The current pandemic has given tremendous opportunities for retailer brands and private brand manufacturers to launch new products and expand existing lines in their FMCG portfolio. Competition is fierce for sure, but the scope to expand remains extraordinary.
With uncertainty of travel and physical meetings still in the minds of trade show visitors, the FMCG industry’s only event for private label and own brand sourcing – CMPL Expo filled in this gap by launching “CMPL Connect” – a unique digital event featuring category specific events that enabled retailers and trade buyers to directly meet suppliers based on their product interest and included pre-scheduled meetings only.
Besides virtual meetings, attendees could learn and gain valuable knowledge from industry leaders featuring latest industry news and insights, product and category trends, research and more as part of the CMPL Connect Webinar Series. CMPL organised webinars on various subjects – private label development, food and beverages, beauty/ cosmetics/ personal care & hygiene, cleaning/ kitchen & home care, packaging & brand design and health & wellness.
WOOB presents to you the webinar on private label development where the Moderator was Pankaj Kapoor, Head – Business Intelligence & Digitized Process Excellence, Marico and the Panelists were Dhruv Bhutiani; Senior Director – Own Brands; Grofers, Vishnucharan Manjunath; Head – Private Label Gourmet & International Foods; Big Basket, Ganesh Mishra; Head – FMCG – Non-Food; Star and Bobby Michael Raymond; Strategic Account Director; Traceone.
Learnings from the Covid-19 year
Covid-19, technically is a threat to most of the businesses, but some of the businesses actually looked at it as an opportunity. We have made a promise to the consumers and we will provide elements to them. We have also had new elements that we have added to the promise, said Pankaj. He asked the panelists as to how can the ecosystem of manufacturers and retailers do this at a higher speed? What are the learnings you had during this unprecedented period?
Last year was a big challenge for almost everyone but obviously there were some opportunities that we had to look at because we were looking at them like a silver lining, said Dhruv. “One of the biggest challenges was to embrace and understand how the business models are going to evolve during this time. Also, we had to look at this as a short learning curve and evolve very quickly to understand what the consumers immediate needs will be and work around that as well.”
He continued, “It’s been very fortunate on our side, we had great partners who could evolve with us on the manufacturing side. Looking at it as a retailer and looking at it from a problem solving or how do I bring more products to the market for my consumers, it will always remain the same that I need to first understand my consumers right. Typically, also retailers bring private labels when they know their consumer right. Then go to the part where we try and fail. So, we have tried our share of products and failed at some and succeeded at some. During this period, learning from your successes and your failures, we created a quick playbook – what we have spent doing last year, especially the first part of last year. By creating the playbook, we knew that we can bring in the learnings much quicker and use those learnings to develop newer products. This is how we as retailers have worked.”
The opportunities that we have looked at were evolving based on the consumers’ needs which were evolving, informed Dhruv. Consumers who were looking for just price previously are now looking for price and safety. We were forced to think that way and we have the right partners at hand to be able to move into that manufacturing process really quick and come out with products that were right for the consumers and were fitting into this puzzle, said Dhruv.
Sharing his views about his learnings from last year, Vishnucharan said, “This unprecedented time has taught us a lot of lessons. During this unforeseen period, we went across with the equal amount of support from our vendor partners who stood strongly by our side and ensured that there were plenty of supplies, getting the right product at the right time and ensuring that the development of products never stopped.”
As a retailer, in association with the right manufacturer, we can do it at a faster speed, believes Vishnucharan. “The only reason being that, me as a retailer has the power of data to know what is actually selling and we already have a platform which is available to sell the product, unlike any brand to develop where they have to find the right channel, right set of retailers or the online space retailers to sell the products.”
He added that last year taught him many things from social learning to personal learning. It has taught me patience, trust and belief. Some of these values were inculcated during this entire phase, asserted Vishnucharan.
With a sense of gratitude, Ganesh thanked all the manufacturing partners and everybody associated with it as they have been able to work in extraordinary circumstances and have been able to satisfy the needs of the customers at that point of time.
“At that point of time, customers just wanted products in any brand to be available so that they can satisfy their needs. Clearly the suppliers had worked extraordinarily well to deliver to the expectations of the given circumstances,” said Ganesh.
Citing an example, Ganesh said that the turnaround for sanitizers was so fast that I could not have expected that I could have done anything better. However, there are certain procedures and issues or regulatory issues that could have managed better, we could have had better solutions.
The digital element
Talking on the lines of how digital elements come into play during the Covid-19 lockdown, Bobby said, “As the Covid-19 lockdown started, private label retailers and manufacturers were quickly filling the gaps in the market left by some brand owners who had some supply chain issues. There was a real big push towards what we call digitization, whether it be online ecommerce or part of the product development process, starting from sourcing where you couldn’t travel to meet suppliers and buyers did not have that capability online to quickly source products or raw materials through what we call the product development process, the approval of manufacturers working closely with them, your product information that needed to go online.”
