. Determine the Measures of Performance
While creating a private label, as with creating a brand, it is necessary to
identify the measures of performance. It is necessary to develop a system to
track and monitor private label program performance and identify
recommendations for program refinement and improvement.

Thus, private label, as a concept, is poised for further expansion, and their population
is fast extending too many nonfood categories and formats. Retailers have realized
that private labels have a huge impact on bottom line and margins of private labels
are usually double than that of branded products. The power of private labels is being
explored by most retailers today as they do not want to be at the mercy of the big
manufacturers. At the same time, they also realize that it’s not going to be easy as it
takes time and money to build private labels.

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2.6 Private Label: International Scenario

Globally private labels are winning acceptability and the loyalty of customers. Private
labels posted market share gains in 15 countries tracked by Nielsen for PLMA’s 2007
International Private Label Yearbook. It further states that in Central and Eastern
Europe, where modern retailing is rapidly taking root, retailer brands are making their
biggest market share increases. This change reflects in a shift in shopper attitudes,
where a private label is no longer sought out only for reasons of price and economic
conditions.13

The data also shows substantial growth for retailer brands in Western Europe. The
share increase in the United Kingdom, up by more than a point to 43%. In France, the
A-brand competition has not been able to stop the powerful trend towards private
label in recent years. Market share in the country has now climbed to 34%, and would
surely be higher if sales data from discounters were included. Even so, the private
label’s high market share contrasts sharply with the situation in 1997, when it stood at
only 21%.

Spain continues to be one of the biggest success stories for retailer brands. Market
share there has surpassed the 35% mark for the first time ever and seems destined to
reach 40% in the next few years. Private label maintains its significant position in
Germany and Belgium. Market share in Germany approaches the 40% level, while it
is over 42% in Belgium. In Austria, retail brands climbed more than one point and
now account for one of every five products sold.

Switzerland again had the highest volume share of any of the countries surveyed by
Nielsen. Retailer brands now account for 53% of all products sold in the country and
their market share is still climbing.

In Scandinavia private label’s share is at least 20% in each of countries – Denmark,

Finland, Norway and Sweden. The biggest increase was posted in Denmark, where

46
the share for retailer brands climbed more than two points to 27%. Market share has
been climbing steadily in Sweden, up from 22% in 2003, to more than 28% in 2006.

In the Netherlands, the share for retailer brands has now climbed to 22%. Private
label continued its growth in Italy, marking substantial gains over the past eight years.
Market share for private label in Portugal climbed more than two points reaching
27%.14

Table 2.2: Private label Penetration (%) & Sales growth (%)15, 16
Penetration (%) Sales Growth (%)
North America 16 7
Latin America 2 5
Europe 23 4
Asia pacific 4 5
Emerging markets 6 17
World 17 5
Source : Images Retail Report,2009

2.7 Private Label: Indian Scenario

Private label in India are coming on their won. Retailer in India appears to be taking a
leaf out of their western counterparts. In case of Spencer’s, about 25% of all goods
displayed in its store counters are private labels. This figure is set to rise in the future.
Hyderabad-based Heritage Foods (India) also has a fair share of private labels on
display in its stores. The share of the private labels is almost 27%, barring fruits and
vegetables. The emergence of private labels is giving smaller brands – especially in
functional driven categories where emotional connect plays a negligible role – a
chance to compete with the big national brands. 17

In Lifestyle segment, private labels form 80% of apparel sales in Pantaloon as well
Big Bazaar (Fashion@Big Bazaar). Following table details the private label brands of

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PF in Lifestyle, Food as well as FMCG categories. Some of the Private Label Brands
are - John Miller, Lombard, BARE, Knight-Hood, DJ&G, RIG, Chalk, Honey,
Scullers etc.

