The report, based on a consumer survey, reveals that while the adoption of private labels began with its value proposition, consumers perceive that these store brands are offering quality on par with other national brands.
“The increased scale of operations of retailers is shifting the bargaining power from FMCG companies to retailers,” says Vaibhav Khera, director, India Consumer Markets Research at Datamonitor. “The growing adoption of private labels can compel FMCG companies to reassess their trade margins or relationships with retailers.”
Indian retailers are laying a strong emphasis on the growth of their private-label brands, which is bringing in greater margins and is helping them gain greater bargaining power with FMCG companies.
Retailers are now mirroring national brands with respect to product packaging and claims, and are offering these products at a lower price. Retailers are also launching products with tiered pricing to cater to a wider audience while holding on to their store positioning.
Datamonitor expects that a customer satisfied with a private-label brand in a low-involvement category such as household care will have a greater propensity of trial in other categories such as food and beverages and personal care.
To highlight this threat, Datamonitor has analysed several product categories on the basis of their private-label penetration and attractiveness, where attractiveness is defined with respect to category involvement, brand loyalty and price sensitivity, and through this Datamonitor has highlighted the product categories that are a potential threat to FMCG companies in the near future.
© FoodBev Media Ltd 2020