He further said that if you look at digitization globally, there was almost a 50% rise in buying of collaborations of solutions just for brand owners and retailers to work closely with the manufacturers. To fill the gap, we needed to move fast, you needed to make sure your supply chain was simpler than being more complex as well as retailers with private labels have control of their supply chains much more and visibility that they could just adjust faster.
Leveraging the strength going forward
There are few reasons which drive a private label. There is an increased concentration among retailers and improved quality perception among consumers and our rising social acceptance of private brands consumption, said Vishnucharan. In addition to that, during this pandemic downturn, it has further boosted the private label only because of its price utility, availability, speed at which it is developed and it is offered to the end consumer.
“Competition between private brands and national brands in the current situation is always high. But on the other hand, private labels know that maintaining a differential pricing over to a national brand is very important along with a unique offering, but also recognizes that being perceived close to them as even quality matters a lot for a private label success. Ensuring these parameters are right and this will help us in making one of our key strengths to leverage upon private labels being superior to brands,” Vishnucharan stated.
We were quite surprised to see the strength that we could actually bring during the lockdown period, said Ganesh. “There were established manufacturers for more than 100 years by MNCs but they completely collapsed, they were not able to supply the products in time and they were seeking our help in getting trucks to their DCs and for supplying the stocks to us. So, the kind of supply chain structure or infrastructure that the retailer brings is one strength definitely. Secondly, the strength came in with the coordination between supplier partners – be it our own brand suppliers or be it the supplier on the manufacturer’s side.”
Services to be built on in the future
Private label retailers have been able to attract new shoppers, but as the Covid-19 situation slowly winds down, keeping all the consumers within your world is not going to be easy, informed Bobby. “They have to have a brand strategy like discount leadership is going to continue, things like sustainability, healthy products etc. You need to do the differentiation; it could be a partnership e.g. Reliance and Disney partnering to do a private label range to fit in a certain category.”
Speaking about his experience, Dhruv said, “One of the biggest things that came to us as a surprise was that we saw bigger brands crippling down on the supply chain side. One thing that we learnt really quick was that as much as control we had on the supply chain, things were moving much faster. That is where one of the big ups was own brands because we controlled the supply chain from the very beginning from the production side. Whenever we could extend our help in the supply chain to our supply partners which were brands also, the turnaround was much faster.”
That being said, we are investing very highly on the supply chain side and making sure that if another unfortunate scene happens, we should be ready for it, affirms Dhruv. I can safely say that gone are the days where buy private labels were a stigma for a consumer and I have seen that shift happen very significantly during this time and that is going to stay for a very significant amount of time and that time is what we will invest in making sure that brand recognition for our own brands is also established during the same time because this is what I feel about the whole eternal fight about private brands versus bigger brands.
Dhruv continued, “In the real-world market, a private label is another challenger brand for a national brand practically. A third-grade brand could easily become competition for the guy sitting on the top, similarly, a private label can become that competition as well. So, the problem is that a brand has to face the same problems that I am going to face. But I need to come out agile and basically have better actionable data available at all times and action to basically be taken at this time, to make sure that I am working in order to make my turnaround for any product much faster. If we can solve that as a problem, I think we will stay on the top.”
Certifications for private label
Certification was the most obvious thing to do during Covid-19, stated Dhruv. “When everybody is thinking about a virus that could potentially harm them, a virus protection would have made the world of a difference coming in as a USP for a product. Now we are evolving from my soap or hand wash is protection from bacteria to now virus, which is more relevant in the market. Alongside this, there are other certifications that we have also worked on, you can see it in a lot of our products. In the same direction – how can we be pesticide free/ organic/ eco-friendly/ natural, how can my home cleaning products also be aroma therapeutic, how can I bring more Ayurvedic products on the platform for the consumer to use, so that they can differentiate between a regular product and a product that contains these USPs, and be able to buy that product with confidence saying that this is the product that works for me and is in favor of my family as well.”
From a manufacturing perspective, we got Covid-19 audits in place to ensure that all manufacturers maintained the desired level of quality and points, assured Vishnucharan. We have seen a trust among lot of manufacturers where at least 60% have upgraded themselves or they are willing to upgrade themselves to the latest certifications, which actually showed manufacturers customer centricity or competitiveness and responsibility.
Regarding the certifications, Bobby feels that more and more retailers rely on manufacturers with the certifications because they can’t go to the sites to do the audits during the lockdown period.