In the Value format, Future Group has private label brands comprising of 30% of
sales across Food, FMCG and Personal care categories. Some of the key private label
brands in this space include Tasty Treat, Fresh & Pure, Clean Mate, Care Mate etc.
For FY10, Future Group's FMCG private brands have registered a whopping 75%
YoY growth. Future Group's major initiative in enhancing the private brands portfolio
was the launch of the Ektaa brand, offering community specific food products across
the country.18

In the Electronics space, FG has Koryo Private Label (Value for Money) and Sensei
(as the Premium Offering). FG is facing tremendous competition from LG, Samsung,
and Sony.19

In case of Food Bazaar, in many categories, private labels are better than branded
products. For instance, Food Bazzar’s Care Mate hand wash has been a fast moving
product. While as a category, hand wash hadn’t grown much in the last few years, the
company introduced Care Mate by offering a unique price proposition. Food Bazaar’s
hand wash, detergents and oral care products are priced 20% to 25% lower than
market prices. The company’s private label business is doubling every quarter.

The company also believes that when it comes to local tastes and preferences, private
labels hold an edge over national brands. And this is extremely pronounced in food
categories, as a national brand can only offer limited varieties. But a private label can
be localized to a greater extent, for example Food Bazaar’s Tasty Treat pickles not
only use local ingredients but also the oil is suited for the local palate. In western
India, pickles are prepared in groundnut oil, while it is cooked in sesame and mustard
oil in south and east. The company introduced Tasty Treat Kasundi (mustard sauce)
only for the eastern market as kasundi is a regional favorite; the product is now being

48
rolled out nationally. It has also introduced „Thank You Aunty‟, an umbrella brand
provided to self-help groups that make locally favorite snacks like murukku, chakli,
thepla and chewda.

Food Bazaar has also adopted labels like the insecticide spray Quite, manufactured by
Asian ITG, a manufacturer for brands like Mortein, and Maniar’s Khahra (earlier sold
only in the export market) for a year when the manufacturer was thinking about
launching the brand in India. All these adopted brands are now sold exclusively in
Food Bazaar outlets.20

Given the nascence of retailing in India, one can assume that players are looking only
at generic private label brands. But segmentation is already taking place even within
own labels – from pure generic brands to premium brands being retailed on the
shelves. For instance, Big Bazaar has four different private label strategies – opening
price point labels, promotional labels, trade – up labels and even deep – discount
labels. This segmentation is created according to customers’ preferences.

Similarly, Spinach has tied up with small brands in jam and sauces, and retails these
products after rebranding them.

Aditya Birla Retail is aggressively pursuing the strategy of promoting Sales of private
labels. Currently, the segment accounts for around 3 percent of its total sales. A B
Retail, which operates supermarket and Hypermarket formats, under ‗More for You’
food and grocery chain, is Targeting to increase private label sales to 10-15 percent in
the next 2-3 years.21

According to Mr. Amit Kumar, Retail head, Fashion@bigbazaar on private labeling,

he said that he plans to increase his private labels from 60 percent to 90 percent in the
next three years. According to him Private labels provide four key merits:

 Gives the opportunities to stand out from the crowd.

 Helps maintain consistency in stocks.

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  Outside brands may or may not be available in the future leading to a potential
loss of customers.
 Enables retailers to control margins by improving their bargaining Power.

Bharti Retail, Walmart’s joint venture partner in India, have bought eight private label
in total including Great Value line of food (flour, dry fruits, spices, cereal, and tea) ,
George Apparel. The Private Label lines are going into the Cash & Carry format
(BestPrice Modern Wholesale) and discount convenience (Easyday). Equate, a brand
for pharmacy and health and beauty items, has been introduced only in the handwash
category as of now in Easyday stores. Other Wal-Mart private labels introduced in
India include Home Trends (home furnishing), Mainstays (plastic containers, kitchen
accessories), Kid Connection (toys, clothing), Faded Glory (footwear) and Athletic
Works (athletic shoes, equipment). Astitva, is a line for Indian ethnicwear.22

