Retailers will float private labels to take on big brands

Private labels, promoted by modern retailers like Pantaloon Retail, Reliance Retail and Vishal Mega Mart in their stores...

Private labels, promoted by modern retailers like Pantaloon Retail, Reliance Retail and Vishal Mega Mart in their stores, are set to give a run for money to branded labels. With almost all the retailers emphasising more on their own labels, branded goods manufacturers will be at the mercy of retailers who will now decide the prices of goods sold in their outlets.

At least four players 8212; Pantaloon Retail, Reliance Retail, Vishal Mega Mart and Big Apple 8212; are promoting their own labels in several consumer segments like apparel, accessories, furniture and footwear. In three to five years, sale of private labels in their stores may overtake that of branded labels, say industry experts. Some retailers including the Kishore Biyani-promoted Future Group plan to make their private labels available at other stores too.

Reliance Mart, Reliance Industries Ltd8217;s RIL hypermarket format, stocks more than 50 per cent of private labels in its apparel section. 8220;We hope to increase this further,8221; said Reliance Retail president and chief executive apparel Sriram Srinivasan.

In the Future Group8217;s flagship stores Big Bazaar and Food Bazaar, 40 per cent of milk and dairy products sales were accounted for by its private label, Fresh n Pure. 8220;Some Pantaloon private labels will go national and will be made available even at non-Pantaloon stores,8221; said Future Brands chief executive officer Santosh Desai.

The Future Group plans to kick-start this initiative with two private apparel labels, John Miller annual sales of Rs 100 crore and DJC Rs 250 crore. Within three years of going national, annual sales of these two brands should increase to Rs 500-1,000 crore, according to Future Group estimates.

One of the reasons why retailers are increasingly switching to private labels is that Indian consumers are cost-sensitive. Most leading retailers are adding cheaper private labels alongside branded goods to demonstrate the difference in their prices. 8220;Presently, we have 30 per cent private labelled goods, which we intend to increase beyond 50 per cent in the next few years,8221; said Rajat Gupta, general manager sales of Big Apple, a supermarket chain in North India. Big Apple intends to introduce private labels in apparel, bakery and confectionery.

Retailers admit that margins are huge in private labels 8212; 30-35 per cent in some categories since they cut down on advertising, marketing and distribution costs. 8220;In such a scenario, where private labels might overtake branded labels by 2012, branded goods companies will be forced to buy retail shelf space at greatly increased margin for the retailer, thereby eroding their own profitability,8221; says a Technopak Advisors report. The only segments immune from the challenge posed by retailer8217;s brands will be consumer durables, electronics and lifestyle brands, the report adds.

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By 2013, five leading retailers are likely to have private label scale by volume and value for many consumer product categories. This projected growth in private labels will be comparable with the total size of many consumer product companies.

Turf Tussle

8226; Future Group plans to go national with its private labels

8226; Reliance to increase number of private labels in Apparel from 50

8226; Private labels may overtake branded labels by 2012, says Technopak Advisors