National Brands versus Private Labels and Generics

National brands generally sell for more than house brands (private labels, such as
Safeway's Cragmont or Town House labels) or generics. Presumably consumers
believe that the national name brands are of higher quality. Whether this belief is
true or not is irrelevant to the market outcome so long as consumers believe it.
There is very little difference in quality between some national brands and store
brands, such as aspirin and bleach; yet consumers pay substantially more for
national brands. In other cases, such as some canned fruits and vegetables, there
are substantial differences between national brands and generics that consumers
can determine in blind taste tests.
It is often difficult to determine, without careful chemical analysis or blind taste
tests, whether house brands or generics are equivalent to national name brands.
There is good reason for uncertainty. For example, Wonder Bread produces many
of the private-label breads. That does not imply, however, that private brands are
necessarily of the same quality as the name brand. Wonder Bread may vary its
formula when it produces private brands, and the private brands may not be as
fresh.
Similarly, Falstaff, one of the largest brewers of beer in the United States under its
own label, is also the largest supplier of private-label beer. Most private-label
brands of bourbon, scotch, vodka, and gin are produced by well-known namebrand companies. Sears often induces major manufacturers of typewriters, water
heaters, and other products to produce Sears (Kenmore) brand products to the same
or higher standards than the manufacturer's own brand.
Consumers may be willing to pay more for national brands to avoid the risk of
buying a low-quality product. As a result, if they can be induced to try the cheaper
brands and can see that their quality is as good as the name brand's, they may
switch.

A Gallup Poll found that nearly 80 percent of people who try a product with a
store-brand label become repeat buyers. Typically the store-brand buyer is a bettereducated, affluent person who reads and understands the labels.
Many consumers do study labels and prices. The Gallup Poll indicates that 40
percent of shoppers shop selectively: They do not just choose the national brand,
but compare products on a variety of dimensions (quality, price, and special
offers). Nonetheless, nationally, only 2 or 3 percent of store-brand sales are
generics.
Many, but not all, national-brand products are of a superior quality and hence sell
for substantially higher prices than private labels. The Private Label Manufacturing
Association had an independent research firm compile a "Market Basket List" for
17 staple items in June 1984 (shown below). The total cost for the private labels
was $25.59 compared to $34.15 for the name brands. Thus, private-label shoppers
pay $8.56 less (25 percent less), though not necessarily for comparable quality
items.
Size

Name brand

Private label

Corn flakes

18 oz.

$1.35

$1.12

Orange juice, concentrated

6 oz.

.76

.59

Coffee, regular grind

16 oz.

2.79

2.37

Margarine, stick

16 oz.

.72

.54

Bacon, sliced

16 oz.

2.61

1.81

Peanut butter, creamy

18 oz.

1.62

1.41

Grape jelly

18 oz.

1.32

1.06

Chili with beans

15 oz.

1.01

.82

Cut beans, frozen

9 oz.

.78

.57

Mashed potatoes, instant

16 oz.

1.41

1.17

Vegetable oil

48 oz.

3.24

2.07

Pineapple chunks

20 oz.

.90

.79

Aluminum foil

75 ft.

1.70

1.62

Plastic wrap

200 ft.

1.54

.79

Toilet tissue, 2-ply

4-pk.

1.33

1.02

Disposable diapers

48 ct.

9.01

6.73

Dish detergent

32 oz.

2.06

1.11

A market with a small number of name-brand products and a number of generic

products is said to consist of an oligopoly with a competitive fringe. See Chapter 4
for a discussion of the analogous market structure of a dominant firm with a
competitive fringe.
Manufacturers, retailers and consumers: a win-win-win strategy
After years of struggle, the Fast Moving Consumer Goods (FMCG) industry is
poised to growth. In countries such as France, the United Kingdom, Germany and
the United States, shoppers have started to spend again. Countries such as Spain,
Greece and the Netherlands remain in economic problems although they start to
show little signs of recovery and sales seem to have an opportunity.
Anyway, global recession has changed consumers shopping behavior and there is
no return to pre-recession habits. In this context, manufacturers and retailers must
work together, given that they need each other. Retailers are demanding more from
their suppliers, and manufacturers from the chains. They have realized that price
wars are unsustainable for both and, even, for consumers who will not accept them
if they mean lower quality products. Manufacturers must focus on joint business
planning with their retail partners and convince them that stocking national brands
benefits the store, generating traffic and a profitable margin for the store. Retailers

