A presentation prepared as a part of Retail Mangement subject. The presentation deals with the past, present & future of private labels globally as well as the current scenario in India

1. Presentation onPRIVATE LABELS Presented by: Harsh Vardhan Sharma Submitted to: Prof. AjitPatil 1

2. Agenda Understanding the opportunity. Private facts. Private Myths. Private Present & Future. Data Analysis. Shopper’s Perspective. Brand Perspective. Retailer Perspective. Overall Perspective. Private India. Conclusion. 2

3. Understanding the opportunity I don’t like talking in terms of market share. I don’t want to share my market with anyone Larry Light, CEO McDonald’s 3

4. Private label has been growing at least at twice the rate of famous household brands over the past 10 years. Sometimes can account for two out of three of your customer’s physical purchases. A trillion-dollarindustry. Hundreds of billions of dollars of revenue will be potentially diverted from brand owners to this force. It is brand-owner’s wake-up call. 4 NATURE OF THE BEAST

5. DEFINITION Private labels are retailer brands: brands owned & sold by the retailer & distributed by the retailer. E.g. , GAP, IKEA. 5

6. The Chinese use two brush strokes to write the word ‘crisis’. One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger-but recognize the opportunity. John F Kennedy (1917-63) PRIVATE FACTS 6

7. NATURE OF THE BEAST : The global facts A look at CPG categories: PL have virtually penetration of 100% in all key European countries. USD 17 out of USD 100. Presence in more than 2600 categories. With mass retailers one out of two products we buy is a PL. 7

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12. GLOBAL PL SHARE & PRICE GAP Low (<30%) Price gap with manufacturer brand High(>30%) Low (<12%) High(>12%) Private Label Share

13. Private myths The great enemy of truth is very often not the lie – deliberate, contrived & dishonest – but the myth, persistent, persuasive & unrealistic. Beliefs in myths allows the comfort of opinion without the discomfort of thought. John F Kennedy (1917-63) 13

14. MYTH1: PRIVATE LABELS ARE FOR PEOPLE WHO BUY PRIVATE LABELS 14

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16. MYTH 2: WE BUY PRIVATE LABELS NOW & THEN 16

17. MYTH 3: PRIVATE LABELS ARE FOR PEOPLE WITH NO MONEY 17

18. MYTH 4: IT CAN’T GROW ANY BIGGER 18

19. MYTH 5: PRIVATE LABELS ARE NOT BUSINESS BUILDERS 19

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21. 21 Myth 6: People don’t like PRIVATE LABELS

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23. MYTH 7: LETS CALL IT ANYTHING BUT BRAND 23

24. MYTH 8: IT’S NOT PROFITABLE ANYWAY 24

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27. A mainstream consumption brand everywhere & every type genuinely liked by people for the value & quality growing bigger & bigger & more profitable (maybe). 27

28. Private Present & Future The hunters are becoming the hunted. Kotler, 2001 28

29. PRIVATE PRESENT Brand loyalty reduction. Convenience is the name of game. We all love a bargain. Trading up. Involvement. Freshness. Health. 29

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31. PRIVATE FUTURE 31

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33. 40 Over performance CH UK GER NL SP FR BE Actual PL Share % 20 US IT ARG JAP Underperformance ROK Predicted PL Share % BR PRC 40 20 0

34. 34 THE SHOPPERS PERSPECTIVE

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44. THE BRAND PERSPECTIVE 44

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46. GEARING UP FOR COMPETITION

47. PERCEPTION OF BRAND OWNERS

48. THE RETAILER PERSPECTIVE 48

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50. SHOPPERS PL has become increasingly popular. People buy not only for price. High PL/brand parity. Unlimited growth for PL. The future seems very bright.

51. BRAND OWNERS All of them feel the heat. They too have recognized that PL is bought not only because of price. Swinging brand loyalty. Competition will be huge.

52. RETAILERS Apart from price & quality, packaging and trust play a major role. They see a dominance of PL worldwide. PL products have become dynamic like brands. Greater innovation & premium products on the way.

53. FOR EVERY THREAT THERE IS AN OPPORTUNITY A man’s reach should exceed his grasp or what’s a heaven for. Robert Browning 53

54. Most non-brand loyal served; consumer dissatisfaction with lack of variety Increased Market Power Retailer Bargaining Power Credible Threat Introduction of PL PL Share %

55. THREATS Vs OPPORTUNITIES PL has become a threat because: Monopoly of brands is lost. Information readily available. Brands losing their emotional appeal. Same or better quality is made available at a lower price by PL.

56. BRAND ADVANTAGE Vs BRAND COST

57. FORMS OF PRIVATE LABELS Retailer Commodity Brands: Cheap generic variations of brands. High volume, low margin, low- profit. Not much of a threat to brands.

58. RETAILER COPY BRANDS Copycat brands that mimic brands greatly. Mainly transfer profits from brands to retailers. Assume that brand image is not that vital. Zara (Spain) is a very good example.

59. RETAILER PREMIUM BRANDS Future threat. Are high on innovation as well as price. Tesco & Sainsbury are some major players. Trader Joe’s, Wegmans, Wild Oats etc. are some examples.

60. FOUR TYPES OF BUYERS Consumer price sensitivity Perceived quality gap with manufacturer brands

61. PRIVATE INDIA Some facts: Aditya Birla Retail’s Feasters Noodles Family pack contributes 40% of the category revenue. Kitchen’s Promise pickles are outselling Mother’s Recipe. Spencer’s has a 0-20% market share in food; 8-10% in beverages; 10% in home care and personal care. Pantaloon’s Fresh n Pure, Cleanmate, Tasty Treat, Caremate, Sach have 15-40% market share in the respective categories. In international markets, private labels contribute to more than 55% of store value in FMCG sales. 61

62. PRIVATE INDIA: CURRENT SCENE PL has 10-12% of the total FMCG sales volumes. Players like Spencer’s (Smart Choice ) targeting 20% market share. PL have 20-30% share in groceries (KPMG). The above share could go up to 50%. 62

63. CHIEF REASONS FOR PL SURGE IN INDIA Customer trust on the retailers. Price attractiveness. Less middlemen. Retailers also have higher margins as compared to brands. Reliance, Spencer’s & Aditya Birla Group plans join hands to cut operational costs. 63

64. CONCLUSION We can clearly see that the PL phenomenon has arrived & is unlikely to disappear any time soon. With the increasing globalization of retailers & the new opportunities of the internet, an ever more dominant PL presence seems highly probable & inevitable. & that presence will be everywhere…in every country ….& in every category. 64

65. 65 THANK YOU