Since private Labeling requires long term planning, it enables the retailers to
understand all the nuances of its products as against an opportunity. Stock which
could turn into an opportunity cost in the long run. Globally, own label brands
contribute to 17 percent of retail sales with a Growth of 5 percent per annum.
International Retailers like Wal-Mart of USA and Tesco of UK have 40 percent and
55 percent own label brands representation in their stores, respectively. In India there
is an increasing trend towards acceptance of private label brands and thus their
penetration is on the rise especially in the apparel, consumer durables, home care and
FMCG segments. Overall, in India, private labels constitute 10-12 percent of the
organized retail product mix. 23 Players like Shoppers Stop, Tata Trent, Pantaloon,
Reliance, Spencer’s, moved towards adopting private labels to address consumer
needs and to increase profitability of their retail businesses. 24 In India, very few
players are into own manufacturing of private labels and are dependent on third
parties For example, Vishal Retail is increasingly shifting from manufacturing to third
party sourcing primarily because of increase in categories for private labeling and
volumes. Vishal Megamart's offers salt and toothbrush under its `V-need' brand.25

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There is hardly any special advertising created for own labels, expected for the odd
leaflet or two. Most retailers rely on shelf space and signage’s, and techniques like
sampling and active merchandising at the essential that the packaging and look and
feel are as good as, if not better than national brands, so that customers don’t have a
reason to view the products with suspicion.

The real challenge, however, will be for retailers to take own labels outside their
stores and make them national brands. Following table lists few private libels of
Indian retailers.26

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 Table 2.3 Private Labels with Indian Retailers
Sr. No. Retailer Private Labels Merchandise Details
Maha Saver, Freya Groceries
Aditya Essentials, Pebble Rock Home Décor
Birla Ltd Big Feet Foot Ware
1
Feasters, Kitchen Promise, Best Of India Food Brands
{MORE}
Enrich, 110%, Pestex, Paradise, Germex Home & Personal Care
Daily Groceries, Processed
Smart Choice Foods, Beverages, Home &
Multipurpose Needs
Iland Monks, Mark Nicolas, Scorez, Detailz,
Fashion
Asankhya, Puddles, Little Devils, UNI
2 Spencer’s Maroon Non Stick Cookware
Live Smart Modular Furniture
College Studio Stationary
360 degree Luggage
Great Electronic & Electrical
John Miller, Lombard, Bare, DJ & C, Fashion
Buffalo, RIC
Dream Line Home Segment
Future Tasty Treat, Premium Harvest, Fresh & Pure Food Brands
3
Group
Care Mate Personal Care
Clean Mate Home Care
Koryo, Sensei Electronic & Electrical
Reliance Reliance Select, Reliance Value Staples & Food
4
Retail Dairy Pure Dairy Products
Rei Six Real Magic, Mr. Miller, 6Ten
5 Staples & Food, Home Segment
Ten
Mens’s Ethnic Wear, Western
Wear Men & Women, Mens
Kashish, Stop, Life, Mario Zegnoti, Casual Wear , Jeans Wear,
Shoppers
6 Acropolis, Push and Shove, Vettorio Fratini Men’s Formal Wear, Men’s
Stop
Formal Wear, Eye Wear,
Premium Men’s Wear

Source:Futurebazzar.com;Relianceretail.com;indiaretailbiz.com;spencersretail.com.., sixteen.com
Advertising Express December 2008 pg 20; http://www.retailmantra.com/shoppers-stop-private-
label-business-outlook/ June 20, 2009)

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2.8 Snapshot of Indian Retailer’s Depth of Private Labels27

Private labels are likely to continue to grow in the current financial environment as
cash-strapped consumers' perception of the products as a 'cheaper option' changes.
Part of private label growth in a recession is permanently sustainable. As consumers
learn about the improved quality of private labels in recessions, a significant
proportion of them are likely to remain loyal to private labels, even after the necessity
to economize on purchases is no longer required.

Higher profile, quality-focused private label brands are likely to prosper as consumers
begin to reassess their views of own-brand goods. Also, with increase in competition
and rising pressure on margins, private label are increasingly getting attention due to
the aggressive marketing of retailers at par with branded goods. Following states the
present depth of private labels in few Indian retailers.