are the gateways to customers. They control shelf-space, so national brands need
retailers to get their product to the end consumer. By optimizing their range
assortment, sharing information and working together, retailers and manufacturers
can identify new areas of mutual benefit.
Who is at the end? A new consumer..Economic recession has affected
consumers preferences for Private labels and national brands in the retailers
assortments. Consumers have evolved to become harder to find, engage and please.
FMCG has become in a consumer-facing industry; consumers are more in control
of relationships with brands and retailers and are more aware of products and
services theyre being offered. In this context, shoppers are no longer tied to a
brand or retailer and instead theyre looking for value, whether that comes from a
low price or high quality. Therefore, both manufacturers and retailers have many
new areas to explore for retail recovery. The goal is clear: to ensure consumers
products and brands are available at the right time, through the right channel and at
the right price.
The broad topics of the conference are:
Private label portfolio and assortment management: To address questions
on introduction and marketing of premium store brands, national brands to
exclude (delist) and include, optimal assortment size, consumer store
patronage, etc.
Private label pricing and promotion: How should standard and premium
private labels be priced relative to each other and relative to the national
brands in the assortment? Are store brands promoted if so, what types of
promotions and how is it coordinated with NB promotions? Etc.

 National brand strategies: How to cope with private label penetration,

especially premium private labels? Should they engage in dual branding,
coupons? Etc.
The specific targeted topics are, but not limited to, the following:
Addressing assortment from a shopping basket perspective
Retailers investing in their own manufacturing capacity
Optimizing assortment range at different levels (locally, regionally,

nationally)
Mix of national brands and PLs in retailers assortments.
Assortment decisions in times of economic crisis and eventual recovery.
Sharing information for building the right assortment
Local vs. global: getting closer to consumers
Delisting national brands and the effects on the distribution channel

relationship.
Price, promotion and shelf-placement decisions for retailers portfolios
Optimizing shelf-space distribution between national brands and PLs
Developing a modern PL tiered strategy including new-value and super

premium PL ranges
Product Innovation decisions for national brands and PLs
Retailers starting to use promotions with PLs
Recent food and non-food strategies for national brands and PLs
Developing new retailing formats

We look forward to meeting you in Barcelona and having a great time, sharing
ideas and experiences in an amiable gathering.
The organizers.

NATIONAL BRANDS
Nokia
Nokia has established itself as the market and brand leader in the mobile devices
market in India. It manufactures a wide range of mobile devices and provides
people with experiences in music, navigation, video, television, imaging, games
and business mobility through these devices. It handles research and development,
network infrastructure businesses and company handsets.
With the global launch of Ovi, the company's Internet services brand name, Nokia
is renewing itself to be at the forefront of the convergence of internet and mobility.
It has three Research & Development centers in India, based in Hyderabad,
Bangalore and Mumbai. Nokia has its manufacturing unit in Chennai.
Nokia, Samsung and Sony have retained their respective positions as the most
trusted brands in india
Lux
Lux soap was launched in India in 1929. The very first advertisement in 1929
featured Leela Chitnis as its brand ambassador. It was branded in India as "the
beauty soap of film stars'.
Today, the brand is still heavily advertised in India using Bollywood stars.
Madhubala, Mala Sinha, Hema Malini, Sridevi, Madhuri Dixit, Juhi Chawla,
Karisma Kapoor, Rani Mukerji, Aishwarya Rai, Amisha Patel, Kareena Kapoor

and Tabu have all been past brand ambassadors. Priyanka Chopra is the present
brand ambassador of Lux.
Amul
Amul, the milk and milk products brand, owned and marketed by Gujarat Cooperative Milk Marketing Federation
Apart from butter and packaged and loose milk, Amul sells cheese, ice-cream,
yogurt and desserts like shrikhand. GCMMF had announced last fortnight that its
sales had crossed $2.2 billion (Rs 9,774 crore) in the 2010-11 fiscal.
Tata
Tata Group is an Indian multinational conglomerate company headquartered in
Mumbai, Maharashtra, India. It is one of the largest conglomerates in India by
market capitalisation and revenue.
It has interests in communications and information technology, engineering,
materials, services, energy, consumer products and chemicals.
6 to 10

