Private Labels
Private label brands were traditionally defined as generic product offerings that competed with their national brand counterparts by means of a price-value proposition- first developed by Sainsbury in the U.K. in 1869 (Collins & Bone, 2008), these products often sacrificed quality to reduce costs and appealed primarily to lower-income consumers.. Often the lower priced alternative to the “real” thing, private label or store brands carried the stigma of inferior quality and therefore inspired less trust and confidence. There was no attempt to make them anything more than just a ‘value pay’ and retailers evolved these products often referred to as private label. These are terms consumer use interchangeably, but the market has actually changed quite considerably. Retailers continued to push more and more private label products into different categories of the marketplace because they represented high margins and the promise of profitability with little to no marketing effort
. The first value brand was Tescos Value range, launched in 1995; today, it includes over 2,000 products in food and non-food categories (Collins & Bone, 2008). Other retailers quickly followed suit creating their own value lines.

In India private label penetration began in the mid-2000s when retailers established organized retail format stores across the country. - Organized retail occupies a small percentage of the overall retail market in India. Traditional forms of retail, such as neighborhood 'kirana' stores, dominate the market. - The most widely used private label products were cereals, pulses and spices. This was followed by packaged food products and fruits and vegetables.- In 2011, Spencer's Retail revamped its business strategy to focus on the young, urban population. In these terms they are repositioning themselves as an affordable, luxury retailer. - The Future Group launched its new private label brand, 'Sach', in 2009 with the Sach branded toothbrush, which was followed by Sach branded toothpaste in March 2010.

Definition of Manufacturer’s Brands and Private Label Brands

“Private label products encompass all merchandise sold under a retailer’s brand. That brand can be the retailer’s own name or a name created exclusively by that retailer. In some cases, a retailer may belong to a wholesale group that owns the brands that are available only to the members of the group.” The German Committee for Definition of Terms in Trade and Distribution (2006) sees private labels as product- or company brands with which retailers or wholesale groups label products, in order to distribute these labelled products exclusively in their own retail stores. These definitions from two different sources mention two important factors for defining private label products. First of all, both definitions imply that the retailer has the ownership of the private labels sold in his retailing stores and also the control over these private labels. The second consistent factor of both is the exclusivity of the retailer’s rights to the labelled products.
Premium private label products are positioned in the high price segment and have a high quality perception (Bruhn 2006). Even if their quality standard is comparable to the manufacturers’ prestige brands, most premium private label products still have a lower price than manufacturers’ prestige brands. De Pelsmaker defines prestige brands as luxurious brands with high-quality. Prestige brands target this small segment which is looking for status and high psycho-social meaning. (De Pelsmacker, Geuens and Van den Bergh 2007). Example- Spencers, Shopper Stop.

Discount brands or generics are positioned on the price entry level of the product category with the main intention to demonstrate the cheapness of the specific retail store (Bruhn 2001). Example- Food Bazaar.

