Private labeling

PRIVATE LABELINGPresented by

Paluru munesh

Vignan university

Vadlamudi.

WHAT IS PRIVATE LABELING?

products or services are typically those manufactured or provided by one company for offer under another company's brand.

They are often positioned as lower cost alternatives to regional, national or international brands.

WHY PRIVATE LABELING?

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

CHANGING LIFESTYLE

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

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

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

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

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!!!

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

MARKET EXPANSION

Market expanding organically

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

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.

TYPES OF PRIVATE LABEL

CONTD……

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

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

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



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

WHAT THIS MEANSTo 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

Private labeling

Education

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