Lifebuoy
Popular for over 100 years in USA, the light red soap is still available in india.
Lux stands for the promise of beauty and glamour as one of India's most
trusted personal care brands.

Horlicks
Horlicks is the leading Health Food Drink in India and enjoys more than 50%

of the market. Horlicks is owned by GlaxoSmithKline (current as of 2007.)

The largest markets for Horlicks are, in order, the UK, India and Malaysia

Dettol India.
Dettol is the name of a commercial liquid antiseptic belonging to a product
line of household products, Dettol is the gold standard of effective germ kill
recommended by medical experts and healthcare professionals for its proven
ability to protect

Pepsodent
Pepsodent is the leading brand in most Asian Countries with Indonesia and
India as the biggest market.

Britannia
In 1975, the Britannia Biscuit Company took over the distribution of biscuits
from Parry's who till now distributed Britannia biscuits in India.

11 - 20

Welcome to Reliance Communications

Reliance Mobile is one of the many businesses of Reliance Communications
Ltd. One of the leading mobile service brands in India

Close-Up
Close-Up is the original youth brand in India

Airtel
Leading prepaid mobile, postpaid mobile services, broadband internet
connection, direct to home, dth, landline, blackberry, home phone , calling
cards, India telecom operator, prepaid tariff, postpaid tariff plans from Airtel.

State Bank of India

State Bank of India is the largest bank of India in terms of Assets, Net
Earnings & Market Share with a vast network of 10000+ branches in India

Clinic Plus Shampoo

Clinic Plus Daily Care Shampoo is one of India's most popular shampoo

Pond's
For over 150 years, Pond's has helped women across the world care for their
skin. And through unceasingly effective products, designed to help women

Life Insurance Corporation of India

The Oriental Life Insurance Company, the first corporate entity in India
offering life insurance coverage, was established in Calcutta in 1818

Fair & Lovely

Fair & Lovely was developed in 1975. Nationally marketed since 1978, this
'fairness cream' brand has been extensively tested with consumers in India

Bharat Sanchar Nigam Limited

BSNL is India's oldest and largest Communication Service Provider (CSP).
Currently has a customer base of 90 million as of June 2008

LG
LG Electronics India offers LCD TVs, Plasma Screens, Flat Panel Televisions,
Full HD TV (Scarlet), Home Theatre System, GSM Mobile phones, Monitors,
Desktop PC, Laptop, Refrigerator, Washing Machines, DVD Player,
Microwave Oven & wide range of ho

Private Label Brands in Indian Retail Industry

ISSN (Print): 23195479, 2014 37 Private Label Brands in Indian Retail Industry
1T.Subha, 2R. Kirthika, 3 P. S. Narayanasamy 1,2,3Assistant professor, School of
management, VLB Janakiammal College of Arts & Science, Kovaipudur,
coimbatore-641042. Abstract:-