Private Label Brands in Indian Retail

The retail sector in India is growing at a phenomenal pace, with an increasing focus on private label. Recently in sharp contrast to earlier periods, consumers have started considering purchase of private label as smart shopping. Indian retail industry is the fifth largest in the world with currently estimated at around $450 billion and organized retail accounts for around 5% of the total market share. It is estimated that the retail sector would continue to grow at 10-12 % per annum, which is extremely encouraging when the country's economy is only projected to grow at 6%. Private brands already account for close to 7% of modern trade sales in India, compared to 1% in China, according to a Nielsen survey that covered more than 50 countries last year.
According to Images Retail Report 2009, as quoted in Indian Retail: Time to Change Lanes" by KPMG; private label brands constitute 10-12% of organized retail in India. Of this, the highest penetration of private label brands is by Trent at 90%, followed by Reliance at 80% and Pantaloons at 75%. Big retailers such as Shoppers Stop and Spencer’s have a penetration of 20% and 10% respectively. Globally, store brands constitute nearly 17% of retail sales. In fact, international retailers such as Wal-Mart and Tesco have 40% and 50% of in-house brands in their stores. According to Salil Nair
Customer Care Associate & COO, Shoppers Stop Ltd. “Private labels are highly profitable. The profits earned from them are almost double than those from the third -party brands.”
Customers have begun to like private labels due to better quality, high food safety standards, international look and feel of products, customized packaging created after customer feedback and the credibility of the retailer," said William Savage, chief merchandising officer, Bharti Walmart, which has Private labels owned by retailers such as Bharti Retail, Future Group and Aditya Birla Retail outsell several national brands in certain home care and food categories at their retail stores even as big brands push more sales through modern retail. In India some of important retailers who have come up with their own brands are:
Reliance Fresh is a subsidiary of Reliance Retail Ltd which in turn is a subsidiary of Reliance Industries Limited. Reliance Retail Ltd. was established in 2006. The first Reliance Fresh store was unveiled in October 2006 in Hyderabad. Reliance Fresh is the pioneer for the multi-format retail initiative of Reliance and involves an investment of Rs 25,000 crore. Reliance Fresh stores stock in-house brands like Reliance value grains, pulses, rice and spices, Reliance Select tea, noodles, jam, honey grains, dry fruits, dals as well as healthy life fortified grains, flours and pulses.
Shoppers Stop is an Indian department stores promoted by the K Raheja Corp Group (Chandru L Raheja Group), started in the year 1991 with its first store in Andheri, Mumbai. Shoppers Stop is one of the leading retail stores in India. Shoppers Stop began by operating a chain of department stores under the name ―”Shoppers Stop” in India. Shoppers Stop has 35 stores across the country and three stores under the name Home Stop. Shoppers Stop retails a range of branded apparel and private label under the following categories of apparel, footwear, fashion jewellery, leather products, accessories and home products. These are complemented by cafe, food, entertainment, personal care and various beauty related services.
Aditya Birla Retail Limited is the retail arm of Aditya Birla Group, $40 billion corporation. The Company ventured into food and grocery retail sector in 2007 with the acquisition of a south based supermarket chain. Subsequently, Aditya Birla Retail Ltd. expanded its presence across the country under the brand "more." with 2 formats Supermarket & Hypermarket. They are currently pursuing strategy to increase its private label sales from the current 3% to 10-15% of total sales in the next two to three years. These products shared the shelf space with other branded products. For instance, in the Reliance store that we visited, its curd brand Dairy Life was placed next to the other brands, such as Amul. More offers food brands like Feasters, Kitchen Promise, Best of India and home and personal care products like Enriche, 110%, Pestex, Paradise and Germex.
Easyday India is the retail chain operated jointly by Wal Mart and Bharti Retail a subsidiary of Bharti Enterprises. It opened its first retail outlet in the city of Ludhiana in 2008. [1] The first Easyday store in South India was opened at Mysore. Bharti Retail has introduced eight Walmart private labels, including two of its largest—‘Great Value’ and ‘George’—in its supermarket chain Easyday. It has introduced Great Value line of food (flour, dry fruits, spices, cereal and tea). Equate, a brand for pharmacy and health and beauty items, has been introduced only in the hand wash category as of now in Easyday stores. Other Wal-Mart private labels introduced in India include Home Trends (home furnishing), Mainstays (plastic containers, kitchen accessories), Kid Connection (toys, clothing), Faded Glory (footwear) and Athletic Works (athletic shoes, equipment).
Spencer's Retail is one of India’s fastest growing retail stores.Spencer's is based on the 'Food First' Format (it mainly offers fresh and packaged food). Many outlets though sport multiple formats for retailing food, apparel, fashion, electronics, lifestyle products, music and books. It is owned by the RPG Group, a major business house. Spencer's boasts of a wide range of private brand products that encompasses both foods as well as non-foods FMCG category. 'Spencer's smart choice' is the leading instore brand which has a plethora of products ranging from juices, noodles, cookies, honey, Air freshner etc. Spencer's also has the 'clean home' range of home improvement products and 'Tasty wonders' range of snacks and impulse food range. Its general merchandize products under the brand name of MAROON which includes Non Stick, Hard Anodized, Home Plastic and Foils.
Future Brands Limited (FBL) is involved in the business of creating, developing, managing, acquiring and dealing in consumer-related brands and IPRs (Intellectual Property Rights). Its offer fashion brands- John Miller, RIG, Bare, DJ&C, UMM, Srishti, Knighthood, Lombard. Electronic brands like- Koryo, Dreamline, Sensei, IQIP, Unpaid. And FMCG brands like- Fresh & Pure, Caremate, Tasty treat, Cleanmate, Sach. Clean Mate and Great Value, respectively, top the floor cleaner segment, according to market researcher Nielsen's data for July-September 2011 period, the latest available. When PepsiCo Frito-Lay decided to boycott Pantaloon’s Food Bazaar due to differences in terms of trade, it was the latter’s Private Label which got a boost in shares. Today the Private Label product line of Tasty Treat (line of pickles, ketchup, jams) is leading with 5-10 percent of its overall sales.
Nilgiris is South India’s leading chain of retail stores providing consumers a shopping experience that hinges around freshness of produce, superior quality and better value. From humble beginnings in the hills around Ooty and Coonoor at the turn of the twentieth century, Nilgiris has grown from being a Dairy Farm specializing in butter to a supermarket chain of over 90 stores spread across India’s southern states. Nilgiris offers exotic range of handmade Jams/Marmalades/Chutneys with more than 50% real fruit. Classic Kids Favorite: Strawberry, Mango, Peach, Apricot, Guava Jelly. Your Kind of Flavors: Cinnamon Apple, Black Cherry, Bitter Orange, Strawberry Mint Meal Times or Bread Spreads: Mango Chutney, Tomato Chutney, Ginger Orange Jam.
From the above stated data it is evident that Future Brands Limited is having more private labels in contrast to the other retails in India.

