Organised retailers in India are giving a big push to their own private label products to cash in on a growing appetite among consumers for differentiated and value products.
India’s largest hypermarket retailer Future Group, for instance, is looking to launching six-eight new products in the next three-six months. It already has private brands in 40-50 merchandising categories.
“India is an under-branded market, especially in categories such as regional food. We want to be a catalyst and grow the market,” said Devendra Chawla, CEO, Food Bazaar, said. He also heads the company’s private brands business.
Also, private brands offer higher margins for retailers, since distribution and marketing costs of these products are very low.
Future Group sells regional staples such as rice Red Matta from Kerala and Govind Bhog from Bengal, and pulses and spices under its Ektaa brand. It plans to expand the brand into more regional and community food products.
“Private brands are growing 20-25% each year. In certain categories, share of our private brands is as high as 35-40%,” said Chawla.
Chawla said differentiated products such as Ektaa will drive sales of private brands for organised retailers. But it is also bargain hunting in times of high inflation that is driving sales of private brands, said analysts.
Market research agency Nielsen expects India’s private label market to grow five-fold to $500 million by 2015. Private label sales rose 22% in 2012, according to the agency.
Food products such as packaged foods, refined edible oils, breakfast cereals, ketchups and sauces itself account for 75% of total sales of private label goods.
But its not just in food and non-food fast-moving consumer goods (FMCG) segments that private brands are seeing good demand. Consumer durables too are seeing a lot of action.
Tata Group-promoted Infiniti Retail, which runs electronics stores Croma, has products such as air conditioners, washing machines, kitchen appliances, storage devices under its own brand name. This year it has launched new models of mobile phones, tablets among other products.
“We are expecting sales of over Rs. 200 crore from private brands in 2013-14, up from Rs. 128 crore last year,” said Ajit Joshi, CEO and managing director, Infiniti Retail.
An official at another electronics retail chain also said value buyers do tend to seek private brands and some of the products such as air conditioners and TVs have seen good sales. The number of private brands will grow over the years as retailers cash in on higher margins, however, for now, a majority of the consumers still prefer buying products from well established brands, he added.