WHAT MAKES PRIVATE LABELS CLICK? - Production - Nielsen

1FEATURED INSIGHTS | WHAT MAKES PRIVATE LABELS CLICK? Copyright © 2013 The Nielsen Company

1

F E AT U R E D I N S I G H T S

W H AT M A K E S P R I VAT E L A B E L S C L I C K ?UNDERSTANDING SHOPPER ATTITUDES & PERCEPTIONS TOWARDS PRIVATE L ABELS

BY: ADRIAN TERRON

• IF ALL PRIVATE LABELS WERE CLUBBED TOGETHER, THEY WOULD EQUAL THE THIRD-LARGEST FMCG SUPPLIER TO MODERN TRADE IN INDIA

• SHOPPERS ARE BECOMING INCREASINGLY EXPERIMENTAL IN THEIR BRAND CHOICES

• FOOD AS A CATEGORY ACCOUNTS FOR THREE-FOURTH OF TOTAL SALES IN PRIVATE LABEL

• PRIVATE LABEL PRODUCTS GIVE SHOPPERS THE REASSURANCE THAT THEIR RETAILER IS ACCOUNTABLE FOR QUALITY

While India’s retail industry continues to scale new heights each year,

the private-label area in FMCG has shown incredible consistency and

potential. In fact, Nielsen estimates that India’s private-label market will

grow fivefold to reach the USD half billion mark by 2015. With a projection

like that, India’s private label sector is better poised than its counterparts

in other emerging economies. It also highlights shifting attitudes and

perceptions with respect to brand loyalty.

DELIVERING CONSUMER CLARITY

2 FEATURED INSIGHTS | WHAT MAKES PRIVATE LABELS CLICK?

PRIVATE LABEL SHARE IN MODERN TRADE

FOOD DOMINATES INDIA’S PRIVATE LABEL MARKET

Food category alone accounts for 76 percent of the total sales in private

label, and within this, some areas are making bigger waves than others.

Packaged grocery, for example, has a particularly dominant position,

as it pulls in a whopping 53 percent of total sales. The hot beverage

category has an 8 percent allocation and is another segment worth

watching.

Source: Nielsen

MAT Dec ‘12Source: Nielsen

CHINA INDONESIA THAILAND

0.8% 1.7% 3.3%5%

6.8%8.6%

13.6%

24.5%

INDIA HONG KONG SINGAPORE NEWZEALAND

AUSTRALIA

15%

20%

8%5%

52%

COOKING MEDIUM

OTHER FOOD PRODUCTS

HOT BEVERAGES

IMPULSE FOOD PRODUCT

PACKAGED GROCERY


PRIVATE LABEL GROWTH HIGHER THAN MODERN TRADE GROWTH

While segments within the foods category like packaged rice, packaged

atta and pure ghee have garnered the highest value sales, a few private-

label segments are generating sales that are stronger than their modern

trade equivalents.

In the non-food category, household cleaners hold the numero uno

position, accounting for nearly half (48%) of the private-label sales.

Personal care, fabric care and the general category are other segments

which contribute significantly to non-food.

Source: Nielsen

“FOR MOST OF THE CATEGORIES, GROWTH IN PRIVATE LABEL IS HIGHER THAN THE GROWTH WITNESSED IN MODERN TRADE.”

PACKAGED TEA

REFINEDEDIBLE OILS

BISCUITS

PL CONTRIBUTION IN CATEGORY MT SALES

PL V

ALU

E O

FFTA

KE IN

RS.

MN

PL VALUE GROWTH (MAT DEC ’12 OVER MAT DEC ’11)

MT VALUE GROWTH (MAT DEC ’12 OVER MAT DEC ’11)

BREAKFASTCEREALS

KETCHUPS ANDSAUCES

377

231

181

129

83

7% 46% 22%

2% 420% 25%

2% 64% 26%

8% 55% 22%

3% 41% 23%


WHAT’S DRIVING THE CHANGE?

To identify what drives the private-label market, it’s crucial to understand

the characteristics of the modern shopper. With growing levels of

disposable income, shoppers are far more open to experimentation

than ever before. With the rise of modern trade, the perceptions about

grocery shopping have changed. Rather than viewing shopping as a

chore, more and more Indians are finding it to be a more pleasurable

experience.