How Private Label Works

The development of the Private Label can be seen as a vital winning strategy for improving store image and profitability. Private Labels usually offer customers value for money and increase the overall price competitiveness of the chain.
While shares of private labels have been constantly increasing compared to national level brands, they have never been able to shrug off the indignity of being called cheaper brands (with fairly good levels of quality), for example John Miller from Pantaloon. The major elements of the private label are rational and emotional appeal. Rational appeal includes the marketing mix and distinct positioning, while emotional appeal involves communication with customers. The consumer perception behind buying private label depends on demographic factors, individual differences, variable like extrinsic cues, level of perceived risk and degree of knowledge about particular category. Besides higher margins the key growth drivers for private label retailers are differentiation and positioning in economic downturn, freedom from pricing strategy and strong customer loyalty. Private label provide the ability to offer a significant price advantage to consumers, typically around 16-23% lower as compared to manufacture brand. For example Reliance tea brand price tag of Rs.118 for 500gms where as Brooke Bond, which was placed next to it was Rs.132 for 490gms.
Atulit Saxena, COO of Future Brands, explains, “Traditionally, private brands worldwide were always conceived to take on category leaders. If we are talking about soaps for instance, you might have 15-20 soaps, but as a large organized modern retail player, you might want to create your own trademark in your store, which is of the same quality, but at a price that is substantially lower.” This also becomes the differentiating factor for a retailer, as these brands are exclusively available at that retail outlet only. So a customer, for example, may want to revisit the store if they find the quality comparable to others at a more affordable price point. Private labels are mostly priced much lower that branded products because of substantial marketing and distribution savings. Retailers make up for lack of media marketing through in-store promotions and prominent display.

