PRIVATE LABEL Presented by:- Love kush (2k81M49) Ram Naresh (2k81M62) Pratiksha Tripathi (2k81M49) Tanu Rawat (2k81M49) Ashutosh kumar (2k81M10)

What is private label Private labels are generally introduced to get higher gross margins from branded products. They also place the retailer at an advantage over the branded FMCG players who have historically been arrogant with the retailers.

Private labels are generally introduced to get higher gross margins from branded products. They also place the retailer at an advantage over the branded FMCG players who have historically been arrogant with the retailers.

Why private label Burgeoning Middle-class Changing Lifestyle Consumer Choices Regional Preferences Demand Growth @ higher trajectory Enter early birds Critical factors for high-end users Market Expansion

Burgeoning Middle-class

Changing Lifestyle

Consumer Choices

Regional Preferences

Demand Growth @ higher trajectory

Enter early birds

Critical factors for high-end users

Market Expansion

Burgeoning Middle-class 182 million families; strong upward mobility due rising incomes and aspirations Incomes influencing lifestyles Higher propensity to consume

182 million families;

strong upward mobility due rising incomes and aspirations

Incomes influencing lifestyles

Higher propensity to consume

Changing Lifestyle Urbanization (cramped houses); nuclear families; Working women Quality & health conscious Convenience; Eating-out turning fashionable; Demonstration effect

Urbanization (cramped houses); nuclear families; Working women

Quality & health conscious

Convenience; Eating-out turning fashionable;

Demonstration effect

Consumer Choices Local flavour preferred; do imported pulses meet local need? organoleptic tests necessary; Demand price elastic; high prices lead to substitution with cereals; some cases with low cost pulses

Local flavour preferred; do imported pulses meet local need? organoleptic tests necessary;

Demand price elastic; high prices lead to substitution with cereals; some cases with low cost pulses

Regional Preferences Gram: across India; Pigeon pea: central & south India Black matpe: across India; but strong southern demand; Moongbean: east India, Mah’tra Lentils: north and east India

Gram: across India;

Pigeon pea: central & south India

Black matpe: across India; but strong southern demand;

Moongbean: east India, Mah’tra

Lentils: north and east India

Buying Habits Most buy from small retail units that sell loose; purchase quantum depends on income level; Frequency & quantity purchased decline as incomes rise; Prepackaged pulses at co-op stores & private retail chains

Most buy from small retail units that sell loose; purchase quantum depends on income level;

Frequency & quantity purchased decline as incomes rise;

Prepackaged pulses at co-op stores & private retail chains

Demand Growth @ higher trajectory Rising institutional demand Households want clean, graded, hygienic, packaged, ready-to-cook ingredients Urbanites now make do with convenience (not freshly cooked) Food safety & food quality

Rising institutional demand

Households want clean, graded, hygienic, packaged, ready-to-cook ingredients

Urbanites now make do with convenience (not freshly cooked)

Food safety & food quality

Enter early birds Entry of corporates; Retail revolution; Supermarkets mushrooming Private labels; no national brands Regional value-added products – food habits in India change every 100 kms!!!

Entry of corporates;

Retail revolution; Supermarkets mushrooming

Private labels; no national brands

Regional value-added products – food habits in India change every 100 kms!!!

Critical factors for high-end users Quality, size, shape, colour, cooking time, taste; 20% consumption by high-end ( 3 mn.t.) and growing Little product differentiation; so, quality assurance is key

Quality, size, shape, colour, cooking time, taste;

20% consumption by high-end ( 3 mn.t.) and growing

Little product differentiation; so, quality assurance is key

Market Expansion Market expanding organically Trade can accelerate by lobbying government to include pulses in welfare programs – PDS, midday meal, food-for-work schemes ;

Market expanding organically

Trade can accelerate by lobbying government to include pulses in welfare programs – PDS, midday meal, food-for-work schemes ;

Why The Growth? Consolidation of retailers Brands sell to same retailers and become a commodity Retailers need differentiation and better margin Declining retail prices (women’s apparel prices dropped 2.4% 2007 vs. ‘06) Globalization of Production

Consolidation of retailers

Brands sell to same retailers and become a commodity

Retailers need differentiation and better margin

Declining retail prices (women’s apparel prices dropped 2.4% 2007 vs. ‘06)

Globalization of Production

Global Sourcing How do retailers achieve low PL prices? Imitate designer brands to reduce R&D costs Source direct with factories to eliminate middlemen cost Buy in larger volume to receive lower cost Source from low cost, duty and/or quota free countries: China, India, Bangladesh, Vietnam, Pakistan, South & Central America, Africa

How do retailers achieve low PL prices?