Table 2.4 : Indian Retailer’s depth of private labeling

Indian Retailers Depth of Private Labels (%)
Trent 90
Reliance 80
Pantaloon 75
Nilgiris 38
Indiabulls / Piramyd 30
Food world 22
Shoppers Stop 20
Subhiksha 19
Spencers 10
Ebony 10
Rei Six Ten 6
Aditya Birla Retail 3
Source : Images Retail Report 2009

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2.9 Long-term Growth Drivers of Private Label28

The conclusion that private-label penetration will have reached 50 percent by 2025 is
based on assumptions about food retail market structure. The underlying drivers for
private label growth are scattered over a number of trends/strategies. To complicate
matters, there is a strong interdependency between the growth factors. The 11
arguments for private label growth are summarized below:
1. Consumer acceptance levels for private label are rising, due to price
sensitivity (economic recession or hard discount competition).
2. Continued industry consolidation in developed food retail markets (Western
Europe, the US and Australia). Economies of scale in logistics, procurement,
marketing, store opening strategies and private label will continue to fuel
sector consolidation. Larger operating scale provides more opportunities to
launch private label.
3. Adoptions of modern retail i.e. more professional and larger scaled
procurement organizations in developing markets (Central and Eastern
Europe, Russia and Turkey).
4. Growing share of hard discount due to increase price awareness, a consumer
trend toward demand polarization (indulgence versus value for money) and
ongoing expansion in developing countries.
5. Hard discount competition is driving value private-label growth. Service-
oriented supermarkets are expanding their value private-label offering, aiming
to retain traffic and prevent customers defecting to hard discounters.
6. Need for diversification among service oriented supermarkets. The ongoing
convergence of service and price-oriented business models is driving the need
for service-oriented supermarkets to differentiate through premium private
label.
7. More comprehensive private-label strategies of larger retailers. Many top-
three retailers in developed countries are still in the early stages of private-

54
 label adoption and have only recently started to look at private label as one of
the pillars for growth.
8. Need for diversification among smaller supermarkets. Smaller, regional food
retailers need private label to help them carve out a niche position in a rapidly
consolidating market.
9. Increased professionalism of private-label suppliers. The emergence of
specialist private-label suppliers is increasing professionalism and quality
levels, thus improving the ‗image’ of private label among retailers and
consumers.
10. Consolidation among A-brands undermines retailers’ negotiation positions.
Larger A-brand suppliers drive the need for food retailers to reinforce their
position at the negotiation table by expanding their private-label offering.
11. Price competition in private-label supply is expected to heat up. As private
label and A-brands is winning share; producers of delisted B-brands are
looking for alternative products/markets to safeguard their production capacity
utilization rates (and profitability). This is expected to fuel price competition
in private-label supply.

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2.10 Rationale of Study

The birth of retailers owns private label brands are a major landmark in the
history of retailing. According to De Charnatony and McDonald (2003), the changing
nature and popularity of retailing in the 19th Century was the main reason for growth
of this new concept.29 Subsequently due to rise of private label brands, branding in
retail sector has also taken a new shape and significance (Gilbert, 2002) 30 . This
became increasingly apparent as more retailers have been launching a wide range of
products, improving quality standards, offering reasonable prices, implementing
effective promotional strategies and using bigger distribution networks. Private labels
were actually introduced in the grocery market by some early big retailers as cheaper
alternatives for premium ones. In last couple of years these goods have gradually
expanded their presence across all product categories ranging from clothing,
electronics, health, footwear, beauty, OTC (over the counter) medicine, etc. and at
present all the leading groceries offer a range of products under private-label brands.