The private label provides the end delivery of fulfilment to consumer within the purview of the store brand. A consistent delivery mechanism and careful attention to detail may lead consumer to prefer the private label to competing offerings.
Line extensions provide another lesson for private label manufacturers (or the retailer). The presence of other branded outlets extend the offering and brand equity of the parent store- as in the case of Lifestyle International’s Kappa (a sportswear brand)- and provide a distinct identity by targeting a well-defined audience.
Increasingly, retailers are offering much beyond the traditional, right from financial services to holidays. Wonder how it would sound if I told my neighbour that I went on a national holiday (26 January or 15th August)? In these stores, the private label is not limited to a particular category. For instance Shopper Stop it extended from apparel for men, women and children to crockery, kitchenware and even furnishing. Similarly in Reliance store it extended from pulses to spices, noodles and even dairy products.

Advantages of Private Label
You have control over your pivotal product, and that means over your business.
It is the only way to be able to market high quality product, if you so choose.
You save substantially in product cost. You can spend these savings on anything you please, including higher product quality.
You have no competition for the brand of product that you carry. No one can trade on your name legally. This is a strong motivational plus for your salespeople.
With your exclusive brand you can, if you wish, enter the entire Out-of-Home market supply for every other nook and cranny of the market.
You can sell the mystique as well as the real quality of your product, enabling you to achieve a higher average selling price (though many operators make the mistake of selling their private label for a lower price than the national brands).

Disadvantages of Private Label
It takes time to work up your private label with the right quality coffee. While that is not terribly difficult, you can simply opt to have the supplier pack one of his standard blends in your graphics.
Because no one else is handling your product it will have to be packed to order, requiring some lead time from the day of order to the day of delivery. This requires at least a bit more organizing and control of inventory than would be necessary in purchasing the national branded, though of course it guarantees freshness.
The private label roaster may have his own imperatives in terms of production, with your order being shoved aside in favor of his own customers' needs.
Although the cost of your product will be substantially less when bought from a good private label supplier there will, of course, be little "help" in marketing the product by that supplier. The selling of your own product is likely to be entirely in your own hands.

Future Trends

Lifestyle International, a division of Landmark Group, plans to have more than 50 stores across India by 2012–13.
Shoppers Stop has plans to invest Rs250 crore to open 15 new supermarkets in the coming three years.
Pantaloon Retail India (PRIL) plans to invest US$ 77.88 million this fiscal to add up to existing 2.4 million sq ft retail space.
PRIL intends to set up 155 Big Bazaar stores by 2014, raising its total network to 275 stores.
Timex India will open another 52 stores by March 2011 at an investment of US$ 1.3 million taking its total store count to 120. In the first six months of the current fiscal ending September 30, 2009, the company has recorded a net profit of US$ 1.2 million.
Australia's Retail Food Group is planning to enter the Indian market in 2010. It has plans to clock US$ 87 million revenue in five years. In 20 years they expect the India operations to be larger than the Australia operations.
Conclusion

Private label come a long way over the few decades, private label are showing increasing growth because of attractiveness that they offer to retailers. Private label are slowing becoming hero in the nig Indian retail industry. Taking cue from the other countries- in India also private label are going to give tough competition to national brands only if retailers are consistently providing quality products at fair price.
This new paradigm of private label thinking requires that retailers consider an arsenal of often-overlooked business and branding tools to further success.
Category management and brand management must work together to fuel the marketing strategy. One cannot replace the other. Both product and positioning points of difference set the “own” brand apart in consumers’ minds. A consumer-centric approach is at the heart of “own” brand development and elevates above the product-centric thinking of the past.
In order to have a consistent and compelling brand voice, retailers need to understand the contribution and role of proprietary or "own" brands within their business and also within the lives of their consumers. “Own” brand products, branded communication and expressions should all be developed in accordance with this thinking.
When “own” brands are appropriately created and steered, they have the potential to reach their pinnacle of success. In doing so, they create a persuasive connection with consumers, drawing them into a retail store, but more importantly, becoming an essential, experiential and indispensable lifestyle choice that they embrace over the long-term