Private Label Demand Grows in India

2009-11-11 | 07:50

Household and personal care demand remains low.

Private labels are increasingly posing a threat for fast-moving consumer goods (FMCG) companies in India, according to a new consumer insight report published by Datamonitor. The consumer survey reveals that while the adoption of private labels began with its value proposition, consumers perceive these store brands are offering quality at par with other national brands.

“The increased scale of operations of retailers is shifting the bargaining power from FMCG companies to retailers. The growing adoption of private labels can compel FMCG companies to reassess their trade margins or relationship with retailers”, explains Vaibhav Khera, director, India Consumer Markets Research at Datamonitor.

Indian retailers are laying a strong emphasis on the growth of their private label brands which is bringing in greater margins and is helping them gain greater bargaining power with FMCG companies. Retailers, which started launching their private labels as a value alternative to national brands, are now mirroring these national brands with respect to product packaging and claims and are offering these products at a lower price. Retailers are also launching products with tiered pricing to cater to a wider audience while holding on to their store positioning.

Datamonitor expects that a customer satisfied with a private label brand in a low involvement category such as household care will have a greater propensity of trial in other categories such as food and beverages and personal care.

Though private labels are increasingly gaining a strong foothold in the organized retail segment, FMCG companies can avoid this competition by investing in innovation and product differentiation. Vaibhav believes that “FMCG companies should play on their strengths and monetize opportunities emerging due to changing consumer behaviour.”