Price-conscious consumers drop top brands, shift to private labels

BANGALORE: From a retail strategy known to gel well with the downtrading consumer, private labels are turning out to be strong contenders to top brands, as retailers show up with market leading in-store sales figures.

Take, for instance, Aditya Birla���s retail arm More, whose Feaster���s private food label outsells iconic instant noodles brand Maggie across many zones.

���We also sell more than the benchmark leader in the non-aerated fruit drink and squash category across our stores on a national level,��� Aditya Birla Retail CEO Thomas Varghese said. National brands such as Maaza and Kissan operate in these categories, respectively.

More currently sees its private labels accounting for about 5% of total revenues, but expects this to jump to 15-20% soon. Private labels are generally priced 15% lower than their branded counterparts, offering the retailer an incremental margin over the earnings from a national FMCG brand.

Traditionally, private labels have performed well in low-branded categories such as rice, sugar and salt.
According to data from the Future Group, the potato chips category is dominated by brands such as Frito lay, Future Group���s Tasty Treats has registered second place with an in-store share of 22%, falling back by a small margin.

In the namkeen (ready-to-eat snacks) category, driven by brands such as Haldirams, Tasty Treats has become a top seller at the group���s Food Bazaar outlets with a 21% in-store share. The company���s Care Mate diaper brand has clocked a share of about 41% in a category known to be built by brands such as Huggies. The group plans to grow into a Rs 10,000-crore consumer products company by 2012, with private labels contributing a third of its revenue.

RPG Group���s Spencer���s Retail, which sees private labels accounting for 25% of its revenue over the next two years from 10% at present, sees a similar trend.

���We have seen our Smart Choice cookies, diapers and agarbattis sell more than market leaders across the store chain. Besides, the lower pricing with quality being on a par, the downtrading customer has prompted these higher sales,��� vice-president (marketing) Samar Sheikhawat said.

The Future Group���s private apparel label John Miller, which grew into the largest selling apparel brand within the company���s Central format, has been spun off into standalone stores over the past few months. This move will see John Miller taking on brands operating in the mid-price segment.

But, partner and industry leader at Ernst & Young Pinaki Ranjan Mishra said market leaders still drive store footfalls and the chances of them being upstaged in certain zones is dependent on the number of stock-keeping units.