Share of private labels across modern trade format stores between December-February to July 2020 rose from 3.5% to 5% as unavailability of top brands during India’s peak lockdown and consumer pivot to affordable brands helped them gain share in modern trade stores, market researcher Nielsen said.
This was visible across categories of fast-moving consumer goods, largely foods, such as packaged flour, liquid toilet soaps, frozen foods, non-refined oils, branded honey—all of which gained share over the last six to seven months. Depending on the retail format, private labels are a key for most large retailers as they help with better margins and variety. They are also priced at a discount compared to other brands in their category.
Share of private labels in categories such as packaged atta moved from 11% to nearly 14% between the three months of December, January, February when compared to July this year. Similarly, share of non-refined oils moved from 6.3% to 10%; while private label share of branded honey inched up from 7.8% to 10.2%. Frozen foods went up from 3.3% to 5%, Nielsen said in its report.
It is expected that consumers increase their private label purchases when the economy is struggling, Nielsen said in a 2018 global report on private labels. With Covid-19 having left millions jobless or working with reduced incomes, consumers are likely to trade down, driving demand for such value offerings across categories.
“Modern trade private labels have started growing in the last two quarters. The categories which are seeing growth are packaged foods, essentials required for cooking meals, and health products,” said Diptanshu Ray, Retail Intelligence Lead for the South Asia market, Nielsen.
Several retailers pushed their private labels in the early part of the lockdown as FMCG companies struggled with supply constraints and distribution.
For some, demand for private labels is still holding steady. Wholesale retailer Metro Cash & Carry has seen an uptick in its private label offerings for packaged foods such as biscuits, condiments and salted snacks even in the unlock phase.
“In the unlock phase i.e. between June to September 2020, in our own brands (private label), we saw sweet biscuits and confectionery category grow by over 250%; condiments and salted snacks category by 100%; breakfast cereals growing over 80%; pasta and noodles over 70%. Commodities such as flours and oils have continued its upswing growing over 65%,” a Metro Cash & Carry spokesperson said.
Affordability is a key driving factor for consumer off-takes when it comes to private labels, online retailer Grofers said. Grofers already offers 1200 private label products under categories such as kitchen staples, personal hygiene, and household items. Currently, Grofers’ own brands constitute 40% of the business. Over the next one year, the company will invest $15 million in owned brands to expand the snacking, baking essentials, immunity products, and RTE (ready to eat) categories.
Since these products are not backed by high marketing spends and directly supplied to the company—they cost less as compared to brands manufactured by large fast-moving consumer goods makers.
“Consumers are buying our ‘own brands’ (private labels) as it offers quality products at affordable prices. Since products are made in-house and sold on the app itself, there are no commissions for middlemen, therefore resulting in low product prices i.e. 30 to 40% cheaper to cater to price sensitive Indian consumers. Currently, Grofers own brands constitute 40% of the business, and we are expecting to grow this to 60% in these six months,” a company spokesperson said.