Private

label

brands

are

typically

those

manufactured or provided by one company for offer under another company's

brand. Private label goods and services are available in a wide range of industries
from food to cosmetics to web hosting. They are often positioned as lower cost
alternatives to regional, national or international brands, although recently some
private label brands have been positioned as "premium" brands to compete with
existing "name" brands. Organized retail is on the threshold of a boom in India.
But as companies line up to grab a bigger and bigger slice of the retail pie, another
battle is likely to change the face of the industry -- the one between the
manufacturer brands and the retail chains private label brands, which are far from
being just cheap generics. Worldwide experience shows that as retailers become
more powerful, they have increasingly focused on their own brands at the expense
of manufacturer brands. Private label brands, which occupy less than 5 per cent of
the market in India now, are likely to corner 50 per cent of the market as the retail
space opens up and matures. The article discusses about the effective use, role,
share, creation and development, promotion and future of private labels in the
Indian retail industry. INTRODUCTION TO PRIVATE LABEL BRAND: What
keeps brand managers in manufacturing companies awake at nights? Would you
say rival brands that are snapping at their heels? You would be way off the mark.
The answer is private labels owned by the retailers themselves, which are also
known as store brands or own labels. Should manufacturers really lose sleep over
what the retailer is doing? Well, private labels are large in developing markets
they account for 40 per cent of Wal-Mart sales ($126 billion or Rs 5,16,600 crore),
50 per cent for Tesco ($36 billion or Rs 1,47,600) and are eating into a larger
chunk of the organised retail sale in developed markets. In Germany, for instance,
private label has shot up from 12 per cent of sales to 34 per cent. This has, in
effect, changed the balance of power between brand manufacturers and retailers,
giving the latter a decided advantage when negotiating terms with the brand
manufacturers. And apart from the multibrand retailers, a category of private label-

only retailers has also been created Ikea, Toys R Us, Zara who sell only
private label brands. ROLE OF PRIVATE LABEL BRAND IN INDIAN RETAIL
Retailing in India is still very primitive. At the moment, private labels almost do
not exist in the country. They are less than 5 per cent of the retail business and still
have a long way to go. But Indian retail is extremely hot and it offers a proposition
that cant be seen anywhere else in the world. Only in China and India can retail
chains have as many stores as they have in the US. In no other country can one
imagine companies having 5,000- 6,000 stores of their own. Heres a little
calculation: in a few years, most retail chains will have close to 5,000 stores in
India. A profit of, say, Rs 5 lakh a store a month would mean a profit of Rs 250
crore. Ten such companies would mean profits of Rs 2,500 crore with their
combined turnover being more than Rs 25,000 crore. In the next 20 years, the
richest Indian or one of the top three richest people in India will surely be a retailer.
Private labels will have a huge role to play in this. As much as 50 per cent of
Indian retail will be occupied by private labels. The question is not whether this
will happen, but when? If the government opens up retail, we would see it happen
within the next 10 or 15 years. SHARE OF PRIVATE LABEL BRANDS IN
INDIAN RETAIL: Private labels constitute around 10-12 per cent of the organised
retail product market in India and their share is likely to grow even in the current
economic environment, says a report by global consultancy firm KPMG. Private
labels are brands that are not owned by a manufacturer or producer but by a retailer
or supplier who gets its goods made by a contract manufacturer under its own
label. In a report titled 'Indian Retail: Time to Change Lanes', KPMG said India is
witnessing an increasing presence of private labels in various segments and retail
players International Journal of Research and Development - A Management
Review (IJRDMR) ISSN (Print): 23195479, 2014 38 are adopting such brands to
address consumer needs and increase profitability. "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 per cent of the organised retail
product mix," it said. The growth of private labels is likely to continue in the
current financial environment as "cash-strapped consumers' perception of the
products as a 'cheaper option' changes," the report added. "Part of private label
growth in a recession is permanently sustainable," KPMG said. Among the major
Indian players, the degree of private label penetration was the highest in Trent with
90 per cent, followed by Reliance Retail (80 per cent), Pantaloon (75 per cent),
Nilgiri's (38 per cent), Indiabulls/ Piramyd (30 per cent) and Food world (22 per
cent). Sl. No. Company Degree of private label penetration 1 Trent 90% 2 Reliance
retail 80% 3 Pantaloon 75% 4. Nilgiris 38% 5. Piramyd 30% 6. Food world 22% In
comparison, international retailers like the US-based Wal-Mart and Tesco of the
UK have 40 per cent and 55 per cent own label brands representation in their
stores, respectively, the report added. Among the reasons for the likely growth of
private labels, KPMG cited higher margins, cheaper price and better bargaining
power for the retailers. "In the long run, the retailer can use the private labels to
attract customers to his outlet. Thus, many retailers are considering increasing their
private label offerings significantly," the report said. Citing retail players like
Shoppers Stop, Tata Trent, Pantaloon, Reliance, Spencer's, and Vishal Retail, the
report said that in India the predominant trend of third party sourcing due to
increase in categories for private labeling and volumes. Creating Private Brands A
significant opportunity for the large retailers is to develop private brands that can
create a proposition of value from the consumer's perspective. A proven example of
this is the Aldi chain in Germany. Almost 95 per cent of the commodities in this
chain consist of local brands. Wal-Mart could not budge the strength of this chain
due to its strong positioning amongst its buyers who enjoyed the value offered to