Entering into a category
According to Vishnucharan, it is difficult to enter into a category where there is a monopoly of at least 70-75% of a large brand. We know that getting into that category is first of all challenging and now when you are entering it, you have to be very careful. What products are you going to bring in and what will be the unique selling proposition? We know that there is a limited margin and similarly when there is a plethora of categories where there is a spread horizontally between multiple brands, you have a very limited share in that. It might be a bit of a challenge to replace a brand loyalty in a customer, but look at those categories which are emerging where there is a complete gap and where there is a new idea that can be brought in where there is no leader in the market. If those kinds of categories are there then that can develop very fast, which we have seen in our tier-II cities as well. They have done phenomenally well in our private labels during this Covid-19 times in categories such as snacking, home baking, ready-to-cook, health foods and immunity boosters. We never thought frozen pizzas would become such a large category for us because there is no national brand that is present apart from Amul. Similarly, products in home baking – vanilla essence was searched 2 million times. We were surprised that the products which were not selling at all, suddenly there is a huge demand for it. So, we came into those categories, providing what the customer requires.
On the contrary, Dhruv said that they follow a slightly different strategy. Categories that are not monopolized by any brand are categories that are easy wins for any private label to get into. But I think if you have supply chain, distribution, quality, consistency and pricing solved then even picking categories which are monopolized by brands, you can create a dent in that, he believes.
Giving an example, Dhruv explains that when you think of ketchup, you are already thinking of a brand you like. That is also a category that we have created a significant dent in. I am a significant brand in that category as well. There are numerous others that are really surprising for us also and it gives me more confidence in taking more chances. You need to go out and look for products that you can become a challenger in. When we started thinking about doing our own ketchup, we actually saw a big store in a tier-II city which did not keep any big brand ketchup. We saw different brands of ketchups sold so why not we build a product like this as well.
Agreeing to Dhruv, Ganesh said, “We saw a similar experience in our case. There are certain categories which are easy wins, but even in difficult categories we are already number one. Also, some of the manufacturers are getting surprised seeing those numbers. I think it is just a matter of time, while you can easily get into the easy wins category, you can also create an impact in the categories which are a little difficult.”
Online v/s offline
Commenting on whether online will be supplemented by the offline if things start moving back to normal, Vishnucharan said that there was no brand loyalty attached which we saw in the beginning of the lockdown. Consumers shopped as if there was no tomorrow. But over a period of time, things started relaxing and we saw consumers are moving back to their beloved brands and they are going back and attaching back their loyalty. Now it is actually becoming crucial to maintain that momentum of growth that you have seen and to ensure that we stabilize that growth month-on-month and keep that momentum going. For that, we have to give some kind of confidence to the customers and that confidence can be in the form of ensuring the origin of the product or how hygienically it is processed, packed & delivered to the customers and we have ensured that we have done a lot of online campaigns around it to ensure and build customer confidence around it.
In the UK, what we really saw was that there was a huge shift to online, but almost every retailer struggled in the first two months, said Bobby. You couldn’t get a slot for delivery; the capacity just wasn’t there. So, even pure online retailers struggled to keep up with their slots for the consumers.
Speaking from an international perspective, Bobby said, “As we come out of Covid-19, what are retailers doing globally, e.g. you will see a lot of push into new areas like plant-based, suddenly over the last year. I can see supermarkets where the whole aisle is filled with plant-based food which was never there before Covid-19. Even though things are still in lockdown and slowly recovering, we are seeing whole new product ranges in the market that weren’t there, which is filling up the needs.”
Differentiator for private labels over brands
In the opinion of Ganesh, “The biggest differentiator would generally be pricing. It is basically the value for money that you would offer. But at the same time, there are many other things which over the period starts being created as a differentiator. E.g. today if you search for a body lotion, you will hardly find any brand, even the topmost brand being paraben free. I did my search and wanted to shop for a paraben free product, but the Sky brand that we sell under the Tata brand name is paraben free and that is a big differentiator. We try to offer superior quality of products at a great price and that combination becomes a killer combination.”
According to Bobby, the pricing and the availability usually is the default entry point for the private label brands. As we start getting back to normal, those products really need to have a differentiator, because just with price and availability you are going to lose on that. You have to fill it with quality and differentiation to add to the market space.
I agree that the first point of entry for any consumer when he tries to make that call of buying a private label, at least in our minds is price and that is something that we definitely want to fall for, says Dhruv. For a straight commodity, I will just focus on price and the right packaging and come with the right kind of assortment and I am good to go right away. As the product becomes complex, I need to add more to the mix to make sure that I am able to deliver a one-up on any existing brand that there is, which becomes the default choice of the consumer.
Vishnucharan too agrees that some of the default attributes are pricing, quality, availability and so on. But over and above that, what is important is how do you differentiate yourself from one of the brands of the same category you are getting into. I would like to take an example of normal breads. We have never gotten into bread which is preservative free from the day of inception. Today, I charge a premium price to a customer than what a national brand is offering, but still we have built that customer base that people really want a preservative free bread, even though they know that it will only last for 3 days versus a 5 or 6 days that they can still store and consume. They feel that keeping preservative free keeps me happy and I just want to be away from these kinds of chemicals.
These are some of the unique selling propositions that become key differentiators. If these differentiators are not there, if you are having a brand or a product range with just fighting over price and availability, I don’t think it will be successful, concludes Vishnucharan.