A report shows that these brands are the top sellers in many product categories
sold in the US supermarkets (Quelch and Harding, 1996)31. These brands were found
to be successful reasons for the same are as follows:

1. They have higher gross margin opportunity to retailers than premium brands
(Raju et. Al., 1995). 32 Although they are typically priced much lower than
premium brands, lower marketing costs compensate for lower prices allowing
them to enjoy a higher overall gross margin (Mason et. Al., 1994).33
2. Retailers often advertise premium brands to attract customers to their stores
and sell their own brands (generally placed along with premium ones) to the
price sensitive segment (Hoch and Banerjee, 1993)34.
3. Retailers use them as bargaining tools for asking manufacturers for better
trading terms such as cheaper prices, more promotional items, quicker
deliveries,35,36,37 etc. (Ailawadi et. Al. 1995); Narasimban and Wilcox, 1998,

56
 and Chintagunta et. Al. 2002). Moreover these brands enable retailers to get
better deals from manufacturers in the form of lower wholesale prices on
premium brands (Mills 1995)38.
4. Retailers can build distinctive store image with these brands (Richardson et.
al. 1994; Grewal et. al. 1998; and Sayman et. al., 2002).39,40
5. Private label brands with strong and exclusive image can develop store loyalty
resulting in more store traffic (Levy and Weitz, 2001).41

Hence from the above factors leading towards success of private label it is
believed that rise of these brands will continue in future with significant improvement
in product quality, reasonable price, higher brand image as well as store image. For
capturing a greater portion of private label market, the retailers now a days are trying
ever means – expanding product range, offering wide varieties in attractive
packaging, using wider distribution networks, doing customer – oriented sales –
promotion activities, etc.

The Indian retail market is the third largest retail destination globally. It has been
ranked as the most attractive emerging market for investment in retail sector by AT
Kearney’s’ ninth annual Global Retail Development Index (GRDI), in 2010. A Mc
Kinsey report ‗The rise of Indian Consumer Market’, estimates that Indian Consumer
Market is likely to grow four times by 2025. According to the Investment
Commission of India, the overall retail market is expected to grow from US$ 262
billion to about US$ 1065 billion by 2016, with organized retail amounting to US
$165 billion (Approximately 15.5 % of total retail sales). FDI inflow as on September
2009, in single brand retail trading, stood at approximately US$ 47.43 million,
according to Department of Industrial Policy and Promotion (DIPP). India’s’ overall
retail sector is expected to rise to US$ 833 billion by 2013 and to US$ 1.3 trillion by
2018, at a compounded annual growth rate (CAGR) of 10 %.

India’s FMCG sector is the fourth largest sector in the economy and creates
employment for more than three million people in downstream activities. 42 Its

57
principal constituents are Household Care, Personal Care and Food & Beverages. The
total FMCG market is in excess of Rs. 85,000 Crores. It is currently growing at
double digit growth rate (15%) and is expected to maintain a high growth rate. 43
FMCG Industry is characterized by a well established distribution network, low
penetration levels, low operating cost, lower per capita consumption and intense
competition between the organized and unorganized segments.44

Indian Scenario of Selected Categories: Consumer Durable, Personal Care &

Home Care Products.

Consumer Durables in India45

India’s consumer durable market is riding the crest of the countrys economic
boom. Driven by a young population with access to disposable incomes and easy
finance options, the consumer market has been throwing up staggering figures. The
Indian consumer durable market, with a market size of US$ 27.38 billion in 2008 –
09, has grown by 7.1% in 2009-10.

The purpose of this study is to explore the attributes and to known the attitudinal
difference amongst the selected private label categories viz. consumer durable, home
care product, and personal care products across different selected demographic
factors in four major selected cities of Gujarat State. To meet the research objectives
most significant attributes were identified from the in depth literature review on
private label, and respondents were asked to compare them with national brands with
respected to different selected product categories on a likert scale (1 to 7) from least
significant to highly significant.

Richardson, Jain, and Dick (1996) present what is probably the most extensive
such framework offered to date. They argue that consumers' propensity to purchase
Private Label’s depends on certain demographic factors, such as income, family size,
and age. Richardson, Jain and Dick did not study category-level variations in these
factors.

