Private Labels – ‘A Middle Class Solution’

Shukrant Jagotra | MBA Gen 2013-15

With the number of brands and choices more than ever, the need for aggressive advertisement to survive or perhaps to build a brand image is more than ever. In the era of global competition, marketing, advertisements, campaigning have become a prerequisite for the success of any product or company. Most companies, if not all spend more on their advertising budget every year.

But on the contrary, there are some companies which spend negligible amount on advertising and are still not only able to survive but are also able to acquire larger market share every year. These are known as ‘Private Labels’.


Private labels are typically those product manufactured by one company for offer under another company’s brand. The Private labels have shorter reach and most of them are specific to a smaller area compared to the national brands. Private labels are mostly priced lower than the branded products because of substantial marketing and distribution savings. Retailer make up for the lack of media marketing through ‘in store cheap promotions’ and ‘prominent display’. Some of the examples of private label at Big Bazaar are shown below:

                 

PRODUCT	BRAND NAME	NEED/WANT/DEMAND
Sugar 5kg	Renuka	Need
Ghee 2kg	Fresh n pure	Need
Detergent	Clean mate	Need
Microwave Oven, TV	Koryo	Want
Apparel	John Miller	Demand

In the modernized Indian market, shoppers have started moving away from the traditional list of global brands, and are willing to experiment with different brands, giving a boost to the sales of private labels. An example of this is the rising popularity of local fashion designers. With most of the shoppers not confining themselves to the brands and seeking variety and experimentations, they are shifting to the local designers or private labels.

The numerous advantages of private label include; they create a more personalized image which leads to better customer loyalty, the ideas in the company can be implemented in a shorter span of time, despite of being priced lower they still manage to have high margins. Having a stronger command over production, they have freedom to create their own marketing strategy.

The private labels are rightly being called as the “middle class solution”. The highest segment of people living in India is middle class people. This segment holds enormous potential for private labels and hence is their target market. They can offer substituted for the products that the middle class cannot buy. For example, John Miller is a decade old private label at Pantaloons and offers high quality shirts within the affordable range of 300-600 rupees.

The private labels are still small to become a cause of concern for national brands. But their growing popularity could spell trouble for the companies like Hindustan Unilever, Britannia, Nestle and ITC etc in the long run. Private labels already account for close to 5% of modern trade of FMCG sales and the estimate on the market of private label is likely to grow five times to reach $500 million by 2015.