them though the various brands. This model is often referred to as one of the major
causes of Wal-Mart's failure in Germany. If we look at the Indian market there is
colossal capacity existing with the retailers to explore in this area of private
branding due to the diverse spread of spending power and generic competition at
the lower end of the market. Product categories like FMCG, Fruits, vegetables
which may be bought on daily basis a good quality can draw a premium price from
the consumers at the higher end who are not very sensitive to price as compared to
quality. This section of consumers wants the best of products and would not
hesitate to spend on a private brand which is not well established in the market and
would willingly pay a premium price for such brands provided they get a better
quality. Thus the option of private branding may be suitable for a organized retailer
trying to compete with the local seller catering to the high end consumer. However
if we look at the bottom of the pyramid which is a massive consumer section of
Indian socio-economic continuum we find the presence of generic competition.
There is the reality of minimum wages and a high price sensitivity which makes
the consumer balance between his desire to use branded products from well known
retailers and his income. For these consumers quality means acceptable level of
performance across categories. And hence these consumers may balance their
budget by having a trade-off by buying branded commodities across product
categories. The consumer may buy a few branded products and compromise in the
other product categories for unbranded offerings. Hence there is a massive
potential of developing private labels suitable to the various segments. Big Bazaar
has already started developing such private labels with regard to durable
categories. Develop private label brand: Private labels act as margin generators,
increasing sales Volume by positioning the label as providing higher perceived
value to consumers. In the Long run, they also increase the retailers' bargaining
power with national brand suppliers. Private labels generate customer loyalty by

providing exclusive products, which works Towards differentiation strategy, much

sought after by the retailers. To add to this, the companies can also give their
Private label brands to the small retailers to sell it to the common public. This
move will allow the small retailers to retain those customers who were moving out
in the search of the branded products outside, now they will get all of them at their
door steps. Not only that, the retailer will now be more motivated to sell the private
label branded products to the customers as they to a great extent will also increase
their brand equity. Undoubtedly it will also help the big companies International
Journal of Research and Development - A Management Review (IJRDMR) ISSN
(Print): 23195479, 2014 39 to seek the potential customers easily i.e. helps in
expansion Promotion of the Private label brand: Promotion is that aspect of
marketing communications that keeps the product in the minds of customers and
helps stimulate trial and repeat purchase. Most retail owners and marketing
managers are familiar with promotional strategies such as: Advertising Personal
selling Sales promotions (buy one get one, coupons, introductory offers, etc.)
Public relations & publicity Experiences of Indian companies with Private labels
brand: The Aditya Birla retail launched an experiment across 30 stores in
Visakhapatnam in Andhra Pradesh. Titled Project Vizag, after the colloquial name
of the port city, the strategy places private labels in 25-30% of a stores shelf space,
against a mere 4-5% earlier, Varghese said. The difference is a fourfold increase in
sales, he claimed, and that sales numbers have held up for April, too. According to
Raghav Sehgal, a research analyst at Angel Broking Ltd, Shoppers Stop gets 20%
of its sales from private labels while Future Group gets about 24-25%. India is
still an under-branded country and in each category there is still a lot of scope for
growth, this is where the private label comes in. Future of private label brand
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 arent enough choices. In countries such as