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In this research, we focus upon these consumer-level inter category attitudinal
differences. By doing so, we hope to shed light on what has made Private Label’s
successful overall, drawing implications both for retailers marketing Private Label’s
as well as the National Brands that compete with them. Major implication of the
study is to give retail sector, private labels as pivotal strategy during times of sluggish
growth and long term establishment of the private label brands across various
categories to sustain in market.

Personal Care Products in India46

Skin Care
The total skin care market is estimated to be around Rs. 3,400 Cr. The skin
care market is at a primary stage in India. The penetration level of this
segment in India is around 20 per cent. With changing life styles, increase in
disposable incomes, greater product choice and availability, people are
becoming aware about personal grooming. The major players in this segment
are Hindustan Unilever with a market share of ~54 per cent, followed by
CavinKare with a market share of ~12 per cent and Godrej with a market
share of ~3 per cent.
Hair Care
The hair care market in India is estimated at around Rs. 3,800 Cr. The hair
care market can be segmented into hair oils, shampoos, hair colorants &
conditioners, and hair gels. Marico is the leader in Hair Oil segment with
market share of ~ 33 per cent; Dabur occupy second position at ~17 per cent.
Shampoos
The Indian shampoo market is estimated to be around Rs. 2,700 Cr. It has the
penetration level of only 13 per cent in India. Sachet makes up to 40 per cent
of the total shampoo sale. It has low penetration level even in metros. Again
the market is dominated by HUL with around ~47 per cent market share; P&G
occupies second position with market share of around ~23 per cent.

59
 Antidandruff segment constitutes around 15 per cent of the total shampoo
market. The market is further expected to increase due to increased marketing
by players and availability of shampoos in affordable sachets.
Oral Care
The oral care market can be segmented into toothpaste - 60 per cent;
toothpowder - 23 per cent; toothbrushes - 17 per cent. The total toothpaste
market is estimated to be around Rs. 3,500 Cr. The penetration level of
toothpowder/toothpaste in urban areas is three times that of rural areas. This
segment is dominated by Colgate-Palmolive with market share of ~49 per
cent, while HUL occupies second position with market share of ~30 per cent.
In toothpowders market, Colgate and Dabur are the major players. The oral
care market, especially toothpastes, remains under penetrated in India with
penetration level ~50 per cent.

Household Care Products in India47

Personal Wash
The market size of personal wash is estimated to be around Rs. 8,300 Cr. The
personal wash can be segregated into three segments: Premium, Economy and
Popular. The penetration level of soaps is ~92 per cent. It is available in 5
million retail stores, out of which, 75 per cent are in the rural areas. HUL is
the leader with market share of ~53 per cent; Godrej occupies second position
with market share of ~10 per cent. With increase in disposable incomes,
growth in rural demand is expected to increase because consumers are moving
up towards premium products. However, in the recent past there has not been
much change in the volume of premium soaps in proportion to economy
soaps, because increase in prices has led some consumers to look for cheaper
substitutes. The size of the detergent market is estimated to be Rs. 12,000 Cr.
Household care segment is characterized by high degree of competition and
high level of penetration. With rapid urbanization, emergence of small pack

60
 size and sachets, the demand for the household care products is flourishing.
The demand for detergents has been growing but the regional and small
unorganized players account for a major share of the total volume of the
detergent market. In washing powder HUL is the leader with ~38 per cent of
market share. Other major players are Nirma, Henkel and Proctor & Gamble.

2.11 Research Objectives

1. To study & find out attributes on which consumers evaluate both Private
Labels (PLs) & National Brands (NBs).
2. To find out & compare the overall customers’ attitude towards private label
versus national brands across different attributes, selected categories, as well
as demographic variables.
 Different attributes viz.
 Quality,
 Price,
 Risk Associated,
 Packaging
 Image;
 Selected categories viz.
 Consumer Durables,
 Personal Care,
 House Hold Care Products;
 Demographic and other variables viz.
 City,
 Gender,
 Age,
 Monthly Household Income,
 Type of Family,
 Occupation,
 Marital Status,
 Shopping Frequency.

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