Great Value is the largest private brand at Walmart. Grocery products from Great Value, with brands such as Equate (pharmacy), Mainstay (low-cost furniture and bedding), Ol’Roy (dog food), Dr Thunder (soft drink) and Parent’s Choice (baby products) bring in close to 40% of the big-box retailer’s revenues of $421 billion. Similarly, UK-based retail giant Tesco earns 50% of its £64 billion revenue from private brands. Its two private labels Tesco Value and Tesco Finest are worth £1 billion each.
With margins as high as 20% in FMCG categories and 40% in apparel, private labels are the mainstay of retailers worldwide. These similar quality and low-priced alternatives to regular manufacturer brands not only draw consumers into stores, they help improve revenues and drive up profitability for retailers. According to market research agency Nielsen, private labels contribute 17% to retailers’ revenues in the US, UK and France. In India, that figure is closer to 7% of organised retail sales (which itself is just 7% of total retail).
To be fair, private labels have made their mark already, but only up to a point. The ₹10,000 crore-crore retail giant Future Group, owned by Kishore Biyani, generates ₹200 crore in revenues from them. Almost 20% of the FMCG business of the group’s flagship value format, Big Bazaar comes from its in-house brands such as Cleanmate and Sach. In soups, about 25% of sales come from its brand, Tasty Treat. Other leading chains such as Mukesh Ambani’s Reliance Retail and Harsh Goenka’s Spencer’s have long been focusing on private labels too. Over 200 stock keeping units (SKUs) of Walmart’s Great Value are available at its Easy Day stores in India. And one can see a significant presence of Tesco Value brands at the Tata Group’s Star Bazaar. Nearly 22% of the merchandise at K Raheja Group’s HyperCity, too, comprises its own brands.
But in the absence of scale, inadequate brand building and the effects of a slowdown in consumer spending, Indian retail’s private label story has yet to take off from its modest levels.
Too many odds
In fact, only few experts are upbeat about private labels making a significant difference to the business anytime soon. “The reason for that is none of the retail companies (barring Future