THE NEW GENERATION OF SHOPPERS IS LESS LOYAL TO BRANDS THAN BEFORE AND QUITE OPEN TO TRYING NEW PRODUCTS.

The format has also triggered the transformation of the shopping

experience from being a necessity to becoming a sensorial experience

with less dependence on planning and a fixed list of brands. Interestingly,

we find that consumers sometimes choose private labels in certain

categories because of the assurance they get from knowing that they

can interact directly with the retailer during their shopping trip.

Source: Nielsen

In terms of category contribution in the non-food category, floor

cleaners, tissue papers and toilet cleaners occupy the top three spots

with 24 percent, 28 percent and 16 percent of sales, respectively.

3% 11%

19%

47%

17%

3%

BABY CARE PRODUCTS

FABRIC CARE

GENERAL

HOUSEHOLD CLEANING

PERSONAL CARE - GENERAL

PERSONAL CARE - WOMEN


NOT ALL CATEGORIES HAVE ACHIEVED PRIVATE LABEL SUCCESS

In spite of the robust growth in the private-label market, certain

categories have yet to make successful inroads. For example, baby

care and baby foods products have been less successful. Retailers can

help overcome the challenges that certain product categories face by

enhancing in-store awareness, increasing visibility and providing value

for money options.

As private labels gain traction, national brands need to focus more

on differentiating their products to prevent shoppers from switching.

Considering the steady growth rate of private labels through modern

trade, it looks as though India’s fast-moving consumer goods market

will continue to diversify with increasing levels of private label and

national brand products on offer.

OVERCOMING CHALLENGES

• ENHANCE IN-STORE AWARENESS

• INCREASE VISIBILITY OF PRIVATE LABEL PRODUCTS

• HIGHLIGHT VALUE- FOR-MONEY ASPECT

THE NIELSEN QUALITATIVE VIEWREDEFINING ‘VALUE’ – FROM PRICE DIFFERENTIAL TO BRAND DIFFERENTIATION

SARBANI SEN, ASSOCIATE DIRECTOR, NIELSEN INDIA

• Private label brands have introduced another axis of ‘value alternative’ in the consumer’s mind tempting them to relook the perceived ‘price - quality’ equation during their shopping trips.

• With shoppers looking to trim their shopping bills & hence look at Value for Money (VFM) options, private labels cater to a segment which wants to participate in the modern trade experience but is not as brand savvy. This is the key reason private labels stand to gain.

• Having managed to intersect & peg itself in the shopper’s consideration set, they are redefining value by now signalling better quality, convenience, service, experience & innovation.

• While most players begin by suitably identifying the pricing sweet spot, as the market for private labels expand, it will become more sophisticated with retailers using their own private labels as a means of brand differentiation.

• This allows retailers to cater to multiple shopper segments rather than the generic ‘value conscious’ mindset which is not besotted by big brands or drawn to a more homely private label counterpart merely by virtue of price.

• As shopper loyalty becomes increasingly ‘episodic’ and event-based, private labels are here to make inroads in an increasingly unobtrusive fashion and are likely to continue positioning themselves as a natural alternative in the categories they are present.

6 FEATURED INSIGHTS | WHAT MAKES PRIVATE LABELS CLICK? Copyright © 2013 The Nielsen Company

NIELSEN ESTIMATES THAT INDIA’S PRIVATE LABEL MARKET WILL GROW FIVEFOLD TO REACH THE USD HALF BILLION MARK BY 2015


ABOUT NIELSEN Nielsen Holdings N.V. (NYSE: NLSN) is a global information and

measurement company with leading market positions in marketing

and consumer information, television and other media measurement,

online intelligence, mobile measurement, trade shows and related

properties. Nielsen has a presence in approximately 100 countries,

with headquarters in New York, USA and Diemen, the Netherlands.

For more information, visit www.nielsen.com.

Copyright © 2013 The Nielsen Company. All rights reserved. Nielsen

and the Nielsen logo are trademarks or registered trademarks of

CZT/ACN Trademarks, L.L.C. Other product and service names are

trademarks or registered trademarks of their respective companies.

ADRIAN TERRON

EXECUTIVE DIRECTOR

NIELSEN INDIA

ABOUT THE AUTHOR

Deepak Pillai and Modhurima Maiti from the Nielsen Retail & Shopper team

were instrumental in the creation of this issue of Featured Insights.

WHAT MAKES PRIVATE LABELS CLICK? - Production - Nielsen

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