Imitate designer brands to reduce R&D costs

Source direct with factories to eliminate middlemen cost

Buy in larger volume to receive lower cost

Source from low cost, duty and/or quota free countries: China, India, Bangladesh, Vietnam, Pakistan, South & Central America, Africa

Types of Private Label Store brands - The retailer's name is very evident on the packaging. Store sub-brands - Products where the retailer's name is low-key on the packaging. Umbrella branding - A generic brand, independent from the name of the retailer. Individual brands - A name used in one category, this is only used to promote a "real" discount product line. Exclusive brands - Again a name used in one category, but to promote "added value" products within the category

Store brands - The retailer's name is very evident on the packaging.

Store sub-brands - Products where the retailer's name is low-key on the packaging.

Umbrella branding - A generic brand, independent from the name of the retailer.

Individual brands - A name used in one category, this is only used to promote a "real" discount product line.

Exclusive brands - Again a name used in one category, but to promote "added value" products within the category

Premium Store Brands What is the preferred PL strategy? Highly competitive - same or better quality at better prices, average 37% less than national brand Higher Gross Margins (est. 58 – 68%) Higher selling price per square foot than other Private label strategies Biggest threat to national brands Brand Loyalty

What is the preferred PL strategy?

Highly competitive - same or better quality at

better prices, average 37% less than national brand

Higher Gross Margins (est. 58 – 68%)

Higher selling price per square foot than other

Private label strategies

Biggest threat to national brands

Brand Loyalty

Private Label Trends Combined effort, a win-win strategy: RELIANCE One time exclusive deal – big bazzar Blending in with Premium brands – subiksha

Combined effort, a win-win strategy: RELIANCE

One time exclusive deal – big bazzar

Blending in with Premium brands – subiksha

National Brand Counter Strategies Develop unique products and stay ahead as a trend leader Create own stores Develop a compelling marketing strategy Increase brand loyalty Combine effort by offering exclusive lines. Create one shot exclusive deliveries and SKUS Evaluate sourcing strategy and production cost Maintain net price (minimal promotions & discounts) Improve forecasting and turn around time

Develop unique products and stay ahead as a trend leader

Create own stores

Develop a compelling marketing strategy

Increase brand loyalty

Combine effort by offering exclusive lines.

Create one shot exclusive deliveries and SKUS

Evaluate sourcing strategy and production cost

Maintain net price (minimal promotions & discounts)

Improve forecasting and turn around time

Future of Private Labels Becoming national premium lifestyle brands: TATA WESTSIDE Branching out to create specialty chain business: VISHAL MEGAMART ,RELIANCE FRESH Increasing depth of multi dimensional merchandising product mix (Tony Hawk mens, boys, footwear and etc) Spin off PL brands (Aeropostale) Cannibalize weaker PL brands

Becoming national premium lifestyle brands: TATA WESTSIDE

Branching out to create specialty chain business: VISHAL MEGAMART ,RELIANCE FRESH

Increasing depth of multi dimensional merchandising product mix (Tony Hawk mens, boys, footwear and etc)

Spin off PL brands (Aeropostale)

Cannibalize weaker PL brands

Overview Worldwide Private Label retail sales have passed US$1 trillion 2006 US apparel & shoes retail sales: $358.6 Billion 2006: 45% apparel sales were private label 2005: 39% apparel sales were private label 2002: 35% apparel sales were private label By 2010, private label merchandise expects to increase by 22% to 55% of total apparel sales

Worldwide Private Label retail sales have passed US$1 trillion

2006 US apparel & shoes retail sales: $358.6 Billion

2006: 45% apparel sales were private label

2005: 39% apparel sales were private label

2002: 35% apparel sales were private label

By 2010, private label merchandise expects to increase by 22% to 55% of total apparel sales

Private Label Pros & Cons PROS Exclusivity & differentiation Bring customer loyalty Better margin Better control in deliveries Brand equity Freedom in pricing strategy Increase bargaining power with both national brands and PL factories CONS Inventory risk Higher R&D expense Higher marketing expense No markdown or return allowance from branded suppliers If product fails, will create negative image Quality control, complex production & import issues

PROS

Exclusivity & differentiation

Bring customer loyalty

Better margin

Better control in deliveries

Brand equity

Freedom in pricing strategy

Increase bargaining power with both national brands and PL factories

CONS

Inventory risk

Higher R&D expense

Higher marketing expense

No markdown or return allowance from branded suppliers

If product fails, will create negative image

Quality control, complex production & import issues

What This Means To differentiate To gain and maintain consumer loyalty To achieve higher gross margin To compete with national brands Private brands will continue to play an important part of the assortment to their growth strategy Become national lifestyle premium brands Deploy a multi-layer strategy in brand, price and quality Cannibalize weaker private and national brands

To differentiate

To gain and maintain consumer loyalty

To achieve higher gross margin

To compete with national brands

Private brands will continue to play an important part of the assortment to their growth strategy

Become national lifestyle premium brands

Deploy a multi-layer strategy in brand, price and quality

Cannibalize weaker private and national brands

Thank you ?